>> this is a frustrating market for both bulls and bears. >> we have not seen u.s. growth deteriorate that much yet. >> there is lingering concerns over credit tightening. >> this is bloomberg surveillance with and lisa ambramowicz. jonathan: live from new york city, good morning. this is "bloomberg surveillance."

takei is going to take a long weekend. equity futures unchanged. later this morning we need to discuss this story, president biden could be looking to announcing his reelection campaign as early as next week. we catch up with ann-marie later. sons of fed speak,. lisa: the bears are consistent even with hate and not necessarily being right for a wild. there are still bearish and the data confirms it. they're going to catch up because it is only a matter of time. jonathan: easing of financing conditions, premature. we've heard so much like this from j.p. morgan, mike wilson at morgan stanley. they have not changed our view over the last month. lisa: the earnings confirm what

they are saying. the fundamental story is very much in line with the bearish view. earnings commit below expectations. we saw a take up in usage of emergency loan programs catering to some of these banks. on one hand, nothing massive. on the other hand, all is not a clear. we are not completely out of the woods when it is clear the economy is falling all beat alongside inflation. jonathan: overall more signs of stability did not. profitability problems are going to persist we imagine, for the smaller banks banks leading to potentially tighter conditions. i do not think the fed has the answers they want or need to be on may and that is the problem. they cannot give you anything beyond next month. lisa: yesterday we heard a slew of fed speak. i do think there was a cohesive message for the first time which

was one and on. they're going to hike one more time and they are going to pause. it seems the consensus in federal reserve. the issue for markets is how long are they going to pause for. keep it there longer or cut in the face of deteriorating information. yesterday at leading economic indicators that came out strongly in recessionary territory. deeply negative. how much does edify a feeling we are having a catastrophic collapse? jonathan: when i talk about the unknown beyond may i am not talking rate hikes, i am talking their understanding of tightening financial conditions. patrick harker talked about that over the federal reserve. i expect to see tighter conditions that may slow economic activity and hiring. we understand the direction but the full extent is unclear. i do not think we know with the rest of the year it looks like

on that front. lisa: they're in the unknown territory so is anybody else. jonathan: i could be softer by .1%. -- equity market softer by .1%. 10 year 35261. euro-dollar down .2%. pretty tight trading ranges for the single currency against the dollar. lisa: it has been the stasis as people came out, a trading range everywhere and it has been frustrating for a lot of people that seems to realize the angst underpinning it. they beat expectations across the board all the provisions for credit losses came in slightly above expectation. if you take a look at the net interest margin, became slightly

above. it is a question of profitability and it goes to the issue of where are the strongest going to get more strength. are they going to consolidate today? we will get perhaps more information. 9:45 a.m. we got data out of europe earlier this morning. the get the latest of manufacturing and service pmi in u.s.. consensus pmi in europe was services doing better-than-expected, manufacturing doing worse than expected. how long can this bifurcation happened before one carries the other? it is a real tension as we see different moving pieces of this economy. 4:35 p.m., is it the last gas? lisa cook speaking at georgetown university, the last gasp before all goes quiet. jonathan: what else to say? lisa: there seems to be consensus there is enough information to raise 25 basis points but after that, probably not so much. jonathan: maybe the hike in may

is the last hike of the hiking cycle. joining us now is luke kawa. good morning to you. i want to pick up on the line from bank of america, sale at the last rate hike. how do you and the team feel about that? luke: equities at the headline level have not been that exciting. that is not where you're going to see the big move to the upside. more confidence under the hood trade, but has been stark for us for the past month, what is crazy is how much to volatility environment has normalized across assets. whether that is sprayed or fx. all of that is below before we had an episode of banking stress. the relative value positions that got hit hard during that short period of time where we were pricing in tail risk with u.s. regionals those have not

retrace much at all. that is where the opportunity is more so than focusing on whether to sell the last trade. it is not a foregone conclusion as you guys have noted. jonathan: would you expect the underperformance to close or for it to go higher ? luke: the trade here is the oxygen is coming back into the room from the macro perspective. whenever you are talking about u.s. financial system risk, perhaps the only narrative that is going to matter. rippling more time and distance and data -- they are putting more time and data between that episode. like large-cap financials outperforming tech closing more than vix spiking up to love is consistent with a real growth scare. lisa: you mentioned tech.

next we could get a earnings. how concerned are you when you have been signs that the chip manufacturers are still facing real headwinds? luke: withtech it is the combination of the earnings growth, for the group in aggregate, it's going to post is not that much stronger than the rest of the index to justify the price higher multiple to the index. it is more of a value play, a lot more susceptible to mistakes if we talk about high valuations at the next level. we all know what is driving that. this a situation where as you say, that news can have more of an impact based on the initial conditions of evaluations. lisa: i'm curious your view on china and potential influence in earnings because you come on the program before and said you were bullish on chinese equities and

chinese bonds. the assets that have been left for dead too quickly. do you feel the same about chinese assets and chinese aspects of some of these tech firms in light of discussion and proposal from the biden administration? luke: i do think you do have to take those note of those and the risk. that is one reason why in some cases get to be more choosy if your plane chinese equities that allows you to mitigate those risk. but to talk about the micro-oxygen coming back, yes. it is the china deposit story as we get more evidence, even in things was able link green she was a link green shoes in real estate over the past month we think the market can focus on that in an environment where the market is not worried about pricing details. do geopolitics play a big potential role in how investors are going to treat china and keep it in valuation penalty

box? very much, perhaps. there is a lot of moving parts in u.s. china relationship right now. to boil it down to a headline we might see on a weekly basis, a lot of those prophecies panelists have not necessarily come to fruition. i do think there is fluid eat there -- loaded t there. jonathan: last time we caught up euro-dollar we asked a friend of yours on the team at ubs for a call euro-dollar, they said we should go long from 106 21 to 76 on friday. try to call. -- quite a call. where are you now on foreign exchange? luke: is going to put me out of a job. on the broad dollar view, are take care -- our take care

similar when the fed talks about tiptoeing through a dark room, now that the fed is tiptoeing through a dark room where a note there is broken glass on the floor, they're going to be more cautious even if they go beyond may, that from addition additional since cut off the right tell the u.s. dollar smile so the only way to get u.s. higher a surprise price in recession and we do not think is imminent factor. we like the short thesis here. jonathan: we appreciate you. luke kawa of ubs. i promise we would not talk about manchester united but i would talk about this article and drawing my attention to it. bank of england policymaker, savanna who tom caught up with

on friday at imf spring meetings, said this about her hawkish colleagues, compared them to quote a fall in the shower who scolds himself by being too impatient to wait for the water to warm up saying interest rates are too high for the economy to bear. what you make of that? lisa: this is the fair a lot of people have. people, fed officials or ecb officials are creating to previous crisis and previous mistakes and not engaging with the risk are in real time. jonathan: from maureen from doing too little to worry about doing too much. priya misra in the next hour. on the bond market right now, yields unchanged. equity market going nowhere on the s&p 500. this is bloomberg. >> keeping you up-to-date with

news around the world with the first worried. rishi sunak deputy dominic raab has cleared after investigation into bullion complaints. the probe criticize his behavior towards servants. it is a major blow to rishi sunak who is trying to present his government will contrast to the boris johnson era. federal reserve officials are backing another interest rate increase. at the same time they are monitoring the economic fallout from stresses on the banking system. cleveland fed president says she favors getting rates about 5% because inflation is still too high. a lance of fed president says he backs a one and done rate hike approach. president bynum it will crackdown on u.s. investments in key parts of china's economy. he was signed executive order in the coming weeks that will limit investing in chinese semiconductors, artificial intelligence, and quantum computing. the president is hoping to get

the backing of g7 partners. elon musk's doing an about-face after saying he would continue to drop the price of his electric vehicles. tesla increasing the cause of model s and model x vehicles in u.s.. prices will be pumped out by 2500 dollars raising the cost of the sedan and suv by 2% to 3%. markdowns took a toll on profitability and tesla shares. global news powered by more than 2700 journalists and analysts in more than 120 countries. i am lisa mateo. this is bloomberg. ♪ you got this. let's go. gobble gobble. i've seen bigger legs on a turkey! rude. who are you? i'm an investor in a fund that helps advance innovative sports tech like this smart fitness mirror. i'm also mr. leg day...1989!

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>> at the end of the day, the crisis is too strong a word and words like that gets used a lot. then she has reported good earnings across the board -- the industry has reported good earnings across the board. the banking system is what they do to make credit tighter and help slow down the economy. jonathan: that is the bank of america ceo speaking yesterday during the leaders form. your equity market this morning, looks like this.

unchanged on the s&p 500. yields unchanged as well. 10 year 35280. tesla got hammered post earnings yesterday down by close to 10% is on the back of margins coming in following price cuts. yesterday, more price cuts. this morning price increases on the high end of model s and model x in the u.s. lisa: don't you feel like there's a dartboard and he is like let's try this one? jonathan: he was busy with spacex yesterday but to return to tesla and get the focus there. says if you start a ev price war. i think this is where it is heading. lisa: says she surprise no one. this is what expected and you

could argue it was started by chinese manufacturers electric vehicles which are dominating the industry and could be said to be tulsa's main competition. jonathan: highly desirable for the consumer. some of these vehicles, ev so expensive. the government is trying to make them affordable but this is what consumers want to see and we caught up with, julian emanuel? we said is this idiosyncratic. lisa: will be really important if they signal a similar kind of pushback from the consumer in pricing. jonathan: taza bank earnings over the last couple of days. we go from bank to take next week. let's talk about the minx right now. we can do that with mayra valladares. wonderful to catch up with you. i want your thoughts on regionals of small banks and may be shifted to the bigger lenders in a moment.

the net interest margin, the profitability story. do you think it is too early to see the pain, how this is going to evolve the next coming quarters? mayra: yes. we have to remember they banking turmoil started the second and third week of march and by that point the vast majority of regional bank strategy, the transactions were well underway and they have benefited from high interest rates. they have been charging more on a variety of loans and credit facilities but they have not been paying more as much over on the deposit side. the net interest margin benefited them. i do see trouble spots in the horizon. lisa: like what? luke: you see just about every single regional bank increasing their provisions for credit losses and some of them had released them a couple of quarters ago.

that is a sign that all of these banks are preparing at worse for the beginning of a recession or adventists -- at best for softening of the economy. you had a lot of banks have a decrease in deposits. four regional banks, it is incredibly important. anywhere from 75 to 85% of their funding comes from deposits. they're not diversified. it is important to watch not just the level of the deposit is but the diversity of the deposits. that can be hard for some of the small regional banks because by definition they are concentrated in the community and regions they serve. lisa: there's a lot to unpack. i'm want to stick on. they're continuing to land more aggressively and provisioning for more potential losses or they are patrolling some of their lending prowess on the hills of deposit outflows as

well as concern about loan losses that keep ticking up. which is it? mayra: the answer may not be so satisfactory to investors. it is a bit of both. there are a lot of signals in the economy, the market that we do need to pay attention to. we have tech companies, consulting companies, retail media announcing leal's. how are these people going to pay their mortgages and other credit facilities? we have american companies at their most indebted level in history. many of those loans are leveraged which means six times debt over year dot. the page book already stated some of the banks had been tightening their credit conditions. a lot of these banks are exhibiting good risk management but they increase their provisions. i am not seeing big rises in lending. you have trouble areas over in

the auto loan sector. you are already seeing high housing prices in the last. there's a lot to remind banks they need to remember the religion of good risk management. lisa: yesterday we got data from the fed on the latest emergency borrowings from that discount window and a new program. i almost laughed at the way it was interpreted. the optimist said it show stability. the pessimist said it shows people are drawing down. how would you read we saw the first increase in usage of these operations in five weeks? mayra: that is a grade a point. the banks should no longer be borrowing if there is stable and liquid as they say they are. it is one of the reasons why legislators and regulators should be demanding banks be more transparent. by the time you and i get some of their liquidity metrics,'s or deposits it is already too late.

the information is old. any of these facilities from the fed is not the way banks in a capitalist system should be running for you they should be depending on their cash flow and it is why most of them need to be better managed and they are. jonathan: just to finish on this word crisis. would you call it a crisis? this time last week mohamed el-erian said it is not a crisis. what is in a word, wet -- why is the word so important? mayra: it is important because unfortunately it starts to be overuse. this is bank turmoil caused by serious lack of good risk management. there is no excuse for that. silicon valley bank, signature, all of those banks needed to have been back on the basics a long time ago, managing their interest rate risk, managing their liquidity. we have to be careful not to

overuse worries. this is banking turmoil. it is not a crisis created a crisis it was when we are talking about massive interconnection with the banks and the real economy as well as of course as corporations 2007-2000 nine was a crisis. this is not a crisis. i am hoping it is not a go that way. jonathan: appreciate your perspective. this from mohammed yesterday, we talked about that briefly. he also said it is not a credit crunch, he said it is a credit contraction. it is a difference. credit crunch is economy wide. credit contraction has should be true effects and we should focus on those. lisa: this is why people are having a difficult time understanding the trajectory of the economy and how significant credit contraction will be because we are use to 2008 as the reference point, it is not 2008. it is something different.

it is a slow-moving burn yet banking turmoil, bank tremor them at what point we call it off. jonathan: i do not like it when he becomes dismissive and goes the other way. you can say it is not a crisis but on the other hand, we have to make sure you did not say it is something you should ignore. lisa: you cannot say because it is 2008 we do not care. just because we're not saying all banks in a flaming distress -- pala distress does not mean. jonathan: from new york city this morning, good morning to you all from a beautiful new york. this is bloomberg. ♪

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jonathan: two days without any gains on the s&p 500. will it become theory? equity futures negative of .1%. on the nasdaq down .2%. two year for 11. it spent the whole week above 4%. claims coming in a bit higher than anticipated. that trend, is it a trend? yields lower by three basis points on the two year to 411. your 10 year 3.5261.

euro-dollar tight trading range. 1.0964. the fed largely committed to more rate hikes -- uncommitted to more rate hikes. lisa cook on top following a slew of officials making the case for walmart to breed philadelphia fed president saying, rates are close to where we need to be, we need to be cautious here to not just respond to the current level of inflation but where we think it is going. this is interesting because mohamed el-erian talked about this yesterday. he said this fed is too sensitive, to date of and issa take a longer term view of where they think -- and it need to take a longer term view of where they think it is heading. lisa: do you think they agree on the longer-term view? jonathan: no. lisa: fundamentally we do not know where the destination is and it is coming at a time where

paul's talk, what is the threshold to cut because right now we're still pricing in cuts in the market this year. does the fed let the market decide for them which is how they have been operating for time now. jonathan: let's talk about the range for fed funds next year. 3.4% to 5.6%. they have no idea. lisa: if it we talk to you, miss, they do not have an idea either. people say it is a difficult time and underpinning what will be the data we get at 9:45 a.m. which is a complete bifurcation between manufacturing and services. how do you put those two things together when it is psychological? people want to explore. people are willing to spend what they have an experience but they have bought the stuff they need to. jonathan: his flying an

experience? lisa: it is an experience. it is a whole trip mentality. jonathan: ceo said this week, boom ier and boom ier. lisa: and that is for a budget airline. we all talkwe all talk about wep flight prices and how much they have gone. jonathan: alan ruskin joins us now. great to catch up with you. we are discussing this last hike. people i know do a lot of work about the last interest rate hike and what happens after that. it is always easy to identify the last hike with hindsight. we think it is easier this time around to went the last hike of the cycle is going to be? alan: i do not think it is easier. i agree with the discussion you had earlier that the fed and the market are facing uncertainty. we do not have a huge amount of

experience in credit charges. we have to go there to 2008, a unique experience so otherwise more familiar early 1990's. there is a sense that credit conditions are tightening sharply from the quantitative standpoint but when you look at financial conditions from a price standpoint they are easing. it is this dichotomy the fed wrestling with it or not enough history to understand the quantitative. i can see why you might be -- ca paul's and the reignition of a rate hike in this cycle. i think in that sense the issue is more problematic than usual. lisa: what are you looking at when you talk about that given people say inflation readings are coming down quickly than expected? what do you push back

against the idea that perhaps the fed is underestimating the impulses? alan: you're looking at the differentiation between what's going on in the good side where you are seeing excess supply kicking in where supply looking at being unable to meet demand. and supplied deliveries improving quite dramatically. the good story is real. services side is much more problematic and again there seem to be underlying demand. you got like in europe today, you saul in the u.s. as well where service sector is outperforming manufacturing and all likelihood services inflation and wage related inflation relates to the service sector, it is going to remain

pretty stubborn. i do not think the fed is going to be in a position to cut rates easily. the talk from the central bank is that there's going to be more of a plateau period they cannot cut rates quickly or shipped from rate hike to rate cuts quickly. lisa: many people reading this negative as the dollar and is probably why we see the strength in the euro. how does that play out for the remainin -- remainder of the year at the fed fidgets with one more hike in may into signals that is it? alan: when you look at the way markets have traded once you get confident that the fed rate hiking cycle is done, there is rails standouts -- real standouts. you get the dollar generally weakening. i do not think it's going to be

an exception this year perfectly in the context of the ecb hiking rates when the fed might be cutting rates. maybe towards the end of this year. that is the central view that is out there. simply because it is partially priced, the euro still got plenty of run and it is also happening against the background where european position is improving and related to the interest rate changes, the capital flows are improving as well. jonathan: when you say more room to run, what you mean by that? alan: we have been quite conservative in forecasting 115 at year end. that is the forecast. in terms of how high can go.

typical ranges for the euro or at least 10% -- are at least 10% in year were there is reasonable volatility. the broader point is not where we end this year. i think it is a trend you continue into 2024 you start to get into a much more serious february cutting cycle and you're talking about 120. jonathan: you touched on the projection that under pretense the projection -- underpins the projection. i think we have a decent idea of terminal rates relative to we think the terminal rate might be at the ecb. is that the way you think -- see things? alan: not really. i think we could see a terminal rate that the market pricing -- the market is pricing roughly 3.75. some are close to 4% i think is reasonable. the markets underestimate the

extent to which labor market in europe is tighter than almost anywhere else in the rest of the world. i think there is pressure from labor market walmart -- untoward that will keep the ecb on a tightening case through 2023. jonathan: thank you for that. a way of saying ecb might go higher than you think they're going to go. lisa: america's want to visit europe, they should probably do it now than a year from now with the dollar is going to be weaker. that is what i heard. maybe i am hearing quite different. if this cheap option to go to europe is looking less cheap, putting out fictions of airplane cost and hotel bills.

i felt like i am in tom keene seat and tell the kids spirit in terms of the linens i am viewing it in. jonathan: it is highly dependent on the rest of the world. if you get the federal reserve cutting interest rates and the rest of the world is still doing ok, the idea you get a weaker dollar off the back of that make sense. if the world is not doing ok, the federal reserve cutting interest rates and you have problems in europe and china fade but you wonder if you go to the other side and the dollar star symbol form. i think that is a different argument. do not think that is the consensus view based on the numbers from europe and numbers from china earlier this week. lisa: both had the same message which is europe is an attractive place to go right now versus the dollar. you graze a great question what does it mean on a broader scale. the other think he said the divergence with manufacturing and services, he thinks it could resolve to mean inflation stays higher for longer.

people are looking at the manufacturing sector as a leading indicator for everything else where everything else is going to go and eventually will cause this downturn. he sang it is the opposite. you see this push pull start that could lead us with a sticker type of inflation i do not hear people talking about. jonathan: relatively speaking people more nervous than u.s. economy then europe. the socgen put out research and said the rise in initial jobless claims, we witness yields lower, bonds up. investors on edge waiting for the next shoe to drop. risks remain skewed to the downside on interest rates. i keep going back to the range. pre-svb highs north of 5%. post svb lows in and around 350 and two years somewhere and between right now. the bias if you asked people in

fixed income seems to be to lower yields again. lisa: the bias is what we are seeing with respect to credit tightening, which we cannot gauge is significant. that is the implication that it will end up bringing down inflation substantially. i'm curious if alan ruskin will agree with that because his view is perhaps inflation is stickier for longer and it seems like a narrative has been cast aside for the moment. jonathan: inflation and tesla up next. price cuts yesterday, price hikes this morning. year-to-date doing better than good. >> keeping up-to-date with news from around the world. in the u.k. complaints by government workers have brought down prime minister rishi sunak's close ally. dominic raab if resigned after

an independent investigation criticize his treatment of civil servants. they probed into accusations of bullying lasted months and it threatened to undermine rishi sunak's place to restore professionalism to the government. u.s. once the cut its dependence on taiwan's microchips because of concerns that china might invade the island. colonies and facials are quietly urging their american counterparts to tone down the rhetoric's. there weren't u.s. comments arming their injuries. president biden may formally announce his campaign next week. plans for the possibility of making a video announcement to coincide with the anniversary of his previous campaign launch. he has been signaling he intends to seek a second term next year make it is somewhat of an open secret. as the canada police are investigating an airport highs that may have resulted in thieves getting away with millions of dollars worth of gold and other valuables.

police say it -- a container with gold and other items were taken from an airport holding area. glencore unsaid for another bump your year of trading commodities. energy partners continues to be strong while it is trading business is booming. also trying to expand is mining operations. this in the middle of a fight to by canadian mining rival teck resources. global news powered by more than 2700 journalists and analysts in more than 120 countries. i am lisa mateo. this is bloomberg. ♪

>> anticipate monetary policy will lead further into restricted territory this year. the fed funds rate moving about

5% and real fed funds rates same positive territory for some time. the fed has been focusing on lowering inflation which is essential if we want to support a growing economy and rising incomes. jonathan: lisa mentioned this, the fed speak yesterday sounding very similar. cleveland fed president, federal reserve governor they're weighing in on all of this and sounding the same that were going to go one and we might be done. lisa: that is clear in the trajectory they are after. let's say finish where they end, may 3 when they hike rates by 25 basis points as expected. how quickly do they cut? was the threshold for them to make a move lower? jonathan: mohammed's range of outcomes, you pause or you pause and the you have to cut are you pause and the you have to hike. alan ruskin a bit of doubt around that story.

lisa: he's alone. i do not hear a lot of people talking about that. it is compelling because of what we are seeing in the stop start economy. is there no fear of the fed is a possibility or how they discounted the fear with the softer inflation data? jonathan: i mention people who come on the program seem to be more nervous about the economy than they are the european economy. for a number of years said if you think in terms of potential policy mistakes the risk askew to europe rather than the united states. that's an interesting way of looking at it. lisa: this has been narrative roulette. it is exhausting. i think the trading range is interesting and knology's case lack of direction because people are not sure what to make of the

next narrative at play. jonathan: let's talk about tesla. yesterday price cuts again. this morning price hikes, specific ones. they have increased prices of model s and model eggs and those vehicles in the u.s. after steep markdowns we have seen, yesterday the stock hammered. this morning the stock looks like this positive .5%. dan ives joins us now. can you frame the strategy here? yesterday cuts, this morning hikes. what is happening? dan: they're trying to find the balance because right now it is about the driving demand, also aggressive because a confrontation we are seeing globally. i think we continue to see this. some cuts, some hikes over the next few months you will start to see it level of. it speaks to what investors have because of margins and it is why the stocks. lisa: this flip-flop inc. of

cutting or raising prices, would random approach in how he is signaling to pricing? dan: a lot of it is inventory driven. as well as what they are seeing in demand. for month-to-month they can tell they cut too much or maybe they need to cudmore. they're trying to find that balance. we look at s and exit is different with model line three, you start to see a leveling off from a supply and demand. model three is really the focus in the street in how many more price cuts, for the margins look like because right now they're going to go -- they're going game of their own style in which they are doing from a pricing perspective. it is great for demand. what margins continues to be -- but margins continues to be the elephant in the room. lisa: tesla is not just an

idiosyncratic story. because it does signal this need to cut prices and disinflationary for his. how much do you expect to see that as a theme leading through tech earnings we get next week? dan: i do think it is separate from what we are going to see next week. if i go back a few weeks when apple, iphone demand continues to be resilient in the storm. cloud we look at microsoft, amazon, and others. we are starting to see some stabilization relative to what we saw in december, january. in tech stocks and going into earnings is a greenlight to continue into the tag. this earnings season is something more investors are going to start to dive back into tech rather than fearing it in fundamentals are starting to stabilize. jonathan: dive back in? talk about your to date. what do you think people have

been doing already? they have ripped. dan: no doubt from an institutional perspective still many hate the rally. many on the sidelines ultimately bidding against tech. he look at what is happening in numbers that are starting to stabilize. they ripped the band-aid off on the guidance. big tech, apple, google, amazon these are stocks that 15% for the rest of the year led by apple. jonathan: you mentioned the cloud the story. there is massive pull forward in demand for a range of things across the spectrum to the pandemic. i wonder how much the call story has become a cyclical issue for some these companies. what is your view on that? dan: we will see with microsoft.

the big issue is a lot of companies, budgets were not said but they are halfway through massive cloud employments. you're starting to see more and more. only 45% of workload in the cloud. i believe that goes to 70% in next two years and names like microsoft continue to see shared gains versus the likes of amazon. google is another one you could see success. these are sectors. we are bullish going into earnings. lisa: what about disappointments. rates begin with luke over and he said if there is earnings this appointment will be earnings because people are waiting for the cash payments to continue to be cash payments. do you agree? dan: no doubt the. you have cook and dell and

others and you're going to see in -- it is almost a fork in the road where you see weekends play out. there are still some broth and this is ultimately going to be a divine eke earnings seen -- a dividing earnings season. i really enjoyed this year in the way tech a spank out. especially as we go into earnings season. jonathan: there was a glimmer of bearishness they are. can you build on that? dan: what i'm saying is this is not a rainbow and champagne background. you're going to see fall by the wayside. competition continues to increase you have to pick of the right stock. were going to see play out in -- during earnings seasons.

when it has a cyber security cloud, i continue to viewed as a greenlight going into earnings. jonathan: ok. we will touch base when we get these earnings. amazon, microsoft, google all next week and i think after that apple, early may. lisa: the bifurcation between social media stocks and the others, i wonder how much china gets mentioned in these whether you hear mutsa come out and saying we're doing ok but when tiktok comes under we're going to crush it. how much is that going to be the underpinning of some of the discussion? jonathan: the stock is up close to 80%, up 77% you today, meta. the year of inefficiency. lisa: how much is it the year of competitive advantage because of geopolitical issues? saw huge pop in meta and a snap. we did see results from taiwan semi manufacturer and it was

disappointing. where is in chipmakers that have not seen the dark cloud rollaway? jonathan: you mentioned china. the president is going to announce something about curbing investments in china. annemarie is going to join us to discuss that, also exclusive reporting, the president may announce his reelection run, officially. didn't they say after the holidays? lisa: we have been waiting for this. why now? is it because the former president trump is ramping up his advertising campaign? jonathan: maybe he was right. we thought christmas, he meant easter and no one knew. it is coming, apparently. maybe. we also catch up with priya misra.

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>> this is a frustrating market for both bulls and bears. >> we are still dealing with the echoes of the crisis which are going to slow the economy and make recession more likely. >> we have not seen u.s. growth deteriorate that much yet. >> this lingering concerns over credit tightening. >> we have to keep in mind in tightening financial conditions is why the fed has been trying to do. >> this is "bloomberg

surveillance." jonathan: live from new york this morning, good morning. this is "bloomberg surveillance." equity futures down .2% on s&p 500. over the last couple of days we have gone without gains on the s&p 500. what we make it date three? federal reserve for monday away from a quite period until the next fed meeting on may three. the decision expected to be interest rate hike. after that the guidance is clear, president bostic that the restrictive action at way through. president harker let monetary policy do its work. we are going to hear much of this over the next. lisa: we're going to see what happens. people take that as we're going to cut rates and it is over. how do they push back against that, signaling they are more

patient? they still view the risk of inflation as significant despite signs of disinflation. jonathan: bank earnings early this week. smaller names, tech coming up next week and may you could apple. may 4, apple. microsoft, april 25. google, erbil 25. amazon, april 27. lisa: i do wonder if we see pressures that we saw. yes he reports in chipmakers showing -- mesirow sports in chipmakers showing slower demand. how much are they going to be winners and losers? dan i'm saying is going to be a pivotal earnings season to determining who is going to going to get stronger and who is not. that's what we heard from luke kawa as well,

well, jonathan: tesla has been cutting prices of vehicles the last few months. most of this year. i think it was close to four. cut prices, increase volume, tank market share, sacrifice profitability. the stock got hammered on the back of some of this. this morning we get price hikes on two models, model s and model x in the u.s.. the stock is up .5%. who is the winners and losers? the takeaway was that their price cuts are everyone's else's problems. yesterday did i become tesla's problem to see? -- did it become tesla's problem too? lisa: it has at a valuation story more than dominance and electric vehicles -- it hints at a valuation story more than dominance and electric vehicle. you heard from fort is going to become their problem to and their margins are smaller than tesla's margins but here we are

in scenario for we are questioning valuations. it is not about survival and it has to do with tesla and regional banks and more broadly with markets. jonathan: tesla investor group, coalition of 17 shareholders who hold more than $1.5 billion of texts -- tesla stock. that is not a great deal of stock they hold but a significant enough we should have a conversation about it. a group of investors -- tesla investors have accused the company of mismanagement and seeking a meeting with its board discussed the performance of ceo, elon musk. concerned that he is the because he's overcommitted across too many companies. lisa: he's always been a keep man at risk. we hear this every earnings season. whether he is smoking up on a call or -- pot on a call. his rockstar status has been a point of angst for the company

and a driving force. how much is he real time trying to price up the market in a way that is more transparent than other vehicle makers and other manufacturers? jonathan: according to an open letter they sent it a charwoman and one director, they want the board to come up with a plan and seek to remove directors too closely tied to the ceo. i do not think the issues are new. they have been around for a long time. lisa: it is always been an issue. it is all what are you doing. we want more strategy -- clarity on your strategy. jonathan: the stock is positive .7%. to lower it by a single basis point. no drama here. lisa: by begetting regional bank earnings throughout the morning and throughout the week. we get fed data on commercial banking at 4:15 p.m.. it is the drumbeat to may 8 want to get the senior loan officer

survey to get a sense of deposits and loans created. 9:45 a.m. in u.s. services pmi and composite reading. we got earlier the european read, composite look good. completely story you're looking at services which beat or manufacturing which missed. does this mean inflation is going down faster than expected or is going to be stickier? choose your narrative and you can plug in the numbers to back it up. fed governor lisa cook speaking at georgetown university. i more curious less about how much they're going to hike rates and much more about what the threshold is for them to start cutting. how high is that a bar yet? how much are they looking for economic weakness? core inflation having to stay there for a time.

jonathan: how far are they going to hike to how far do they cut? the process seems to be continuing. do you expect it to accelerate in the coming months? >> we do. the fed still hiking. qt ongoing. long and real rates high and now you have the bank tightening lending standards. it is not an idiosyncratic mismanagement of a few banks. this going to have long-lasting issues. deposits continuing to fly outs of banks into money market funds. the banks are going to have to cut landing standards -- lending standards. even if you ignore cr e, as lending slows down's, our view is it accelerates. things are slowing, i do not think i can point to any data and say here's the recession. the speed of the decline, particularly in high fricassee

data is what we're looking at and end our view is going to celebrate and to the second half. -- accelerate into the second half. the data is flowing. it is not obvious right now but we do think it all the signs point to accelerating into the end of the year. lisa: i would love your take with respect to the divergence we see with respect to manufacturing and services. this assigned if the fed pauses they may have to -- it's a sign at the fed pauses they may have to hike again. do you agree that there is actually a risk signaled by the operations -- the operations and inflation is stickier than it people expect? priya: believe there are structural factors. i would say in manufacturing is a cyclical industry. it typically slows down before services.

services have been strong because consumers have a safer buffer and monetary policy works with a lag. manufacturing as a harbinger for the fact that services is going to slow down. as the savings buffer comes down and i cannot max out my credit card and cannot get a credit card, it is when consumer spending starts to slow down. our view is that that is going to be torn between inflation north a 2%, with the unemployment rate starting to rise. we do not know their pain threshold. i think the market is going to grapple with that for the rest of the year. services going to slow down. hiking again, that -- we should talk about that in 2025. they will have to cut rates. they're going to have to take rates into a accommodative territory. rasul -- at the economy is in a recession at the end of this year, we will talk about how low they are going rather than stopping around 3%. lisa: lots people do not think

the fed is going to go back to the low rates we saw pre-pandemic. are you saying zero or half percent is on the table for a fed funds rate? priya: i look at real rates. real rates should be closer to zero or negative. if inflation is 3% next yearm or 4% next year, how low can the fed go in terminal rates? i do think the an implement rate is rising, we see it peaking at 5.5% next year similar are of the saving and loan crisis. if you get that much weakening in labor market, the fed has to take real rates narrative. i do not know about zero but can they get to 2% on fed funds? at least get rates that load. market is not a pricing that. we should keep an eye on inflation but those real rates. real rates are well in restrictive territory. that's what we will be watching.

right now they're in a bind. i did not eat they can signal any near-term cuts. our view is they start later in rate cuts. there going to be pulled in integrate cuts. -- into rate cuts. jonathan: also to get your perspective. looking for a 5.5% unemployment next year. the federal reserve is at 4.6% in 2020 four. 4.6% on unemployment in 2025. later this week, the bank struggles -- he said the bank struggles because it implies and implies they are doing something wrong can also went as far as saying it could be self-fulfilling and could lead to something bad. lisa: he said they did not have the luxury of saying what they think is going to happen objectively because they are active and they are having to control the message a bit in to

signal a degree of confidence or degree of steadiness they want to the market to follow, which again goes to the point you made, soros self fulfilling prophecy. the federal reserve is trying to signal something but also contain is credibility. jonathan: they can shake the events they anticipate to some degree. neil dutter is going to join us later on this morning. look out for that conversation. tennille's point, they're still at between. the fed assays where they are they're going to cut more than you think. we catch up with annamarie in washington dc. the latest down in washington. president biden looking to formally launching his reelection campaign as early as next week. that conversation up next. >> keeping you up-to-date with

news around the world. in the u.k. prime minister rishi sunak deputy dominic raab has quit after an investigation into bullying complaints. the probe criticize his behavior toward civil servants. it is a major blow to rishi sunak. he is trying to present his government as a contrast to the boris johnson era. federal reserve officials are backing another interest rate increase. at the same time, they are monitoring the economic fallout from stresses on the banking system. cleveland fed president says she favors getting rates about 5% because inflation is still too high. at fed president says he backs a one and done rate hike approach. president biden will crackdown on u.s. investment in key ports of china's economy. bloomberg has learned he was signed executive order in the coming weeks that will limit investing from chinese semiconductors, artificial intelligence, and quantum computing. the president is hoping to get the backing of g-7 partners.

elon musk is doing and about a phase. after saying he will continue to drop the prices of its electric vehicles, tesla is increasing because of his model s and x vehicles. prices will be bumped up by 2500 dollars raising the cost of sedan suv by 2% to 3%. markdowns this year took a toll on tesla shares. global news powered by more than 2700 journalists and analysts in more than 120 countries. how lisa mateo. this is bloomberg. ♪

>> national security is paramount importance in our relationship with china. even though these policies may have economic impacts, they are driven by straightforward national security considerations . it will not compromise on these concerns -- we not compromise on these concerns even when they force trade-offs with our economic interests. jonathan: janet yellen on the relationship of the united states and china. national security concerns trumping economic interests. the latest today president biden aiming to sign executive order

in the coming weeks that will limit investment in key parts of china's economy by american businesses. will pick up on that story in a moment. where down .2% on s&p 500. softer this morning. a couple days without gains on the s&p 500. in the bond market, violence not doing much. joining us now as he, -- in washington annamarie. the report that may be next week as the week where the president announces officially he is running. annmarie: the president has said in ireland soon he would be making the announcement and we have seen everyone in his inner circle and most importantly, the first lady come out and say of course he is running but he's making this announcement potentially next week, nothing

is set in stone is gay video that will be released. potentially this is even a soft launch because it is -- does not seem like it is going to amass a huge campaign event if it is just a video with the president saying once again he is running, he will also start taking meetings with the donors. it does look like they are trying to set the scene. there have been debate about whether or not he should announce for 2020 four officially as soon as or put it off because he is the president of united states and once he announced, he becomes president joe biden and potential nominee for 2024. lisa: why does it matter in terms of exactly when he decides to run and what that can signal? jonathan: -- annmarie: they want to set up the donor meetings and make sure they can get campaign staffing in place. make sure they're going to have campaign management. it does seem like he's probably

under pressure within the democratic party because those whispers are still circulating about whether or not it should be the individual to lead them into the future. 80 years old right now he's the otis u.s. president and if he takes the u.s. mechanic party into 2024 he will be 86 years old at the end of that term. his age has been a big concern and they're probably under some pressure to make that decision and start looking at it as the republican rates for who is going to be their candidate is heating. lisa: as he talks about this, he onto bipartisan agree to talking point of how to deal with china right now and we heard the biden administration is playing -- planning to unleash provisions of restrictions on u.s. investment in china. we have a sense of what those might look like and whether it is been expected by people in the market? annmarie: do not know exactly

what is going to look like but will probably start targeting those investments into companies or technologies that can advance chinese military. the same way you are seeing advanced technologies u.s. curve in export control. one thing administration has tried to do is make sure they can gain the support of allies as they try to confront a china on this economic basis which is why you see potentially this going to be a huge story at the g7. biden wants to make sure other countries are looking at similar ways to curb investment into china so they are not going at it alone appreciate we still are waiting for details on this but it comes at a time when tensions continue to ratchet up beijing and washington and so much of this has to do with what is going on in taiwan. jonathan: let's talk about paris and washington.

what is the president say to the french leader about this pledge? -- this push? neil: they had a phone call and the readout came they talked about china and maintaining a safe and independent taiwan strait. for me reading the tea leaves, this phone call potentially was may a talking to to the french president to make sure they are on the same page. what you have seen, french officials try to walk back and tone down some of the rhetoric we heard from their. it is going to be slightly awkward because he said these things. he talked about europe not becoming a vassal between u.s. and china. he talked about strategic autonomy. talked about not wanting to decouple from china. the issue he has as he does not have the backing of european allies on this. ap leaders and officials uncountable with the comments

macron has made. jonathan: wasn't there depomed expect under president biden -- diplomatic spat under president biden? annmarie: it is something our strain is may be saw and underscores the reason why they ditched france for the partners they took on in the end, which is united kingdom and united states. we recently saw per minister -- alongside the president in california talking about the submarines. there have been a few spats between paris and washington throughout this administration. this is a little bit of how emmanuel macron likes to have is the. we saw him go speak to plate when people were concerned he would not be able to make a breakthrough. he tried do the same thing with

xi jinping. to get china on board to work out a peace agreement, putting pressure on moscow but for xi jinping it was a huge coup. emmanuel macron trip was a huge coup and underline who was he there with him in a difficult position. jonathan: then you think come out from her side whatsoever? annmarie: everything was overshadowed by emmanuel macron. it is what the chinese government wanted to push forward and it was not just the trip, but the interview he gave to french journalists and politico on his way back that created even more tension and drama. jonathan: thank you. wonderful to get clarity from you. 5 p.m. eastern time speaking to kate hutchison, former u.s. ambassador to nato. some of these leaders, they love

playing the statesman and. they are desperate for it. those kind of personalities that want to be seen on the international stage saying big things. lisa: dealmaker and bringing together the powers while their world burns. it is the theory and the place that emmanuel macron god. it is interesting we did not get anything from the line that was memorable. it is really telling at a time when even germany, they acknowledge potential risk for china, that economy cannot decouple right now from china. if you look at all you manufacturers, they are reliant on purchases from china. this consistent across the board. how much of that underpinning the strength we are seeing in europe? how much is emmanuel macron saying the apart out loud? jonathan: can lvmh decouple from china, i do not think so. lisa: how much is emmanuel macron representing what a lot

of companies feel, not only in europe but also in u.s.? jonathan: remember the lead up to the war, italian business lobby, they were still holding meetings and business in europe wanted to keep those ties and i imagine they will want to keep the ties with china regardless of what happens. lisa: what the meat is behind janet yellen saying national security because before economic interest. jonathan: dan suzuki joins us next. your equity market -.2%. this is bloomberg. ♪ ♪ it's just a bike. wait. they make a treadmill with an intuitive speed knob? yeah. want to try? 92% stick with it, so can you. start a 30-day home trial today. terms apply.

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jonathan: equities negative on the s&p 500, down .0 2%. all the nasdaq, down 0.4%. in the bond market, we look at this are the two-year yield. north of 4% all of this week. down a couple basis points. down a lot more just yesterday off the back of softer than anticipated data. jobless claims a little higher. the fed not looking to descent. encouraging one more hike and then saying we are's for the rest of the year.

we heard from at least six of them. no more fed speak until the decision on may 3. and all to be ecb on may 4. the is backing away from 1.10 to 1.09 this morning. totally unchanged. snoozing to close out the week. lisa a: it is interesting because there is a lot under the surface but it speaks to a lack of conviction everyone has. if you want to look for conviction, it is in the recession and manufacturing that continues. tesla shares are up a whole half a percent -- up by 0.5% after elon musk was saying he is going to cut prices. the shares are rebounding a touch but yesterday, they were pummeled on the idea of getting their prices cut. raising questions of whether we

end up in a disinflationary spiral that is more broadly applicable to a wider range of companies. you are seeing this. overstock.com, furniture providers put out a note, downgrading both of them. i wonder if this is a specific set of home furnishing and if this continues to be the shape of recovery for people looking for a medium and low income furnishings rather than the highest income which continues to produce some returns. overstock is down almost 3%. big lots down more than 6%. remember when overstock had a huge pot on just -- pop on just mentioning bitcoin assets? talk about a complete about-face just mentioning some names where you are seeing froth taking down some markets and market narratives when shares are down around 30%. jonathan: you just have to put ai in your name. 2017 or something like that,

when everyone started putting crypto in their names. long island iced tea? something like that. lisa a: it was a ridiculous story. now the question is, that is dead and not going to do anything or prop up share price. do you think ai will work? if you say chatoverstock.com? jonathan: yes. williams-sonoma is negative. the real test if you go around the corner and design is businesses because things cost a fortune. lisa a: yes, but it is really nice. jonathan: just to look at a $5,000 chair. if you ever bought it, you would never actually sit in it because you are to's ear to break it. lisa a: we talk about hermes bag and lvmh and williams-sonoma doing better. in some of these others.

is that a sign of what we are seeing on the margins are people who have to pay to the two discretionary? jonathan: are you the kind of person who buys a sofa and put plastic on it? lisa a: i am not. i am not from 1946 in long island. jonathan: is that something they did in 1946 in long island? [laughter] dan suzuki joining us. great to catch up with the. you know you start was financials and you shift to technics we. what is the take away so far for you and your team? dan: it is still very early in earnings season but the take away is clear that growth continues to slow and that continues to pressure profits and put us further into the earnings recession we have already been in. nothing is collapsing. there is a lot of fears that carry over from the banking crisis and things were going to fall apart. that is not the case but things

continue to get worse. this benefit that helps companies over the last couple years has really started to bite. jonathan: we are starting to see them cut costs. meta going through a year of efficiency, making cuts. the stock is up 7%. can they cut costs quick enough? dan: i do not think so. i think that is evident in the data. you look at these companies. when have you seen companies cut their workforce to keep up with topline growth, such that there margins are expanding? that is the hope here but that is rarely the case. if growth continues to slow, i think this will hurt them more than they can make up for on the operating line. lisa a: we are talking about tech as a holistic group. dan ives was talking earlier about how this will be a defined season of winners and losers and the consolidation of market

share and power. do you disagree? dan: to some extent, that is right. they can about the word tech. it has been less and less meaningful at this point. from an investor sentiment perspective, it is very meaningful. but tech is part of everything. that is why they keep reclassifying indices because you have to think about tech in terms of markets. the end markets have different demand drivers. i think you will see different -- quarter to quarter, there will be differences in timing and the fundamentals. ultimately, when you look at tech, reality is people got so excited about all these companies and they all benefited from this turn into a bubble. as this deflates and people realize there is more to the world than wiener dogs and metaverse, as my boss likes to say, then you have to focus on real things and real assets. lisa a: let's stick on the text

theme and what we expect from next week, given the fact we could get a tipping point in terms of sentiment. these are dominant players in the index. do you think this will be a make it or break it's already seasoned not only for the tech players but if the shares -- break it earnings season the only for the tech players but if the shares selloff? dan: by definition, if shares selloff, it will be a make or break corner -- quarter. this is probably the long way to -- wrong when it think about it. as you see over the last quarters, they get further into negative earnings both but they had rallies along the way. i think it is sort of the compounding of worse and worse fundamental data to the point where you cannot justify the valuations for the tech sector are now 25 times. at some point, the market starts

to come back to reality but make or break corners is putting a lot of pressure on one print. i think this will be a combination of their earnings fundamentals combined with what is happening in the macroeconomy. he put it altogether at the time he does not come out until they report earnings. jonathan: we need to build more on these names in tech that were considered offensive through most of the last decade, flattened by where interest rates were. a lot a people used to say they were damaged because of the tailwinds. you see it quite the same way as other people did over the last 10 years? are they far more cyclical and more sensitive to the cycle them people are letting on? dan: if you just dispassionately look at the data, even the last decade when they were considered offensive, if you look at their earnings and put covid aside,

which a lot of companies did benefit from earnings as the world was -- the economy was collapsing, but if you put this aside, almost every single cycle, their earnings have been some of the most sensitive to the cyclicality. nothing has changed there. we are not saying it is worse or better. people just under appreciate it, especially since their last example of the recency bias is the pandemic. they are very cyclical companies. if we go into a recession or a maybe -- or a major slow down, people will be buying less expensive ev cars and 1500 to $2000 phones. this is the normal cycle. are not saying anything profound. we are just saying, you should expect fundamental things to occur. lisa a: the markets action has not really. dan: i think that is to be

expected. our point to investors has been that bubbles do not deflate overnight. if you go back to the inflation of the internet bubble, it took 2.5 years and along the way, you had multiple rallies. 16 double digit rallies. this is to be expected. people love these parts of their portfolios and they dominate their portfolios. they will not go out without a fight. every opportunity of optimism, people will rush back into things. that has always been the case. that is what history has borne out. looking away for the real opportunities out there that are underappreciated overlooked -- or under looked, they have underperformed. granted, they have underperformed for a decade. jonathan: thank you. dan suzuki at richard bernstein

advisors. the course so far this week is it is a process, not an event. seems to be a trend. this or what will happen with financial conditions. they want it all at once, a special program. lisa a: a sunday special. to tell us what to expect. if it will not be delivered this way. how do you remain patient when you want a story borne out by fax it is not reflected in the market action? jonathan: you nailed it. it is so frustrating to mail this and get the market call wrong. look karo was talking to us from pbs earlier this morning -- luke caro was talking to us from pbs earlier this morning. the tech part was not a future. lisa a: this is why it was a difficult market because every time you look at fundamentals and try to come up with a story,

you get your face ripped off. it is a difficult moment and that is what that is facing. people who are looking at the fed guidance and got frustrated with the lack and now we have from andrew hollenhorst that they will be wordlessly watching. i love that phrase. jonathan: so they will be upgrading growth and inflation forecasts. did you see that? what does he expect? lisa a: andrew hollenhorst has been really sticking with expecting inflationary rates to get higher. jon: -- jonathan: andrew hollenhorst looking for hikes in may and july. that was not a cyclical test for the tech companies. lisa a: quite the opposite. jonathan: quite these companies in their cyclical form had a test. neal dunn to of ren back -- neil dutta of ren mac.

lisa m: keeping you up-to-date with news from around the world. with the first word, i am lisa mateo. deputy prime minister dominic raab resigned after an independent investigation criticize his treatment of civil servants. the probe lasted months. it threatened to undermine rishi sunak's pledge to restore professionalism in the government. the u.s. wants to cut dependence on taiwan microchips because of concerns taiwan may invade the island. now taiwan is urging their american counterparts to turn down the rhetoric. are worried the u.s. commons are harming their interests. president biden may formerly -- formally announced his election bid as early as next week. there are toying with making a

video announcement to coincide with the anniversary of his previous launch. in the u.k., two insurers have become the first major companies to quit the confederation of british industry. this follows a report involving allegations of a second case of rape at the business lobbying group. avina -- aviva says the cbiz a longer able to represent corporate britain. markets, headlines, and breaking news, 24 hours a day, at bloomberg.com, the bloomberg business app, and at bloomberg quicktake. this is a bloomberg business flash. -- global news, 24 hours a day, on-air and on "bloomberg quicktake", powered by more than 2700 different journalists and analysts in over 120 countries. i am lisa mateo, this is bloomberg. ♪

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harnessing data-driven insights and boundless curiosity. we dissect the market from every angle. helping to build portfolios that redefine what's possible. because investing isn't one size fits all. allspring. purposefully divergent. >> united states will assert ourselves when our vital interests are at stake but we do not seek to decouple our economy

from china's. a full separation of our economies would be disastrous for both countries. it would be destabilizing for the rest of the world. jonathan: janet yellen, the u.s. secretary of treasury, announcing her speech on the relationship between the u.s. and china. from new york city, welcome to the program. on the s&p 500, negative 0.2 percent. on the s&p, yields doing absently nothing. the 10-year yield is unchanged. the u.s. dollar fell by a tent. a bit of euro strength, some dollar weakness. this time last friday, 1.1076 with the new intraday on the year up on the currency. and a current joins us now from

washington, d.c.. the bloomberg correspondent now based in washington. we heard from the treasury janet yellen, framing what she thinks the relationship should be between the u.s. and china, and pointing out emphatically there should be no decoupling but ultimately security concerns are paramount. andrew, i wonder how the chinese government has responded from the comments just yesterday? andrew: it sounds like they were not accepting janet yellen's message. overnight the spokesperson for the foreign ministry said the u.s. is trying to choke china's economic output. they said it was economic coercion. as you mentioned in the treasury secretary's reach, she went out of our way to make the point that we are willing to take an economic hit on national security grounds when it comes to competition with dina but also stressed it was not about trying to contain china and a

lot of people were skeptical on whether or not the message would be received in beijing. obviously, they are not seen it that way bar seeing it as if the u.s. is trying to ring fence china. we hundred comments and they spoke to western business executives. he was pushing back against some criticisms toward china especially criticisms toward taiwan. there was interpretation that janet yellen was being hawkish also middle ground and an all of branch over whether they can operate. beijing is just saying you are trying to choke our economics. lisa a: that was not the big surprise. we expected them to take it that way. what is more interesting to me is whether the g7 response will be and that the u.s. is seeking approval of g7 leaders to approve these curves on investment in china. what is the response like on the other members of the group especially after signs of

division on the margins with not only but most prominently emmanuel macron? enda: it will be interesting to see what kind of unity they get among the g7 users. france is sending mixed signals on where they are when it comes to an alliance that has been built against china at the moment. china has been active on the global stage in recent weeks. not just with g7 members but beyond. we had a visit from joe selman the last week talking about an alliance there. the point being it does not seem everybody is on board the u.s. narrative when it comes to china. this may be a harder sell than it looks for the u.s. in terms of getting everybody on the same page, g7 economies in particular, to agree on these investment curves. we know some companies are probably well underway. it has been signaling it is on

board for the u.s. approach but not everybody is there. france will have skepticism when it comes to this. lisa a: as we get into this back-and-forth and understanding where we are, sometimes i lose the plot when using out of how much has changed with china's economy. and its role geopolitically as it befriends saudi arabia and connects more closely with russia. how different is now versus three years ago when it comes to both of those issues? enda: there is this idea of political blocks building around the world. the narrative a few years ago was there were genuine complaints against china on economic grounds on the transfer of technology and fair access for markets, with a broad consensus among major leading economies. now, we are getting into fragmentation. we have saudi arabia peeling

away from the u.s. and closer toward china. then we have the china-russian -- china-russia alliance. president z shipping what to moxa -- president xi jinping went to moscow. there may be some unity among the u.s. and western europe on some issues when it comes to china, but there is not an overall global approach to this issue with china. and even within the western europe alliance. francis also -- france also has a different view. the alliances are more fragmented and it continues to change to what it was even when people -- when president biden took office. jonathan: and two there are two sides. on hong kong a few years ago and now in washington, d.c. what is the difference between the way the chinese government use the u.s. and the way the u.s. government views the chinese

government? enda: tensions are high. once upon a time, hong kong would have been mutual ground. china can do business there at the u.s. can't do business there. i have been struck by the sense of urgency in my very short time in washington with this idea of fragmentation. it is very real here. on china's side, they are very determined to protect their investment and are going around the u.s. which is why they are reaching out to brazil, saudi arabia and russia. they want to circumvent the u.s. approach. jonathan: that is exactly what i wanted. thank you. enda curran in washington. the push is real. we saw this at the imf at the spring meetings. this is why there is a push at the imf that rates could return to pre-pandemic levels because the push is only accelerated. lisa a: i think about what telling walt set a while ago when it came to a single of

global demand and gazed the china reopening. she sent saudi arabia holds the key and is having conversations with china about how much crude they need and if they decide to cut some production, that will be the true signal that perhaps the recovery is not as quick as people thought in china because that is ultimately how closely connected these two nations are. it speaks to do alliances and tension of addressing this when you are looking at or the old economic model like at the imf like many people said they seem to be trying to portray. jonathan: i will not offer my thoughts about the exchange in the u.s. dollar, but we have to talk about and highlight the fact there is a push to the of the size u.s. dollar from some countries. we can talk about the challenges of shifting away from the u.s. dollar but we do not have time for that. but story after story, you see it and china is often at the center.

lisa a: how about the idea that some of the dollar purchases of crude were denominated in the. nothing that would really lift the market for a portion of purchases but it is a sense that there is a sort of undercurrent moving to diversify away from the dollar, especially because of what happened with russia. a dollar uses almost a tool of retaliation or enforcement. making people feel more vulnerable. jonathan: the latest this morning on the news front, russian president vladimir putin and the saudi crown prince had a phone call earlier today and talked about opec-plus. they expressed "satisfaction with the level of cooperation with the opec-plus to ensure the stability of the global oil market." i wonder how the white house feels about that one. lisa a: the idea that saudi

arabia is cozy up to russia and you could get a cozy up between china and russia. but the fact trade data increased 130 5% between china and russia gives you a sense of how much these holes are shifting. jonathan: the story we all missed because we were drowning in financial tension and thinking stress was the deal that had been brokered by china between saudi arabia and iran. that is a big deal. lisa a: people were saying this was something saudi arabia and iran had wanted and this was not significant but symbolically, you framed it right. symbolically, the fact that saudi arabia allowed china to take a victory lap as a negotiator says a lot. jonathan: coming up, patrick armstrong. we will get his call on the big tech names. which report next week and the week after that. this is bloomberg. ♪ ♪ and it's easier than ever to■ get your projects done right.

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>> the problem is you still have to get through the recession. we have all been waiting for the

recession for a year now. >> we are not in the camp of forecasting recession but we believe u.s. growth will not be far from zero. >> there has been decent momentum all year in stocks despite the headwinds. >> it seems right the fed is getting close to a pause. >> even if we have a mild recession, i do not think they will cut all the way to zero. >> this is bloomberg surveillance with tom keene, jonathan ferro and lisa abramowicz. jonathan: good morning. this is "bloomberg surveillance" on tv and radio alongside lisa abramowicz. tom keene is taking a long weekend. up 0.2% on the s&p 500. the doom and gloom and bears are not changing their futures. you heard from emmanuel from evercore. we need to catch up with recession. her argument and message are "do not look through the economic."

-- economic weakness. lisa a: lean into the pain. i think this is going to be one of the most difficult moments where you see the money -- the monetary stimulus being pulled back. people talk about them intel it is declining -- about m2 and how it is declining. this is the conundrum we are going to get at 9:45 today. services keep coming in stronger than expected even though people pull back on how many desks they buy. jonathan: a busy week for financial earnings this week. next week, we hear from tech. microsoft on the 20 fit alongside google. amazon on april 27. may 4, apple. that is going to be a big focus because some names of had a tremendous year. lisa a: look cabo said misses

will be severely punished. he heard from dan ives who said this will be a defining moment for a lot, the haves and have not's. he heard from dances yuki that -- they will -- dan suzuki that there is less demand for some products. this will be an interesting macro test akin to what we have seen with regional banks in terms of what people spend but not just people but businesses. jonathan: without a doubt, cloud spend for me is a standout. is it now a real cyclical story, and do they start to pull back on that? will that show up in that direction? lisa a: how much will companies continue to invest and build out these things if they are concerned about profit margins and their intellectual security, and keeping the right employees in the right mix? this pressure some industries. jonathan: you mentioned dan

suzuki. do we think this will change sharp enough if the revenue demand starts to change? lisa a: this goes to dan ives point. will there be some that can but the rest cannot? the reason people have pointed to this so much is because they where they stand out margin play and had margins not akin to the automated factors -- automated manufacturers. now they are closer because they are trying to gain market share. jonathan: margins coming in more than anticipated yesterday. this morning, we get price hikes on certain models. for the broader markets, simple. negative zero .2% on the s&p 500. no real drama. outside of equities, we are basically unchanged. 10-year yield is 3.5261. if the euro is essentially unchanged over the last couple days.

1.0980 on the back of the currency. we get pmi data. lisa a: there has not been much of a catalyst. you talked about this earlier. people are looking for the a-ha moment. ok, we are heading into recession now, it is heading into the bull market. we are not getting that. it is just a slow grind. it is just like [groan]. jonathan: which fed member sounds like that? lisa a: all of them. we are not sure, maybe we get some insight. jonathan: if you are just tuning in and have missed this, let me share this with you. one policymaker from the bank of england, incredibly dovish as you may have guessed, compared her hawkish colleagues to a full in the shower who's galled himself by being too impatient to wait for the water to warm up and then it comes down all at once. that is a not to milton friedman

but can you imagine sharing the committee with that member? she is heading for the exit anyway. lisa a: how much is the balance of risk actually shifting? the difficulty right now is both sides of the debate can prove it with data. that is the problem because how do you know what is right? have to know when it is too late. jonathan: she has two more meetings left. patrick armstrong joins us right now, the cio at plurimi. he wants an update from your standpoint on where you are with these tech names at the moment going into next week. patrick: i own alphabet as google going into next week. i am comfortable with them. i think that is where the whole world is right now. that is one thing that makes nice garrett. if you look at the s&p 500 year to date, it is of 8.5%. 10 stocks contributed that.

the other 490 stocks katrina and only 2%. everyone is worried about a recession. you feel really safe with these mega cap attacks and high-quality growth. i think that is in the price now. the risk is not that these companies miss and fall off a cliff but they are cyclically exposed. it may be a period of dead money where it takes a long time to catch up with the multiples and where some are trading right now. affable -- apple and google, i still own. they are a little expensive now were as mega cap tech and quality growth are getting expensive. the russell 1000 growth is now trading at 88%. 26 times earnings. it is not cheap. and lots of good news and safety premium priced in right now. jonathan: you mentioned breadth. is narrow breadth alone a problem when we saw this repeatedly over the last decade?

patrick: i do not know if it is a problem but this trait is very likely because everyone is trying to hide from cyclicality. these growth companies have moved up to 30 times earnings or some 35 times earnings, depending on the stock. it is really important to buy stocks at a fair multiple for the growth it will deliver. we just sold lvmh which is an incredible company. i bought it in september last year when it was trading at 19 times earnings. i've sold it at 31 times earnings. there is a lot priced into companies right now. if you feel safe ordering it, it is probably expensive. trade make sense right now and some companies that have lagged have predictable tail flows. i think we are trading at a market multiple, very predictable, strong cash flow generation which is in ink where i preferred to be if you are

trying to hide from a recession. lisa a: i want to go back to the idea of dead money. with some you think are good companies but will not exceed their valuations for a sustained period of time. when do you decide to cash out those and try your hand elsewhere versus sticking with it to allow the dead money to be flat? patrick: it is the 30 handled by gets worried. when stocks get to 30 times earnings, i have to believe they have a way to beat the consensus. consensus is bullish. that is a level i start to get worried everything is in the price. the companies where i am shorts are not big cap quality growth. i still earn some of them but companies like delivery hero and softbank are companies that have no profitability. rivian. i do not see a path to profitability and they are still trading at billions of market caps. those are the stocks i think are

at risk. the markets are condensed. -- convince the fed will cut hikes later this year. a lot of these companies have cyclical risk. if the fed is cutting, the economy is not good. sometimes you are hoping for the fed cutting, allowing big multiples, but it will affect her earnings. jonathan: aldean ages of 31% today. product is up 35% -- prada is up 35%. do you still hold it? patrick: coming into this year, i thought lecturing was the best place to invest because it was trading slightly to the market multiple. i cut lvmh. i still earn earnings -- hermes bank -- the same reason i sold lvmh. the reason i chose to sell first is to make an acquisition good

to shareholders. >> interesting. you think it may be in the market for something big? >> it is the 10th biggest tent spinning in the world. the business model is growing not just organically but the acquisition. if your company is trading at 20 times earnings, acquisition is not far off. jonathan: patrick armstrong of plurimi. an interesting final thought. lisa a: do you think it is a tiffany tie up? what other luxury players are out there? lululemon? jonathan: i am not sure they quite cry it. [laughter] lisa a: that is the issue. where you decide what to go for where it is not some brand solution. it is interesting. jonathan: what do i know? lisa a: brunello? jonathan: christians deal?

brunello, i love. lisa a: you are genuinely offended. but he was also saying with this idea of understanding when something is overvalued at a time when people are hiding in what they perceived to be safe is an interesting one. what is a safe defensive? jonathan: how cyclically exposed are these tech names? you heard him talk about this. neil dutta will join us, not to talk about tech for data because none of us know about that. throwing a shortly to talk about the u.s. economy. -- joining us shortly to talk about the u.s. economy lisa m: keeping you up-to-date with news from around the world. with the first word, i am lisa mateo. prime minister rishi sunak's deputy dominic raab has quit

after an investigation into bullying complaints. the probe criticizes his behavior toward civil servants. a major blow to rishi sunak as he tried to present his government as a contrast to the boren johnson era -- boys johnson era. biting plans to crack down on key part of china's economy. you will sign an executive order that will limit semiconductors and computing. he is hoping to get the backing of his g7 partners. for the governor ron desantis will test the international waters ahead of a possible decision to run for president. he will pay a courtesy call on japan's prime minister during an international trade mission. a new poll shows him trailing donald trump 51% to 38% among likely reporter asked -- republican primary voters. png cited higher prices and a

slight increase in demand. p and g's quarterly results beat key estimate. global news, 24 hours a day, on-air and on "bloomberg quicktake", powered by more than 2700 different journalists and analysts in over 120 countries. i am lisa mateo, this is bloomberg. ♪ get refunds.com powered by innovation refunds can help your business get a payroll tax refund, even if you got ppp and it only takes eight minutes to qualify. i went on their website, uploaded everything, and i was blown away by what they could do. getrefunds.com

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>> this is not a credit crunch. it is a credit contraction. a credit crunch is economy wide and has massive implication. a credit contraction has distribution effects. we should be talking about that. that is issue number one and will hit small businesses harder than big businesses. jonathan: good to catch up with mohamed el-erian, bloomberg opinion columnist. equity market policy lifts are negative by a 0.1% on the s&p 500. negative zero point zero 7% on the s&p 500.

the price change. there just is not much outside of equities on the bond market. unchanged. 3.5 on the 10-year yield. moments ago, patrick armstrong saying he sold lvmh because he thinks they will make an acquisition. measuring a bunch of companies lvmh already owns. name a lecturing firm and basically they already own it. lisa a: they already are a huge, consolidated luxury player. if they have to acquire somebody else, where do they go? jonathan: ms. they don't own that. apple's may be the one company they cannot afford. [laughter] let's get back to something we know something about. dan ives joins us right now. i want to build on recording from our colleagues earlier this morning that president biden aims to sign an executive order

that will limit investment in key parts of china's economy by american businesses. ready you see this going? danko -- dan: this outbound as it has been labeled is really the culmination of focus of the biden administration for the last 10 years. i time on the hill a few weeks ago with some senior house gop members that have been looking at this. this is something that is a very bipartisan issue in the u.s.. you will begin to see more clarity as there has been a lot of investor concern on what this actually looks like. we have seen in the past that the u.s. government attempted to limit investment in certain chinese companies and it had a pretty adverse impact on threats to the list and other challenges. but this will cover specific investment of semiconductor companies, artificial intelligence and quantum computing companies in china

with a focus on u.s. firms playing an active role in management. venture and private equity firms are under the magnifying glass where they are largely managing and not just taking passive investment in some specific sectors. not ellie -- not anything more broadly. jonathan: forgive me for asking you to read the political tea leaves but they think this will take place at the may summit for the g7 allies in japan. do you think the g7 allies will be on board? dan: i am not sure how much allied support exists for this package and this only has a chance of success with multilateral support otherwise he will open up opportunities for other g7 allies to take investment for american businesses that are essentially restricted or that investors are restricted from. the u.s. administration has had a good track record of beginning to jim of support for these -- drum up support for these

issues. a lot of the talent has been what is this? it has been labeled as outbound cities for the last few months which takes on a much broader conversation than we are talking about here which is about chinese firms and what investment restriction would be placed on u.s. companies. lisa a: you were at the imf last week. was israel reading on how aware policymakers are and what kind of hit they would take if there was a true fragmentation or breakdown in the relationship between china and the u.s.? >> i cannot believe that was a week ago but that is a second issue. there are a lots of concerns. this is where the biden administration and treasury is very careful about looking for unanticipated consequences especially when dealing with anything that has broader market impact. it is a huge focus on not disrupting the u.s. china

western efforts from a business standpoint because there is still a substantial amount of training -- training. it has been overblown by the numbers and bloomberg cover this but there is huge recognition that you cannot only play around with the relationship too much for it has too many adverse consequences. at the end of the trump administration, one exchange that was de-listing and then de-listing was written chinese telecom companies that created after confusion. lisa a: how comprehensive can these restrictions be that the cabin plans to put out there? how much meat can there be behind what janet yellen had to say last week about the potential to put national security over economic interests? dan: it is a balancing act. there is obviously national security concerns and ip concerns. it is hard to say they do not

have broader economic protections for the u.s. economy. this is the investment restriction equivalent that some bands of the u.s. government have put in place as well as other european nations on the ability for china to import high-tech they need to potentially catch up in their technology manufacturing. jonathan: he mentioned your name earlier this morning with regards to foreign-exchange and u.s. dollar. and emphasis around the -- a de-emphasis coming from u.s. and china and other countries based on developed me -- develop means we have seen. where do you see that? dan: i have had this discussion a number of times. you have heard the de-dollarization threat for the last two years that the u.s. is trying to force other countries to choose. i am not sure the world will move off the dollar so fast.

while we have see larger countries like brazil push for india to settle certain transactions outside the dollar, i do not know if the dollar dominance will be road quite so quickly. jonathan: i think a lots of people listening right now will agree with you -- a lot of people listing right will agree with you. looking forward to this. lisa shannon's of morgan stanley, michael collins of pgim and tony dwyer. we will catch up with tony around the opening bell. we have a lot to talk about. ultimately, the equity market. lisa shalett has a point. the message is do not look through the economic weakness. it is going to hurt. she thinks this is a dangerous moment from the equity market. lisa a: i think a lot of people would agree. before a downturn, you get certain rallies and they keep coming back. then people settle into what becomes more obvious. if it is not this earnings

season, than what is it going to be? it is not going to be the may 8, senior officer survey. there will not be one data point that changes everything, so what is going to be the catalyst? is it just going to be a grind and angst for the rest of the year? jonathan: it is a process. that is probably the phrase of the year. lisa a: protests and nuanced is not really work so well. jonathan: sometimes it is more nuanced. lisa a: next week, tech earnings will be interesting. i think they will be nuanced because it will not be a make it or break it moment as dan suzuki punted back at me. i think so far as where we are going with the economy and the goods versus the services within tech, which is getting money, and i think that will be interesting. jonathan: daniel tannebaum's rights. a week ago? it has gone by so quickly.

lisa a: this has been a tough week. jonathan: it is nice and quiet. it is great. when into the weekend, nice and quiet. tom keene is taking a long weekend. lisa a: can i make a correction. earlier i said 1940 652 was more like the 70's i think. jonathan: to the 40's feel like the 70's taking? tom will love this lome talk about this monday. lisa a: we are not going to talk about it. jonathan: down by 0.05% on the s&p. yields unchanged. 3.5337 on the 10-year yield. in morning to you all. ♪

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lisa a: this is bloomberg surveillance. welcome back. about an hour before the opening bell. jonathan is off to his property and tom keene is taking a long weekend. at 9:45 a.m. eastern, we get the services and backswing -- manufacturing pmi for the u.s. it follows the trend with services coming in hot and manufacturing coming in soft. i have heard i will need boxing gloves. neil dutta is joining us, head

of economic research at renaissance macro. i am curious about where you after hearing all the pessimism. you are here to tell us why we need to be more optimistic. neil: happy friday. what this business is about is what the consensus is pricing in and what the likely outcome is going to be. that is how we create some distinction. remember, the consensus is basically priced for essentially sudden stop dynamics in the economy. people are calling for a recession starting sometime this week, it feels like. i have to tell you, that is not in the data. the time to have been concerned about recession was last year, in my view. that is not to say we are not worried right now but it would

have been more prudent to worry last year. had energy prices spiking at the global economy was going down the tube. people were worried about europe . china was slowing down. in the u.s., the housing market was weakening and fiscal tightening and all the rest of it. think about each of these things in turn. fiscal policy is a tale and for the economy -- a tailwind for the economy. there is no fiscal drag. the government is a tailwind for growth. housing. take a look at homebuilding stocks. did anybody have that on their own car for 2023? admittedly, the manufacturing piece was not strong this morning but it is clear that global growth in the aggregate is stronger so far this year than it was before. if the consensus is talking about some sort of cliff dive moment in the second quarter,

that is not happening. it does not mean we do not pencil in a recession. if you want to be honest with yourself, you have to keep this in the outlook for the next 18 months, but the question is this going to happen imminently? that is what the consensus is expecting and i do not see it. lisa a: there is growth and inflation. growth has slowed but it has not cratered, to highlight what you are talking about. certain sectors have actually accelerated. inflation seems to be coming down. do you think this will continue, that we will see disinflation at the same time there is momentum under the growth? neil: well. growth in some parts of the economy and accelerating. that may have tasted bitter coming out of your mouth. lisa a: i have actually bought airplane tickets or understand in some capacity. neil: to me, it feels a little

bit -- i may be crucified for saying this, but it does feel like a soft landing. at the margin, the data is consistent with soft landing. inflation is slowing, activity is holding up. you look at the early reads for auto sales in april. they are pointing to sequential acceleration for auto sales in april, despite this financing cost and the rest. builders are doing the same thing. sequential improvement in activity in april. everyone was talking about how housing was a leading indicator because it was collapsing last year, that would spell the death of the economy but now housing is really accelerating. it is likely that single-family reconstruction picks up over the next few months. lisa a: i hear what you are saying. i think a lot of people would agree with the which is why you have seen rallies year to date, but it has surprised a lot of

people. even in areas some people thought would underperform. but now people are saying just wait because tightening credit conditions will play out. are seeing this with loan originations and credit loss prevention. how do you push back against that? and say it is not that big of a drive and is part of every tightening cycle we have had. neil: the question is whether or not this is enough to push the economy below the potential growth state. it is the unemployment rate. we are not there yet. speaking to the part about credits, the housing market is working which must mean credit is following the households. if you look at loans and leases or loan growth, thank credit relative to gdp has been flat since 2016/2017. perhaps the economy is not nearly as credit sensitive as it is being made out to be.

the reason the economy has been holding up is because consumers have been doing ok. the reason is because disposable incomes have been holding up. that will continue because lower natural gas prices will bleed and to household utilities. the fact that wholesale gasoline futures have been declining will show up in cop prices in the coming weeks. we are not going to get as much of energy and pretax as we have seen that will push up disposable income -- and food taxes we have seen that will push up disposable income. i do not want to sound like everything is great but my sense is disposable income will remain relatively stable and continue climbing in the second quarter. i think that is an important story. lisa a: you said you think you will get crucified by saying this looks like a soft landing

but i would beg to differ. i think people will say yes, finally sang the quiet part out loud because the market agrees with the. the equity markets are pricing in a soft landing. do you disagree? how much is this priced in? not necessarily the recession because people are waiting for. neil: i think there is more room to grow. i think you can see growth holding up. i think you start to see part of the inflation picture continue to improve somewhat. we did see shelter come in quite a bit in march. that is very inertial and sticky. it will not accelerate right away. that is an important development. when i think about the fed, they are closer to the end of this than not. it is unlikely they will begin ratcheting hikes up immediately. i think you can make a case for

equities. over the next couple quarters, for equities to rally. we continue to see a tailwind from what is going on globally. this will continue to take pressure off the dollar, which should provide earnings support for a lot of the cyclical names that do a lot of business overseas. lisa a: how much do you see tech participating in this especially with earnings coming next week? are they still going to be the leaders when there are a lot of areas that could recover if what you are saying comes to pass? neil: if the fed is backing off, which i think is likely at some point this summer, that should provide some tail end for technology stocks. lisa a: how do you pushback on the idea that we are getting sentiment shifting and we saw this in the indicators and fed beige book and when it comes to marginal softening in the labor market around the edges?

can say it is just marginal is on the other hand, it is starting in a more meaningful way. how do you say it is par for the course and will not pick up more meaningfully? neil: it is something you have to be concerned about. the risk is you get this sort of snowballing effect and unemployment. i would just say there are offsets. it is very rare. people are pointing to claims which are up by 40% from lowe's. but typically when that has happened, that has always been a recession. what about the recovery has been typical? as that happens, you have seen employment to raise -- employment rates rise to highs. typically, the employment rate is already reclining. it has not happened. it is still going to new highs.

consumer attitudes about the labor market are strong. it is hard to know. people should be a little more -- show some more humility about this. it is difficult to know whether this is the start of something truly nefarious or just a normalization of a labor market condition from unsustainably hot rates last year. my sense is there are offsets. you have global growth getting better and u.s. housing and fiscal tailwind. now you will have real income holding up. you have to defend backing off. sometime after -- probably in june. the risk is, -- they may have to come in later. that is the risk but i think you can make a case or risk assets over the next couple of quarters when you get this confluence of slowing inflation, growth holding up, and defend backing off. lisa a: before me and, i want to

raise one issue. i think you are right. i think broadly, i hear it all the time. i wonder about the fact that steadily deposits are not free anymore, and the long-term implications of this in the main credit impulse of this economy. how do you factor this into your calculus at a time when it has to be before it happens? it cannot be with any material data just yet. neil: i'd take that point. there are certainly areas -- there are certainly areas of concern. people have been talking about commercial real estate and how regional banks drive credit to that sector of the economy. it is important to remember that we think about structures and investment in gdp, that has rarely been as low a share of gdp as it is right now. even if you are talking about a

20% drop in structures investment annualized, that's probably -- that probably gets you maybe half gdp growth. there are issues. clearly, residential lending continues which is a big piece of it. households still get credit when they want it but i take her point about what is going on with small business. the question is, there are areas of the economy that are weak and look bad. no one is denying that. the question is, is this enough to push the economy into a below potential growth state? that is what is required. the fed believes we need below potential growth for a period of time to quell the inflation issue. i do not see it yet. lisa a: unfortunately, we have to leave it there. do not be a stranger. neil:, renaissance macro --neil

dutta, renaissance macro. lisa m: keeping you up-to-date with news from around the world. with the first word, i am lisa mateo. complaints from government workers have brought down the deputy prime minister dominic raab in the u.k., who re-signed after a probe criticized his treatment of service workers. this undermined rishi sunak's pledge to restore professionalism to the government. the u.s. wants to cut tops on taiwan's microchips because of concerns china may invade the island. taiwan is encouraging u.s. counterparts to tone down their rhetoric. president biden formally launches a -- may formerly -- formally launched a reelection bid next week.

he has been signaling that he intends to seek a second term next year, eating it somewhat of an open secret. the biggest global luxury conglomerate is shifting global resources out of hong kong. bloomberg learned lvmh wants to focus more on investment in manning china studies. hong kong used to be ages premium shopping hub but now consumers have switched to buying luxury goods in their home cities. global news, 24 hours a day, on-air and on "bloomberg quicktake", powered by more than 2700 different journalists and analysts in over 120 countries. i am lisa mateo, this is bloomberg. ♪

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>> i think real rates should be closer to zero or negative. if inflation is going to be 3% next year or 4% next year, how

low can the fed in terms of nominal rates? perhaps two or one. if the unemployment rate is rising, we see at -- it at 2.5%. the fed has to take rates negative. lisa a: -- calling for federal funds rates to go to a base case of 2% or 2.5%. the question was not whether the fed would cut rates but how quickly based on the expectation there would be a recession and unemployment rising. a different view from neil dutta who said there is no recession apparent in the data right now. one area that has not been range bound this week has been in the crude market. brent crude is down more than 5% this week, the biggest weekly loss going back to march 17 in

the immediate turmoil of the banking crisis. the real question is around the y in a time when data that is not terrible, but has not been great this week, but not terrible. julian lee joining us right now. what is where read on the why in terms of the narrative shipped in oil markets? >> it is growing concerns demand is not going to grow as strongly as forecasts have been predicting and this will weigh on oil markets, particularly in the second half of the year but also the second quarter. if you look at the breakdown of forecasts people like the international energy agency, a loss of their demand growth is skewed into the period from now to the end of the year. and, there are some fears that we are seeing diesel and other

middle distillates emerging in asia. this could lead to refiners cutting back on how much oil they are processing. there are going -- growing concerns as some earlier guests have been suggesting around the strength of economic growth and the rolling back of some of the strength of economic growth in the atlantic, in the u.s. and europe. this will have a knock on effect on oil demand. there are concerns that growth may not be as strong as people have been predicting. on the supply side, yes, we have had this announcement of cuts from some opec-plus members. they have not come into effect yet. the one country that has to set it is coming out is russia. but there is no sign of this flowing through into exports from russia. that is what really matters for the global oil market.

lisa a: with the narrative shifts we are seeing in a life different areas of the economy, but it is not just -- in lot of different areas of the economy but it is not just crude. some people are accusing opec-plus of acting in a political manner in response to a drop of of productivity. but it is also copper and iron ore, and across the how much can we look at this and say something is going on and perhaps it has to do with the strength of china's recovery? >> i think we can start to look at that. there are real questions about the strength of china's recovery going forward and how that recovery is going to link to commodities prices generally. we can, i think, become very fixed on this idea that chinese

growth flows through to commodities very quickly and very strongly. but we might be seeing is something of a bit of a shift in the strength of the flow-through , and perhaps the chinese economy may recover a little more through domestic consumer spending, rather than a very commodity intensive infrastructure investments that perhaps have driven a lot of the growth in the past. lisa a: the other issue is we talked a lot about how manufacturing is lower and underperforming the services are growing and people want experiences. they are flying around in potentially rates exceeding pre-pandemic. people are driving and using all these forms of fossil fuels as they go around the world. how does this factor into calls for potentially lower oil prices ahead if this is only wrapping up heading into the summer?

>> it is a matter of one sector balancing out another. if we are seeing a pickup in transport, and it may be that flights are getting fuller as well as more flights being put on, the growth in passenger numbers first will fill up the flights that are already going. before people start scheduling more flights. but if you have growth in the transport sector being offset by lower consumption in manufacturing and construction, those two may balance each other out to some degree. that is what we are perhaps seeing at the moment. the growth in transport demand is coming but that is still a month or two away as people sort of perhaps start thinking much

more about holidays and summer. we are not quite there yet. this is still looking ahead a bit. lisa a: as you sit in london, i am curious about where view from europe with a since we dodged a bullet. some people contributed -- attributed ongoing exports from russia about as well as a much warmer than expected winter. how much do you see this as a permanent state of greater resilience in europe in the face of less of an energy source from russia? >> i think europe has taken significant steps towards building up their resiliency. i do not think anybody here is complacent. just because we have got through this last winter, the next one will be a walk in the park. we are very aware that this winter has been mild, that

natural gas demand and electricity demand has been lower because of that. but there has been, across many parts of europe, real steps taken both to diversify supplies and liquefied natural gas from the u.s. and elsewhere has played a big part of that. but there have been steps to reduce consumption. we are seeing this on a national level with governments taking the lead is also on an individual level, where high prices have led people to put on an extra sweater or turn heating down, or turn lights off to a much greater extent than they have done in the past. this, i think, has allowed quite significant savings of energy which bowed recently -- bode reasonably well.

and if you add the fact that natural gas stockpiles are being replenished quickly, partly because of the warmer winter we had. that means, europe should have a pretty solid buffer gas in storage ahead of the coming winter. but, we are very aware that we had some russian gas still coming into europe last year by pipeline. we may have very little, if any, this year. lisa a: julian lee, thank you for being with us as we try to parse market moves. exxon and chevron both reporting a week from today that we will get a sense of -- from today so we possibly will get a sense of the outlook. this out of downing street, the u.k. prime minister rishi sunak is putting oliver dowden -- is

appointing oliver dowden as deputy after his previous one step down. and difficult moment for rishi sunak considering dominic raab was a major ally in trying to rebuild the administration after boris johnson. it is a front time especially with inflation coming in with double digits. no questions about how resilient the economy is at time of ongoing angst around the inflation picture but also salaries and economic pictures. we can see a bit range bound after a week of trying to adjust all the shifts over the past few weeks. the best moments from surveillance and daily insight. not forget our newsletter. sign up at bloomberg top, --

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jonathan: live from new york city this morning, good morning, equity futures are just about unchanged on the s&p 500. the countdown to the open starts right now. >> everything you need to get set for the start of u.s. trading. this is bloomberg, the open with jonathan ferro. ♪ jonathan: live from new york, fed officials committed to a pause after one more hike. president biden may deliver a ree