>> this is one reason we are remaining overweight in u.s. stocks. >> u.s. dominates. regardless. >> we are in the middle of a game changer on technologies. >> the power of earnings has reason -- risen. >> the economy is riding the waves of an increase in the stock market. >> this is "bloomberg surveillance," with jonathan ferro, lisa abramowicz, annmarie hordern. jonathan: things are settling down over the last 24 hours a

little bit as we work our way through the middle of the trading week. the bond market, call mark, for the second time in a week -- calmer for the second time in a week. the 10 year, down four basis points. lisa has been talking about this for a while. are we here for the right reasons or the wrong reasons? the most bullish fms since january of 2022, the biggest jump in global growth optimism since may of 2020 at a record jump in allocation to commodities. jonathan: the fund manager survey has the headline fully bully. the most overweight commodities going back, a record jump. this is the set up to yesterday and the day before, jay powell coming out and saying -- it's been a little bit disappointing for us, we might have to wait a bit longer in the reason why

people are seeing the potential for pullback, we are not fundamentally shaking the confidence. jonathan: the quote for me yesterday did not come from jay powell. it came from the vice chair, philip jefferson. i will share it with you now, the base outlook is that inflation will decline further with the policy rate hub steady at its current level. at the current level. our old friend pk would say extending the x-axis. on time and taking longer. lisa: and what you have now in markets, it's time. remember yesterday, what if the fed chair came out and said he was hopeful and not confident? that's the subtext, they are hopeful and not confident, the reason they are holding it higher for longer and right now the market is trying to come to terms with that. annmarie: i got that sense as well, that we are expecting the confidence to come with more

data. john, you mentioned the timeline, that makes me think this is political. if they need more time, there's only a certain number of meetings and data points left before it becomes unfathomable. jonathan: let's talk about the politics. joe biden calling for higher tariffs on chinese steel. this from lael brainard, the president understands we must invest in manufacturing and we have to protect from unfair exports associated with chinese industrial overcapacity. where is the president today? annmarie: pittsburgh. jonathan: what's he talking about? annmarie: tariffs on steel. he's talking to steelworkers. you have to think that when you see a policy like this, given how much of this kind of steel is in the marketplace, it's 1% of demand in the united states. a little over $1 billion last year. they probably look at what the resident is doing gearing up for the election. trump and biden both won the

state in the elections that they one, and you have to think that they worked backwards. lisa: what do you read into this from the market perspective? if it's inflation, you are not going to see tariffs like this going through in a meaningful way. if it really is this idea of economic competition between the u.s. and china, you can expect stickier inflation and this is what the market has been trying to reconcile. annmarie: it's neither of them, it's purely politics. jonathan: purely politics with economic consequences. we are going down to washington, d.c. in a few hours for the world -- world bank spring meeting. this is a bigger issue. they are down there talking up the benefits of free trade. feels like everyone is throwing in the towel on all of that to get elected. they know that if they start

talking about doing anything else, they will not win an election in november. lisa: how do they compete with the idea that china has been unilaterally funding other countries to exert influence where they talk joint cooperation and china going its own way, china being the one country that nobody talks about. i'm curious how people address how this will shake out and what they are doing to either get them on board or come up with a cohesive strategy and the others. jonathan: there's very little cooperation and we will try to talk about it throughout the week. s&p 500 futures, there's a bit of a lift here. yields are up, 45366 on the 10 year. crude, backing away on wti. coming up, catching up with state street.

jeffries, the boeing whistleblower is set to testify on capitol hill. and then we catch up on the management shakeup. jay powell put 5% yields back in play, admitting that cuts will have to wait. saying that if the fed has not started to ease by july, we don't believe they will be able to cut in september, it will be too close to the election. the timeframe for cuts is closing sharply. lee, let's get straight to the argument. why do you think that the election matters that much? lee: if we were in the middle of a cut or hiking cycle, september is a perfectly light meeting. being within six weeks of an election, you don't want to start a new cycle there. this is why i'm saying look, if they don't even july, i don't think start a cutting cycle in september, meaning that the november meeting is there until the election, that is why

september really for me, it's difficult for them to move. jonathan: we have breached in yesterday's session for the second time in a week with the 10 year getting closer. we are trying to figure out if they are up for the wrong reasons or the right reasons. and what it ultimately means for the equity market. how much competition is the bond market providing against stocks now? lee: it's starting to be a competition. two years of that our growth, 10 years are up because we are getting worried about inflation. we are looking at breakevens. you can see the two and five-year moving up as well. look, with the bond market, two and 10 being -- 10 are moving. then it becomes a very real challenge for the equity market. look, i still think as long as the curve is inverted, as long

as the market still believes that they are about to embark on a series of rate cuts, emphasis can hold in. at the moment, that is where we are. we have extended and pretended so far this year. march, the first start for cutting. then june. now we push it back again. the important thing is the market believes we are going to enter and easing cycle. as long as that scenario of equities generally carry, they can all carry on trading as we have been. maybe it gets more challenging from here, i think it does, but overall the risk environment is passed to as long as the market believes cuts are cutting. lisa: how much conviction do you have that we will be embarking on a rate cutting cycle with a risk on deal at a time that is look shaky? lee: my conviction levels on the whole cutting cycle have been limited for a while.

look, i worry that if we don't -- if chair powell doesn't get to cutting before july, i'm not sure we can get one this year. i worry about the base effect in the second half of this year and the shelter component of cpi in the second half of this year. house prices are going back up the u.s. pc shelter and cpi tends to lag house prices by 12 months, implying that in the second half of the year they start moving back up. base effects are generally not supported in the second half of the year. the real risk is that in the second half of this year, inflation moves back up again. it hasn't come down as they hoped for in the first quarter when the base effect was positive. my confidence level is that we are about to enter a really prolonged cutting cycle that is quite low, actually. the market isn't there yet. the market still believes that we are, that is why i say risk

holding for now, but the end of q3 is when i'm starting to worry that the market is going to have to have a re-think. lisa: i spent a lot of time last night thinking about the dollar in what it means for other rate cutting cycles around the world. how close are we to a strong dollar starting to break things? lee: i think we are there. one thing i've been amazed by is the market reluctance to price earnings, but we have a huge macro divergence, probably the biggest we have seen in decades. the interest rate market has been very reluctant to price other central bike cutting before the fed. they have no choice now. the ecb has pretty much nailed the june move, with chair powell yesterday obviously talking about the fed and the market has been forced to pricing thanks cutting the fed. and that's fine. fx markets are still not moving that much. look at where the euro is now.

we are pretty much the middle of the range, we've been here for 12 months or so. it's not as though we are in extremes. the yen is a different case but we are not really in extremes. other central banks should be confident to cut rates as they see it. if the euro is getting below parody, maybe we should worry. but that is not where we are right now. annmarie: we heard from andrew bailey yesterday at the bank of england and he pretty much imply that they are ready to go before the united states. is that your base case? lee: it is. this is why we have a negative yield of sterling against the dollar. look at what the rate are could has pressing. the first bank cut is september. pretty much the same as where the fed are in terms of rates pricing. that makes no sense to me. u.k. growth is negative. you can -- u.s. growth is twice,

3.1% in the first quarter. very, very different economies right now. u.k. inflation is higher than expected this morning it is now below u.s. inflation, headline for the first time since 2022, moving in different directions, the u.s. growing above trend, the u.s. in recession. the bank of england should be cutting before the fed. no doubt about it area the market still doesn't have that price, it has to be pulled forward with sterling weakening and you can see the euros sterling higher in that story. we pulled forward on the ecb but not the bank of england in the same way. jonathan: you talk about parity on the euro-dollar, are you actively looking for those levels to come back again? lee: not yet. i got called out for being too bullish on the dollar last year, i thought we would go further and we reverse. i think that the dollar over the next month, couple of months, it is going to struggle to make

gains across the board. we have taken so much out of the fed this year, it's hard to take a lot more out. maybe we can in q3, things could change dramatically, but right now you won't see it. it's going to be more idiosyncratic, moving on the dollar, rather than in q2 where we have rate cuts elsewhere. 110 is a long way on that basis. i think that we get down to 120 on the euro, maybe down to the 103 level. quite a ways from here, honestly, given the ranges we have been used to with these big moves. maybe not the ones you are talking about. it's possible that the other economies, they continue to weaken, but they seem very wary of cutting too much and that might contain some of the moves. but it is hard to look young the dollar right now. jonathan: lee, good to catch up, as always.

we have seen some big moves so far, today, and you might see some bigger ones with yesterday closing out on dxy with six days of dollar strength. lisa: we talked about who cares most, the bank of japan, the ecb, or the people's bank of china? take a look at the one weakening and the fact that they are avoiding cutting rates even more to avoid further depreciation of currency. this is a massive issue for the other central banks. it has got to be front and center. jonathan: what if you are worried about tariffs? lisa: weakening the currency, suddenly you are exporting and more cheap goods. it gets hairy when you start to think about it. jonathan: not saying that's what it is, but it is an interesting dance. right to bring it up, dollar strength is a big issue at the moment, weaker on the session. updating your stories elsewhere,

let's look at the bloomberg brief. >> the most valuable european technology firm fell sharp -- fell short of equity analysis for machines needed for high-end chips and they are expecting weaker than high-end sales in the second order or demand picks up. lvmh sales growth grew, revenue in the fashion and leather goods unit, growing just 2% in the first quarter compared to 18% growth one year ago. but shares are rising amid relief from investors who feared that results would be worse due to a worldwide slowdown in demand for luxury goods. record rainfall in dubai led to flights being diverted and cars being left stranded on flooded roads. the united arab emirates experienced its heaviest

downpour since records began in 1949 at running to the leading office in dubai. the government told employees to work from home and urged private employers to do the same. schools have been directed to remain closed. john? jonathan: so, they have been seeding the clouds, right, trying to make it rain more aggressively? lisa: how are you coming up with a is fear security? seriously? this is their own doing? jonathan: i don't know, but they have been seeding the clouds, they have been trying to generate or rainfall for the drainage on the rainfall they have been getting, which is obviously problematic. lisa: man versus cloud will continue. coming up next. jonathan: you should read about it. lisa: i know. jonathan: up next, bowing under scrutiny on capitol hill. >> the safety and consistency, and a reputation, you simply can't compete. everyone is worried about

bowing. jonathan: that conversation, up next. good morning. ♪

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jonathan: i love aronowitz. we spent the whole commercial break discussing cloud seeding in dubai. lisa: fascinating, some people say that they might have conducted it. they are saying they absolutely did not. this is a real thing. jonathan: i'm surprised it hasn't been bigger in the new cycle. annmarie: they've been doing this since 2002 but they haven't put the right drains in case it actually worked? jonathan: it's amazing. the amount of flights that have been canceled as well. if you are over there, i hope you're doing ok. yields are lower by three points on the 10 year, 400-6366.

bowing under scrutiny this morning on capitol hill. >> of course, everybody in america is worried about what happens without the reputational safety and consistency. you simply can't compete. that is why everybody is worried about bowing. we have got to get bowing back to the point where it can produce. jonathan: the latest, the senate holding two hearings around whistleblowing claim over safety culture with ongoing safety investigations in a criminal probe. the whistleblower is set to testify but bowing officials will not present at either hearing. present now, these allegations from whistleblowers, how serious are they? >> the 777 whistleblower, that's

news. the 77 has been a fairly safe aircraft. we have tracked it and we are seeing a rate of five months. we feel a lot more confident there given the track record. bear in mind, 787 peaked at eight months. it's a lot more pressure on the production line to turn up aircraft numbers. it's of course a bigger aircraft, but the pressure of the volume really hurts. annmarie: are we going to learn something, or is this theater? jonathan: jonathan: --4 i think it's a bit of --2 sheila: -- sheila: i think it's a bit of theater. there was the ntsb in the senate and we didn't really learn anything new on the alaska flight or the bowing safety culture. i don't think we will be hearing much new. lisa: is that news in and of itself, the fact that we are so

far past where this happened, there have been lost orders and increasing delays on certain airplanes? is it surprising that we don't have more answers as the department of justice operates a kind of middle probe? sheila: everyone asks what is going on with boeing. kayak has a search function where you can ask what kind of aircraft you are on. is it safe? yes, complete the say. public perception is what we need to change. the new ceo when announced, and no one knows how far that search is, no one knows, as well as with new technology coming to bowing and overhauling the culture and cleaning up the production lines a bit. jonathan: ntsb -- annmarie: ntsb on capitol hill, do they see any evidence that things are moving in the right direction for boeing? sheila: it was a bit backwards

looking. very little was given on alaska. we will wait to see what happens with the audit now being complete and what happens with the next steps, but that brings you to summer time where we should see a new ceo in place by then. bowing is in a kind of purgatory right now where they, on top of that they are producing only 17 737's per month. that brings us to airlines with a capacity being very tight. jonathan: how big is the potential talent pool for the ceo of boeing? where do you find them? if you are a recruiter, who do you call? sheila: our most popular question every day. it seems that overall sentiment for someone new and outside. we saw it happened six years ago with ge. larry coptic dismantled ge, they

traded as a public company at the start of april. jonathan: is that the number we are dialing? sheila: it kind of is. he brings a strong background. there are a number of people on the board and there are also of course other airspace executives as well. jonathan: it might be a few quarters before we get there. are we going to sit here until we pick up? sheila: we have cut to 400 but with only a handful of deliveries for the year, you will see more pressure on deliveries and depending on when a new ceo is announced, i can't imagine he's going to the rate backup the first time he steps back in. they will probably say that that cash flow target is out the door, we are not talking about the rate, we will focus on quality and once we hit those, we will start increasing rate.

lisa: does that mean that we will be flying old airplanes? because we cannot get the new ones? jonathan: with the ashtrays? lisa: you can see them at the hotel, they made into a bar. but it's pretty cool. sheila: i was speaking to the united cfo last night. they had been expecting a lot of new planes this year but they are not getting them. they are positioned to be a bigger airline than they are, but they have to buy those older planes while trying to put up a premium product. focusing on better wi-fi, better interiors, better food polity, keeping costs down. for now, the consumer is in a tight spot. when you think about the aircraft that were moved out of their forecast, that's a big capacity reduction out of the u.s. domestic market that could translate into a big price momentum for u.s. airlines, which have been suffering their u.s. semester rising was flat in

2023. q1 saw signs of improvement in the inflection that we were looking for, but airlines have not placed it in. the way to play the bowing issue is through an airline aftermarket shop, like ge, while boeing keeps deliveries low. bad for the consumer overall. jonathan: it's all more impressive that united did what they did, a free-market promo by 5%. lisa: what are we saying? free wi-fi, ceiling optional? -- seating optional? jonathan: better food. [laughter] from new york city, this is bloomberg. ♪ i asked myself, why doesn't pilates exist in harlem? so i started my own studio. getting a brick and mortar in new york is not easy. chase ink has supported us from studio one to studio three.

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jonathan: things just a little bit palmer in new york city -- calmer in new york city this morning. doing ok on the russell with small caps up, but the russell though has been absolutely hammered. off the highs of the year, we are down something like 7%. it's been difficult. extending the bond market, a breach of 5% yesterday in the session, backing away again this morning, down on the 10 year, 400-6366. lisa: fed chair powell set the

quiet part out loud and he didn't use the bump word, but he did say that it suggests we are not making as much progress on inflation and maybe they might policy take further time to work, extending the timeline. jonathan: reinforcing the moves we have seen in bonds and foreign-exchange. going through the currency pairs for you, the euro is back, bouncing back today with yen strength on the board, dominated by dollar strength and weakness over the last few weeks. i'm not really ap pad -- i'm not really peeping at that, will they throw the money uphill? lisa: hope it doesn't come down? people talk about 160 as a testing point because they cannot counter a strong dollar given that they are not raising rates materially from here. when does the dollar break something? seeing strong dollar, strong dollar at the same time the rest of the world wants to start a

rate cutting cycle. how does that work? jonathan: inflation is just a little bit hotter, but the pushback we got from state street, lee said that inflation was hotter this morning but it was running below where nation is in the united states in the boe will have to cut soon because the growth file is so bad and you should expect a stronger dollar against the pound, the euro, and every thing else. lisa: and when does that become a problem when they see inflation getting hotter from the outside? especially problem -- prevalent with oil if oil continues to climb. jonathan: under surveillance, jay powell putting rate cuts on ice with the recent data not giving greater confidence, indicating that it's likely to take longer than expected to achieve confidence.

today we hear from more fed speakers, with the beige book coming later this afternoon as well. i said it earlier this morning but i think that more constructive direct blunt comments, jefferson really put the emphasis on the time it current levels. it's that phrase, current levels, really important at a time when it's becoming the consensus view with a few people asking us we could be to a conversation about higher interest rates based on that communication from fed officials, they are nowhere near having that chat just yet. lisa: seems like hikes are off the table but no cuts when there is clearly a split. i thought it was interesting as we heard from fed vice chair jefferson and chair powell, williams being there resident of in that triumvirate of fed officials, saying inflation has fallen across several categories over the last year and a half,

pointing to that story in the disagreement percolating under the hood. annmarie: the problem is, it is not broad. we also heard from the fed president, he reiterated this a lot, recent data including cpi has not and supportive of a soft landing. so, it is just wait and see but this timeline makes it complicated not just for powell, but for president biden. jonathan: president biden talking about new tariffs on chinese steel and -- aluminum products. getting ready for a trip to pittsburgh, that was a direct quote on a wider review, repeating the u.s. steel shift will remain american owned. this will become an issue, adding to be a bigger issue on the campaign trail based on these events today. annmarie: absolutely, you should announce at the american way, aluminum, jonathan. i know you took a breath there.

jonathan: this feels political. if you thought that this was export overcapacity from steel into the u.s., you would have taken it earlier. it is such a minute part of the demand area $1.7 billion, less than 1% when you look at chinese steel in the american markets. is this a top priority when it comes to china influencing the u.s. economy? likely not. lisa: it raises the question about what can get done before the election with conflicting messages coming out. what kind of baby will get thrown out the bathwater in the name of politics? jonathan: tesla market value dropping after a 10% cut. ben calhoun said this, we think that these results will be messy due to several one-time items. on the other hand, the announced unveil with emphasis on self

driving energy business growth, positive. ben is with us or more. can we talk about how real you think the robot taxi effort to be and how quickly we could see the money from that effort fall to the bottom line? how instructive are you? >> thank you for having me. i think it is real. there is so much skepticism at tesla in this time and we have seen this overall coverage in the past decade, appearing like this, key executives leaving. people thinking that the robotaxi is all smoke screen. i wouldn't bet against elon musk on this. does it show up in the numbers next year? i don't think so. it's probably a 2026 story. i would be very cautious in thinking that this is something that is vaporware. i do think that they put a considerable amount of, as well

as r&d, into full self-driving robotaxi. i think we could be surprised with additional announcements as well. jonathan: people were skeptical, and we can get into the prospect of additional announcements, but the original reasons for skepticism, we had had fakes before, this was the same day that waiters said they were about to grab the 25 k platform, as you wrote yourself in your most recent notes. what do you make of the timing? how relevant is that? ben: very relevant. there is a lot of confusion weighing on the stock. a couple of key executives -- outsiders look at it as responsible for the lower-priced vehicle, call it the model two, the next generation, people thinking that that is no longer on the front earner.

scrapped, pushed back. there's all kinds of, you know, confusion around the different terms being raised. i would say this post's were always playing on the same form right now. through august 8, in our view they could both be announced at the same time and shown at the same time as well. lisa: is the thesis divided based on who believes in elon musk, others believing he's a man with good ideas but this is just a car company? ben: car company, ai company sematech company, my answer is yes, all of the above. rate down, no results, auto industry ev's particularly in the u.s. with weakness, a particular weakness in q1. we think that q2 numbers are

likely to high. it goes back to being an auto company and not hitting any real reddit for the work that they are doing in ai, but what they are doing in self-driving, that shows up in results, albeit a small part in the auto business. so, right now people view it as a car company and that's a risk to the stock as they start to get value as a car company. lisa: what in the production right now gives you confidence that it is something more, turning point coming in the bearishness around the value falling below 500 billion dollars for the first time in a long time? ben: a couple of things. number one, being able to attract the best talent in engineers out there. many studies say spacex, tesla, they are top-five in attracting talent. number two, they went through

capital this year and last year with a balance sheet, they have to do that even with a weakness, we expect free cash flow after deployment of 10 billion in capex and i think a big chunk of that is going to ai, different initiatives there. so, as they discuss different ways of group -- waves of growth , the next will take longer and the risk is we have gone from flat to down three years in a row in people wondering if it's a growth stock. i think that you are right to be patient for that longer-term choice. annmarie: i spoke to the white house climates are yesterday, john podesta, who admitted that there is anxiety out there around range, the lack of charging stations ev. until that is fixed, are we at peak when it comes to ev?

ben: the u.s. is lagging china penetration. if you look at the china numbers, just in q1, up year-over-year, over 30%. you know, the u.s. is still growing. headlines suggest there's growth in ev, there has been a lot of pullback of the others, the oems, ford, gm, still committed to different timely -- timelines that are pushed out. at the bottom, tesla has been very aggressive on expanding their supercharging network. it's still a problem out there. often you can go to non-tesla charging stations, but they will be broken, there's a long line, the technology is not that great. tesla is really leading the way in this. the work that they are doing now

will help with future adoption were not just tesla but other pms as well. lisa: will we ever see tesla produce a hybrid? ben: i don't think so. looking at the data here, and there is a consumer shift towards these plug-in hybrids, one, just personally, driving a rental car, inferior products, inferior to internal combustion engines or pure ev's in the way they drive number two, thinking about it from emissions, we don't really highlight that as much as we should, but you know, the emission profile is much worse than a pure ev, if you don't charge them they just run off of gas. so, a lot of data is coming out of the eu and other aces showing

how the mission profile is bad. it's not cool to drive and it's expensive to make, you are basically doing two powertrains on a vehicle. it's a kind of band-aid approach for oems right now. jonathan: we got a bit of news on the leadership of tesla, elon musk, i want your reaction if we can get it, tesla said that they would call a -- vote on moving the state from texas to delaware. we have been waiting for that. they are also discussing the massive compensation package she was awarded in 2018. and can we talk about leadership and where we expect to see that outcome from those kinds of votes? ben: we had a cautious approach only came out earlier this year, end of january, around the package.

take it or is taking my ball to go someplace else with ai. if i don't have 25% control, i don't want to do it. tesla that was seen as a risk. but going back to that package, going back to the previous conversation package, when it came out, the bearishness around the targets was immense. people never thought they could hit those different targets. the different goals around the number of vehicles produced. you know, i think that even i was surprised, being very bullish back then on how fast they hit these targets. i think you should be compensated that way. does muscat do things that alienate people or make people mad? sure, yes. no question about it. all the time.

people outside of investing will talk to me, family members, this, that, he's controversial. at the same time, you know, he has built several different groundbreaking, revolutionary, whatever term you want to use, companies out there. so you know, he deserves a lot of credit. jonathan: i think a lot of people might agree with you. thank you, sir, for the update. we just had back-to-back conversations. one of them on boeing, the other one on tesla, and it's almost unbelievable that boeing is, year to date, the third worst performing stock on the s&p 500. tesla down by close to 37. lisa: it's amazing but it shows you where tesla is coming from. this issue of the hope and prayer, the confidence in the elon musk story, con -- prevalent until now and it was

challenged with real delivery numbers out of china. jonathan: let's get your bloomberg brief. yahaira: u.k. inflation slowed less than expected last month, tempering rate cuts from the bank of england with consumer prices rising in march compared to one year earlier. that is a drop in february and its lowest since 2021, above the three point percent boe and economists expected with traders significantly paring back in the u.k., now favoring just one quarter quid reduction this year. morgan stanley plans to start cutting if the investment anchoring jobs in the asia-pacific region this week according to bloomberg reporting . 80% of the reductions will be in hong kong and china. these job cuts will be the deepest in years for morgan stanley and china, the biggest market in the region. in an interview with bloomberg,

jamie dimon makes no secret that his firm is all in on artificial telogen's. >> it's a living, breathing thing, there will be different kinds of tools and technology, but the biggest way to think about us is every single process , every app, every database, you will call it ai. it might be to replace humans. doing the equity for us for the most part, idea generation. yahaira: you can see more of that interview with emily chang and jamie dimon, tonight on bloomberg. or stream it on bloomberg originals. jonathan: thank you. i've seen the trailer for the new series, very cool, looking forward to that of it later. coming up next on the program, higher for longer. >> we will need greater confidence that inflation is moving.

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jonathan: stocks on the s&p 500, further hit, after three days of lawsuits are positive by half. or hundred 64 after coming close to 470 in yesterday's session. under surveillance this morning, higher for longer. >> we need greater confidence that inflation is moving sustainably. the recent data has not given us greater confidence and indicates it's likely to take longer than expected to achieve it. right now given the strength of the labor market and progress on inflation so far it's

appropriate to allow restrictive policy further time to work and let the data outlook guide us. jonathan: year to date highs on the dollar seeing its best gain since october of 2022 as jay powell signals that rates could stay higher for longer. david page is expecting three cuts this year, starting in july, with three more in 2025. david, good morning to you. you are still our july guy. let's talk about that. what needs to happen between now and then to make it happen? david: we had shifted act to look at the inflation number coming through and what we heard from powell yesterday is that that time is coming. we are probably thinking, pushing back now to september, but only september. if you are seeing september, you still need the softness to come through and we are not seeing it across the metric and the biggest surprises have been

retail sales and payrolls and both of those are likely to get softer over the next couple of months, hence we think the cuts are likely this year. but there is uncertainty unfolding. jonathan: i can tell you how this will play out in new york this week, you will meet with clients and they will scream election in november. we have had so many people push against the prospect of anything in september because of the election a few months later. what's your response? david: we hear this every four years, market mythology that the fed never moves around election. it's that sort of thing about the fed worrying about the optics. if you look at it, you can never statistically see any deviation in that policy towards economic needs. it always moves roughly around the table regardless of where the election is. that's not saying the election cannot have an effect it of markets think that such and such will happen, they have to take that into consideration, but the timing of an election we don't

sit her. lisa: most people are not on the same page, with rate cuts baked in by september but shifting further further out in the year. what would you do differently if you pushed out your expectation to december or into the beginning of next year? david: then you start to see financial conditions shifting and that's the real issue we have coming through here. the fed is trying to control the economy through interest rate policy but the economy is much more insensitive than we have seen in a while. and of course, financial conditions are therefore transmitting that. we have seen financial conditions shifting materially and that's the important thing. the restrictive policy the fed wanted was undermined by the easing of financial conditions that we saw in october of last year and now it is swinging back the other way and that starts to play on the medium-term driver. short-term driver rates will be inflation with softness coming

through their. medium-term, growth, financial conditions and we suspect with a little bit further to go that will start to weigh in on growth. not so much in the first couple of quarters but through next year that facilitates further rate cuts. lisa: don't we have to see further softness over the last trading sessions in order to get inflation back down to a level that gives the fed confidence? aren't rates going to remain at this level until there is a crack in the markets? david: exactly and that's what we need to see with financial conditions. we have to think the softness came about with markets incredibly looking for seven cuts at the height of last december, which always looked unrealistic, now moving a little bit further in the opposite direction -- markets pricing out the prospect of two cuts this year with an impact coming through on the rest of the space . but you need to see the softness coming through.

the easing of financial conditions has helped to boost spending in the first half of this year and we probably will have to see a swing move. jonathan: one issue that you are in the opposite for, this big disagreement around where the fed is at and where you are at? david: the fed has kept that unchanged since the gfci on the funds rate, 2% inflation with half of 1%. to our minds, the artstar level is hard to pin down. but when you look at the trends in advanced economy growth, they have picked up markedly since the lows of the gfci you would expect growth trends to be higher during that time and when we think about the u.s. there are clearly short-term dynamics showing that trend going higher and we think it's natural to see it moving from the lows of the

last decade to around 75 basis points higher. we think that it's probably up 3.75 -- 3.2 five. and that's not particularly controversial in the market. the market also has that kind of priority in the five-year, up even higher than that, still. we do think that over the medium-term the fed is likely to start pushing those views even higher. still for now, there is that jonathan: sticking to july, david page, thank you, sir. the conversation will continue with sebastian page t. rowe price. the ontario finance minister, it's all still to come. equities in the s&p 500. if you are just joining us, welcome, positive by zero point 4%. live from new york, this is bloomberg. ♪

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>> the fed wants to cut. the key russian is surrounded nation. >> they are in a good place. they can hold rates but if things deteriorate, they can cut and have a substantial impact. >> this is why a coin inflation is accelerating so quickly. >> we believe we will have higher inflation for longer with higher rate. >> they need to get away from

excessive data dependence. they need to have a view. jonathan: the phrase of the morning is good morning, good morning to you all. fully bullying from bank of america, one of the most bullish fund manager surveys since january of 2022. the biggest jump in growth optimism since may of 2020. still bullish. max canyon seen this morning, extending high-yield credit to max bullish. lisa: we have seen tailwinds that have not changed in the fundamentals, that is what a lot of people have said. even if there is turbulence in the market, they will still be investing, but that said when do the fundamentals change? if we don't get earnings that overwhelm and we have a yield on the two-year, the 10 year,

approaching 5% and beyond. jonathan: we did breach 5% yesterday for the second time in a week, at the moment down to 496 20 with a massive repricing on the intent of the curve. this is the point that max is making, starting point is much more hawkish now than at the start of the year. any mild downsize surprise should reduce concerns about the bed not cutting at all this year. i guess he said the balance of risks around the story have shifted over the last few months. lisa: at a certain point we were pricing in seven rate cuts and now it's fewer than two. if you really think this is a federal reserve cutting rate, this market is cutting at worse and at best it's more hawkish than what the fed delivers. this is the thesis from a lot of people who still believe the fed is going to get the ammunition that they need to cut rates before the end of this year.

annmarie: but not before the election. i was looking at what powell needs to see or november 5. four fed meetings, seven jobs are it's. including the one just before the election. you have to think that at least half of those have to be almost priced for perfection for him to take the cut. jonathan: we just caught up with investment managers who think that the door is open july. let's talk about what president biden wants to see. he's going to meet some 200 school -- 200 workers with high tariffs on chinese steel. as the election campaign picks up and we get closer and closer to november, we will have more calls like this. it's the beginning, we are still waiting for a call on ev's. annmarie: there will be a lot of policy levers they are tapping into. this stood out to me in the financial times right up, it's

important to get ahead of the chinese export surge as they make it harder for steel companies to compete, though when you look at what it impacts , it's not a ton of chinese steel, with the senior official saying it had nothing to do with election. if that is the case, then why are you doing it now? lisa: no one reads that on the surface and says -- guess not, it's a political lens, honestly. but from a market perspective i wonder, what do you do with this? is it a policy? do you trade around? do you talk about electric vehicles? what do you think about what it does to the complexes in the united states where they say it hasn't had a big impact on auto sales yet. these things make it difficult. what if they said they loved this? jonathan: do you not trust politicians when they tell you it's not about politics? do you not trust them? lisa: look at that body language. [laughter] jonathan: equities right now, we

can talk about that, the tenure getting close to 470 yesterday's session. we are down on 400-6490. -- 460 490. t. rowe price with the united states weighing fresh sanctions on iran and why still for him it's a chill environment. beginning with the top story, jay powell on the top burner with t. rowe price writing -- enthusiastically with lots of conviction, aggressively neutral between stocks and bonds. what would take to get us to overweight stocks? said is with us here in new york. i want to know what you are not tuesday asked the lish onset given the repricing we have had in fixed income. why not? seb: first of all, as an asset allocator, we spent a lot of time and asia -- on strategic

allocation with strategic allocation mix for the advisors in the work they are doing with you. why are we not more bullish on bonds? i think we will continue to see upward inflation pressure with potentially upward pressure on rate, specifically on the long and. long on the short end, but still worried. jonathan: did we not have strategic conversations on this program? lisa: that's not true, we talk about the 60/40 every month. we do. global shipping. carry on. jonathan: are we sitting here and waiting for 30 basis points to make it interesting? seb: these things matter, but we would change the view at 5%. look, on the inflation side, look at q1 data. running at 5% inflation.

this is not what the fed expected. economists would say don't look at one month or two months. i'm a runner. i like to look at my watch and see the pace that i'm going. the pace right now is 5% area to me, you know, i look at shipping costs and wages. atlanta fed, 4.7%. i look at unemployment, up or percent. oil prices. gasoline is up 18%. i do not think that we are out of the woods here with inflation pressures. lisa: you look like you go eight miles for our. david: no, -- seb: no comment. [laughter] lisa: if you believe that this inflationary pressure will reassert itself in the united states, why do you believe in broadening out, especially with the divergence between the u.s. and the rest of the world and a real problem for growth outlooks and the ability to cut rates

materially? seb: i love that question. it looks at the positioning of the valuing. look at -- ink back to 2021. how naïve are we to think that bonds can only go down 2%? think about everything that happens between now and then with a crystal ball in 22. i say that we are going to have 550 basis points of hikes with the number two, number three, number four largest bank failures in history. wars in europe and in the middle east. what would you think, what would you prove -- predict the s&p would do? probably down. however, on the broadening, the average stock in the world, msci index equal rated down.

it includes more value stocks and the bet on the bargaining is in the value that joins the inflation team as well. lisa: we are now going to talk about strategic allocations. jonathan: that's rare. [laughter] lisa: something we never do. this idea of a hedge, you been talking about this extensively. we saw the biggest surge in overweight's with bank of america -- america on the bully fully survey. are you on the same page? it's a strategic way to hedge inflation over a long amount of time? david: yes it week -- seb: yes, and you like specific assets stocks. strategically, we have the 5% allocation dedicated to real assets stocks in our portfolio. in a strategic regime long term, where you get more inflation

volatility with inflation stabilizing higher than expected, having a shorter duration position, and maybe what you can do strategically, take those 40% bonds and shift towards absolute return strategies. that would be a strategic move to hedge against greater inflation volatility. nowadays, hedging equity risks. glad that you asked about strategic asset allocations. jonathan: where does gold fit into that at all? david: -- seb: they don't expect for long specific commodities positions, so broadly diversifying metals and mining stocks is how we would think about it. annmarie: so, then you have exposure to the international

landscape? seb: yeah, and we are close to neutral on those, those are the most exciting positions, but strategically want to be diversified or nationally. you don't say that lightly, that is pretty hard to do when the u.s. large-cap stocks have dominated for 10 or 15 years. but it does make sense to have a broadly diversified for olio. lisa: when was the last time you really recalibrated this strategy and what would make you recalibrate it once more given that the market seems to recalibrate every couple of months? seb: tactically at the end of october, the market was down 10% and we like to lean in when the market is down. that was a big tactical calibration. we reviewed strategic asset breaks every year but i would say that right now -- i spent a week in asia talking to the world's largest investors and

everyone wants to talk about strategic allocation and now is the time to review what it means to do saa in a higher rate volatility environment. if you go back a very long time in history, real rates averaged 3%. the only exception was the new normal, if you will, the post financial isis which was near zero. i wrote a paper saying that the new normal was abnormal. it's on the minds of investors right now. jonathan: i appreciate that conversation but i think that i prefer the other page. good to see you. appreciate it. let's get you an update on stories elsewhere. yahaira: president biden is calling for new tariffs on chinese steel and aluminum products ahead of the visit today to the steel city, he's set to visit steelworkers as he is looking at efforts to shore up the steel sector before the

november election with 25% tariffs on certain chinese products as part of a wider review, repeating that u.s. steel should remain american-owned. the boeing safety record will be under scrutiny today on capitol hill, the senate holding separate hearings on whistleblower claims of poor assembly processing and shortcomings on the dreamliner program. senators will hear from an engineer who worked on the plane for years, us safety experts from nasa and in the academic world. boeing executives will not be there, but the ceo, dave calhoun, is expected to testify at a later date. senator bob menendez, planning to blame his wife at his bribery trial with work documents showing he will claim that his wife withheld information from him about gifts that the couple allegedly accepted from businessmen and the objection government in exchange for favors. his legal team is trying to get a judge to try him and his wife

separately. that is your bloomberg green. jonathan: what did you message me last night, talk politics? annmarie: it's basically nothing says love like incrimination. jonathan: brutal. utterly brutal. lisa: a charming way to endear yourself to someone after years of marriage. annmarie: i think it's divorce after the first trial. jonathan: you think? i think we should say less about this, if we can. up next on the program, the response to iran. >> i fully expect we will take additional sanctions actions against iran in the coming days. jonathan: that conversation, coming up next. good morning. ♪ t... is smart here, right? feel more confident with stock ratings from j.p. morgan analysts in the chase app. when you've got a decision to make... the answer is j.p. morgan wealth management.

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jonathan: stocks on the s&p 500,

posited by zero, down two basis points. things are calm her, but maybe the epicenter of that is the bond market with the dollar you weaker and the euro, stronger. under surveillance this, response to. >> i fully expect we will take additional sanctions action against iran in the coming days. we don't preview our sanctions tools, but in discussions i have had, all options to disrupt terrorist financing for iran continue to be on the table. jonathan: the u.s., set to impose fresh sanctions as israel weighs their own response. the national security advisor, jake sullivan, saying the president is coordinating with allies on a comprehensive response under the anticipation that allies and partners will soon be following with their own

sanctions. the former nato supreme allied commander and co-author of "2054," joins us now. fantastic to catch up with you. i want to start with this question, what did we learn over the weekend and by week, i mean iran, what did iran learn about the missile-defense system in israel? >> they learned that it is formidable, comprehensive geographically, and overall they would have been amazed at the coalition. i spent a lifetime the military doing air defense. the hardest thing in the world is to get together the israeli air defense, israeli air defense, alongside jordan, u.k., france, and put them altogether. iran was unpleasantly surprised

at the coalition level, comprehensiveness, and most obviously the result, 99% batting rate knocking down and coming missiles. jonathan: do you think the success of that will shape or influence israeli response? adm. stavridis: no, i don't. as follows, the israelis are clearly looking at it, and i think they should, as a massive attempt to bombard their homeland. something they have not done to iran. heretofore it's been between proxies, fighting more or less. now you have got the uranian military, specifically revolutionary guards, and elements of the conventional iranian military launching a massive wave of souls at israel. so, they will respond, i think they will respond in a measured way, but clearly they are going to take on this challenge from iran. annmarie: is there a way that

they can respond to make sure that there is the terrence but not spark off in -- a revenge cycle in the gulf? adm. stavridis: it's exactly the right question and the one clearly under discussion in the or cabinet. i would think of it as an ascending ladder of violence. option one, do nothing militarily but impose sanctions, more diplomatic aggressiveness, try to get all of your allies on board. perhaps some cyber response. option two is you go after, kinetically, perhaps maritime assets, warships. up the cyber game of it. certainly throughout this you will go after the proxies. option three is a strike on the iranian home and. that could be a fairly tightly packaged graph of going after the industrial facility where the drones are held. option four, let's hope israelis

don't pick it, a massive counterattack. hundreds of missiles, ballistic and ruse missiles, aircraft, all of that thrown at age or military targets across iran. i don't see that later option. i think it will be a mix of two and three as i described them. annmarie: one of the options had to do with the red sea and there is new reporting that there is a naval mission underway with the iranian navy escorting their commercial vessels from the gulf of aden to the suez canal. do you think that iran is preparing for potential retaliation in the waters? adm. stavridis: clearly, they are. let's call immediately before, a day before the strike against israel over the weekend, the iranian navy in what can only be described as an act of piracy, seizing a large merchant ship that is ultimately owned by

israel, by an israeli business concern. iran kicked off that cycle as well. the israelis have to be contemplating something in retaliation that, hence the export i the iranian worship. lisa: i've been trying to figure out why iran has felt so old and to attack israel on its own land, move out of the shadows. how much are they emboldened by relationships with russia and china? adm. stavridis: you have put your finger on it, that is what's different. over the last three or four years, particularly russia, iran is beginning to feel very comfortable in this partnership that they have developed which, at its heart, is transactions for weapons with iran providing very significant, fairly sophisticated drones to the russians and their attack on you a.

in turn this feeds the iranian sense of having, you will, a larger coalition partner behind them. finally, with china, iran is fully engaged in the belton road initiative. -- belt and road initiative. more of an economic relationship there, but oath of those have emboldened iran. lisa: given the fact that they have their own coalition or the appearance of one, how much do sanctions actually work? adm. stavridis: sanctions are always an imperfect tool. we can go back to the global sanctions imposed on south africa during apartheid. it took decades, decades for them to really create a sense of economic disadvantage that caused a part of why south africa changed course. anytime you impose sanctions, it

is going to take time. here you are absent the correct, these are leaky sanctions with at least one third of the world's gdp, maybe a bit more, simply not participating. not only china and russia, here, but for example india not participating in the sanctions against russia that were correctly imposed in the ukraine work. it will take time. it is better than nothing, but we should not believe that it will be the path to changing the course of iranian bad behavior. jonathan: you mentioned china. can we finish on china? you are out with another book, follow-up to open 2034 -- "2034." it was a novel the next war. waking up this morning and hearing the president talking about upping tariffs on chinese steel in referring directly to building ships in america, do you think -- what do you think

we are drifting towards? adm. stavridis: unfortunately we are drifting towards the possibility of more tension but i will close my reappearance here on a mile a more optimistic note, i think a good deal of what you will hear in that regard over the next coming months is in fact tied to the election cycle in the united states. once we get through that, i think there will be a pot lydia the two sides finding their way to a better ending. clearly there will be no go zone in the relationship, everything from taiwan to the south china sea, military competition itself , but the possibility of continuing to have coupled economies and not staggering into decoupling of these massive economies. i think i am cautiously optimistic we can work that after the election. jonathan: i think that we can all agree that we hope that your

great novels remain just that, novel fictions. admiral, inc. u. a big focal point, leading into november. lisa: especially because this has legs on either side of the aisle, it will and i it just this election cycle. we are in a new world where china wants to do one have to find a different way. annmarie: trump or biden, chinese tariffs are on the way. jonathan: big time. china raising the capital gains tax in a bid to make housing more affordable. we will catch up with the finance, just around the corner.

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jonathan: pretty steady. positive one third of 1% on the s&p. steady yesterday. biggest loss since spring of last year. the russell attempting to bounce back .6. breaching 5% again at on the two-year, back down to 4.9685. down to about 4.6552, a single basis point on the 10 year maturity. sebastian page with us earlier this morning not ready to buy that yet. he is waiting for 5%.

jonathan: -- lisa: 45 .5%. does the federal reserve allow inflation to run hot and what will it take to bring inflation back down if the fed does cut rates? there are some the questions i have. i am watching the 20 year auction. jonathan: is an odd one. 20 year maturity. lisa: basically it is less liquid so you have higher yields on 20 year than 30 year. jonathan: why should i care about that? lisa: you are right and that it will come to a weak auction and everyone will freak out. it is fueling that narrative of supply versus demand. jonathan: the bid at the moment is ok. we have had a lot of dollar strength recently. we have hit the highs of the year and backed away. cable at 1.2458.

154 on dollar-yen. the dollar gripping over the last few months. lisa: you could argue they want a weaker currency but to what extent. how much does this tie the hands of the people's bank of china? jonathan: the dollar is in the driving seat. fed chair jay powell pumping the brakes on rate cuts, sing recent data indicates it will take "longer than expected to achieve confidence inflation is headed back to target." the emphasis in the last month is on time, the time it will take to get back to target. annmarie: cannot hurry rates because he does not see the confidence in the data. you look at all of the data that is coming out. the reason everyone cares this year is because there is an election in november. four fed meetings before the election. it is not a lot of time to see

-- it cannot be just one print. it needs to be at least three and he said yesterday it is not pumped as we've been talking about. this looks like a trend. jonathan: it is funny it is either july or december for so many people with the exception of david page. he thinks it can happen in december because he does not think the election matters that much. everyone else if it does not happen until july they think the window should close. do you buy that? lisa: it depends whether the data is sufficient to justify it in the market size. if you get sufficiently weak data you will end up having justification to cut rates. if it is on the margins, wait till december. jonathan: do you like a fed official around the dinner table? lisa: i say this is sufficiently inappropriate tape -- i say this

is sufficiently inappropriate behavior, leave the table. jonathan: second-quarter forecasts have beat estimates, easing concerns aircraft delays from boeings could put expansion plans at risk by 4.99%. annmarie: they are walking this line very carefully and people are surprised how well they did given the issues with boeing. i look at this and say they not expanding as quickly as they want. what does this mean for airline prices this summer? it feels like they will be going up, especially on top of billing on one end and jet fuel prices going up. lisa: would you prefer free internet and better snacks but it old plane? jonathan: i would prefer a safe flight. annmarie: stop flying air italia. lisa: they will probably be older planes, but then we heard

they will offer more amenities. i do not mind. jonathan: they will give you better food and free wi-fi as long as you fly the plane with the ashtray from 30 years ago. let's turn to the news out of canada, raising capital gains tax on businesses and wealthy individuals as part of a bid to make housing more affordable. the announcement coming amid cold data showing justin trudeau losing support among young voters due to housing prices. joining us is the ontario finance minister. thank you for being with us. >> it is a pleasure to be back in new york. what did you make of that announcement yesterday evening? jonathan: as a conservative provincial government i never believed -- >> as a conservative provincial government i never believed taxing your way out is a way to go. we had attacks in the province of ontario. we cut the gas tax.

i do not think you can tax your way to prosperity? jonathan: will this holdback investment? >> i don't think so. we are booming. we are growing faster than florida and texas. people are coming to ontario. we have capital flowing in. $28 billion of capital investment in electric vehicle production supply chain and assembly. we have growth in many parts of the economy and we are building everything. we have more subways in ontario. it is a real opportunity to build the economy. lisa: how much did the capital gains tax hike lead to more unaffordable homes because people will not be selling him if they will be taxed to such a high degree. >> this is not on your primary residence. your primary residence is exempt

from capital gains. we have a robust plan and i will give the federal government credit they are investing in the infrastructure. it is the plumbing you need to build more homes. we have an ambitious target in ontario to build 1 million and a half homes and we'll do everything to get there. lisa: how do you get the confidence from investors to have the capital to do that at a time where growth is weakening, there is a question about the debt overhang, and the whole idea of how you will raise that revenue could curtail growth, which makes it less attractive. how difficult is it? >> in ontario we are 40% of the country. as ontario goes, kennedy goes -- canada goes. we issued a 10 year bond yesterday and it was more well received. we had more investors for u.s. 10 year deal out of europe and

asia then we had out of the u.s.. we will keep continuing to build the infrastructure and the economy. the other thing we are doing with that population growth, we put a lot of money into training the workers. you need people who know how to build the hospital's, highways, subways. jonathan: you won the population growth. you are fiscally conservative but when it comes to immigration you have a different view the republicans in this country. your population has gone up to 60 million. this is by design. -- has gone up to 16 million. this is by design. are you able to build housing fast enough? >> we cannot have immigration and not have the infrastructure in place. schools, highways, transit. i am the son of hungarian refugees from world war ii.

other than indigenous everyone from canada came from somewhere else. we have been a beacon for everywhere around the world. we have an obligation to make sure we can accommodate that growth. we have a plan in ontario to do that. annmarie: a lot of analysts say the united states trains high skilled workers in canada steals them. is that what you see going on? >> we are pretty shameless in canada. we accept people from all over the world. my wife is american, born in new york. that is the tradition and history of canada. we are welcoming of people from around the world. when they come to canada they want to have a good job and feel safe and raise a family. that is why our government is focused on making sure we come back, we rebuild the economy, and we train the workers for the jobs of tomorrow. jonathan: this seems like a big

investment phase for you at the federal government. how do you balance the budget with that in mind? >> i am the only major jurisdiction in canada to balance, we balance in three years. yesterday the federal government to not have a path to balance over a five-year period. we are committed as conservatives, we think we can do both. we think you can have a healthy economy and a healthy balance sheet. that means we are not passing on a lower standard of living to the next generation where they have to raise taxes and cut spending's. lisa: how do you adjust expectation when it comes to benefits. this is the question the united states is facing. do you have to cut back in certain areas to provide that stability for future generations? >> we do index some of the support payments like our ontario disability support program and low income seniors we index.

we have chosen a different path to afford all of those payments and all the infrastructure we are building by growing the economy. we believe in economic prosperity and putting in place conditions to let people and families and businesses grow. annmarie: yesterday we had jay powell sitting next to the bank of canada governor. this administration, with the inflation reduction act, many in canada lobbied for it and it came out and said this was protectionist to the united states. where do you see this going now? have they assuaged concerns the canadian government had? >> there were concerns. by american. we said we have been a trading partner for a couple of hundred years. we found some common ground. to their credit the administration exploited canada

from that provision. the inflation reduction act, we responded. we were a free trading country. we transferred free trade in 1988 and we continue to believe in free trade. the united states is our best friend and ally on the planet. we will continue to find ways. jonathan: is ideal to find someone else who believes in free trade. can you find them? who are they? >> we have a trade deal with europe, with the u.s., with asia. jonathan: without a doubt. the reason i asked the question, it is all well and good. the problem is there are leeches on the free-trade system and one of them is china. what we are seeing is the rise of industrial policy in america because of what has happened in china and china has been successful developing industry. how does canada compete in a

world where everyone seems to be drifting towards really big subsidies and manufacturing that is local and not international. >> continue to find ways, like in advanced manufacturing, life sciences, to set the conditions -- the government does not create the jobs, the private sector does. our view as per mr. harold mcmillan -- as prime minister held mcmillan said the biggest problem for government is events. we deal with events in canada and we are a big trading country and we know we will come out the other side. jonathan: we appreciate your time. enjoy new york. the ontario finance minister there. let's cross over to the bloomberg brief. yahaira: the sec is cracking down on the use of third-party messaging apps on employee phones.

the agency is restricting access to platforms like whatsapp. the restrictions are meant to help improve record-keeping and address potential security vulnerabilities. the sec's twitter account was hacked earlier this year which resulted in a fake post announcing the approval of spot bitcoin etf's. tesla will ask shareholders to vote again on its compensation package for elon musk after a court in delaware avoided the $56 billion payout alleged for the company ceo in 2018. a proxy filing tesla said it would call for a shareholder vote on moving the company state of incorporation from delaware to texas. record rainfall into by lead to cars being diverted -- it is the heaviest downpour and united arab emirates since 1949 and

comes after the uae has been clouding out an operation involving spraying chemicals into the atmosphere to squeeze out more rain from clouds. it has done that seven times this year as it aims to address water security issues. i learned something new. that is your bloomberg brief. jonathan: the rain they engineered, this is what they wanted. they did not develop the drainage. infrastructure first. lisa: [laughter] have been doing it since 2002 and this is been a complaint. i don't think anyone was expecting a dilution. jonathan: that is what the government does now. buy ev's, then we will all the charging stations. lisa: i feel a little bit like glass house. who does it the best? jonathan: problems all over the place. this swiss probably do it the best. coming up, putting rate cuts on

ice. >> if inflation gets worse they could hike. the likelihood of hiking, is it low? jonathan: what was i thinking? canada, of course. from new york city, this is bloomberg. ♪ so, what are you thinking? i'm thinking...

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

jonathan: equities on the s&p positive one 31% on the s&p 500. bond yields settling down. 4.6552. putting rate cuts on ice. >> if inflation gets much worse they could hike but if they do hike we will have a regional banking crisis, we will have all sorts of damage in the marketplace. i think that is at the back of their head. the likelihood of them hiking is low. is it zero?

no. they could. jonathan: the two your briefly touching 5%. krishna memani writing "remain in a rage bound market. when the economy is doing well it is probably still a t-bill and chill environment." krishna is with us. i'm surprised we have had -- we have not had people say by bonds. buying bonds and buying t-bills is two separate things. the rally we had in bonds at the beginning of september had to be unwound. that is what is taking place. the 10-year today is a much better value than before but can still steepen more. t-bills or the two year provides you a really good return in an environment where things are not moving in one direction in a big

way in bonds or stocks. jonathan: let's go to the balance of risk around the 10 year. the 10 years sitting at 4.65. what is the risk we go another 50 basis points higher or 100 basis points lower? krishna: 5% is probably the upper end and that requires the fed not to do anything for an extended period. if we have had a significant slowdown, we are going down 100 basis points in a hurry and that creates all sorts of situation that increases demand for long duration in a big way. that is the convexity of bonds at the moment. lisa: i understand the t-bill side. i do not understand the chill side. i do have no chill. [laughter] if you believe t-bills are the best bet, that implies weakness down the line, that implies something that is less than chill.

krishna: that is saying the upside in stocks is very limited. you need earnings to continue to grow in rates to stabilize or come down. one leg is working. it remains to be seen how long it will work. given where the market is relative to earnings outlook, the upside is modest and the downside is significant if we have a 100 basis point cut in rates in a hurry because we are talking about a recession as opposed to a soft landing. this is kind of a placeholder more than anything else. at 5% is a pre-good placeholder. lisa: you are still in placeholder mode. what are you waiting for to get conviction? krishna: what we are waiting for is confirmation the economy can continue to grow. in an environment where inflation continues to trend down. what we have not seen so far is

inflation continuing to trend down. that is what we are waiting for. the longer the fed holds at five and a change until the end of the year, the risk in the equity market is increasing rather than going down. that is what we have to be mindful of in the current environment. annmarie: given jay powell's comments yesterday do you think they hold until the end of the year? krishna: a month and a half ago he was talking about cutting in june. they are as data-dependent as the rest of the market. if things slow down they probably bring it forward rather than later. the challenge for the economy is there is no sign of any slow down in the economy. until that comes about everything is speculation, whether jay powell or us. jonathan: the emphasis seems to be on time. they keep saying "at current levels." do you think we are sufficiently

restrictive or are they just waiting for inflation to come down and then there restrictive where they want to be? krishna: to truly claim whether we are restrictive or not you have to have a hand of where our scar is and none of us do. the two bet -- the true bright side of tightness -- that sort of tells you how we are interpreting the current situation. lisa: if someone were to say to you i get t-bill and chill but what about t-bill and chill and gold? krishna: i have always had a tough time with gold for nonhealing assets. it is like bitcoin. it is very hard to wrap my head around something like that. when you earn 5%, that is 5% of appreciation you have to deliver. jonathan: lisa is struggling to keep it together so let's build on the bold story. what is driving things at the moment? what is behind the breakup?

it is hard to see gold rip and the dollar stronger. what is going on? krishna: the dollar stronger report is easy. rates will remain a lot higher. the gold part is we can make a story we want. that is what the problem is. people in china -- people india started buying jewelers. the point is a speculative rally will continue as long as martin uncertainty continues. if the direction of rates becomes clearer i am not sure we be doing as well right now. jonathan: there are a lot of reasons gold is up here. there is one argument suggesting it is difficult to understand where i can go to find risk mitigation characteristics if we have problems and the problem might be higher inflation. lisa has been asking whether treasuries fill that role anymore. does gold fill that role?

krishna: if you think gold fulfills that weight then you have to think other places like china who have not been buying gold will all of a sudden start. that might be the case. it has to be some additional buying. the nonhealing characteristics of gold has not changed. in that sort of a context you have to believe one of these stories with very sparse data. i cannot get myself there. jonathan: is the biggest risk upside risk or downside risk? what about now? krishna: the reason for t-bill and chill is the market environment is uncertain. the upside inequities from current valuation levels is modest at best. for that a lot of things have to fall into place. the upside is relatively mild but it does not mean the economy is not doing well and will have

a 20% correction. from the optionality standpoint is worth owning. having a full allocation or significantly higher allocations than equities because of the perceived upside is a tough case to make. jonathan: you are brilliant and this was awesome. thank you. t-bills and chill. krishna memani of lafayette college. not much chill around the table. just a little bit of chill? lisa: it is a fascinating idea. everyone says where do you wait -- deciding to wait in an asset class that delivers returns is an interesting concept. jonathan: coming up, alicia levine of bny mellon. and bloomberg's verio parker. the third hour of bloomberg surveillance is up next. ♪

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>> the u.s. is leading and this

is one reason we remain overweight u.s. stocks. >> the u.s. dominates almost regardless of what the global scenario is. >> i think we are in the midst of a game changer on technology. >> the bar for earnings to surprise to the upside has risen. >> the market is riding the wave of the increase in the stock market. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: live from new york city, good morning, good morning. the third hour of "bloomberg surveillance" begins right now. equity on the s&p 500 positive .33%. always fascinated with the psychology of markets, particularly in fixed income. let's talk about this. what is it about bonds? you get a 50 basis point move higher no one wants them, 50 basis points lower no one can get enough. lisa: it has been the moment from everywhere and fixed income seems to be as whipsawy as the

fed speak has been. you have data dependency. every data point is the cause for another 20% move in bonds. it is our to get ahead of that it the other direction because we have seen this overshoot again. jonathan: tons of fed speak of the last 24 hours. i go back to this quote from the vice chair. "if you thought there was a threat -- if you thought there was a threat of higher interest rates take a look at this line. "my base look outlook tends to be inflation will decline with policy held steady at the current level." lisa: powell indicated they will not hike rates also. he said this inflation is not a standard case of overheated demand. this is something else. this is not indicate the need to kill it off. this the reason people are saying the upside risk to

inflation is not in the same way where should be. powell says data has not given us more confidence so we need more data. this are no longer bumps the timeline issue will be incredibly important. jonathan: the emphasis has changed. in august 2022 when chairman powell was at jackson hole and he delivered the speech on pain, the emphasis was on pain. now the emphasis is on time already healed not cutting for the right reason? or will earnings be supportive of some of the valuations we got to over last month's? lisa: the delinquency data we keep seeing on credit cards and auto loans give pause. the idea you are seeing small businesses struggle with higher benchmark rates. there are reasons you could see

this economy slowing more materially. that is the reason there is little pain, it is just not widespread enough to get average numbers. that is the reason people think this is a real weakness. annmarie: which is after jay powell spoke i looked up senator elizabeth warren's website, her tweets. yet to see anything at. with everyone talking this will be longer, there will be a consensus in washington on the democratic side that it will say we've been asking you since january to bring rates down. it is hurting people in the electorate. jonathan: i'm not sure that is how it works, just because the democrats ask the federal reserve has to deliver. i imagine we will get more letters. lisa: that is the reason they will not cut rates in september. jonathan: why can't it be september. if the data is there cut in september. annmarie: arguably powell did the best thing he could do provided when he just said there will be a pipit and then we have

seen this market rally. that is when he helped the electorate in terms of how they view the economy and buy-in. i do not think that september will rival november. lisa: that is why i laughed at t-bill and chill. telling wall street to chill is ridiculous. people coming up with every narrative under the sun when really they have to be chilling and watching the data. it is a difficult about the crack. jonathan: equity futures positive .25%. yields lower by a single basis point. the dollar is weaker today against the bulk of g10. coming up this hour, bny alicia levine on why markets can still reach new highs. citi's akash looking for gold. and dana peterson on optimism.

alicia levine saying "the market is more aligned with the fed than three months ago. that move from six to three hikes happened with barely a hiccup in the equity market. we think the fed will cut less later. it could be two as long as the economy is strong. the equity market can handle less and later." alicia joins us. good to see you. we are talking about a year of two habs. i think the second is going to be better than the first half. alicia: it looks like the first half was strong into the first quarter. we are clearly walking into a counter story in the last few weeks. it is not just at the rate cuts are lesson later, but is inflation higher. jay powell said the part we were all thinking. are there no cuts at all.

i think the issue is the pipit already happened. it happened in december. to pivot from the pipit -- to pivot from the pivot will be a difficult thing for the institution. we are in a place where the fed can hold this higher for longer but i do not think we go higher. we are not pivoting from the pipit. the data are hanging in there. the job market data has been extraordinary. if you look at the three-month average, six months ago the rolling average was 200-3000 jobs per month. we are now 275 jobs per month. it is back up in what is supposed to be a slow down. we have done it with wages ticking lower. there is a supply story going on in the labor market the fed is hanging their hat on to quietly bring inflation down on the

labor side, even as we see higher numbers in services. jonathan: you call 2021 the covid excess years and 2022 and 20 trade three years -- 2022 and 2023 the transition years and now you're calling this the new normal? alicia: we have an economy that can grow at 2.5% and inflation not down to 2% anytime soon. we have deglobalization, we have re-shoring, and hot conflicts in two parts of the world where commodities matter. we are in a place of 2.5 to 3% inflation as a steady state that feels about right. we are also in a place where growth is likely to be higher than the 2% which we had post global financial crisis. i think this is the new normal. we have had hiccups along the way, but this is not feel

problematic. we have lived with 5% inflation quite well. lisa: is not problematic for google or microsoft but it is problematic for smaller companies struggling with highly leveraged balance sheets. at what point does that become a problem for the broader market given the steady drum in the backdrop? alicia: there has been a bifurcation it is the slow ringing out of excesses in all of these challenge balance sheets. there was a lot of hope last year with the pivot that this asset class would finally rally. still 25% below the high of 2021. it is happening across the economy to smaller businesses. the larger companies in the u.s. termed out there debt, meeting just like households -- large

companies sell bonds -- the bulk of the s&p debt is not due until 2030 or later. we have larger companies paying update at 3% to 4% and getting 5% of their cash. just keeping that part of the market solid. u.s. markets will protect the s&p from what we are seeing in smaller companies. if the fed keeps high for longer we will see that slowly wind its way through the economy. it is really slow and unequal on how the higher rates is hitting the economy. lisa: what i'm hearing from you his own u.s. big tech companies and chill. is there some room for t-bills or international or gold or you just say can have your general allocation overweight u.s. stocks. keep the tech names.

alicia: we allocate tall asset classes. on the equity side we have favored the u.s. for several years because it is clear the potential growth in the u.s. is higher than elsewhere. even though we get better-than-expected numbers from europe or china it is not enough to go where the u.s. can go in terms of sustaining growth. you're looking at policies that boost growth. we have been u.s. large-cap overweight for a while now. we are comfortable with that. in terms of the bond side we have always said you have to actively manage your bonds. we've never said go along duration. we said please get out of cash. why does everyone want to go into bonds when rates come down 50 basis points? maybe this is the time to start walking out a little bit. we still like alternatives for that world where there are distressed assets to invest in

and private equity valuations are steadily coming down. this is the time you want to start getting into the vintages? annmarie: what about gold? alicia: gold can be risk off or risk on. it is not in our allocations. it has no yield or dividend. hard to track. i think gold is acting as an expression of discomfort with possible inflation bombs. -- possible inflation bumps. jonathan: alicia levine of bny mellon. don't leave us so long next time . equities positive .2%. let's get your bloomberg brief. yahaira: the u.s. is said to place new sanctions on iran after the country's unprecedented attack on israel. jake sullivan say new measures will target iran's drone and missile programs, and on capitol

hill lawmakers are debating legislation to place sanctions on importers of iranian oil. u.s. homeowner rates are climbing once again. the contract rates on a 30 year fixed mortgage it a four month high of 17.31% -- home sales actually increased 5%. that is the first date. mortgage rates are at risk of rising further. s.e.c. is cracking down on the use of third-party messaging apps on employee mobile phones. the agency is restricting access to platforms like whatsapp, plus sms and i message. the restrictions are meant to help improve record-keeping and address security vulnerabilities. the sec twitter account was hacked earlier this year through a staffers agency phone, which resulted in a fake post

announcing the approval of spot bitcoin etf's. jonathan: up next, it is gold's shining moment. >> gold is a marvelous sweet spot, a good diversifier and a good head for paper assets. that started a lot of buying of last couple of months and set the market all-time highs. >> at all-time highs and why it could go higher. citigroup looking for 3000. that conversation is next. ♪

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

jonathan: equities on the s&p positive one third of 1%. yields lower a single basis point. in the fx market, the dollar is weaker. maybe steadying things. the epicenter of the calmness from europe exchange. under surveillance, it is gold

shining moment. >> gold is a marvelous sweet spot. you can be out of the dollar without being in a another currency. gold has proven to be a good asset to own. it makes it likely the central bank were not have five -- it is very good head for paper assets. that started a lot of buying coming in and set the market all-time highs. jonathan: gold hovering near record highs. of just over 50%. "we expect 3000 announced over the next six to 18 months. the recent gold rally has been aided by geopolitical heed and has coincided good morning to you. i want to talk about the drivers. could you help me understand? typically we associate a gold boot with a weaker dollar and

lower reels -- and lower yields. >> gold has coincided with a stronger greenback as well as real backup phenomenal yields. real interest rate adjusted treasury yields. part of it is financial flows are finally catching up to what is been strong physical demand. if you look at what is driving gold over last couple of years, if i was sitting in the studio that the fed would increase interest rates to 5.25%, no one would've thought gold would average $1800 an ounce to $2000 bounce. it has been barn for demand from retail and the physical demand -- that is driving the goal demand on the physical side in financial flows are only catching up. jonathan: do you think there is no limit to the divergence we

are seeing between treasuries and cold at the moment? >> the relationship is still there but the duration is shortage -- the duration has shortened. think it is plausible if the fed proceeds with insurance cuts and nominal rates can stay high and real yields would rally. if you have a turn in the dollar cycle that would be a kicker for gold getting higher also, given equities aren't all-time records , or were in the past week or two -- are at high time records or were so if you get an equity correction or unwind, if the market is mispricing u.s. recession risk, i think gold is a good portfolio diversifier. lisa: in the past couple of weeks we have seen repricing in the bond market about the idea of higher for longer. what we hear from institutional investors is it a pet rock and

there is no door. in t-bills if you get 5%, choosing his positions pullback is a root else gets in? >> the inflows are not only coming from retail but institution. oldest a non-interest-bearing asset. the move in rate is not a positive tailwind. it is not a negative headwind right now. it is for other reasons. the central banks are buying gold because it is a bear asset so you do not have credit risks. -- some of moves in crypto, part of it on etf launches. from the point of view is can you modernize gold? you can hold gold and overwrite volatility on that. a lot of private backed had high net worth individuals own --

lisa: this is what i was going to ask by do wonder about the central bank buying of gold. are they looking to monetize it through options? do they have a gold carrier and they can call one 800 monetize my gold? what is the functionality of gold in the central bank portfolio. >> central banks are buying gold that is physical, physical gold stored underneath the new york federal reserve. some might be stored on shore and some might be stored in france and switzerland vaults. it -- as treasury holdings might go down incrementally, gold holdings go up. guess what is is a smaller market? the fiat market or the gold market. even demand from the official

sector which is down 25% to 28% -- as $1000 became the new price post financial crisis i am arguing that 1900, even 2000 could become the new base for gold going forward and we are a higher for longer regime -- annmarie: how much you think u.s. sanctions are driving that appeal to gold. >> u.s. policy has been a big driver. central bank demand trends started increasing post financial crisis after being at sellers four decades. 2014 russian annexation of crimea bank holders started to decrease further. most recently you have had record central bank purchases since the russia-ukraine more. annmarie: these purchases are stored in place like downtown at the new york fed and london.

is there a point where if they are owned that central bank the u.s. could maintain control. very difficult to track. we expect the trend to continue -- it is not just the pboc in russia buying gold. it is poland, india -- jonathan: you said the phrase dedolarizaion. why are people afraid of that phase -- afraid of that phrase? >> i did i think everyone is afraid of that phrase. if you look at the russian sanctions regime, gold as a bear asset was the one instrument they could hold, which they held on shore, that cannot be touched. you can push russia out of the

lvmh market and give less liquidity to the swiss refining centers but they still have that asset. from that point of view, challenging the u.s. dollar and the hegemony and of the u.s. is the boat emerging markets. we see -- lisa: is there a limit the amount of gold central banks can hold on a relative basis to their reserves? >> he would have to ask central bank reserve manager. from that perspective, incremental gold holdings have grown. right now they are representing around 25% of annual gold production. as that number increases that is price supportive. it lifts the price for of gold and damps downside price volatility. that is why i think we are in a new regime shift and it could be multiyear and multi-decade. jonathan: where it bitcoin fit into this? is it a competitor to some of the forces you are talking about that support gold? alicia: -- >> on the retail side

we see bitcoin as part of the fiat story. from a central bank or official sector standpoint we do not view crypto and bitcoin as digital gold. we view it as an alternative or separate asset class. gold holdings increasing from sovereign wealth funds or central banks proves the validity of gold and the monetary system and gold is old and traditional money. we think crypto is newer. that is happening more on the all fee outside for retail. jonathan: this retail catching up to the gold story yet? how far away is that? michael: it happens a lot -- >> that happens a lot uncertain networks you may not be watching late at night, certainly not bloomberg. you've seen headlines about posco selling out of gold bars

and coins. you talk about young millennials doing stacks of gold bars. it is becoming something that retail could get more interested in. etf's have still posted outflows. since q4 2020 two have seen 20 times a month of etf outflows on average. imagine if that flag lines or starts to increase, that titans of gold physical that helps accelerate the move to $3000 an ounce. jonathan: i enjoyed this. they mentioned to lowbrow financial news networks as well. coming up, dana peterson of the conference board. coming up -- from new york city, this is bloomberg. ♪

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jonathan: equities with a bit of a bounce going into the opening bell 60 minutes away. three-day losing streak on the s&p 500. positive a quarter of 1% on the morning. on the nasdaq positive .2%. the russell has been difficult since march. in the bond market, new highs for 2024 on a two year yield and a 10 year yield. 4.6552. yields backing away a little bit. down a single basis point on the 10 year. on the two year 4.9642.

breaching 5% in the last 24 hours. lisa: there are people circling to buy but it seems like they are not showing up in force yet. underpinning that is this question of how much does the equity market have to crack to get bonds under control and inflation under control and get the fed to cut rates. jonathan: the good news for those of you worried about the dollar is the dollar is weaker against free much everything in g10. the euro is positive. the yen showing the smallest bit of strength against the dollar at 154.67 and cable is 12450. inflation in the u.k. a little bit hotter than expected. the boe expected to cut sometime soon. lisa: they do not have the luxury of allowing inflation to run hot while also supporting the economy. that seems to be what they're working at. inflation is still below whe

we are in the u.s.. it might be hotter than expected. the u.s. is looking more inflationary than the u.k.. jonathan: the eu and the u.k. do not have a growth profile of the united states. under surveillance, our top stories, president biden calling for 25% tariffs on chinese steel , only targeting a small segment of the u.s. market. by did making a campaign stop in pittsburgh to reiterate his call for u.s. steel to remain american owned. we talked about this hours ago. it is going into november. annmarie: this is on-q for november, not how they feel about steel when it comes to putting steel in the united states in terms of how minute it is in terms of demand. this sets the stage for policy levers the administration can pull before the election. it will be these tariffs on china when it comes to steal, we

are waiting on more terms when it comes to eb's and strategic petroleum reserves. it is putting oil into the market. in swing states this is what matters. lisa: it is ahead of the election and it is policy. we talk about geopolitics. they are more and more intertwined with the economic backdrop and the question of what you want the economy to be? you talk about free trade. the u.s. is trying to say someone is not playing by the rules, but we are trying to play at their level and how this does not contribute to inflation, it a circle we are trying to square. jonathan: what we saw in the administration our national security concerns that seem to cover a lot of things and they seem to come before any economic ideas. is been interesting to see the journey someone like secretary ellen has been on. coming out of the federal

reserve with specific views, old-school establishment views about global trade, took over a complete reverse for the treasury secretary to put at the forefront of her concerns national security issues and that is not what we heard at the start of her term at treasury. annmarie: she has started to migrate towards the jake sullivan's in the quote she gave to the wall street journal talked about the path. you get a discount and send a thank you note, she says i'm no longer sending a thank you note. jonathan: the mf world bank meeting is kicking off. boeing under scrutiny. senators calling on safety experts to address gaps in the playmakers assembly processes. boeing executives will not be present in either gearing. the ceo expected to testify at a later date -- at a later date. talk about bad optics. lisa: they do not have the

current ceo there and they are not sure who the future ceo will be. this is mostly theater at a time there are still questions around what actually happened. i am more curious about what people are questioning them about in terms of what we do not know yet given how long this has gone on and the fact that fact-finding should be number one and it is amazing we have not gone further. annmarie: you will talking -- you are talking about backward looking although senators will be looking to figure out who the next executive is. future looking, ryanair said boeing is it sick -- is taking steps to accelerate jet deliveries. they are excited they will get two or three additional planes before the end of june. important for summer travel. jonathan: if you're scared of flying and you are flying later with boeing, do not listen to that whistleblower testimony. the details are frightening. lisa: complete lapses in safety

protocol. we talk about the new technology of tightening some of the boats and someone oversees the construction. the takeaway for those who fly is planes may not be older and it will have a ripple effect as airbus cannot reduce -- jonathan: a strong defense from boeing. jay powell putting rate cuts on ice, saying yesterday "the recent data have clearly not give us greater confidence and indicate it is likely to take longer than expected to achieve the confidence." today we will get more fed speak plus the beige book this afternoon. joining us to discuss is data peterson of the conference board -- dana peterson of the conference board. we want you to help understand whether ceos are moving away from hoarding and towards layoffs or whether that is changing? dana: we have not had an update since the first quarter.

we will get another one in a few weeks. and that data it was suggested there was a move upward in the percentage saying they were looking to lay people off from 13% to 23%. that is a cuv it -- we still see a lot that are hoarding. the key thing whether ceos are still thinking there is something bad and for. there talk about labor costs being elevated and concerns about having to raise wages. jonathan: these are important conversations for a host of reasons, including consumption. can you talk about what is underpinning consumption? dana: we are seeing that goods consumption is starting to weaken. even though retail sales were elevated, most of it was in prices. take away the prices and retail

sales are down in the first quarter. that is not affecting services. consumers are willing to spend on various types of items. do transfer it to things they need like health insurance and car insurance and less towards highly discretionary activities. what is underlying consumer spending is the fact they are working and they are still fairly optimistic about the current situation with their jobs. many of them have seen wages rise and also lots of them are still using credit cards and buy now pay later schemes to finance their consumption patterns. lisa: how much of the strength and equity markets and bond markets fueled consumer spending? dana: most consumers do not own equities but they internalize what is happening in the equity market. they see that if the equity

market is doing well they will continue to be working and that will allow them to spend, even if it is not out of earned dollars and they're putting it on credit cards, they believe they will have the capacity to pay back that debt. a better equity market and continued gains does support consumer confidence. lisa: people have been talking about the pivot in october, november, december by fed chair powell, talking about the potential for cutting rates and keying off the latest bout of strikes that has persisted and allowed inflation to remain a for longer. you adhere to the view that it was the fed's pivot that has allowed inflation to remain as hot as it has and allowed consumers to keep spending as they have? dana: likely not. when we asked consumers what they're planning on buying, they are not excited about it. they are buying fewer homes, cars, appliances, even things

like cell phones. when the fed pivoted and said we are done raising interest rates and the next action will probably be rate cuts, you did see mortgage rates fall. since then mortgage rates have picked back up. we are not seeing broad-based consumption of housing. it is on the margins and mostly for new homes. existing home buyers are on the sidelines. i did not see gains in inflation are because of the fed. if you look at what is driving inflation, a lot of it is supply-side factors. also the fact insurance companies are raising their premiums and that has to do with technology changes and climate issues. the big portion of inflation is housing. that is continuing to slow. the fed did have a say in that. i would have to disagree that

the fed pivot quote unquote is causing inflation to be sticking out. lisa: there is also the question of oil as we are heading into the busiest driving season as well as the busiest geopolitical cross current moment. how are you factoring gasoline prices at the highest levels going back to waterbury, the factory are seeing oil prices hovering above $90 a barrel. how are you gaming this out with respect to confidence but also corporate activity. dana: we have to raise our inflation forecast for the headline. this is a case of insufficient supply and emerging demand. we are heading into the peach driving season in the u.s.. in the meantime opec-plus has pulled back on production. in the u.s. we are having issues with shortages of energy and the strategic oil reserve, and if you think about the energy sector there's not much interested.

fixing -- into fixing refineries. when you put these things together it suggests we are going to see higher gasoline prices over the next few months and will have to factor that into our forecast. the question is whether the fed looks through that. the question is the fed cannot use supply issues a more, even away from the interest rate hikes they have implemented that have helped to affect the demand aspects of inflation. annmarie: how much does geopolitics wrist weighing on executives? dana: it is definitely an issue. our ceo confidence survey from the first quarter, the thing they thought was the worst risk for the global and the u.s. economy were geopolitics. it is the uncertainty around that. how these things will affect supply chains, prices for input such as chips and energy.

these things are causing our executives to be worried about the future and resist big investments in areas they do not think will be productivity enhancing. annmarie: he question whether the fed can look through the spike in the rally. what is the gap? how much is it in terms of $10, $20 on brent that they start to get very concerned? dana: i think the fed is concerned now. chair powell said yesterday we may need to wait longer for that "confidence," and suggests maybe 75 basis points of concert not feasible this year. i think the fed is already concerned. they are looking ahead and saying to themselves it is not clear we will go see the perfect consolation of data that would allow them to have that conference and stop cutting interest rates.

jonathan: dana peterson at the conference board. this from citigroup's andrew hollenhorst, moments ago, pal wants to cut. just 40 basis points for tory 24 under appreciates -- lisa: basically, see that bar, let's lower it here. it is down there. that is fine. that is what we are saying. that coheres with the pivot. can he pivot from the pivot? jonathan: i found it difficult to keep up. it is later in the morning. lisa: back and up. annmarie: a pivot is a u-turn? jonathan: why we call it a u-turn. lisa: because it is sudden and trying to the market. a u-turn is deliberate. jonathan: let's get you the

bloomberg brief. yahaira: tesla will ask shareholders to vote again on its compensation package for elon musk. this after a court in delaware avoided the 56 billion dollar payout arranged for the company ceo in 2018. in a proxy filing tesla also said it will also call for a shareholder vote on moving the company state of incorporation from delaware to texas. senator bob menendez is prepared to blame his wife and his bribery trial. court documents show menendez will claim his wife withheld information from him about gifts the couple allegedly accepted from businessmen and the egyptian governments in exchange for favors. in an interview with bloomberg, jpmorgan chase ceo jamie dimon makes no secret his firm is all in on artificial intelligence. >> it is a living, breathing

thing that will change and there'll be all different types of models and technology. every single process, trading, hedging, research, every database you will be deploying ai. it might be as a copilot to replace humans. his idea generation. yahaira: you can see more of emily chang's interview with jamie dimon tonight at 6:00 on bloomberg television or stream it at 8:00 on bloomberg originals. jonathan: congrats to emily. that is a must watch. this from dan ives on tesla. "interview the clock has struck midnight for elon musk to lay out the growth strategy and give realistic debris posts and announcements by significant layouts now come and give a clear outlook to the street." it has been talked about this inflation point for how long? is just outperforming the

stocks? lisa: is this inflation point where he will say i'm no longer bullish on this stock? jonathan: how much more do you want to see? lisa: this is their moment. it is midnight but once comes after midnight -- but what comes after midnight? jonathan: he has been talking about midnight for six months. lisa:, the show and we will talk about it. jonathan: of next on the president biden's latest pitch to u.s. workers. >> this is not a level playing field and when the markets we can prices fall. it is our firms that go out of business. your opening bell is 43 minutes away. equity futures positive one third of 1%. ♪

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jonathan:jonathan: things are better. if you thought it was a problem

that crude was higher is lower this morning. wti $84.44. treasury yields a low bit lower today. 4.6448. if you're concerned about a riproaring dollar, the euro stronger. these are mild moves but certainly moving in a different direction compared to what we've seen the last week. lisa: it is snooze eat. no one -- it is snoozy. no one has new information. jonathan: i will take snoozy. a break sometimes is a good thing. president biden's latest pitch to u.s. workers. >> this is not a level playing field and when the market weakens and prices fall it is our firms that go out of business. chinese firms remade -- chinese firms receive support so they stay in. i think it creates risks that we are clearly seeking to mitigate,

and it is also unfair to our workers and firms. jonathan: president biden proposing 25% tariffs on chinese steel and aluminum coming ahead of his visit to pittsburgh this afternoon, where he will meet with workers and reiterate u.s. steel should remain american-owned. joining us is the brilliant mario parker from bloomberg in washington. what can we expect to hear later? mariupol: -- mario: we will hear a heavy dose of populism. this was a signal ahead of the visit that joe biden is there for them, he is prounion. a popular refrain is the is the most prounion president in u.s. history. we know he faces a tough slog with the rank and file with his political rival donald trump appealing to that demographic. annmarie: we note the u.s. trade

ambassador is nearing completion of the statutory review of the trump era tariffs. we all agree around this table that this is purely political when it comes to what by will do when it comes to chinese steel. willie actually see it come to fruition before november 5? mario: we may. we are on high alert for the outcome of that investigation. we are on high alert for that in washington, d.c. what we are seeing right now is just the landscape of the 2024 election. there are not many chinese steel and aluminum imports coming to the u.s. relative to previous years because president joe biden kept donald trump's tariffs in place. what you're saying is i am squeezing the melon for whatever modicum or small amount of import still exists ultimately

he is squeezing lemon because he needs has many votes as possible in a swing state like pennsylvania. annmarie: we heard from jake sullivan last night talking about the united states as looking at what more they could sanction. what could the u.s. sanction? this is one of the most highly sanction countries in the world. mario: you saw sullivan say they will target the missile apparatus, some of the aircraft that was used, the technology behind the aircraft used in the drone attack that the u.s. largely helped israel thwart last weekend. you're seeing them target that specific sector. to your point, iran is already heavily sanctioned. lisa: we are hearing from the israeli prime minister benjamin netanyahu, thank you for the

suggestions but we will take care of ourselves. how much are you seeing an ongoing breach that has consequences for the united states versus a bit of a walk back from the administration over the past couple of days. mario: we have seen the administration publicly put pressure on the net and yahoo! leadership -- on the benjamin netanyahu leadership asking for cooler heads to prevail, saying we were able to thwart this attack. let's not escalate things in the region. to your point to your point the frustrations between washington, the biden administration in particular come and benjamin netanyahu, you cannot overstate how tense those moments are right now. jonathan: appreciate the update. we will see will bit later. mariupol are bloomberg. coming -- mariupol park are in bloomberg -- mario parker in

bloomberg. they are on in the week will be speaking to katherine tai herself, a lot of talk about on trade. lisa: they did upgrade their growth forecast going into this with a host of risks coming around this. i am curious how they view an economic regime so heavily influenced by politics where suddenly this is a multi-polar world where economic policy is political policy is geopolitics and does not look they free-trade from the past. annmarie: a strong criticism when it comes to the united states and the fiscal health of this country. all the money coming out the door helping with american exceptionalism. will they ever deal with the debt problem? jonathan: it is time to go to the train station? annmarie: only one of us is

taking the train. john and lisa are lying. i am one taking the train. jonathan: i am very pro-save the planet and take the train down to washington, d.c.. i do not have transient trains are if i'm being honest, getting on and off. you sit on a plane, get where you need to know -- get where you need to go. lisa: you get used to everyone around you. annmarie: are you flying window or aisle? jonathan: i think i am aisle. jonathan: transient train is a good thing. lisa: is a new idea. jonathan: it is rough out there. you have to be careful. that is a real thing. lisa: have you ever had

something stolen from you? jonathan: never because i keep an eye on my back. [laughter] ♪ you're probably not easily persuaded to switch mobile providers for your business.

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>> i'm dani burger, stability finally after three days of selling the push equities down for the month. front-end yields touching 5%. 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. dani: coming up, futures