'Bloomberg Surveillance Simulcast' Full Show 7/01/2022
>> THE FED IS LOOKING AT TIGHTENING CONDITIONS AND SAYING, IT IS PAINFUL, BUT IT IS THE FUTURE. WE ARE GOING TO SEE MORE OF IT. >> CENTRAL BANKERS ARE BEING UPFRONT ABOUT WHAT THEY ARE HAVING TO DEAL WITH. >> WE ARE SEEING MOMENTUM WERE CENTRAL BANKS HAVE TO GO BIG, BECAUSE THE BIG ONES ARE GOING BIG. >> THE MARKETS ARE STARTING TO SMELL ECONOMIC SLOWDOWN.
>> THIS IS "BLOOMBERG SURVEILLANCE." JONATHAN: TAKING A BACK TO THE 1970'S. THIS IS BLOOMBERG SURVEILLANCE ALONGSIDE TOM KEENE AND LISA ABRAMOWICZ. FUTURES NEGATIVE BY .04%. TOM: ♪ MEMORIES.
♪ GUY'S, THIS IS SIMPLE. I LOOKED AT THE QUARTERLY CHART. TODAY, IT IS CALM DOWN FRIDAY. YEAH, IT HAS BEEN UGLY. IF YOU LOOK AT 1970, 1974, AND ON, THERE HAS BEEN ALL SORTS OF QUARTERLY MEASURED PULLBACKS. I WONDERED, WE REMEMBER 1987.
THERE IS 2003, 2009. AND THE PANDEMIC. IT IS NOT THAT BAD. JONATHAN: BRUTAL YEARS THE LAST SEVEN DECADES OR SO. COME ON. TOM: IT IS BRUTAL, A BRUTAL FIRST HALF. I GET THAT. PUT IT IN PERSPECTIVE. I SEE STANLEY OPENING THE SHOW, HAD A NICE FRAME OF IT. A JOHN WILLIAMS TONE. OTHERS, MARKED DOWN. JONATHAN:
WE ARE GETTING A DOWNGRADE. THE NEW DEVELOPMENT OVER THE LAST 24 HOURS OR SO. MORGAN STANLEY, ANOTHER CONTENDER DOWNGRADING GROWTH. ATLANTA NOW GDP CAST, NEGATIVE.
THINGS ARE NOT LOOKING GREAT ON THE DATA FRONT. LISA: IF YOU LOOK AT THE ECONOMICS OF PRICE INDEX, IT HAS BEEN NEGATIVE FOR A WHILE. YESTERDAY, PERSONAL SPENDING NUMBERS DID PUT A DAMPER ON THE ECONOMIC GROWTH EXPECTATIONS.
SIMPLY BECAUSE, PEOPLE ARE PULLING BACK. A SAFE SIGN PRICES HAVE GOTTEN TO A LEVEL PEOPLE ARE SPENDING LESS ON A REAL TERM. JONATHAN: THERE HAS BEEN THIS CONVERSATION ABOUT A POTENTIAL FOR CUTS IN 2023.
THAT IS NOT THE FORECAST, THEY ACKNOWLEDGED THE POTENTIAL. CUTS POTENTIALLY COMING AS GROWTH FALLS FURTHER BELOW POTENTIAL. THAT IS THE DEVELOPMENT IN THE CONVERSATION. LISA: CRYSTALLIZING IT IS MICHAEL BURRY WHERE HE SAID, NEXT UP IS EARNINGS COMPRESSION. MAYBE HALFWAY THERE WITH RESPECT TO HOW MUCH THE STOCK MARKET HAS SOLD OFF, GIVEN WE HAD THE WORST FIRST HALF GOING BACK TO 1970.
WE COULD GET GLOOM PERSISTING IN THE SECOND HALF. TOM: I WENT BACK TO 1947. I LOOKED BACK AT THE SMILES WE GAVE TO ONE ANOTHER FOR THE THINGS -- FOR THE WAY THINGS WERE. JONATHAN: I DISAGREE. TOM: WE DID IT TWICE.
IN THE EISENHOWER DEFLATION OF 1952, THINGS CAN CHANGE. I WOULD SUGGEST WE HAVE TO BE MORE OPTIMISTIC. FROM THE CORNERS OF MY MIND. JONATHAN: ARE YOU RECITING LYRICS OR DO YOU? TOM: IT IS A GREAT MOVIE, BARBRA STREISAND. JONATHAN:
I'M GOING TO GIVE BRAMO THE FINAL WORD. LISA: DEUTSCHE BANK SAYING 10 YEAR TREASURIES HAD ITS WORST HALF SINCE 1978. JONATHAN: ARE YOU SUGGESTING JIM REEVE MIGHT BE A BETTER HISTORIAN THAN TK? DOES JIM REDO MOVIE QUOTES AND LYRICS? TOM: STEM THE X AXIS TO GET PERSPECTIVE. JONATHAN: WHAT I START TO THE SHOW. FUTURES DOWN, A LITTLE MORE THAN 10% ON THE S&P.
YIELDS DOWN BY FOUR BASIS POINTS. TK, THIS IS A DEVELOPMENT. TREASURY YIELDS LOWER. 297.59. TOM: EM UNRAVELS, PARTICULARLY EM. WHAT IS SO IMPORTANT TO UNDERSTAND, IT WAS SIMPLE THEN. JONATHAN: I'M GOING TO STOP TALKING TO YOU IF YOU ARE NOT CAREFUL. TOM: EVERYTHING IS GOING TO ADJUST OVER THE LONG WEEKEND. JONATHAN: LET'S HOPE YOU AND JOS -- YOU
ADJUST THE NEXT COUPLE OF MINUTES. LISA: THAT SOUNDS LIKE WHAT I SAY TO MY KIDS. [LAUGHTER] THE ECB'S NET BUT BUYING PROGRAM AND THE PANDEMIC IS SAID TO END. I AM WATCHING THIS. THE GUIDANCE WE HAVE GOTTEN FROM CHRISTINE LAGARDE ON THE EUROPEAN CENTRAL BANK TO HOW TO DEAL WITH THE PERIPHERAL BOND SPREAD, 10 YEAR YIELDS IN ITALY, GIVEN HOW MUCH THEY BLEW OUT A FEW WEEKS AGO. THEY HAVE COME AND DRAMATICALLY AS PEOPLE LOOK AT THE POSSIBILITY OF FLEXIBILITY WITH REINVESTMENTS. WHEN DO WE GET MORE OF A SENSE AND HOW THEY ARE GOING TO DO THAT? THIS IS A DATA DUMP WE ARE WATCHING AT 10:00 A.M.
U.S. JUNE ISM MANUFACTURING DATA, HOW DO WE GET MANUFACTURING WEAKNESS? HOW MUCH ARE PEOPLE MAKING LESS STUFF, BECAUSE PEOPLE ARE BUYING LESS STUFF? IF YOU LOOK AT THE ECONOMICS OF PRICE INDEX, IT HAS ROLLED OVER AND NEAR THE LOWEST LEVELS WE HAVE SEEN, GOING BACK 2019. MEANING, PEOPLE KEEP BEING TOO OPTIMISTIC ABOUT HOW MUCH GROWTH THERE IS IN THE ECONOMIC METRICS -- METRICALLY TRACK. U.S. AUTO SALES, GM AND TOYOTA REPORTING. HOW MUCH DO WE SEE A STABILIZATION, A LOWER LEVEL OF AUTO SALES, GIVEN THE INVENTORIES ARE BEING WORKED OUT , WELL BELOW THAT $17 MILLION AVERAGE WE SAW IN 2019? JONATHAN: THANK YOU.
LET'S GET TO DAVID WOO. THESE COMPARISONS TO THE 1970'S, WHAT IS THE BIGGEST DIFFERENCE BETWEEN NOW AND THEN? DAVID: THE BIG DIFFERENCE IS THAT THE 1970'S, UNIONIZATION WAS MUCH MORE WIDESPREAD. COVID COMPENSATED FOR, COVID HAS MADE LABOR SUPPLIES SOMEWHAT LESS INELASTIC BECAUSE THESE PEOPLE WHO SPENT TWO YEARS WITH THEIR FAMILY, THEIR PRIORITIES CHANGED, I THINK THAT IS THE REASON -- IS AT AN ALL-TIME HIGH. PEOPLE REALIZED THAT THERE IS MORE TO LIFE THAN WORK, THAT IS A HUGE HEADACHE FOR THE FED. TOM:
I'M GOING TO CUT TO THE CHASE. THE SINGLE ELEPHANT IS THE HUGE FISCAL IMPULSE WE SAW IN THE PANDEMIC. HOW LONG WILL IT TAKE TO TRAIL AWAY TO DIMINISH THE FISCAL IMPULSE? DAVID: LOVE COMING BACK TO THE SHOW. FIRST OF ALL, THERE WERE THREE ROUNDS OF FISCAL STIMULUS. THE FIRST TWO WERE JUSTIFIED.
THE THIRD UNLEASHED BY BIDEN AT THE START OF 2021 WAS WASTEFUL AND UNNECESSARY. BY 2021, THE ECONOMY WAS COMING OUT OF A LAW NOW. VACCINES WERE BECOMING AVAILABLE . THE FED WAS PRINTING MONEY FOR
TWO THOUSAND 21. I THINK THE ISSUE WAS NOT THE STIMULUS THAT WAS DEPLOYED IN 2020, BUT 2021 LISA: LISA:. WHAT IS THE TAKE AWAY? >> THE FIRST HALF OF 2022 WAS SCORING OUR GOALS-AGAINST OURSELVES. THE TOTAL ECONOMIC WAR OF THE WEST AND AMERICA, PARTICULARLY AGAINST RUSSIA, IS HURTING THE WEST MORE THAN AND IS HURTING RUSSIA. IN MY CAREER, 20 YEARS, I HAVE NEVER SEEN ANYTHING LIKE THIS. TO A GREAT EXTENT, I THINK THE REASON WHY THE MARKET IS GOING INTO A RECESSION IS BECAUSE THE MARKET DOESN'T UNDERSTAND THE IMPACT OF THESE ECONOMIC SANCTIONS. JONATHAN:
A LONGER CONVERSATION NEXT TIME. DAVID WOO, UNBOUND. WE ARE TRYING TO FIGURE IT OUT, PARTICULAR WHAT IT MEANS FOR EUROPE. TOM: IS NORMAL AND HEALTHY TO HAVE A RECALIBRATION, EVENTS WILL TAKE OVER. YOU ARE GOING TO SEE CORPORATE COST-CUTTING, CORPORATE ADJUSTING. YOU WILL SEE GOVERNMENTS MAKE
ADJUSTMENTS. MAYBE THE CONCEPT OF JUNE WE HAVE NOT TALKED ENOUGH ABOUT IS THIS CONCEPT OF FRONTLOADING. YOU ARE GOING TO HAVE A STRATEGIC DESIRE. LET'S GET IT OVER WITH, SO WE CAN MOVE ON.
THAT IS WHAT THE MARKET WILL EXPECT, WHERE ARE WE WHEN WE MOVE ON? JONATHAN: LET'S TALK ABOUT THE STRUGGLE CORPORATIONS ARE HAVING WHEN IT COMES TO THE CREDIT MARKET. THE PRICE OF CREDIT, AND THE SUPPLY OF CREDIT. THE STRUGGLE AT THE MOMENT, IT HAS NOT SLAMMED SHUT, BUT THE PRIMARY MARKET HAS BEEN SLOW THE LAST OR SO. THE SLOWEST JUNE SINCE 2010 FOR THE HIGH-YIELD CREDIT MARKET. THAT IS NOTICEABLE. LISA: GIVEN THE FACT YOU HAVE SEEN
MORE DEALS PULLED THAN THE ENTIRETY OF 2020, DURING THE HEIGHT OF THE PANDEMIC. THAT MEANS COMPANIES PLANNING TO SELL BONDS, THEY WITHDREW THOSE DEALS BECAUSE THEY THOUGHT THEY WERE NOT GOING TO GET THE LEVELS THEY NEEDED AND WANTED. THIS HIGHLIGHTS HOW MUCH COMPANIES NEED -- DO NOT NEED THE MARKET YET. WHAT HAPPENS WHEN THEY DO? TOM: THE CALL OF THIS WEEK IS HOW SPREAD AND WIDENED OUT, THAT IS MAY THE SINGULAR PICTURE OF THE WEEK. JONATHAN: COULDN'T AGREE MORE. YOU JUST WONDER WHERE THE
TIPPING POINT IS FOR THE FEDERAL RESERVE IT ISN'T HERE. WHERE WE ARE AT ON PRICE, CLOSE TO THE SUPPLY SIDE. I WONDER WHERE THE TIPPING POINT IS. TOM: I THINK THE TIPPING POINT IS KEY, I WOULD GO TO THE STRANGE PHRASE, REACTION FUNCTIONS MIKE MCKEE PENSION YESTERDAY. OVER THE WEEKEND, YOU ARE GOING TO BE PARTYING LIKE A MONSTER. I READ SOME PAGES, ABOUT BLANCHE HARD.
THEY SAY, WHERE'D YOU GET TO TO THE TIPPING POINTS ALONG THE WAY? IT IS PLURAL, THERE ARE A NUMBER OF POINTS THAT MATTER. MY AMATEUR TAKE IS 5% MATTERS WHEN WE GET THERE. JONATHAN: HIGH YIELD SPREADS, 550.
RIGHT NOW, MIKE SHOEMAKER OF WELLS FARGO, QUOTE OF THE WEEK. THIS IS A FUTURE, NOT A BUG. WE ARE GOING TO SEE MORE OF IT. THIS IS HIS VIEW, WE ARE GOING TO SEE OTHERS. LISA: BY TIGHTENING THESE FINANCIAL METRICS, THAT IS THE POINT. TOM: WE GOT OVER 1974.
BARBARA SINGING. WHAT YOU HAVE GOT TO REMEMBER, IT IS THE LAUGHTER. WE WILL REMEMBER. JONATHAN: ARE YOU GOING TO SING US OUT? GO ON, SING US OUT. TOM: IT IS NOT AS BAD AS 1974 OR 1975. JONATHAN: CAN YOU IMAGINE WAKING UP TO THIS? WALL STREET, TURN ON THE TV, TOM IS SINGING TO US IN A BRIGHT GREEN SUIT. LISA: [LAUGHTER] JONATHAN:
THIS IS PAINFUL. THIS IS BLOOMBERG. ♪ RITIKA: INFLATION IN THE EURO ZONE ROSE HIGHER THAN EXPECTED TO A RECORD LAST MONTH, JUMPED 8.2%. EUROPEAN CENTRAL BANK IS EXPECTED TO RAISE INTEREST RATES THIS MONTH FOR THE FIRST TIME IN MORE THAN A DECADE. CORONAVIRUS HAS RETURNED TO THE CHINESE CITY WHERE IT FIRST EMERGED.
TWO CASES REPORTED IN ON -- WUHAN. THEY CAME DAYS AFTER PRESIDENT XI JINPING'S SYMBOLIC VISIT WHERE HE REITERATED THE COUNTRY ZERO COVID POLICY. REVISE THE 2015 NUCLEAR DEAL, THE STATEMENT CAME AFTER THE LATEST ROUND OF DISCUSSIONS ENDED IN QATAR AFTER FAILING TO MAKE PROGRESS. TRUMP PULLED THE U.S. OUT OF THE AGREEMENT IN 2018. THE BIDEN ADMINISTRATION WANTS
TO RENEW THE DEAL IN RETURN FOR EASING SANCTIONS. IN RUSSIA, A TRIAL BEGINS TODAY FOR U.S. BASKETBALL STAR BRITTNEY GRINER, WHO IS JAILED MORE THAN FOUR MONTHS AGO ON CANNABIS POSSESSION CHARGES. THE OLYMPIC GOLD MEDALIST WAS PLAYING FOR A RUSSIAN TEAM.
SHE COULD FACE UP TO 10 YEARS IN PRISON. THE BIDEN ADMINISTRATION CALLS HER WRONGFULLY DETAINED. GLOBAL NEWS 24 HOURS A DAY, ON AIR AND ON "BLOOMBERG QUICKTAKE." POWERED BY MORE THAN 2,700 JOURNALISTS AND ANALYSTS IN MORE THAN 120 COUNTRIES.
I AM RITIKA GUPTA. THIS IS BLOOMBERG. >> I INDICATED TO THEM, WE SHOULD BE INCREASING PRODUCTION GENERICALLY. I HOPE WE SEE THEM IN THEIR OWN INTEREST CONCLUDING THAT MAKES SENSE TO DO. JONATHAN: THE PRESIDENT OF THE UNITED STATES ON THE INTERNATIONAL STAGE, THE NEXT STOP IN THE NEXT MONTH WILL BE THE MIDDLE EAST. GOOD MORNING. FUTURES KICKING OFF, -2% ON THE ASPEN -- ON THE S&P. BONDS, CLOSED OUT 21, SUB 150. 350 GOT CLOSE TO THAT ON A TENURE.
WE BACKED AWAY THE LAST FOUR DAYS. THE LAST FOUR DAYS ARE INSTRUCTIVE, WITH FIVE BASIS POINTS AT 49 ON A 10 YEAR. TOM: THE ISM DATA WILL -- WHICH, YOU ARE A BIG FAN OF. 29610 YEAR YIELD, THAT IS A COMPRESSION OF THE YIELD CURVE. JONATHAN: BREAK IT DOWN. WRITING IN, TOM, IS IT AS BIG AS 1986 AND THE WORLD SERIES? TOM: THAT DOESN'T NEED AMERICAN TRANSLATION. AIM THREE WAS BAD.
LINNIE GEISER HIT THE BALL OFF OF LINNEY CAN BOYD. THE BALL NEVER CAME DOWN. IT REACHED A VELOCITY. JONATHAN: WE WILL BE DOING THAT ON BLOOMBERG TV, GOING INTO THE OPENING DOW. TOM:
MARIA TADEO AND ANNMARIE HORDERN -- MARIA TADEO COULD NOT GET OUT OF BED, BUT ANNMARIE IS HERE. WE PICK UP THE PIECES. I WANT TO GO TO THE OTHER SIDE OF THE ROAD. PRESIDENT OF THE UNITED STATES
WILL RETURN AND WITNESS HONG KONG AND THE ABSOLUTE SHOCK AT WHAT HAPPENED ACROSS THE ARK OF THE LAST 25 YEARS. WHAT IS THE DISTINCTION BETWEEN THE BIDEN AND TRUMP POLICY ON CHINA? ANNMARIE: AT THE MOMENT, NOT MUCH. YOU SAW THIS IN THE CAMPAIGN TRAIL, BOTH BIDEN AND TRUMP, SEEING HOW THIS WAS PULLING WITH THE ELECTORATES, WANTED TO TALK ON CHINA. THERE IS ONE ISSUE AT THE
MOMENT THAT THIS ADMINISTRATION, WE ARE WAITING FOR AN ANSWER ON. WHETHER OR NOT THEY ARE GOING TO LIFT HIM TARIFFS FROM THE TRUMP ERA ON CHINA, BECAUSE SOME ECONOMISTS THINK IT COULD -- INFLATIONARY CONCERNS. THEY HAD STOCK WITH A LOT OF POLICIES TRUMP PUT IN PLACE ON CHINA. THERE IS ONE POTENTIAL NUANCE IN APPROACH, THAT IS PRESIDENT TRUMP TOOK A UNILATERAL APPROACH WIN WANTING TO COMBAT CHINA, WHILE PRESIDENT BIDEN RELISHES IN HIS MULTILATERAL APPROACH. HE WAS AT THE G7, THEY DISCUSSED CHINA. FOR THE FIRST TIME, A STRATEGIC
CONCEPT IN MADRID FOR THAT NATO DOCUMENT, THEY CALLED CHINA A SYSTEMIC CHALLENGE. A LOT OF THAT IS DRIVEN BY WASHINGTON. TOM: IN THE BLUR YESTERDAY, WE DID NOT SPEAK TO THE SYMBOLISM OF THE LEADERSHIP OF JAPAN, SOUTH KOREA AND THE UNITED STATES OF AMERICA MEETING AT A NATO MEETING. LET ME ASK A DUMB QUESTION.
IS JAPAN AND SOUTH KOREA, DID THEY END UP GOING NATO? IS THAT POSSIBLE? ANNMARIE: IT IS A GOOD QUESTION. AT THE MOMENT, NO. IT IS NOT ON THE BOOKS. WE'D -- WE DID SEE A HISTORIC MOMENT OF FINLAND AND SWEDEN JOINING. THIS GOES TO SHOW WHERE NATO ALLIANCE SEES THEIR POTENTIAL THREAT. IT IS TELLING THAT YOU HAVE JAPAN AND SOUTH KOREA DISCUSSING THIS WITH THE NATO ALLIANCE. I WOULD SAY, KEY, THIS IS AN EXCLUSIVE BLOOMBERG REPORTING, THE WAY THE CHINESE MILITARY IS STARTING TO TALK ABOUT THE TAIWAN STRAIT IS DIFFERENT LANGUAGE WISE THAN THEY HAVE DONE IN THE PAST. NOW, THEY ARE SERVING THAT IT IS NOT
INTERNATIONAL WATERS. I ASKED NUMERAL -- ADMIRAL KIRBY, HE SAID IT IS NOT TRUE. HE SAID THESE ARE INTERNATIONAL WATERS, BUT THIS IS GOING TO BE A GROWING PROBLEM. IT IS CLEARLY A GROWING CONCERN
FOR WASHINGTON AND NATO CAPITAL. LISA: JOE BIDEN COMING HOME TO A JULY 4 WHERE THERE IS GOING TO BE A RECORD NUMBER OF DRIVERS, PEOPLE EXPERIENCING A LOWER PAIN AT THE PUMP, BUT NEAR RECORD HIGHS. SEEING YESTERDAY, -- SAYING YESTERDAY, PRESIDENT BIDEN WANTS PEOPLE TO EXPECT TO PAY HIGHER PRICES AS LONG AS IT TAKES. HOW DIFFERENT OF A SHIFT IS THIS , MAKING IT A NATIONALISTIC PUSH, SAYING THIS IS PART OF THE WAR AGAINST RUSSIA, WE HAVE TO ACCEPT THESE PRICES? ANNMARIE: I THINK THE PRESIDENT HAS BEEN SAYING THIS ALL ALONG, MAYBE NOT SO DIRECTLY. IT IS WHY THE ADMINISTRATION HAS BEEN TRYING TO CALL THIS TO THE PUBLIC AND EXPLAINED TO THE PUBLIC, "PUTIN'S HIGH'S -- PRICE HIKE." OPEC IN AUGUST OF LAST YEAR TO PRODUCE MORE, THEY SAW THE HEADWINDS COME DOWN. THERE IS NO DENYING RUSSIA'S
INVASION OF UKRAINE HAS EXACERBATED THE PROBLEM. THIS MORNING, RUSSIA HAD A DECREE AT ABOUT THE -- TERMINAL, THIS IS GOING TO BE A GAS ISSUE. WHAT IT SHOWS OVERALL IS THAT, EXPECT MORE VOLATILITY IN THIS MARKET. JONATHAN: ANNMARIE, WE WILL CATCH UP WITH YOU. LOOKING FORWARD TO THAT. AMH AND MARIA TADEO. LISA, WHEN IT COMES TO FOREIGN POLICY, RUSSIA IS TAKING THE LEAD ON EVERYTHING.
THE ADMINISTRATION IS WILLING TO COMPROMISE OTHER FOREIGN POLICY GOALS BECAUSE OF THE PROBLEMS IT IS CAUSING FOR HOME. IT IS AWKWARD, I CHOOSE THAT WORD. YOU CAN CHOOSE ANOTHER ONE. TO HEAR THE PROSPECT OF CHINESE TARIFFS BEING REMOVED FROM AN ADMINISTRATION ACCUSING CHINA OF GENOCIDE IS BEYOND AWKWARD. YOU CAN CHOOSE YOUR OWN WORDS.
THAT IS PROBLEMATIC FOR A LOT OF PEOPLE. LISA: IT IS COMING AT A TIME WHEN POLITICAL CALCULUS SHIFTED, WHEN PEOPLE WANT TO DO THE RIGHT THING AND CLING TO ETHICS, BUT ARE FACING OFF WITH BILLS THEY DO NOT WANT TO, OR CANNOT PAY. THAT HAS BEEN THE MAIN, POLITICAL CALCULUS NOW. THE REASON IT HAS NOT GOT PASSED EARLIER, THE TARIFFS HAVEN'T GOTTEN HIGHLIGHTED -- HAVEN'T GOTTEN LIFTED, HIGHLIGHTS THE COMMENTS FROM EARLIER. JONATHAN: THERE HAS BEEN THIS TALK ABOUT
THIS ADMINISTRATION ASKING TO PUMP MORE, THE PRESIDENT WAS HESITANT TO CONFIRM THAT IN THE NEWS CONFERENCE YESTERDAY. TOM: AWKWARD, YES, NICE CASH. I HEARD THAT. WHAT CONCERNS ME, ENERGIES ARE FOCUSED ON OIL PRODUCTION, NOT DISTILLATES. EVERY PRO I TALK TO, INCLUDING
THE GREAT OF A BOSS -- SAYS THEY SHOULD FOCUS ON DISTILLATES. THEY ARE NOT. JONATHAN: THE PROBLEM IS REFINING CAPACITY. THAT IS NOT EASILY ADDRESSABLE RIGHT NOW. TOM: RUBLE, 41% STRENGTH. JONATHAN:
THE PRESIDENT SAID AT THE NEWS CONFERENCE YESTERDAY, I PARAPHRASE, THEY WANTED TO HURT RUSSIA AND NOT THEIR OWN PEOPLE AT HOME. RUSSIA, THE ENERGY REVENUE, THE RUBLE,. TOM: IT WAS ALSO SIMPLE THEN. JONATHAN: EARNINGS FROM THE 1970'S AS TOM IS SINGING. PLEASE STICK WITH US. FUTURES DOWN ON THE S&P, DOWN .1%.
ON THE NASDAQ 100, DOWN .2%. THE WORST FIRST HALF ON THE S&P SINCE 1970, KICKING OFF THE SECOND HALF AND THIRD QUARTER. I WANT TO THINK ABOUT THE RANGE WE HAVE SEEN ON THE U.S. 10 YEAR, SUB 150 TO CLOSE OUT.
350, WE GOT CLOSE TO THAT IN THE LAST COUPLE OF WEEKS. IN THE LAST FOUR DAYS, YIELDS DOWN FIVE BASIS POINTS ON A 10 YEAR. TK, THE DATA IS SPEAKING TO THE MOVE. THE DATA HAS NOT BEEN GREAT. TOM: THE YIELDS SPACES GIVING US A LOT OF INFORMATION THIS WEEK, THE UNCERTAINTY AND ESTIMATES ABOUT RECESSION. THE MAGNITUDE OF RECESSION. THE DIFFERENT OPINIONS. ALL WE HAVE LEFT IS TO LOOK AT THE DATA. WE HAVE OUR FAVORITE DATA
POINTS. WE HAVE GOTTEN MORE INFORMATION FROM FIXED INCOME THIS WEEK THAN ANY OTHER GROUP. JONATHAN: IN CREDIT, THE STRESS WE ARE STARTING TO SEE. WE ARE STARTING TO SEE A LITTLE STRESS. LISA: THAT IS FAIR TO USE. LIQUIDITY HAS BEEN SO POOR. I WANT TO PUSH BACK, IT IS NOT THE OPTIMISM, THE FAITH THAT WE ARE GOING TO GET A RALLY BECAUSE THINGS ARE NOT THAT BAD, PEOPLE ARE OVER GLOOMY, PEOPLE ARE CONCERNED.
PEOPLE ARE CONCERNED ABOUT A FED THAT IS GOING TO GO HARD. THAT IS BY DESIGN. TO THAT POINT WE WERE TALKING ABOUT EARLIER, THEY WANT TO SEE THE SELLOFF DEEPEN IN ORDER TO EFFECT THE CHANGE THEY NEED TO SEE WITH INFLATION. JONATHAN: YOU COULD SEE THE SELLOFF DEEPEN, OR CATCH THE UPSIDE. THERE ARE TWO DIFFERENT WAYS YOU COULD THINK ABOUT IT. THE NEXT SEVERAL MONTHS, THE IDEA WE COULD GET IN EASING THE FINANCIAL CONDITIONS AND THE FED WOULD BE OK, THAT IS A UNCOMFORTABLE POSITION TO BE IN AT THE MOMENT.
BASICALLY, IT CAP ON THE S&P FOR 4K. THIS FED ONCE TIGHT, FINANCIAL CONDITIONS. TOM: I HAVE GREAT RESPECT FOR MICHAEL COST CENTER, THEIR TIMELINE IS THREE TO SIX MONTHS. I'M GOING TO GIVE ZERO CREDIT,
I CANNOT REMEMBER WHERE I SAW THIS. IF YOU EXTEND OUT FROM THE GLOOM , OVER SIX MONTHS, OVER A YEAR, IF YOU GO OUT TWO YEARS, THE FACT IS, YOU SEE A RECOVERY. IN 1970, WHEN YOU ARE DOWN AND OUT, ON WALL STREET AND THERE IS A BEAR MARKET, YOU CAN FIND A BRIDGE OVER TROUBLED WATER. JONATHAN: I WILL MAKE A SERIOUS POINT AS YOU TRY AND SLIP IN MORE LYRICS". -- AGREES WITH YOU.
THE NEAR TERM, YOU GET COMPETITIVE. A BETTER VIEW FROM HIS PERSPECTIVE IN THIS MARKET. TOM: WE ARE NOT GOING THERE. JONATHAN: PLEASE STOP GOING THERE. EUROPE CPI, UPSIDE SURPRISE.
8.6% ON THE HEADLINE INFLATION NUMBER, IN LINE WITH THE U.S. CORE SLIPS BACK, SUB 4%. HOW MUCH HAS CHANGED FOR THE ECB TODAY? I AM NOT SURE A LOT, COMPARED TO WHERE WE WERE YESTERDAY. TOM: INTO OUR FOUR DAY WORK WEEK NEXT WEEK, THE RELATIVE MOVE OF PRICE CHANGE IS KEY.
WE ARE GOING TO GET A BRIEF FROM SARAH WATT HOUSE. WHAT IS THE VECTOR, THE TONE AND MAGNITUDE OF CHANGE IN YOUR FORECAST FOR THE GDP OF THE AMERICAN ECONOMY? SARAH: WHAT WE LEARNED THIS WEEK, THE CONSUMER IS ON MORE FRAGILE STUDIES. CRACKED THE EMERGE IN THEIR SPENDING PATTERNS, MAYBE THEY DO NOT HAVE THE FORTITUDE TO SPEND IN THIS INFLATION ENVIRONMENT THAN WHAT WAS RECORDED IN RECENT DATA PRINCE, WHERE WE CAN SEE NOTABLE DOWNWARD REVISION.
OVERALL, WE ARE LOOKING AT AN ECONOMY USING MOMENTUM FASTER THAN WHAT WE ANTICIPATED. RIGHT NOW, WE HAVE A RECESSION CALL FOR THE BEGINNING OF THE FIRST HALF OF NEXT YEAR, BUT IF ANYTHING, THE DATA SHOWS THE TIMING LOOK LIKE IT COULD BE SOONER. TOM: DOES NOMINAL GDP, THE ANIMAL SPIRIT THAT MATTERS FOR BUSINESSES, DOES IT COME DOWN AS WELL? DOES INFLATION STAY ELEVATED AND GIVE US FALSE COMFORT, OR DOES NOMINAL CRUSH DOWN, AS WELL AS MOVEMENT IN REAL GDP? SARAH: WITH THE INFLATION ENVIRONMENT, WE DO NOT THINK WE HAVE SEEN PEAK INFLATION YET. THAT IS PROBABLY MORE OF A STORY FOR AUGUST OR SEPTEMBER, THAT WILL KEEP THE NOMINAL NUMBERS ELEVATED, EVEN AS WE SEE REAL GROWTH SLOW. WHEN YOU GET TO THE FOURTH QUARTER OF THIS YEAR, YOU WILL SEE A MORE CURIAL SLOWDOWN IN NOMINAL GDP COMING FROM DISINFLATION, NOT A LOT. ALSO, THAT WEAKER GROWTH
PROFILE. LISA: WHERE IS THE INFLATION GOING TO COME FROM IF WE HAVE NOT SEEN PEAK INFLATION YET? SARAH: I THINK THERE IS STILL PLENTY OF PRESSURE COMING FROM FOOD PRICES. YES, WE ARE SEEING MODERATE GAINS, BUT THEY ARE HEFTY. WE HAVE SEEN FOOD INFLATION RISE OVER 1% ARE A NUMBER OF MONTHS.
THERE IS PLENTY OF MOMENTUM THERE. WE ARE SEEING GOOD INFLATION, IT ISN'T OVER. YOU SEE ANECDOTES OF INVENTORIES PILING UP. SERVICES INFLATION, WE HAVEN'T SEEN SERVICES INFLATION PEAK YET. A LOT OF THAT IS COMING FROM HOUSING, BUT NOT JUST HOUSING. THERE IS UPWARD PRESSURE ON THINGS LIKE TRAVEL PRICES, BUT IT IS SOME OF THE MORE MUNDANE SERVICES, MEDICAL, INSURANCE, THAT CAN STILL SUPPORT HIGHER INFLATION OVER THE NEAR TERM, AND KEEP THAT HEADLINE NUMBER FROM LOWING OVER. LISA: THIS IS ONE THEORY FOR WHY THE
FED IS GOING TO GO MUCH FURTHER IN OTHER REGIONS, BECAUSE THEY ARE FACING OFF WITH SERVICE BASED INFLATION THAT EXCEEDS THE WEIGHTING OF CERTAIN GOODS INFLATION. WHEN WE TALK ABOUT THE DISINFLATIONARY FORCE OVERSUPPLY, STEMMING FROM THE UNDERSUPPLIED TWO YEARS AGO, THAT IS GOING TO HELP OTHER REGIONS IN THE WORLD MORE THAN THE UNITED STATES. CAN YOU GIVE US A SENSE HOW CLOSE WE ARE TO THAT OVERSUPPLY, ESPECIALLY AT THE LIKES OF VI KROHN COME OUT AND TALK ABOUT MUCH LESS DEMAND FOR CHIPS? SARAH: WE WILL SEE THAT IN THE GOOD SPACE, WE HAVE SEEN ANECDOTAL REPORTS OF INVENTORY PILOT. WE HAVE NOT SEEN THAT IN THE BROAD ECONOMIC MEASURES YET. THERE IS A LAG THERE.
WHEN IT COMES TO BUSINESS INFLATION, THAT IS THE CORE NUMBER, IT IS ONLY 20% OF THE INDEX. YOU WILL NEED MORE THAN DISINFLATION IS GOOD, YOU NEED OUTRIGHT DECLINE TO BRING INFLATION DOWN. WE HAVE SEEN SUPPLY CHAIN STRESS EASE UP A LITTLE, THERE SUPPLY DRIVE TIMES COME DOWN, THEY ARE AT ELEVATED RATES. WE ARE FAR FROM THE ALL CLEAR, WE ARE NOT GOING TO SEE IMMEDIATE RELIEF. JONATHAN: I AM ON THE BLOOMBERG THING AT THE ATLANTA FED GDP FORECAST.
CAN YOU EXPLAIN WHAT WE ARE TALKING ABOUT, WHAT ARE THEY TRACKING, AND HOW ACCURATE IS IT? SARAH: THIS IS TRACKING THE DATA WE SEE TODAY, NOT MAKING ASSUMPTIONS ON JUNE DATA, WHICH WE HAVE YET TO SEE. IT IS A FACE VALUE OF WHAT THE LATEST DATA PRINT AND MOMENTUM'S ARE SEEING. AN IMPORTANT ASPECT OF THE GDP NUMBER TRACKING FOR Q2, WE SEE MORE MARKET SLOWDOWN AND CONSUMER SPENDING, MORE WEAKNESS IN REAL INVESTMENT ACROSS EQUIPMENT, ACROSS A BIG DRAG IN INVENTORY. WE HAD THE TWO BIGGEST QUARTERS IN INVENTORY BUILD. WE ARE STILL ADDING TO INVENTORY IN THE SECOND QUARTER. IT IS NOT AS FAST A PACE, THAT IS A REASON FOR THE NEGATIVE NUMBER. TOM:
CLAUDIA, CLAIMED ECONOMIST, IN SLOW DOWN AND LABOR WAS HEATED THAT ATLANTA GDP IS NOW NOT CAPTURING A FULLY EMPLOYED AMERICA. DO YOU SEE LABOR BREAKING IN THE THIRD QUARTER OF THIS YEAR? SARAH: I SEE THE LABOR MARKET WEAKENING, BUT I THINK WE ARE FAR FROM THE BOTTOM GOING OUT ON THE LABOR MARKET. THAT IS IMPORTANT WHEN WE TALK ABOUT WHETHER WE ARE POTENTIALLY IN A RECESSION NOW, YES, WE SEE A -- WE HAVE SEEN A NEGATIVE PRINT FOR Q2. IF YOU LOOK AT THE NUANCE,
LOOKING AT THAT CRITERIA THAT LOOKS FOR THE WIDESPREAD DECLINE IN ACTIVITY, I DO NOT THINK WE HAVE SEEN THAT AT A BIG PORTION. THAT IS BECAUSE WE ARE ADDING JOBS AT A TREMENDOUS CLIP, KEEPING REAL INCOME STILL GOING POSITIVELY AS SPENDERS ARE IMPACTED. THAT IS IMPORTANT IN SHORT-CIRCUITING THIS TALK OF RECESSION, IF YOU ARE ADDING JOBS, THAT IS HELPING YOUR INCOME PICTURE. THAT HELPS DEMAND FROM FALLING
TO MARKETPLACE. JONATHAN: IN Q1, WE EXPLAINED AWAY THE NEGATIVE PRINT BY TALKING ABOUT INVENTORIES AND TRADE DATA. YOU EXPECT SAME STORY IN THE SECOND QUARTER? SARAH: I THINK YOU CAN EXPLAIN AWAY SOME OF IT, BUT IF YOU LOOK AT FINAL DEMAND FROM DOMESTIC PURCHASES, WE ARE SEEING A SLOW DOWN THERE. IT ITS EXAGGERATED WEAKNESS, BUT WE ARE SEEING AN ECONOMY BEGIN IN THE SECOND QUARTER AND END OF THE YEAR. JONATHAN: THESE ARE ISSUES, PARTICULARLY WHAT IS HAPPENING IN EUROPE THE TRADE STORY DOES MATTER. IF YOU HAVE INTERNATIONAL
DEMAND, SOFTER WEAKER, YOU ARE GOING TO SEE SPILLOVER. I GO BACK TO THE MORGAN STANLEY CALL, THE BILL OFF THE BACK OF THE TEAM IN EUROPE FORECASTING THE RECESSION FOR THE EUROPEAN ECONOMY AND CONCLUDING SOME OF THAT IS GOING TO BITE. IT IS WHAT HAPPENS STATESIDE. LISA: THAT IS ONE REASON YOU HAVE COMPANIES MULTINATIONAL COMING FROM THE WEST TALKING ABOUT THE DOLLAR, IT IS THE HEADWIND FOR THE POTENTIAL LACK OF COMPETITIVENESS WHEN IT COMES TO EXPORTS, OR IS IT BECAUSE THE WEAKNESS IS WHAT IS CAUSING IT? THERE IS LESS DEMAND ON THE OVERSEAS SIDE. HOW MUCH CAN WE GET EUROPE AVOIDING A RECESSION IN LIGHT OF WHAT WE ARE EXPECTING TO SEE WITH GAS PRICES? THAT IS A CRISIS WE ARE GOING TO BE TALKING ABOUT FOR THE WEEKS UPCOMING. JONATHAN: THEY ARE IN A STICKY SPOT. THEY HAVE UPSIDE RISK ON A INFLATION FRONT, DOWNSIDE RISK ON A GROWTH FRONT. INFLATION IS NOT OF --.
THINK OF THE COUNTER OF THE ECP. THEY HAVE A COUPLE OF MEETINGS, YOU CAN HAVE A SITUATION WHERE THE ECB MAY GETS BACK TO ZERO OR JUST ABOVE. BEFORE OCTOBER TIME, Q4. TRICKY. TOM: I'M GOING TO USE THE THERMOMETER, FOREIGN EXCHANGE. FOREIGN EXCHANGE IS FRONT AND CENTER, I BELIEVE WE HAVE JORDAN ROCHESTER COMING UP. E.M. DOING POORLY TODAY, ADXY ABOUT READY TO GO THROUGH THE WEEK THIS.
FOREIGN EXCHANGE MATTERS RIGHT NOW. JONATHAN: I THINK -- PUT ON A CALL PUTTING OUT FOR PARITY. TOM: I DIDN'T KNOW THAT. I WAS SINGING WALK LIKE A EGYPTIAN. ♪ LISA: CAN -- OH, DEAR LORD. JONATHAN: CAN YOU KEEP THIS UP FOR TWO HOURS? TOM: STAY TUNED FOR 2003. [LAUGHTER] JONATHAN: THIS IS BLOOMBERG.
RITIKA: THE STAGE IS SET FOR THE EUROPEAN CENTRAL BANK TO RAISE INTEREST RATES THIS MONTH FOR THE FIRST TIME IN MORE THAN A DECADE. INFLATION ROSE TO A RECORD LAST MONTH. PRICES JUMPED 8.4% FROM A YEAR AGO. WE WERE DRIVEN BY SOARING COSTS
FOR FOOD AND ENERGY. CHINA'S PRESIDENT XI JINPING'S ENERGY CRACKDOWN ON HONG KONG'S PRO-DEMOCRACY MOVEMENT IN A LANDMARK SPEECH MARKING THE 20TH ANNIVERSARY OF CHINESE RULE. HE SAID THE FORMER BRITISH COLONY SHOULD FOCUS ON ITS ECONOMIC DEVELOPMENT. HE SAID HONG KONG HAS ENTERED A NEW STAGE OF ENTERING CHAOS TO GOVERNANCE.
NEW YORK EXPLAINING ITS CORONAVIRUS OUTBREAK ON "ALIEN THINGS." HEALTH OFFICIALS SAID AS EARLY AS TWO YEARS AGO, THE VIRUS HAS MADE ITS WAY --. CHINA SOUTHERN AIRLINES AGREED TO BUY 86 JETS.
DISCOUNTS ARE GENERALLY GIVEN FOR LARGE ORDERS PRINT CHINA'S GOING TO BE RECEIVING THE PLANES AND 2024. THE COLLEGE SPORTS WORLD HAS BEEN ROCKED. UCLA HAVE AGREED TO LEAD THE PACK 12 CONFERENCE AND JOINED THE BIG TEN, THAT IS A PREDOMINANTLY MIDWESTERN LEAGUE. THE MOVE COMES AFTER THE BIG TEN IS ABOUT TO SIGN A GIANT THE CONTRACT, IT COULD LEAD TO MORE MOVEMENT, DISCOURSE.
GLOBAL NEWS 24 HOURS A DAY, ON AIR AND ON "BLOOMBERG QUICKTAKE." POWERED BY MORE THAN 2,700 JOURNALISTS AND ANALYSTS IN MORE THAN 120 COUNTRIES. >> I THINK WE SHOULD HAVE STARTED EARLIER THE JOINT DECLARATION TO PUT IN PLACE MORE SCAFFOLDING TO PROTECT PEOPLE'S CLAMBER TOWARDS GREATER FREEDOM. JONATHAN: CHRISTOPHER DASH, THE FORMER GOVERNOR OF HONG KONG.
FUTURES DOWN .4%. NEGATIVE ON THE S&P, NASDAQ 100, DOWN .5%. YIELDS,. TO 9657. -- 296.57. TARGETING 340, ON A TWO YEAR YIELD.
SHE THINKS THE TERMINAL RATE OVER THE BED ADDS A FOUR HANDLE, SHE THINKS IT WILL TAKE IT TO 4%. TOM: AFTER THIS WEEKEND, WE WILL MONITOR THIS AND START STRONG ON TUESDAY IN AMERICA. WE WILL PAUSE FOR STEPHEN ENGLE AND YVONNE MAN, AND LOOK AT THE HONG KONG THAT IS GONE. IT MAY BE FROM MY CHILDHOOD AND SUSIE WONG, THE MAGISTERIAL IN LOVE OF 20 YEARS AGO. THERE IS A HONG KONG AND OUR
MINDS, IT IS EVAPORATED. AT THE STAR FERRY IN HONG KONG, I CANNOT FATHOM THE EMOTION OF WHAT IS GOING ON. TELL US YOUR VIGNETTE, YOUR EMOTION AS PRESIDENT XI VISITS. >> IT CERTAINLY HAS BEEN A SOMBER DAY. YOU CAN TELL WE ARE IN A MATTER OF A TYPHOON, WHERE WE HAVE SEEN STRONG WINDS AND STORMY WEATHER. IT RECKONS BACK TO 25 YEARS AGO. BEHIND ME, WHERE THIS HANDOVER
CEREMONY TOOK PLACE, AND YOU HEAR THAT SOUND FROM. CHARLES CAME HERE TO HAND OVER BACK TO BEIJING. AT THE TIME, THERE WAS THAT AURA OF UNCERTAINTY, OF WHAT BEIJING RULE WOULD BE, WHAT THIS ONE COUNTRIES FRAMEWORK WOULD PLAY OUT THE NEXT 50 YEARS.
I WOULD SAY, THE SAME SENTIMENT IS BEING FELT IN THE LAST TWO TO THREE YEARS, WE HAVE SEEN A DRAMATIC CHANGE IN THE POLITICAL ENVIRONMENT SINCE THIS NATIONAL SECURITY LAW WAS IMPOSED TWO YEARS AGO TO THE DAY. TOM: DRAMATIC CHANGES, PEOPLE ARE LEAVING. WHAT -- NOT WHAT YOU WOULD BE PREDICTING, BUT WHAT WOULD BE THE GUESTS OF WHAT THEY WILL DO, AND THE WESTERN FINANCIAL INSTITUTIONS WILL DO? YVONNE: WE HAVE SEEN THAT DURING THE HANDOVER, WE HAVE SEEN AN EXIT US OF PEOPLE LEAVE. PEOPLE STILL LINGERING, QUESTIONS OF WHAT IT WILL BE LIKE. WE HAVE SEEN THAT THE LAST TWO YEARS AGO.
WE SPOKE TO FOREIGN CHAMBERS THAT SAID, YES, PEOPLE LEAVE. IT IS TEMPORARILY RELOCATING, POSSIBLY MOVING OFFICES. MOVING PEOPLE TO HUBS LIKE SINGAPORE, WHERE THE BORDERS ARE REOPENED. IT IS NOT SO MUCH THE POLITICAL
BACKDROP OR NATIONAL SECURITY, WHAT HAS OVERSHADOWED THAT HAS BEEN HONG KONG'S COVID ZERO STRATEGIES, WHERE BORDERS ARE CLOSED NOT JUST WITH THE MAINLAND, BUT THE REST OF THE WORLD. FOR THE FINANCIAL AND BUSINESS COMMUNITY, THIS IS KEY. THERE IS NO EXIT PLAN. WE HAVE SEEN UNDER THE ADMINISTRATION A FLIP-FLOPPING OF POLICIES. WE ARE STARTING TO SEE, MAYBE THERE IS SCIENCE HONG KONG CAN BREAK APART FROM CHINA WHEN COMES TO THE 0 -- COVID ZERO POLICY PART. WE ARE SEEING ABOUT 2000 CASES A DAY, WHICH IS PROBABLY BRINGING IT BACK TO THE HIGHS OF APRIL. A COUPLE MONTHS AGO, WE WOULD HAVE SEEN CINEMAS, BARS, CLOSED.
WE HAVE NOT SEEN THAT YET, THERE IS LOCAL MEDIA REPORTS TALKING ABOUT EASING MORE OF THE TRAVELS HERE, MAYBE A FIVE PLUS TWO MODEL FOR QUARANTINE TIMES, AS WELL. WHETHER JOHN LEE CAN DELIVER ON THAT AND REOPENED TO THE REST OF THE PART OF CHINA IS GOING TO BE KEY FOR MANY BUSINESSES. LISA: THAT DOES SEEM TO BE THE TENSION HERE, ESPECIALLY AS XI JINPING HERALDS THE UNIFICATION OF THE MAINLAND AND HONG KONG, EMPHASIZING IT IS IMPORTANT TO GET HONG KONG'S BUSINESS UP AND RUNNING. HOW MUCH IS THIS GOING TO BE THE DECIDING FACTOR OF HOW CHINA EMERGES FROM ZERO COVID, WITH HONG KONG AS THE TEST CASE? YVONNE: THERE HAS BEEN A LOT OF TALK ABOUT HOW HONG KONG COULD BE THE TESTING PLACE FOR CHINA TO EMERGE OUT OF THIS COVID ZERO. WE HAVE SEEN THAT IN THE MAINLAND. JUST THIS WEEK, CUTTING QUARANTINE TIMES IN HALF.
IN A SYMBOLIC TRIP TO WUHAN, TALKING ABOUT DOUBLING DOWN, SAYING COVID ZERO IS THE MOST EFFECTIVE POLICY. THERE IS STILL A LOT OF QUESTIONS ABOUT THAT. GIVEN THE BUSINESS COMMUNITY, THEY ARE LOOKING FOR A LOT OF ANSWERS. FOR THE MOST PART, I'M NARRATIVE, THEY HAVE BEEN PUSHING THIS THESIS THAT, IF WE CAN SOLVE THE SOCIAL, INEQUALITY ISSUES AND HONG KONG, PERHAPS THE STABILITY CAN BE STORED. FOR THE FOREIGN BUSINESSES ASPECT, THAT IS THE KEY QUESTION.
WE STILL HAVE NOT SEEN ANY SORT OF INDICATION THAT HONG KONG MAY BE READY TO BREAK APART FROM THE MAINLAND. JONATHAN: THE BRILLIANT YVONNE MAN. SHE NAILED IT, A SOMBER DAY FOR A LOT OF PEOPLE. TOM: SHE MENTIONED ON COVID.
WE ARE LIVING THIS WITH OUR HONG KONG TEAM EVERY DAY. WE ARE NOT WAKING UP AND GOING, OK. HOW LONG AM I IN THE APARTMENT? CAN I GET HOME FROM THE OFFICE? THAT IS THE TENSION FOR THE WESTERN WORLD AND HONG KONG. JONATHAN: ON THE BUSINESS FRONT, YOU CAN SEE WHERE THIS IS HEADING. FOREIGN COMPANIES, MULTINATIONALS ARE WORRIED ABOUT OFFENDING THE CHINESE ECONOMIST PARTY. YOU CAN SEE SEVERAL TEAMS
ACROSS DIFFERENT BANKS START TO SHIFT AWAY FROM HONG KONG. OTHER PLACES LIKE SINGAPORE. TOM: SINGAPORE IS A WHOLE DIFFERENT FEEL.
YOU GET ON THE PLANE AND GO DOWN SOUTH, IT IS LIKE, THIS IS NOT THE SAME AS HONG KONG. I DO NOT HAVE EXPERTISE. IT IS SHANGHAI. DID EVERYBODY GO BACK TO TOKYO? JONATHAN: YOU THINK, TO THE MAINLAND? TOM: THERE HAS BEEN A THRUST OF TRYING TO MAKE SHANGHAI THE FINANCIAL CAPITAL. IT IS THE MOST NEW YORK CITY
LIKE NEW YORK IN THE WORLD I HAVE BEEN IN. THEY HAVE GOT THE SAME COVID PROBLEMS HONG KONG HAS. JONATHAN: THEY DEEMPHASIZED HONG KONG FOR A LOT OF PEOPLE, FROM THE OUTSIDE LOOKING IN. LISA:
IT REDUCED BUSINESS ACTIVITY. I KEEP GOING BACK TO THE COVID ZERO ASPECT, WE SAW PMI'S OUT OF ASIA OVERNIGHT. THEY HIGHLIGHTED THE SLOWDOWN TRICKLING FROM CHINA, SOUTH KOREA TO THE SOUTHEAST ASIAN COME -- COUNTRIES EXPERIENCING WAS HOW LONG CAN THEY CONTINUE BEFORE SOMETHING BREAKS ECONOMICALLY IN THE REGION AND BEYOND? I THINK HONG KONG HIGHLIGHTS THAT WITH BUSINESSES LEAVING AND THE INABILITY TO FOSTER GROWTH. JONATHAN: DATA STATESIDE. LATER THIS MORNING, GET A NICE MANUFACTURING PRINT. WE GET THE THOUGHTS OF MICHAEL
OR WORK -- O'ROURKE. EQUITY MARKETS, DOWN .4% ON THE S&P. FIRST HALF, WAS PAIN AND BONDS -- PAIN IN BONDS.
IN THE BOND MARKET, YIELDS ARE DOWN FIVE BASIS POINTS WE HAD FOUR DAYS OF THIS, 296.30. TOM: THE EQUITY LEVELS ARE BACK. I TAKE THE POINT THAT THE FIRST HALF WAS GRIM. I WANT TO EXTEND MY TIMELINE OUT. I FEEL BETTER.
I DO NOT KNOW WHERE I AM GOING TO, MAYBE IT IS 2024. JONATHAN: CREDIT SUISSE SAYS WE COULD GET A DOUBLE-DIGIT GAIN IN THE SECOND HALF. SUPER CONSTRUCTIVE ON EARNINGS IN A WAY OTHERS ARE NOT. QUITE A LINEUP IN THE NINE :00, YOU WANT TO JOIN? TOM: MAYBE I WILL. >> THE FED IS LOOKING AT THE DINING CONDITIONS AND SAYING IT HURTS, IT IS PAINFUL, BUT THIS IS A FEATURE, IT IS NOT A BUG. >> CENTRAL BANKERS ARE FINALLY BEING UPFRONT ABOUT WHAT THEY ARE HAVING TO DEAL WITH.
>> WE ARE SAVED MOMENTUM OR CENTRAL BANKS HAVE TO GO BIG BECAUSE ALL OF THE BIG ONES ARE GOING BAKE. >> THE MARKETS ARE STARTING TO SMELL AN ECONOMIC SLOWDOWN, WHICH I THINK IS PREMATURE. >> THIS IS "BLOOMBERG SURVEILLANCE." JONATHAN: FUTURES -.4%. GOOD MORNING. THIS IS BLOOMBERG SURVEILLANCE LIVE ON TV AND RADIO ALONGSIDE TOM KEENE AND LISA ABRAMOWICZ, I'M JONATHAN FERRO. FUTURES DEEPLY NEGATIVE.
THE QUOTE OF THE WEEK FROM MIKE SCHUMACHER, IT IS A FEATURE AND NOT A BUG. TOM: THAT EXTENDS THE TIMELINE. WHAT I SEE IN FOREIGN-EXCHANGE, PARTICULARLY WEEK EM. 10 YEAR YIELD A ROADS FURTHER. I WILL GO OFF JANE FOLEY, WHO
WAS BRILLIANT YESTERDAY, HAVE TO GO BIG. THIS GOES TO LANGUAGE, THEY BEAT IS FRONTLOAD JULY. JONATHAN: THE PAIN IS COMING UP IN THE ESTIMATES. YOUR COME THE DOWNGRADES ON THE ECONOMY. BUILDING OFF THE WORK FROM THE
EUROPEAN TEAM A RECESSION. THEY ARE NOT LOOKING FOR A RECESSION BASE CASE BUT THEY ARE LOOKING FOR REAL WEAKNESS IN THE ECONOMY. TOM: DID YOU SPEAK WITH DAVID COSTIN THIS WEEK? JONATHAN: I DID.
TOM: I AM MORE INTERESTED IN WHAT THE STRATEGISTS SAY AND HOW THEY ADJUST TO THE ECONOMISTS OUT THERE. IT IS A MIX OF OPINION. I KNOW O'ROURKE IS COMING ON AND HE GOES BACK TO 2002. THIS IS WHY I AM IN TRIPLE LEVERAGED CASH, I NEVER MADE IT AS A WISE MAN, I CANNOT CUT IT AS A POOR MAN STEALING. I CANNOT CUT IT AS A POOR MAN INVESTING. JONATHAN:
BRAMO IS GOING ON VACATION. SHE CANNOT WAIT. TOM: THIS IS NOT AS BAD AS 2002. JONATHAN: WHAT ARE THE BENCHMARKS? EARLY 2000? 1989. TOM: I AM -- TO THE NEXT ECB MEETING ANALYSIS AND TRIED TO STRETCH IT OUT TO SEE WHEN THE ACTIONS CALM THE MARKET AND GIVE US A LIFT. LISA:
THERE IS A DIFFERENCE BETWEEN REMAINING CALM, NOBODY IS SAYING PANIC, A VERSUS BEING REALISTIC ABOUT HOW VOLATILE AND HOW DEEP THE PAIN MIGHT BE, WHETHER YOU WANT TO STAY INVESTED. LONG-TERM ADVICE. FROM WHAT I HAVE SEEN, WE HAVE SEEN A REGIME SHIFT. WE SAW THE FED IN THE ECB. WE SAW MAJOR CENTRAL BANKS COME OUT. THE FOREMOST CONCERN IS INFLATION. THEY WILL BE AGGRESSIVE. THEY ARE HIKING INTO WEAKNESS. THAT IS WHAT WE ARE SEEING. JONATHAN:
I AM NOT HERE TO PROVIDE THERAPY. I WILL GIVE YOU A RANGE OF VIEWS. YOU HAVE THE VIEWS OF JONATHAN GOLUB AT CREDIT SUISSE, WHO BELIEVE YOU CAN GET A ROBUST SECOND-HALF TURNAROUND, MAYBE EVEN REVERSE THE LOSSES OF THE FIRST HALF BECAUSE I THINK EARNINGS WILL REMAIN ROBUST. YOU'VE MIKE WILSON OF MORGAN
STANLEY SAYING THAT WILL NOT BE THE CASE. IT IS THE EARNINGS PICTURE WE WILL GET A FLAVOR OF AND THE NEXT COUPLE OF WEEKS THAT WILL TAKE CENTER STAGE. LISA: RESTORATION HARDWARE, MICRON. THE TEA LEAVES ARE COMING UP IN
THE FORWARD FORECAST. I'M NOT SAYING PEOPLE SHOULD PANIC, BUT YOU ARE SEEING THE DOWNGRADES THE COMPANIES THEMSELVES ARE GIVING WITH THE VISIBILITY THEY HAVE. JONATHAN: NEAR-TERM NEXT COUPLE OF MONTHS THIS FED DOES NOT WANT AN EASING OF FINANCIAL CONDITIONS. 12 MONTHS OUT, OVER AT GOLDMAN THINKS THINGS CAN IMPROVE. NEAR-TERM IT IS A BIG CALL TO GET COMFORTABLE TAKING RISK GIVEN WHAT THE FED WILL DO. TOM: I WILL PUSH AGAINST BRAMO GLOOM
AND 2002 THIS IS HOW YOU REMIND ME, THE INDEX IS -- IT ALWAYS GOES DOWN. THE INSTITUTIONS SOLVE THE TIGHTENING. WE ARE SEEING MAJOR TIGHTENING BY THE MARKET. JONATHAN: THE PUSHBACK IS THAT HAS BEEN
VALIDATED BY THE FEDERAL RESERVE. THEY WANTED THERE. THEY ARE COMFORTABLE WITH WHAT IT IS THAT IT'S AN IMPORTANT PART OF THE SELLOFF. TOM: IN 2002, I GOT HAMMERED LIKE EVERYBODY ELSE. YOU HAVE TO LOOK OUT FOR THE RECOVERY AND THE RECOVERY CAME IN THE MIDDLE TO THOUSANDS. JONATHAN: I HEAR YOU OUT -- I HEAR YOU LOUD AND CLEAR. ON THE NASDAQ 100 WE ARE DOWN .4%.
YIELDS IN SIX BASIS POINTS ON THE 10 YEAR. IT SPEAKS TO THE WEAKENING OF THE DATA. LOOK OUT FOR THE ISM LATER. LISA WILL GO THROUGH THE DATA IN JUST A MOMENT. 2.95 ON THE 10 YEAR. LISA: THIS HAS BEEN THE BIG MOVE.
TODAY I AM WATCHING THE ECB'S NET BOND BUYING PROGRAM IS SET TO END. THIS IS FROM THE PANDEMIC. AMAZING IT HAS BEEN GOING UNTIL NOW. I AM WATCHING THE 10 YEAR TALLY IN YIELDS.
HOW MUCH DO THEY CONTINUE TO COME IN WITH THE FAITH EUROPEAN CENTRAL BANKS CAN CALIBRATE REINVESTMENT INTO THE PERIPHERAL REGIONS IN ORDER TO SUPPRESS SOME OF THE CAPPING OUT WE HAVE SEEN? 10:00 IS THE DATA DUMP WE ARE ALL WATCHING. HOW MUCH DO WE SEE MANUFACTURING START TO ROLL OVER IN LINE WITH SOME OF THOSE REGIONAL REPORTS WE HAVE BEEN GETTING HIGHLIGHTING THE ONGOING WEAKNESS AND WHAT IS THAT MEAN IN LIGHT OF THE INPUT PRICES? TODAY WE GET A HOST OF U.S. AUTO SALES INCLUDING GENERAL MOTORS AT 9:00, TOYOTA AT 10:30. THE EXPECTATION IS FOR THE NUMBER TO STABILIZE AROUND 13 MILLION, WHICH IS WELL BELOW THE 17 MILLION WE SAW IN 2018 AND 2019. JONATHAN: LET'S GET STRAIGHT INTO IT WITH MICHAEL O'ROURKE, CHIEF MARKET STRATEGIST AT JONES TRADING. YOUR WORDS, I AM GETTING WORRIED ABOUT ENERGY AND MATERIALS.
TALK TO ME ABOUT ENERGY. MICHAEL: I'VE BEEN ON THE VALUE TRADE AND I SEE THE KEY COMPONENTS ARE FINANCIALS, BANKS, ENERGY. WE HAVE HAD A GREAT RUN IN ENERGY. THE ENERGY POLICY IN THIS
COUNTRY HAS WORKED TO THE ADVANTAGE OF INVESTORS AND OIL PRICES HAVE SHOT UP WITH THE WAR IN UKRAINE. NOW WE ARE STARTING TO SEE THIS ECONOMY SLOW. WE ARE GETTING CLEAR SIGNS OF SLOWING.
THE DOWNSIDE VOLATILITY COULD BECOME TIED TO ENERGY NEEDS IF WE SEE A REAL SLOW DOWN OR A RECESSION IT WILL BE TROUBLE. TOM: CAN YOU BUY QUALITY? IF YOU HAVE A ONE YEAR OR THREE YEAR PERSPECTIVE, STOCKS HAVE REVENUE STABILITY, THEY PERSISTENT FREE CASH FLOWS, CAN YOU BEGIN TO ACQUIRE THOSE SHARES ARE YOU HAVE TO BE AS GLOOMY AS LISA? MICHAEL: THIS 2000 OR 2002 EPISODE OF EVERYTHING REPRICING. MICRON IS A GOOD EXAMPLE. MICRON TRADING FIVE OR SIX TIMES EARNINGS, AWFUL GUIDANCE LAST NIGHT, BUT THE SHARES ARE DOWN $1.5 TWO DOLLARS.
THEY ARE DIGESTING BAD GUIDANCE PRETTY WELL. I WOULD LOOK FOR VALUATIONS HAVE CORRECTED SIGNIFICANTLY AND THOSE ARE THE TYPES OF NAMES I WOULD BE LOOKING FOR. A LOT OF QUALITY NAME STILL HAVE LOFTY PES. LISA: THERE IS A DISTINCTION BETWEEN LONG-TERM FAITH THE U.S. ECONOMY CAN RECOVER, WHICH A LOT OF PEOPLE SHARE, AND THERE WILL BE AN ENTRY POINT, AND DISBELIEF THERE WILL BE NEAR-TERM PAIN. WHERE IS THE PIVOT POINT?
MICHAEL: THAT IS A GREAT QUESTION BECAUSE YOU TOUCHED ON THE ISSUES AS YOU ARE TALKING IN THE INTRO. THE NEXT PAIN WILL BE THE NEWS HEADLINE BATTLE BETWEEN EARNINGS AND INFLATION. I THINK WE WILL SEE THE INFLATION DATA -- IT WILL PIVOT IN THE RIGHT DIRECTION. THE REST OF THE YEAR WE WILL
SEE DECELERATING INFLATION GROWTH. IT WILL STILL BE HIGH BUT HEADING IN THE RIGHT DIRECTION. THE EARNINGS DATA IS WHERE THE PROBLEMS WILL BE. YOU MENTIONED OUR HR EARLIER. THOSE ARE COMPANIES -- YOU
MENTIONED RH EARLIER. WE HAVE NOT SEEN ANALYSTS RESET THEIR FORECAST YET. EVERYONE HAS BEEN HOPING FOR THE BACK END OF THE YEAR AND NOW WE HAVE TO SEE A REAL ADJUSTMENT IN THE SUMMER. JONATHAN: LOOKING AHEAD TO EARNINGS WITH YOU AND THE WORRIES. MICHAEL O'ROURKE OF JONES TRADING. THIS WAS THE WEEK WHERE CREDIT
STARTED TO TAKE OVER IN A MORE MATERIAL WAY. THE ADDITIONAL YIELD, THE CORPORATIONS HAVE TO COMPENSATE INVESTORS. THAT WAS FOR YOU. SPREADS ARE WIDER. YOU MISSED YESTERDAY'S PROGRAM. NEVER MIND. WE ARE THROUGH 550. IT IS NOT JUST HIGH-YIELD. IT IS NOT JUST TRIPLE C'S, IT
IS INVESTMENT GRADE. WE ARE STRAIGHT TO SEE MOVEMENT WE HAVE NOT SEEN IN A WHILE. LISA: SUDDENLY INVESTORS TO ACTUALLY GET THAT YIELD. IT IS 9% ALL IN YIELD. THIS WOULD BE GREAT FOR PEOPLE WHO HAD FAITH WE WERE NOT ENTERING A NEW CREDIT CYCLE. WHAT DOES IT LOOK LIKE IF YOU START TO SEE A FED THAT DOES NOT USE THAT AS A LINCHPIN TO STEP BACK IN? I THINK THAT LACK OF LIQUIDITY HAS BEEN UNDERESTIMATED BY A LOT OF PEOPLE UNTIL NOW. TOM:
I HAVE A BUNCH OF TEEPEES AND I AM WATCHING -- I HAVE A BUNCH OF TV'S AND I AM WATCHING EMMANUEL MACRON. HE IS WELCOMING A COUPLE THAT TOOK AIR FRANCE AND THEY PAID 22,000 DOLLARS FOR TWO BUSINESS CLASS TICKETS. THEY ARE GETTING A GREETING FROM THE PRESIDENT OF FRANCE. JONATHAN: I AM THINKING OF LOT OF A LOT OF PEOPLE GOING TO THE AIRPORTS. LISA, THIS IS NOT AIMED AT YOU. CAN YOU IMAGINE HOW MUCH PEOPLE HAVE PAID FOR FLIGHTS THIS WEEKEND. IT IS A QUESTION WE HAVE TO ASK FROM AN ECONOMIC PERSPECTIVE, WHETHER YOU WILL SEE THIS REPEATED FOR THE REST OF THE YEAR.
I AM NOT SURE WE WILL HAVE SUCH A ROBUST CONSUMER, THIS REVENGE SPEND, CAN THAT CONTINUE THROUGH THE REST OF THIS YEAR? LISA: I CANNOT BELIEVE IT WILL BECAUSE PEOPLE HAVE GOT IT OUT OF THEIR SYSTEM. WHAT I KEEP HEARING FROM STRATEGISTS AS THEY EXPECTED TO BE A LOT SOFTER WHEN THEY REALIZE WHAT THE REALITY WILL LOOK LIKE. JONATHAN: AMANDA STEIN FROM THE NEW JERSEY DEVILS, 45 MINUTES ON THE RUNWAYS. 20 MINUTES AND ONE OF THOSE DATE VEHICLES. JONATHAN: BRAMO, THAT WAS NOT AIMED AT YOU. WHO ELSE IS SPENDING $20,000 FROM JFK? IT IS ALWAYS ABOUT TOM.
YOU FORGET THAT? IT IS NOT PERSONAL. TOM: I'VE BEEN TO THE BOTTOM OF EVERY MARKET SINCE 2002. NICKELBACK. NICKELBACK IS A BAND FROM
CANADA. JONATHAN: I DID NOT KNOW THAT. WHAT ELSE DID THEY SING. TOM: CHAD WAS DATING AVERIL AND IT WAS GREAT. JONATHAN: WE ARE NEGATIVE. THIS IS BLOOMBERG. RITIKA: INFLATION IN THE EURO ZONE ROSE HIGHER THAN EXPECTED.
PRICES JUMPED HIGHER-THAN-EXPECTED. THEY WERE SOARING BY A HIGHER COST OF FOOD AND ENERGY. GLOBAL FOOD INFLATION LOOKS SET TO SLOW DOWN. HE COMMODITY SUCH AS WHEAT AND CORN AND COOKING OILS ARE EXTENDING THEIR SLUMPED TO THE LOWEST LEVELS IN MONTHS. THE LATEST CATALYST IS A REPORT FROM THE U.S.
DEPARTMENT OF AGRICULTURE THAT RAISE THE ESTIMATE OF AREA IN THE WORLD'S BIGGEST PRODUCER THIS YEAR. I RAN SAYS IT IS READY FOR NEW INDIRECT TALKS WITH THE U.S. TO REVIVE THE 2015 NUCLEAR DEAL. THE STATEMENT CAME AFTER THE LATEST ROUND OF DISCUSSIONS FAILED TO MIX A GIVE YOU PROGRESS. DONALD TRUMP PULLED THE U.S. OUT THE AGREEMENT IN 2018. THE BIDEN MINISTRATION WANTS TO
RENEW THE DEAL. AND RUSSIA TRIBE BEGINS TODAY FOR U.S. BASKETBALL STAR BRITTNEY GRINER WHO WAS JAILED MORE THAN FOUR MONTHS AGO ON CANNABIS POSSESSION CHARGES.
THE OLYMPIC GOLD MEDALIST COULD FACE UP TO 10 YEARS IN PRISON. THE BIDEN ADMINISTRATION CALLED HER LUMP -- WRONGFULLY DETAINED. GLOBAL NEWS 24 HOURS A DAY, ON AIR AND ON QUICKTAKE BY BLOOMBERG, POWERED BY MORE THAN 2700 JOURNALISTS AND ANALYSTS IN MORE THAN 120 COUNTRIES. I AM RITIKA GUPTA.
>> IT GET WORSE. IF IT COMES TO FULL-SCALE WAR BETWEEN RUSSIA AND NATO THEN WE WILL SEE SUFFERING, DAMAGE, DESTRUCTION AT A SCALE THAT IS MUCH WORSE THAN WHAT WE SEE IN UKRAINE TODAY. JONATHAN: THAT WAS THE NATO SECRETARY-GENERAL WRAPPING UP THE SUMMIT IN MADRID. I AM JONATHAN FERRO. KICKING OFF Q3 AND THE SECOND
HALF OF 2022 ON A NEGATIVE NOTE ON THE S&P AND THE NASDAQ. YIELDS NOW IN SEVEN BASIS POINTS, ALMOST EIGHT. ROUNDED DOWN TO 2.93. 70 ON THE 10 YEAR. TOM:
WE ARE HAVING A FESTIVE MOMENT, THE FRIDAY BEFORE A LOVELY SUMMER WEEKEND. SERIOUSLY, ALL OF YOU TRAVELING BY AIRLINE IN PLAIN, OUR THOUGHTS ARE WITH YOU. LOGISTIC CHAOS. IN EUROPE IT IS BABY NOT THE FESTIVE WEEK -- IN EUROPE IT IS MAYBE NOT THE FESTIVE WEEKEND IN AMERICA.
JOINING US IS IN MURRAY OR DERN -- IS MARIA TADEO AND ANNMARIE HORDERN. THE FACT IS THERE IS A WAR GOING ON. IT CAME HOME TO ME HOW SUBDUED CHRISTINE LAGARDE WAS IN ADDRESSING WAR. MARIA TADEO, AS WE BEGIN JULY, WHAT IS THE DISTINCTIVE DEBATE ABOUT ALL OF THE PLAYERS YOU KNOW AND ZELENSKYY IN KYIV? MARIA: THERE ARE TWO BIG THINGS. ONE IS THE ENERGY SITUATION.
FOR THE GERMANS THEY WORRY ABOUT THE POTENTIAL,. ONCE YOU DO THAT YOU WILL UNLEASH FORCES NOBODY CAN MODEL OR CONTROL. THE OTHER ONE IS HOW WILL THIS END? THEY ARE IN A DIFFICULT SITUATION BECAUSE THEY DO NOT WANT TO PRESSURE THE UKRAINIANS.
THAT IS WHAT WE HEAR ALL THE TIME. PRESIDENT ZELENSKYY IS DEMOCRATICLY ELECTED. WHEN WILL IT END AND HOW LONG WILL IT GO ON? THE UKRAINIANS WOULD RATHER KEEP FIGHTING AND NOT CONCEDE AN INCH TO RUSSIA. TOM: WHAT IS THE END GAME FOR PRESIDENT BIDEN WHO MUST COMMIT U.S. TROOPS TO THE FINNISH BORDER? ANNMARIE: I THINK HE MADE IT CLEAR WHEN HE WAS ASKED HOW MUCH LONGER CAN AMERICANS EXPECT THE PREMIUM ON GASOLINE WOULD BE CRUCIAL FOR THIS UPCOMING WEEKEND WHERE YOU HAVE A MASS AMOUNT OF AMERICANS TAKING TO THEIR CARS TO GET TO BARBECUES, HE SAID FOR AS LONG AS IT TAKES.
YOU HAVE SEEN AMERICAN OFFICIALS SAY NOTHING ABOUT UKRAINE WITHOUT UKRAINE, REALLY LEAVING IT TO HIM. WHAT MARIA IS GETTING AT IS A LOT OF EUROPEAN LEADERS IN GERMANY AND FRANCE HAVE HINTED THEY WOULD BE MORE OPEN TO PUSHING FOR A NEGOTIATED CEASE-FIRE. WHEN YOU LOOK AT WHAT IS GOING ON AT HOME DOMESTICALLY FOR EVERY LEADER THAT HAS GATHERED, WHETHER IT IS THE BAVARIAN ALPS OR HERE IN NATO, IT IS INFLATION. SPAIN, 10%, FRANCE GOING UP. THESE ARE ISSUES THAT ARE AFFECTING ALL THESE LEADERS. LISA:
TO THAT POINT, WE TALKED ABOUT THIS YESTERDAY ABOUT THE POTENTIAL GAS CRISIS FACING GERMANY, PARTICULARLY INTO LATE JULY WHEN WE LEARN HOW MUCH OF THE GAS SUPPLY WILL BE BROUGHT BACK ONLINE FROM RUSSIA THROUGH NORD STREAM ONE. HOW MUCH IS THERE DISCUSSION ABOUT SPENDING MONEY TO OFFSET SOME OF THE HIGHER OIL AND GAS PRICES FOR GERMAN CITIZENS? HOW MUCH WILLINGNESS IS THERE FOR SOME OF THE FRUGALITY THE NATION HAS BEEN FAMOUS FOR? MARIA: THAT IS A VERY GOOD POINT. THAT WAS THE REAL TAKE AWAY FROM THE G7. THEY CANNOT AGREE ON THE OIL PRICE CAP. THEY TALK ABOUT IT FOR WEEKS AND WEEKS, BUT WHEN IT COMES TO DELIVERING THEY ARE NOT ABLE TO DO IT. EMMANUEL MACRON WAS TRYING TO
GET A GLOBAL COALITION. WE HAVE PICTURES OF HIM WITH THE INDIAN LEADER. AMERICANS WERE NOT ABLE TO GET IT DONE, EITHER. FOR THE EUROPEANS WHAT THEY ARE FOCUSED ON IS THE STORIES. THEY SAY WE HAVE TWO MONTHS. THIS IS A FIGHT AGAINST THE CLOCK, TO GET THIS DONE BY SEPTEMBER. YOU HAVE TWO MONTHS IN WHICH YOUR STORAGE IS FULL, AND YOU HEAR FROM DEUTSCHE BANK, WE ARE CLEAR ON THIS. IF THIS GETS, FOR A WEEK RAY
MONTH, THE IMPACT IT WOULD HAVE ON THE GERMAN INDUSTRY WOULD BE HUGE. THE ECONOMY GOES INTO RECESSION BY THE END OF THE YEAR. JONATHAN: LET'S GET TO THE IMPORTANT STUFF.
HOW IS THE NIGHTLIFE IN MADRID? WHO WANTS TO ANSWER? MARIA: I WILL LEAVE IT TO THE HOST. ANNMARIE: I HAVE PICTURES THAT CAN MAKE OR BREAK YOUR CAREER. I KEEP THEM FOR MYSELF. JONATHAN: YOU MENTIONED LATE LAST NIGHT. I GOT A LOAD OF MESSAGES FROM YOU. I GOT A LOAD -- SHOULD I PLAY THE MUSIC FROM THE CLUB? ANNMARIE: I DO NOT WANT TO OPEN THAT CONVERSATION? ♪ JONATHAN: WHAT SONG IS THAT? HOW MUCH IS THAT WORTH? TOM: I WANT TO CUT IN. MADRID IS A COOL PLACE TO GO. EVERYBODY IS TALKING ABOUT WHAT
IS MADRID LIKE NOW VERSUS 10 YEARS AGO? WHAT HAS CHANGED? MARIA: IT IS A VERY GOOD QUESTION. IT HAS CHANGED AS A RESULT OF ALL OF THE POLITICAL DRAMA WE HAVE SEEN PLAY OUT IN BARCELONA. BARCELONA WAS THE INTERNATIONAL CAPITAL FOR SPAIN. A LOT OF THAT HAD SHIFTED BECAUSE OF THE POLITICAL TENSIONS WE HAVE SEEN PLAY OUT. MADRID HAS BECOME WHAT BARCELONA WANTED TO BE 10 YEARS AGO AND I WONDER IS THAT GOING TO BE REBALANCED? I THINK IT SHOULD BE BECAUSE IT WILL HELP THIS COUNTRY REBALANCE THE POWER BETWEEN THEM. IT IS EXTREMELY IMPORTANT FOR THIS COUNTRY TO GET TO A POINT WHERE WE ARE BOTH ON THE SAME PAGE. JONATHAN:
YOUR SOME OF MY PAIRED PEOPLE IN THE WORLD. YOU HAVE CRESTED THIS WEEK. -- YOU ARE SOME OF MY FAVORITE PEOPLE IN THE WORLD. YOU HAVE CRUSHED IT THIS WEEK. TOM: FRANCINE LACQUA MADE GLOBAL HEADLINES WITH THAT PANEL.
THIS IS ABOUT GOING TO ALL OF THE COUNTRIES. ANNMARIE HORDERN DID THIS BEFORE SHE WAS RELOCATED TO WASHINGTON. IT IS NOT JUST ONE STORY. YOU HAVE TO VISIT THEM ALL. TO BE THE FOCUS IS THE BALTIC STATES AND SCANDINAVIA AND MAYBE THAT IS JUST TO GET AWAY FROM ALL THE OTHER AGONIES. JONATHAN:
I AM JEALOUS THEY GET SUCH GREAT GIGS BECAUSE BACK IN MY DAY I HAD TO GO TO FRANKFURT AND ZURICH. LISA: NOT EXACTLY THE SAME INCENTIVE. TOM: LISA IS GOING TO WHOLE FOODS FOODS ON THE UPPER WEST SIDE.
LISA: LET'S NOT GET TOO AMBITIOUS. WE WILL SEE HOW IT GOES. JONATHAN: WITH LISA ABRAMOWICZ AND TOM KEENE, I'M JONATHAN FERRO. NEGATIVE ONE THIRD OF 1%. BONDS DOWN EIGHT BASIS POINTS ON THE 10 YEAR TO 2.9354. ALMOST TO 3.50 A COUPLE OF
WEEKS AGO AND SINCE THEN WE HAVE BACKED AWAY. THE DATA IS STARTING TO COME IN WEAKER. JONATHAN: KICKING OFF THE SECOND HALF OF Q3 WITH YOUR EQUITY MARKET LOWER.
ON THE S&P DOWN ONE THIRD OF 1%. ON THE NASDAQ DOWN ONE THIRD OF 1%. THE OFFICIAL COMPENSATION CORPORATIONS DID TO OFFER TO INVESTORS, CREDIT SPREADS A LOT WIDER. WE ARE THROUGH THE WIDE OF LATE 2018, PUSHING 570 BASIS POINTS. THE MOST IMPORTANT PART OF THAT
IS THIS FEDERAL RESERVE IS NOT RETURNING COMPARED WHAT WAS DOING IN LATE 2018. DOES THAT MEAN THERE'S MORE PAIN IN STORE FOR THE EQUITY MARKET? THE RUSSELL DOWN .4%. HERE IS THE MOVE THAT GETS MY ATTENTION. WE HAVE TALKED ABOUT PAIN IN EQUITIES, PAIN IN BONDS.
BONDS RALLYING. AT THE FRONT END, DOWN NINE BASIS POINTS. ON TENDS DOWN TO 2.94. DO WE START TO GET COMFORTABLE WITH THIS IDEA THAT THE FED CANNOT DO AS MUCH AS PEOPLE THINK? P AMID ZAHRA -- PRIYA MISRA IS PUSHING BACK. SHE THINKS THIS FED CAN GO TO 4%. THAT IS A BIG CHANGE FOR PRIYA MISRA AND THE TEAM. TOM: IS A BIG CHANGE FOR PRIYA MISRA. I WOULD LIKE TO THINK OVER THIS
LONG WEEKEND IN AMERICA WE WILL PUBLISH INTO NEXT WEEK ALL SORTS OF CHANGES, PARTICULARLY AFTER THE JOBS REPORT. IF WE DO NOT SEE A CRACK IN THE LABOR ECONOMY HOW WILL THAT CHANGE THE MIX? JONATHAN: LOOK OUT FOR THE ISM LATER. WE LOOK COILED FOR AN UPSIDE SURPRISE. NOT SEEING WE WILL GET ONE. WHAT WE HAVE SEEN STATESIDE FROM THE REGIONAL FED PRINT HAS BEEN UGLY. TOM MENTIONED THE RESILIENT DOLLAR.
EURO-DOLLAR SING THE BIGGEST MOVE TO THE DOWNSIDE SINCE LATE 2016. REMEMBER THE TRUMP AFFECT, ALL OF THAT TALK ABOUT THE STRONG DOLLAR, ALL OF THAT STUFF? IT IS DIFFERENT THIS TIME AROUND. ABOUT EURO WEAKNESS A MONSTER WAY.
UPSIDE SURPRISE ON INFLATION THE IDEA THE ECB MIGHT HAVE TO DO MORE. MAYBE IT IS NOT CHANGE THINGS TOO MUCH BUT THIS IS THE STORY FOR ME. RECESSION IS BECOMING THE BASE CASE, NOT IN AMERICA BUT IN EUROPE. FOR THAT REASON ELLEN ZENTNER CALL RECESSION FOR AMERICA AND EUROPE AND THEY HAVE TO DOWNGRADE THEIR GROWTH FORECAST. WE SAW THAT FROM THE
GDP NUMBERS AT MORGAN STANLEY AND FROM GOLDMAN. TOM: MY ISSUE IS YOU HAVE THE U.S. 10 YEAR OF 3%, THE ITALIAN 10 YEAR PRETTY MUCH THE SAME. YOU HAVE EIGHT DOLLARS A GALLON GAS IN ITALY. THE MATH DOES NOT WORK. JONATHAN: IT HURTS. THE LABOR MARKET IS A DIFFERENT
STORY COMPARED TO THE UNITED STATES. TOM: BRILLIANT. JONATHAN: LET'S MOVE ON. WE CAN GET YOU MOVERS AND SINGLE NAMES WITH LISA. LISA: I WANT TO TALK TO THAT COIL YOU ARE TALKING ABOUT WITH RESPECT TO WHETHER THE FED WILL PUSH BACK AGAINST THE MARKET, PUSHING AGAINST IT, SAYING WE DO NOT BELIEVE YOU WILL BE ABLE TO GO THAT FAR BECAUSE OF THE DISINFLATION FORCES FROM THE LIKES OF MICRON WITH THE CONCERN OF AN OVERSUPPLY RATHER THAN AN UNDER SUPPLY OF COMPUTER CHIPS. THIS IS AMAZING CONSIDERING HOW UNDERSUPPLIED THE MARKET WAS TWO YEARS AGO. EVERYONE WAS GOING OUT AND BUYING DEVICES TO STAY HOME AND WATCH PROGRAMS. NOT DOING THAT
ANYMORE. YOU'VE HEARD THAT FROM THE TAIWAN SEMICONDUCTOR COMPANY. YOU ARE GETTING FEWER ORDERS FROM SOME OF THEIR BIGGEST CLIENTS BECAUSE PEOPLE WILL NOT BUY AS MANY SMARTPHONES. THIS IS A CONCERN AND YOU ARE SEEING SHARES DOWN MORE THAN 4%. TAIWAN SEMICONDUCTOR DOWN NEARLY 4%. NVIDIA DOWN 1.3%.
I AM WATCHING THE SPACE CLOSELY AS POTENTIAL TEA LEAVES FOR THE REST OF THE EARNINGS SEASON. I AM ALSO WATCHING THE AIRLINE INDUSTRY BECAUSE I AM PERSONALLY INVESTED AND BECAUSE WE ARE TALKING ABOUT THE INCREDIBLE AMOUNTS OF TRAVEL THIS WEEKEND IT INCREDIBLE AMOUNT OF TURMOIL WE CAN EXPECT IF WE WERE SO WISE TO DECIDE TO HEAD TO THE AIRPORT THIS WEEKEND. DELTA AIRLINES UP 2% AFTER A PRETTY UNWELCOME FIRST HALF OF THE YEAR. UNITED BASICALLY FLAT. AMERICAN AIR UP .4%. HOW MUCH CAN THEY CONTINUE TO GAIN GIVEN WHAT WE HAVE SEEN. YOU RAISE THIS QUESTION EARLIER. I THINK IS A GOOD ONE. JONATHAN: YOU ARE LIVING IT WITH DELTA. WE ARE TALKING ABOUT THE SAME
THING. CAN YOU REPEAT THE ACT THROUGH THE YEAR? THE REVENGE TRAVEL, THE REVENGE SPENDING, CONNECT GO ON THROUGH THE REST OF THE YEAR? LISA: I'VE HEARD ANECDOTALLY THAT IT IS SOFTENING. TOM, PERHAPS YOU HAVE ANOTHER TAKE? TOM: I SAW THE HEADLINE AND I THINK IT IS AMERICAN AIRLINES OFFERING PILOTS A 70% PAY INCREASE. THAT IS THE ONLY WAY THEY WILL FIX THIS.
THEY HAVE TO PAY PEOPLE MORE. JONATHAN: IT IS NOT JUST ABOUT THE PRICE. THE ONBOARDING PROCESS FOR THIS INDUSTRY FOR THINGS LIKE SECURITY PASSES AND TRAINING, IT IS A BIG DEAL AND TAKES A LONG TIME. TOM: I DID A SHORT FLIGHT. I THINK THE PILOT WAS 18 YEARS OLD. JONATHAN: WHAT FLIGHT WAS THAT?
TOM: THEY ARE MAKING A COCKTAIL WAITRESS SALARY. JONATHAN: YOU WANT TO SHARE WHAT FLIGHT THAT WAS? ONE OF THE PRIVATE ISLANDS IN HAWAII. IT IS A DIFFERENT WORLD TO US. TOM: HEAD OF TAXABLE FIXED INCOME STRATEGY AT UBS GLOBAL JOINING US. LESLIE, WHAT A BRUTAL FIRST HALF. YOU KNOW TOTAL RETURN, BLOOMBERG INDEX DOWN 15%.
WHAT DO WE DO NOW? YOU HAVE CLIENTS COME INSTITUTIONAL AND HIGH NET WORTH, THEY HAVE A NEGATIVE MONTHLY STATEMENT, A NEGATIVE QUARTERLY STATEMENT. WHAT IS THE TO DO RIGHT NOW TO REALLOCATE? LESLIE: MOST OF THE NEGATIVE TOTAL RETURNS ARE HEADWINDS FROM RISING INTEREST RATES. FOR THE SECOND HALF OF THE YEAR WE ARE LOOKING FOR THE HEADWIND TO BE MUCH LESS. WE THINK GROWTH WILL SLOW. WE HAVE BEEN MORE ON THE CAUTIOUS SIDE AND TAKING THE CASH LIQUIDITY AND PUTTING IT INTO THINGS LIKE CORPORATE MORTGAGES, GOING UP IN QUALITY, NOW YOU ARE IN A POSITION WHERE IT HAS BEEN VERY PAINFUL BUT YOU HAVE THE ABILITY TO EARN YIELDS PLUS SPREADS HAVE WIDENED. WE THINK THE SECOND HALF OF THE
YEAR WILL BE MUCH BETTER THAN THE FIRST. TOM: IS A ONCE-IN-A-LIFETIME OPPORTUNITY? LESLIE: WHEN YOU LOOK AT SOME OF THESE PRICES, PARTICULARLY IN THE LONG END , I THINK IT IS TOO EARLY TO SAY ONCE-IN-A-LIFETIME OPPORTUNITY. GIVEN THE FACT VOLATILITY IS SO HIGH AND LIQUIDITY IS SO LOW, WE ARE CAUTIOUS WITH EXTENDING TOO MUCH INTEREST RATE RISK. WITH DOLLAR PRICES WE HAVE SEEN IN SOME OF THE LONG END CORPORATE, AND OBVIOUSLY AS YOU MOVE THAT IS A HUGE TAIL END.
WE THINK THE SECOND HALF WILL BE BETTER, WHETHER IT IS -- LISA: HOW MUCH OF YOUR CALL IS PINNED ON THIS IDEA THE FED CANNOT GO AS FAR AS PEOPLE THINK OR AS FAR AS THEY ARE SAYING THEY'RE ABLE TO GO AND THIS IS EDIFIED WHAT WE ARE SEEING IN THE BOND MARKET SAYING WE DO NOT BUY IT BASED ON THE ECONOMIC FUNDAMENTALS? IS THAT YOUR CALL? LESLIE: THE MARKET HAS SHIFTED FROM INFLATION TO RECESSION. WE DO NOT THINK IT IS HIGHLY LIKELY THEY GO TO 4%. WE THINK THERE WILL BE A LITTLE BIT TOO MUCH OF A CATALYST TO THE ECONOMY, BUT RIGHT NOW THE MARKET IS CORRECTED WITH THE 3.5 MARCH PEAK AND ALL OF THE BASIS POINTS EASING IN THE SECOND HALF. WE THINK THE FED WILL MOST LIKELY DO 75 IN JULY.
WE DO NOT KNOW WHAT WILL HAPPEN OVER THE NEXT SEVERAL MONTHS. WE ARE LESS THAN WHAT THE TERMINAL RATE THE FED IS PRICING IN AROUND 3.8%. LISA: HOW MUCH WOULD THAT CHANGE YOUR CALL IF THE MARKET IS NOT RIGHT IN THE FED DOES GET TO 4% AS PRIYA MISRA THINKS. HOW WOULD THAT CHANGE YOUR
BELIEF IN A FIRMER SECOND HALF? LESLIE: IT WOULD CHANGE IN THE SENSE THAT THE YIELD CURVE WOULD INVERT. WE DO THINK THE ECONOMY SLOWS IN THE SECOND HALF. THAT IS THE KEY. UP IN QUALITY IN TERMS OF AGENCY MBS. THAT SCENARIO -- I THINK IT DEPENDS ON HOW SUSTAINED THAT IS. JONATHAN: WONDERFUL TO HEAR FROM YOU. LESLIE FALCONIO OF UBS GLOBAL WEALTH MANAGEMENT.
ONE OF THE BIG ISSUES HAS BEEN IN THE CREDIT MARKET. WE STARTED THE SHOW BY ASKING WHERE IS THE TIPPING POINT IN THIS CREDIT MARKET? IF IT IS NOT 550, WHERE TO CREDIT SPREADS GET TO THAT IT STARTS TO BITE AND THE CONVERSATION BEGINS TO CHANGE? TOM: HOW DO YOU KNOW WHEN TO BUY THE DIP ON PRICE IN BONDS. I DO NOT KNOW THE ANSWER. IT IS WRAPPED UP IN ECONOMICS. YOU SAY WHERE YOU BUY THE BOTTOM AT AMAZON, DOWN 85%, WE CAN GO ON ALL DAY. JONATHAN: IS AT THE FED THAT TURNS AROUND
OR THE INVESTOR THAT TURNS AROUND AND SAY THEY WILL BUY? WHAT YOU MAKE OF THAT, LISA? WE HAVE REACHED A TIPPING POINT WHERE THE FED HAS TO MAKE A PIPIT OR IS THERE ENOUGH MONEY THAT HAS BEEN WAITING FOR SPREADS TO WIDEN, WAITING FOR INTEREST RATES TO GET BACK UP IN LINE WITH FUNDAMENTALS AND WANT TO START BUYING? LISA: I AM SMILING BECAUSE I DO NOT KNOW THE ANSWER AND I'VE BEEN STRUGGLING WITH THIS MYSELF. IF THE ECONOMY SLOWS SUFFICIENTLY, THAT PREVENT -- THAT PRESENTS A CREDIT RISK TO COMPANIES TO REFINANCE THEMSELVES BUT ALSO ALLOWS THE FED TO TAKE ITS FOOT OFF THE PEDAL IN TERMS OF HOW MUCH IT RAISES RATES. IF YOU HAVE THE OPPOSITE WHERE THE ECONOMY IS STRONG, THEN THE FED KEEPS GOING AND YOU HAVE TO REPRICE THE ENTIRE STRUCTURE. EITHER WAY IT WILL BE A ROCKY PACE WHICH IS WHY SO MANY PEOPLE ARE GOING INTO INVESTMENT GRADE, SAYING THAT WILL HOLD IT TIGHT A MATTER WHAT. JONATHAN:
YOU THINK PART OF THE REASON WE ARE SEEING RENEWED WEAKNESS IS ANY KNOWLEDGE MEANT OF WHAT IS DEVELOPING IN THE CREDIT MARKET? LISA: IS TWO SIDES OF THE SAME STORY. PEOPLE ARE WORRIED ABOUT GROWTH. WHEN YOU START TO WORRY ABOUT GROWTH THERE IS A FUNDAMENTAL REASON PEOPLE HAVE TO CHARGE MORE IN TERMS OF A PREMIUM FROM COMPANIES THAT MAY NOT PAY THEM BACK. THE RISK OF NOT GETTING PAID BACK BECOMES THAT MUCH MORE REAL. JONATHAN:
I SHOULD PROBABLY REPHRASE WHAT I SAID. WHAT IS NOT HAPPENING. TOM: I WAS LOOKING AT DELTA AIRLINES. THEY OFFERED PASSENGERS $10,000 TO DELAY THEIR FLIGHT. TODAY I THINK BRAMO ON TO HOLD OUT $15,000. JONATHAN: YOU HAVE A NUMBER IN MIND? LISA: LET'S DOUBLE AT.
JONATHAN: $20,000. THAT IS HOW IMPORTANT THIS VACATION IS? LISA: ABSOLUTELY. JONATHAN: IS MORE IMPORTANT THAN M
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