Bloomberg Surveillance 01/25/2023
>> WE ARE SEEING UPSIDE SURPRISES IN THE DATA. >> THE THING WE DON'T HAVE IS GLOBAL GROWTH. >> WE NEED TO SEE IF THESE DYNAMICS PLAY OUT.
>> THE IDEA THIS IS ALL BEHIND US, THAT IS TOO EARLY. >> IT IS HARD TO SAY RECESSION WON'T HAPPEN AS A VENERABLE RULE, I THINK ALL THE PAINT IS STILL TO COME. >> THIS IS BLOOMBERG SURVEILLANCE WITH TOM, JONATHAN FERRO, AND LISA ABRAMOWICZ. TOM: GOOD MORNING, JONATHAN FERRO IN LONDON AND IT IS CONTRACTION WEDNESDAY. THE BOTTOM LINE IS GDP COMES OUT TODAY, IT IS GOING TO BE A GOOD NUMBER AND THAT IS IT. LISA:
WE'VE GOT SEVEN STRAIGHT MONTHS OF BELOW 50 READS IN THE PMI'S WE GOT YESTERDAY. WHAT DOES THAT SAY IN TERMS OF WHAT THE GROWTH IS AND WHETHER THAT IS ALREADY BAKED IN? TOM: IT IS AN ODD TERMINAL SCREEN TODAY. LET'S TALK THE DATA CHECKS BEFORE WE GO TO JONATHAN FERRO WITH AN IMPORTANT QUESTION IN LONDON. FUTURES DOWN, VIC'S SHOWING SOME GOOD NEWS. BUT IN THE BOND SPACE IT SCREAMS ECONOMIC SLOWDOWN TODAY.
THE REAL YIELD, AND LOOK AT THE TWO YEAR GROWTH. LISA: IT HIGHLIGHTS THE VOLATILITY. TOM: WHY DO THAT AUCTION YESTERDAY MATTER? LISA: IT MATTERS BECAUSE IT GIVES YOU A SENSE OF WHETHER PEOPLE SEE VALUE IN THE SHORT TERM, AND IT WILL HAVE TO GO FURTHER THAN PEOPLE BELIEVE. PEOPLE ARE CALLING THE FED'S BLUFF AND SAYING WE SEE VALUE AND TO ME THAT TELLS YOU THE MOOD AND HOW MUCH PEOPLE ARE WILLING TO PUSH BACK. TOM: WE WILL BE WHAT JONATHAN FERRO IN LONDON COMING UP HERE. I'M LOOKING AT THE TWOS TENS
SPREAD, REALLY -- TALK ABOUT SPACE, IT IS IN A NEW SPACE OF HIS INFLATION. LISA: DISINFLATION SEEMS TO BE THAT THEME ALTHOUGH WE GOT A READ FROM AUSTRALIA IN THE LAST QUARTER THAT INFLATION ACCELERATED TO THE HIGHEST LEVEL IN DECADES. ON THE ONE HAND, YES. AND ON THE OTHER WHEN YOU THINK ABOUT, -- ECONOMIES AFFECTED BY THE CHINESE REOPENING, ARE WE GETTING A SENSE THAT THINGS ARE PLATEAUING AT A SLOW PACE? TOM: MICROSOFT YESTERDAY AFTERNOON, WE HAVE THE DRIVE THAT FORWARD.
AT 4:00, 5:00 P.M. ISH, IT EBBS AWAY A LITTLE. LISA: THE ACTUAL RESULTS WERE ABOVE EXPECTATIONS BUT IT WAS ALL ABOUT THE GUIDANCE. LOOKING FORWARD TO MONTH THE POSSIBILITY OF CLOUD COMPUTING AND THE GROWTH THEY'RE FOLLOWED BY FOUR TO FIVE SIGNAGE POINTS OR THREE TO FOUR PERCENTAGE POINTS STILL AT A HIGH PACE BUT CONCERNS THERE. TOM: I WANT TO MAKE CLEAR WE ARE SEEING MOVEMENT IN THE BOND MARKET THAT YOU NEED TO FOCUS ON, THE ECONOMIC DATA TODAY.
THE TWO YEAR YIELD COMES IN ITS SIX MASSIVE BASIS POINTS, THE 3.50 10 YEAR, NOW 3.43. IN THE BOND SPACE IT WILL BE 3.59% INFLATION. IT WOULD BE SHOCKING TO SEE A .99% TO 10 YEAR REAL YIELD BUT WE ARE NOT THERE YET. LISA: FIGHTING THE FED IT SEEMS TO BE THE SAME. AT 10:00 A.M. WE GET THE CANADA RATE DECISION. THE BANK OF CANADA WAS AHEAD OF THE CURVE IN TERMS OF OTHER CENTRAL BANKS LAST YEAR. ARE THEY GOING TO BE AHEAD OF
THE CURVE IN DROPPING THE PACE AND HOW MUCH THEY HIKE RATES? WE HAVE SEEN THOSE TWO YEAR YIELDS PLATEAU AS WELL. 1:00 P.M., FIVE-YEAR NOTES. I DO TAKE A SIGNAL FOR HOW MUCH DEMAND THERE WAS YESTERDAY FOR THE TWO YEAR YIELD. TO BE GET THE SAME KIND OF READTHROUGH IN THIS OPTION AND THE EARNINGS GRIND? I CAN'T SAY ENOUGH ABOUT HOW MUCH THE ENTIRE SCHEDULE THIS WEEK LEADING INTO THE GDP REPORT TOMORROW WILL BE ABOUT EARNINGS. MICROSOFT SHARES LOWER, EBBING AWAY AFTER DELIVERING STRENGTH IN THE ACTUAL EARNINGS. BUT THE GUIDANCE, EVERYTHING. TODAY WE GET TESLA AND IBM AFTER TO CONTINUE WITH TECH.
AND BEFORE THAT WE ARE WAITING FOR KIMBERLY-CLARK TO GET A READ. TOM: WE WILL BE WATCHING OFF THE HEADLINES, EARNINGS REPORT IF YOU WILL. AND WHAT IS GOING ON IN LONDON, JONATHAN FERRO STARTING THE DAY, UP AT THE CRACK OF 10:00 A.M.. HE'S GOT ONE OF OUR FAVORITE GUESTS WITHIN THIS MORNING, WHAT YOU HAVE? JONATHAN: I AM NOT SHAVING. I'M WAKING UP AT ABOUT 6:00, HAVING A NICE BREAKFAST, SYNC FAMILY AND FRIENDS. LET'S SET THE STAGE, INTO 2023, THE CONSENSUS IS CLEAR. FIRST HALF IS TOUGH, WE'VE GOT
TO PAY THE BILL. SECOND HALF IS BETTER, YOU GET RECOVERY. THE YEAR STARTS AND EVERYONE IS WRONG. THE NASDAQ UP TODAY, THE EURO STOCKS 50 HERE IN EUROPE UP ABOUT 9%. MAX KETTNER OF HSBC SAID GET ON BOARD. I HAVE TO SAY, YOU ARE THE MAN I WANTED TO CATCH UP WITH.
THE NOTE FROM A COUPLE OF WEEKS AGO, I WILL SHARE THE QUOTE IN CASE OUR AUDIENCE MISSED IT. THERE'S -- BEARS HOLDING A 22, MASSIVE UNDERWEIGHT, AND YOU SAID THIS CANNOT WE SEE A VARIETY OF REASONS TO BE LESS BEARISH ON RISK ASSETS IN THE NEXT HALF. DO YOU LIKE WHAT YOU SEE SO FAR? MAX: SO FAR YES, BUT WE'VE GOT TO BE HONEST THERE'S BEEN SOME EASING IN THE BOND SIDE OF THINGS. NOT JUST CYCLICAL STRENGTH BUT ON THE BOND SIDE. THAT HAS BEEN TAKEN PRETTY POSITIVELY BY RISK ASSETS AND THAT IS PART OF THE REASON WHY THE NASDAQ WAS OUTPERFORMING, I GROWTH AND TECH STOCKS WERE OUTPERFORMING. IF WE LOOK AT THE CONSENSUS I
DO THINK WE'VE GOT VERY PESSIMISTIC EXPECTATIONS. EVERYONE IS SAYING EARNINGS EXPECTATIONS ARE STILL TOO HIGH. I DON'T DISAGREE WITH THAT BUT I DISAGREE WITH THE SEQUENCING AND THE TIMING. IF WE'VE GOT PRETTY MUCH EVERYONE AGREEING THAT AGE ONE IS GOING TO BE TOUGH, ECONOMISTS A GRAYING LIKE THEY HAVE NEVER AGREED BEFORE, LOOK AT THE PHILADELPHIA FED SURVEY ON THIS RECESSION. IT IS THE HIGHEST IN 50 YEARS. WE'VE GOT CONSENSUS ON THE PROBABILITY OF A RECESSION, FACTORS DRIVING IT AND THE TIMING. WHAT IS THE DOWNSIDE SURPRISE?
WHAT IS THE DOWNSIDE SURPRISE TO EARNINGS? IF YOU HAVE SEEN Q4 AND NOW IN Q1, EARNINGS REVISIONS DOWN PARTICULARLY IN CYCLICALS, CONSUMER DISCRETION, MEGA CAPS, I T AND COMMUTE PATIENT SERVICES. WHAT IS THE ACTUAL DOWNSIDE? I WOULD ARGUE IF WE GET AN AVERAGE RECESSION IT IS NOT GOING TO BE LIKE THIS IS A MASSIVE SURPRISE. THIS IS WHY WE NEED TO GET BURIED. NO, WHAT WE NEED IS TO GET SOMETHING PROPERLY GOING WRONG. WE NEED TO HAVE SOMETHING BREAK
AND THEN YOU CAN BE. . JONATHAN: YOU THOUGHT IT WAS UPSIDE RISK. WE'VE GOT A SQUEEZE, LET'S BE CLEAR. I'M TRYING TO WORK OUT THE DURABLE TAILWINDS FOR THIS MARKET. EVERYTHING YOU SAID, A LOT OF PEOPLE ON BOARD. WHAT IS DURABLE ABOUT WHAT WE ARE SEEING? MAX: IT IS STILL DURABLE BECAUSE SENTIMENT AND POSITIONING IS STILL DOWNBEAT. WE HAVE UPDATED THE AGGREGATE REAL MONEY POSITIONING STUDY MONDAY AND THAT SHOWS UNDERWEIGHT POSITIONS AND IN HIGH-YIELD CREDIT. HISTORICALLY HAS BEEN REALLY
THE CASE THAT YOU SEE OUTRIGHT UNDERWEIGHT POSITIONING. THE SAME THING IF YOU LOOK AT CTA EQUITY. THEY ARE STILL DOWN, IN LEVEL TERMS THEY ARE STILL DOWN. EQUITY IS MASSIVELY UNDERWAY. NONE OF IT IS TELLING US SO YEAH, EVERYONE HAS ALREADY GONE BULLISH. IF ANYTHING, WE'VE BEEN TALKING
TO CLIENTS OF THE LAST TWO OR THREE WEEKS, THE BIGGEST PUSHBACK WE GOT WAS KNOW THAT EVERYONE ELSE IS ALREADY BULLISH, THEREFORE I HAVE TO CONTINUE. JONATHAN: RIGHT COME OUT LET'S BREAK IT UP. MICROSOFT THIS MORNING OR AFTER THE CLOSE YESTERDAY, HOW MANY MESSAGES DID YOU GET SAYING LOOK AT MICROSOFT, YOU ARE WRONG. WHAT DID YOU SAY? MAX: I WOULD SAY IT IS NOT THE TIME YET TO BE FULL ON MAXIMUM OVERWEIGHT EQUITIES.
WITH THAT I AGREE. IT IS MOSTLY TACTICAL. LOOK AT WHAT IS PRICING FOR THE FED FOR THE NEXT TWO MEETINGS. GOT LESS THAN 50 BASIS POINTS PRICED INTO FED FUNDS CUMULATIVELY. JUST GOING TO COME OUT NEXT WEEK AND SAY WERE GOING TO GO 25 BUT WE WILL DO ANOTHER TO 25 IN MARCH. EVEN THAT WOULD ALREADY BE A SLIGHTLY HAWKISH SURPRISE AND THAT WOULD WEIGH ON HIGH MULTIPLE TECH STOCKS AND VALUATIONS AGAIN.
A BIT OF A HIGHER RATE, BIT OF A HIGHER REAL RATE AND THAT MEANS WEIGHING MULTIPLES IN TECH. TACTICALLY I DON'T LIKE EQUITIES. I'M NOT MASSIVELY BULLISH ON EQUITIES JUST YET. I WOULD SAY IN A MUDDLING THROUGH SCENARIO WHERE YOU SAY IT IS GOING TO BE NEITHER HERE NOR THERE, WE ARE MUDDLING THROUGH IN TERMS OF GROWTH, A SLOW GRIND LOWER RATHER THAN A SOLUTION DOWN IN RECOVERY.
-- A SWISH DOWN IN RECOVERY. ALL OF THAT, YOU JUST TURN OVER. JONATHAN: LET'S TALK EMERGING MARKETS, MORGAN STANLEY YESTERDAY, GET ON BOARD, THEY'RE NOT ALONE. THAT IS BECOME CONSENSUS. CAN WE TALK ABOUT DOMESTIC U.S. CREDIT? CITY CAME OUT YESTERDAY -- CITIGROUP CAME OUT YESTERDAY AND HAVE IDEAS TO BUY TRIPLE C'S. DO YOU WANT TO GO RIGHT INTO QUALITY TECH AND TRIPLE C'S? MAX: IT DOES MAKE SENSE. IF YOU LOOK AT TRIPLE B'S AND COMPARED TO PMI'S, IF YOU LOOK AT TRIPLE C'S VERSUS DOUBLE B IS, IT LOOKS MUCH FAIRER PRICED RELATIVE TO WHERE MACRO INDICATORS ARE.
YOU CAN ARGUE THE WEAKNESSES PRICED, PARTICULARLY IF YOU COMPARE IT WITHIN HIGH-YIELD. WEAKNESS IS PRETTY MUCH IN THE PRICE SO THAT IS GOOD. IT WILL BE MUCH MORE WORRYING IF WE TALKED ABOUT THE MACRO SIDE OF THINGS AS WELL. ONE PUSHBACK WE GOT IS WE HAD PEOPLE SAYING LOOK AT THIS CANNOT IT IS 45. JONATHAN: WHO WANTS TO BUY CREDIT? MAX: MY ANSWER IS SIMPLE. I WOULD NOT TURN CONSTRUCTIVE IF IT WAS STILL AT 55 OR 60 BECAUSE THEY ARE NOW LEADING INDICATORS WITH STILL A POINT DOWN AND SAYING WE'VE GOT ANOTHER 10 OR 15 POINTS LOWER, BE CAREFUL.
NOW YOU ARE I-45, AND THIS IS EXACTLY WHAT I WANTED TO SEE. LET'S GET ON. JONATHAN: YOU MAKE IT SOUND SIMPLE. IT IS NOT. MAX KETTNER OF HSBC.
THE HOLDER MUST YEAR, GETTING CONSTRUCTIVE FAST. TOM: A NICE SWITCH THERE AND IT COMES AROUND IN THE EARNINGS SEASON, MICROSOFT IS FASCINATED TO SEE THE LIFT YESTERDAY. A SIGH OF RELIEF AND THEN A REAL QUESTION ABOUT CLOUD DYNAMICS. OUR REPORTER OF BLOOMBERG WAS INSISTENT THEY WILL ENDURE. JONATHAN: WAIT FOR THE GUIDANCE IS WHAT I HEARD FROM HIM YESTERDAY. DECELERATION AND GROWTH. WE HAVE BEEN PILING INTO THAT
GROWTH STORY IN THE CLOUD, MICROSOFT AND ELSEWHERE FOR A LONG TIME. NOW REALITY IS STARTING TO BUY. TOM: WE NEED SOME GUIDANCE, WHAT ARE YOU COMING HOME? JONATHAN: I'M HOPING PERHAPS THE WEEKEND, IT DEPENDS. I'M ENJOYING THIS. TOM: YOUR FORWARD GUIDANCE FROM JONATHAN FERRO IN LONDON, STAY WITH US, -28, THIS IS BLOOMBERG. FROM LONDON AND NEW YORK. LISA: KEEPING YOU UP-TO-DATE WITH NEWS FROM AROUND THE WORLD WITH THE FIRST WORD, I'M LISA MATEO.
GERMANY AND THE U.S. WILL PROVIDE SIGNIFICANT UPGRADE IN FIREPOWER TO UKRAINE AGAINST RUSSIA, BERLIN WILL PROVIDE 14 OF ITS LEOPARD BATTLE TANKS. BIDEN ADMINISTRATION IS EXPECTED TO ANNOUNCE TODAY IT WILL OFFER THE ABRAMS TANK. IN THE U.K., THE SPENDING
WATCHDOG WILL CUT FORECASTS FOR GROWTH. THE OFFICE FOR BUDGET RESPONSE ABILITY TOLD CHANCELLOR JEREMY HUNT THAT IT OVERESTIMATED THE PROSPECTS FOR MEDIUM-TERM GROWTH, MOVING THE GOVERNMENT WITH A MULTIBILLION-DOLLAR HOLE IN ITS SPENDING PLAN. CHUCK SCHUMER IS TELLING REPUBLICANS, SHOW US YOUR PLAN. HUMOR AND DEMOCRATS WANT THE
GOP TO OFFER A PROPOSAL FOR RAISING THE DEBT CEILING AND AVOIDING A DEFAULT. KEVIN MCCARTHY AND OTHER REPUBLICANS ARE DEMANDING SPENDING CUTS IN EXCHANGE FOR INCREASING THE BORROWING LIMIT. I DOWNBEAT FORECAST FOR MICROSOFT. THE SOFTWARE GIANT SAYS REVENUE GROWTH IN ITS CLOUD COMPUTING BUSINESS WILL DECELERATE IN THE CURRENT PERIOD AND WARNED OF A FURTHER SLOWDOWN IN CORPORATE SOFTWARE SALES. AND SHARES AND COMPANIES CONTROLLED BY BILLIONAIRE ARE FALLING. WELL-KNOWN U.S.
ACTIVIST INVESTOR SAID IT WAS SHORTLY THE EMPIRE STOCKS. THEY ACCUSED THE MARKET OF ACCOUNTING FRAUD AND MANIPULATION. SOMEONE CALLS THE REPORT MALICIOUS AND BASELESS. GLOBAL NEWS 24 HOURS A DAY, ON
AIR AND ON BLOOMBERG QUICKTAKE, POWERED BY MORE THAN 2700 JOURNALISTS AND ANALYSTS IN MORE THAN 120 COUNTRIES. TOM: BLOOMBERG SURVEILLANCE, JONATHAN FERRO IN LONDON AND WE WILL GO TO HIM IN A MOMENT. LISA ABRAMOWICZ AND MYSELF IN EARNING CENTRAL AS WE LOOK BACK. TIME USED TO STAND STILL, YOU ARE TOO YOUNG TO REMEMBER THIS. MA BELL. NOBODY CARES. LISA: THE BIG INDUSTRIAL AND THE CLASSIC UTILITY COMPANIES, WHETHER THEY WILL BE MORE IMPORTANT AT A TIME OF MORE STABILITY, WHAT I FIND INTERESTING IS THEY MISSED IT WHEN THEY CAME TO CERTAIN ASPECTS OF THEIR EARNINGS. BUT NEXT YEAR, THE CAPEX INCREASING MORE THAN PEOPLE EXPECTED. I'M GOING TO STICK WITH THIS
KIND OF THEME FOR THE EARNINGS SEASON. TOM: WE WANT TO SEE AS WELL AND THEN TESLA THIS AFTERNOON, IT IS NOT A SMALL MATTER. THE FORMER WILL COME UP IN A TESLA DISCUSSION. LISA: IS IT A TECH COMPANY, A CAR COMPANY? IS THIS A LEADING INDICATOR FOR NEXT WEEK, WE GET SOME OF THE AUTO MANUFACTURERS AND AMAZON AND GOOGLE AND SOME OF THE OTHER TECH GIANTS, I DON'T KNOW HOW IT'S BEING ACCOUNTED FOR. TOM: MOFFAT NATHANSON, STERLING DOING A GREAT JOB ON MICROSOFT AND MOMENTS AGO THEY LOWERED THEIR TARGET PRICE, TWEAKING IT DOWN FROM 26232 268. THE BACK-AND-FORTH WE SEE IN THIS NASCENT EARNINGS SEASON.
RIGHT NOW, ON A GREATER ECONOMY AND THE EUROPEAN ECONOMY, SHARING EXCEPTIONALLY THOUGHTFUL NOTES FOR CAPITAL ECONOMICS. GOOD MORNING TO YOU AS WELL. WE ARE COMING UP ON A ONE-YEAR ANNIVERSARY OF THIS WAR. WHAT DOES YEAR TWO LOOK LIKE AND WHAT DOES YOUR TWO OF THE WAR MEAN FOR CHRISTINE LAGARDE? >> WE ARE ONLY A YEAR IN EDIT FEELS A LOT LONGER, THE KEYWAY THIS IS AFFECTING EUROPE'S ECONOMY IN TERMS OF COMMODITY PRICES AND CAPS PRICES, AND THE START OF THIS YEAR HAS BEEN DOMINATED BY WHAT IS HAPPENING IN CHINA, THE SPEECHES FROM THE FED OFFICIALS AND OTHERS, U.S. INFLATION. WHAT HAS CREPT UNDER THE RADAR, I THINK, IS EFFECTIVE THE EUROPEAN GAS PRICES ABSOLUTELY PLUMMETED. NATURAL GAS PRICES NOW A THIRD OF WHAT THEY WERE ALMOST SIX WEEKS AGO.
THE ECB IS NOT OUT OF THE WOODS, THE COLLEAGUES OF GOT MORE WORKS TO DO BUT THE COLLEAGUES I'VE GOTTEN A LOT MORE EASIER. TOM: DO THEY HAVE A NOMINAL E.G. P -- EDP SPIRIT TO ACT LIKE THE UNITED STATES? I'M NOT CONVINCED THEY DISPARATE NATIONS OF THE EUROPEAN SPIRIT HAVE THE OOMPH TO PROSECUTE THE JAY POWELL METHOD. NEIL: THAT IS RIGHT, THERE ARE MANY MORE COMPETING VIEWS AROUND THE TABLE AND A LOWER NATURAL GAS PRICE HELPS THE INFLATION. BEST PICTURE BECAUSE IT REDUCES THE PRICE OF NATURAL GAS. THAT FEEDS BACK INTO THE ECONOMY BY SUPPORTING REAL INCOMES. THEY DEMAND PICTURE STARTS TO LOOK BETTER. THEY PUSH BACK AGAINST THAT.
I DON'T THINK THEY ARE OUT OF THE WOODS YET AND COALESCING AND COORDINATING THAT POLICY RESPONSE WILL GET DIFFICULT. LISA: THERE IS A LOT OF DISCUSSION THAT PERHAPS U.S. IS PAST THE PEAK AIRED EUROPE AS CLOSE TO THE PEAK. WE GOT A SHOW YOU OVERNIGHT WITH INFLATION PASSING EXPECTATIONS AND ACCELERATING THE LAST THREE MONTHS OF LAST YEAR. IS THAT SIGNIFICANT? NEIL: IT IS SIGNIFICANT IN FAR -- INSOFAR AS WHAT IS HAPPENING IN THE AUSTRALIAN MARKET IS INTERESTING. FOR MOST ECONOMISTS, THE MONTH-TO-MONTH GAINS WILL START THESE, AND MONTH FOR MONTH IT REALLY MATTERS, THE BASE AFFECTS WILL GET MORE FAVORABLE AS WE HAD TO THIS YEAR.
AND IT WILL COME DOWN. WHAT IS HAPPENING IN THE LABOR MARKET IS KEY BECAUSE THAT IS DRIVING WAGE PRESSURES AND THAT IS WHAT REALLY WILL AFFECT WAGE INFLATION, PRICE INFLATION 12 OR 18 MONTHS AHEAD. THAT IS WHY I THINK AUSTRALIA IS INTERESTING. A VERY TIGHT LABOR MARKET, WE ARE NOT SEEING SIGNS OF CORE PRESSURES EASING TO THE SAME EXTENT THERE. THAT IS WHAT THE FED WILL BE CONCERNED ABOUT AND THE ECB WILL BE CONCERNED ABOUT TOO, HAPPENING IN THE EURO ZONE. LISA:
THIS QUESTION OF HOW DO WE GET A SENSE OF THE LABOR MARKET AND WHETHER THAT STRENGTH IN TERMS OF WAGE GAINS IS CONTINUING AND HAS LEGS. DO YOU FEEL LIKE THAT IS THE CASE OR DO YOU THINK PEOPLE ARE RIGHT TO SAY THAT EVEN THAT IS REALLY COOLING-OFF? NEIL: THE FIRST CASE IS MISSED BACK TO THE LABOR MARKET, IT COMES DOWN THIS YEAR, -- THERE ARE SIGNS OF HOPE AND IT LOOKS LIKE THE LABOR MARKET STARTS TO LOOSEN A LITTLE AND IT IS A KEY INDICATOR, TIKTOK AT IN THE LAST MONTH BUT HAS BEEN ON A DOWNWARD TREND. THERE ARE SOME ENCOURAGING SIGNS BUT YOU'VE GOT TO THINK PRETTY DEEP AT THE MOMENT. TOM: THE ECONOMICS TO SOME THOUGHTFUL STUFF, I WILL CALL IT 30,000 OR DARESAY 60,000 FEET. IT HAS BEEN A PANDEMIC
RECOVERY, IT SUPPLY-SIDE DYNAMIC WITH MONETARY GUESSING AND MONETARY THEORY. WE'RE SUPPOSED TO SHIFT BACK TO SOMETHING WE KNEW OR MAYBE MOVE ON TO SOMETHING ORIGINAL. WHERE ARE WE RIGHT NOW IN THAT MOVEMENT FROM A PANDEMIC ADJUSTED ECONOMY OVER TO SOMETHING "NORMAL"? NEIL: THERE ARE TWO THINGS HAPPENING HERE.
FIRST, HOW DOES THE PANDEMIC FUELED INFLATION SURGE PLAY OUT. DO WE GET BACK TO SOMETHING APPROXIMATELY IN THE GOLDILOCKS ERA OF 2% INFLATION, 3% NOMINAL RATES, A BIT LOWER. PROBABLY WE DO GET SOME THING LIKE THAT BUT LIKE WE SAY COME OUT WE REALLY SQUEEZE THIS INFORMATION OUT A BIT FURTHER. THE SECOND AND MORE TECTONIC SHIFT IS WHAT IS HAPPENING AT A GEOPOLITICAL LEVEL. THE PANDEMIC HAS MASKED THIS BUT SPLINTERING IN THE U.S.
AND CHINA I THINK IS DEEPENING IN MANY PROFOUND WAYS. YOU GOT THE MEETING, THAT I THINK IS GOING TO SHAPE THE GLOBAL ECONOMY OVER THE NEXT DECADE OR SO, A BIG STORY. TOM: WE HAVE A DEARTH OF FED SPEAK, NEIL SHARING, WE ARE GOING TO USE YOU AS OUR FED SPEAKER TODAY. BUT THE BASIC IDEA HERE IS WE HAVE GOT TO FIND ECONOMIC GROWTH. THAT CAN BE REAL GDP THAT SOMEHOW MIGRATES BACK TO A 3% RUN RATE, VERY FEW PEOPLE ARE LOOKING FOR THAT, OR A NOMINAL GDP GROWTH WHICH IS ALL MESSED UP WITH THE CURRENT AND PLEASANT -- PRESENT INFLATION. TO BE GO BACK TO THE GREAT
MODERATION, WHICH EVERYBODY SUGGESTED WAS TOO SUBDUED EXCEPT FOR THE HABS? THE ONLY ONES ADVANTAGED BY AT WHERE THE ELITE CLASS. NEIL: THAT QUESTION, I THINK THERE ARE TWO PARTS. WHAT EXTENT IS IT GROWING AND AT WHAT RATE AND HOW DO YOU SHARE THAT PIE? ON THE REAL GDP SIDE, I THINK IT PROBABLY IS THE POTENTIAL GDP GROWTH AND ADVANCED ECONOMIES, I DON'T THINK IT HAS REALLY SHIFTED.
PROBABLY ONE ISSUE IN THE U.K. AFFECTED BY LABOR PROBLEMS HERE. IT IS HIGHER IN THE U.S. BUT NOT MUCH, 1.522, MAYBE, AND THEN AS THE INFLATION STORY, I THINK THE MAXIMUM DANGER ON INFLATION WAS PERHAPS 18 MONTHS AGO WHEN THE FED WAS TALKING ABOUT IT BEING TRANSITORY.
RESULT TALKING ABOUT FLEXIBLE INFLATION TARGETING, CENTRAL BANKS GOING A BIT SOFT ON INFLATION. SUCH HAS BEEN THE SURGE OVER THE PAST 12 MONTHS AND I THINK THAT ARGUMENT HAS DIED AT DEATH AND GONE AWAY. CENTRAL BANKS HAVE BEEN AWARE OF THE INFLATION TARGETS AND REMINDED OF THE PAIN THEY HAVE TO IMPART IF IT GETS OUT OF THE BOTTLE. THAT IS WHY I'M FEELING A BIT
MORE CONFIDENT ABOUT INFLATION AND THE 2.5 RATES AHEAD. LISA: YOU'RE TALKING A LOT ABOUT THE SHIFT IN NARRATIVE AND IT HAS SWUNG MY--SWUNG WILDLY. IT IS GOING TO BE A ROUGH FIRST HALF. NOW, EUROPE IS DOING REALLY WELL AND THEY ARE OUT OF THE WOODS.
CHINA IS COMING BACK ONLINE, IT WILL FUEL GROWTH. AS THE NARRATIVE GOTTEN AHEAD OF ITSELF? NEIL: I THINK IT HAS. X ROTATION IS THE STARTING POINT HERE. IN THE U.S., THE DATA HAS FALLEN OFF A CLIFF. THE DATA YESTERDAY WAS A BIT BETTER. BUT THE INDICATORS ARE FALLING SHARPLY.
THE EURO ZONE IS IMPROVING AT ANOTHER LEVEL. WE CAME INTO THIS WITH EXPECTATIONS PARTICULARLY LOW AND PERHAPS TOO OPTIMISTIC IN THE U.S.. WE HAD SOME ADJUSTMENT, NOT NECESSARILY THAT THE U.S.
IS UNDERPERFORMING EUROPE OR EUROPE OVER PERFORMING THE U.S.. TOM: WHAT ABOUT GDP? NEIL: CHINA'S GDP COME OUT WE THINK WILL BE ABOUT 5% THIS YEAR. QUITE A RAPID REOPENING AND -- IN Q1 AND Q2 COME UP WITH AN IN THE SECOND HALF. TOM: NEIL SHARING, GREATLY APPRECIATE IT. -- SHEARING, APPRECIATED. I GUESS THE WAY TO PUT IT IS THE THREE ECONOMIC SYSTEMS BOUNCING OFF EACH OTHER.
BILL -- ABEL BILL RHODES AND BE CENTRAL BANKER TO THE WORLD. I'M NOT SURE IF POWELL CAN BE THERE AND THE PACIFIC RIM. LISA: WE DID GET THE HEADLINE THAT THE FIRST GERMAN LEOPARD 2 TANKS WILL BE DEPLOYED IN UKRAINE IN THREE MONTHS AND THIS FOLLOWS A LOT OF CONTROVERSY IN GERMANY ABOUT WHETHER OR NOT TO JOIN WITH THE U.S. TO SEND TAKES OVER THE UKRAINE, TO PROTECT THE NATION AGAINST RUSSIA. I DO THINK THIS IS A FRAUGHT DISCUSSION FOR A NATION THAT HAS TRIED TO SHY AWAY FROM A LOT OF THE MILITARY EFFORT FOR THE PAST COUPLE OF -- TOM: I DON'T HAVE IT IN FRONT OF ME BUT SOMEBODY THAT HAS BEEN ACTIVE IN THE DISCUSSION HAS ACTUALLY BEEN IN THE TANK. HEAVEN FORBID WE SPEAK TO SOMEONE WHO KNOWS WHAT THEY ARE DOING.
BEN HODGES, GENERAL HODGES OF THE UNITED STATES ARMY. I DON'T HAVE IT IN FRONT OF ME TO DO THE FULL QUOTE JUSTICE, BUT HE SAYS LOOK, YOU TAKE THESE THINGS AND YOU MOVE FORWARD. IT IS NOT THE MOVIES. LISA: THERE IS A BELIEF THAT THERE IS A WINDOW OF TIME FOR UKRAINE TO MAKE INROADS BEFORE THE SPRING. THE WEATHER COULD BE ON THEIR
SIDE AT ALL OF THESE THINGS. THE ISSUE THAT I HAVE IS THEY WAR IS STILL GOING ON AND THE TAIL RISKS ARE STILL THERE. THIS IS REALLY A HUGE EFFORT ON ALL SIDES TO FIGURE OUT HOW TO GRAPPLE WITH IT. TOM: WE SEE THAT WITH THE EURO THIS MORNING, STASIS AT 109 ON THE EURO. FUTURES DETERIORATING, NASDAQ FUTURES NEGATIVE ONE, 2%.
MR. JONATHAN FERRO IN LONDON WITH JANE FOLEY, LOOK FOR THAT. THIS IS BLOOMBERG. LISA: KEEPING YOU UP-TO-DATE WITH NEWS FROM AROUND THE WORLD WITH THE FIRST WORD, I'M LISA MATEO.
THE U.S. AND GERMANY HAVE OVERCOME A DISAGREEMENT THAT THREATENED TO FRACTURE ALLY UNITY. THEY HAVE AGREED TO GIVE THEIR MAIN BATTLE TANKS TO UKRAINE. GERMANY CONFIRMED TODAY IT WILL SEND 14 OF ITS LEOPARD 2 TANKS TO UKRAINE AND EVENTUALLY THERE WILL BE MORE.
AS WE JUST HEARD, IT WILL BE SENT AND DEPLOYED TO UKRAINE IN A FEW MONTHS. THE BIDEN ADMINISTRATION SAID TO ANNOUNCE THAT IT WILL ANNOUNCE -- IT WILL OFFER UKRAINE THE M1 ABRAMS TANK. MOVIE THEATERS, TRAVEL AND BOX OFFICES SHOWING RECOVERY. THE NUMBER OF MOVIE TICKETS SOLD WAS HIGHER THAN BEFORE THE PANDEMIC. THE BANK OF ENGLAND HAS HEADED OFF THE THREAT OF THE STRIKE. THE 4200 WORKERS, THE INCREASE OF THE OVERALL PAY POD WILL BE TARGETED AT LOWER PAID STAFF TO PROTECT THEM AGAINST THE WORST OF THE INFLATION SQUEEZE. GOOGLE SAYS THE U.S.
JUSTICE DEPARTMENT IS DOUBLING DOWN ON A FLAWED ARGUMENT BY SUING THE GOVERNMENT ON ANTITRUST GROUNDS. EIGHT STATES JOINED THE FEDERAL GOVERNMENT IN CALLING FOR THE BREAKUP OF SEARCH GIANTS. THE LAWSUIT CLAIMS GOOGLE HAS ILLEGALLY MONOPOLIZED THE DIGITAL AD MARKET. ONE OF THE LARGEST CHIPMAKERS, TEXAS INSTRUMENTS SUFFERED ITS FIRST SALES DECLINED 2020. THEY GAVE A LUKEWARM FORECAST
FOR THE CURRENT QUARTER. TEXAS INSTRUMENTS HAS THE LONGEST LIST OF CUSTOMERS AND BROADEST RANGE OF PRODUCTS IN THE INDUSTRY AND THAT MAKES ITS PROJECTIONS AND INDICATOR OF DEMAND. GLOBAL NEWS 24 HOURS A DAY, ON AIR AND ON BLOOMBERG QUICKTAKE, POWERED BY MORE THAN 2700 JOURNALISTS AND ANALYSTS IN MORE THAN 120 COUNTRIES. I'M LISA MATEO. THIS IS BLOOMBERG. >> MOST LARGE CORPORATIONS PLAN OUT THERE HIRING AND HEADCOUNT A YEAR, 2, 3 YEARS IN ADVANCE. THEN THEY ADJUST. I THINK WHAT IS HAPPENING IS THE WEAKNESS BECAME MORE PRONOUNCED AND CONCERNS ABOUT CORPORATE MARGINS BECAME MORE ANNOUNCED IN THE FOURTH QUARTER IN THE MIDDLE OF THAT PLANNING PROCESS.
IF YOU LOOK AT CEO CONFIDENCE IN THE ECONOMY SIX MONTHS OUT, IT IS AT AN ALL-TIME LOW. TOM: DREW MANUS WITH METLIFE, GREAT TO SEE HIM YESTERDAY. I THOUGHT HE WAS VERY GOOD ABOUT SOME OF THE OPTIMISTIC TRENDS OUT THERE AND A WARNING DATA CHECK SUGGESTS ECONOMIC SLOWDOWN HERE. THE YIELD SPACE IS IMPORTANT, 4.15% YIELDS COMING IN LOWER ON THE TWO-YEAR SPACE COME OUT THE 10 YEAR WAS 350. OVER TWO DAYS, SEVEN BASIS POINTS, 3.43%. TWO STANDS GIVES MAJOR
INVERSION YESTERDAY AFTERNOON, COME BACK A LITTLE BIT, STILL A VERY LARGE INVERSION, 72 BASIS POINTS. MY HEADLINE, THE INFLATION AHEAD OF THE 10 YEAR YIELD GRINDS INTO A NEW LOWER GRILL YIELD. JONATHAN FERRO IN LONDON COULD COME UP WITH ANYTHING ON FOREIGN EXCHANGE, LISA ABRAMOWICZ AND TOM KEENE HERE. I WANT YOU TO GRAB WHATEVER YOU HAVE, I'M HAVING SOME HERE, IN A CRYSTAL-CLEAR CUP. BUT YOU'VE GOT TO HAVE YOUR COFFEE BECAUSE WE ARE GOING TO BORE YOU TO DEATH RIGHT NOW.
THERE IS MY TANK FREE. SENIOR VICE PRESIDENT, OF BORING YOU TO DEATH, MANDEEP SINGH OF BLOOMBERG INTELLIGENCE WHO IS TRULY EXCELLENT WHEN WASHINGTON DECIDES TECH IS TOO BIG. HE JOINS US THIS MORNING WHILE THE 150 PAGE DOCUMENT THAT I WAS THUNDERSTRUCK BY. I'M NOT GOING TO MINCE WORDS. I GO BACK TO APRIL 13, 2000 SEVEN JUST BEFORE THE GREAT FINANCIAL CRISIS WHERE I FELL OFF MY CHAIR WHEN GOOGLE BOUGHT THE AD BUSINESS BY BUYING DOUBLE-CLICK.
TAKE US BACK TO 2007, WHAT DID GOOGLE ROCK WHEN THEY BOUGHT DOUBLE-CLICK? MANDEEP: BASICALLY THEY DEGRADED THEIR PRODUCT SUITE. THINK ABOUT SUPPLY-SIDE PLATFORMS, DEMAND-SIDE PLATFORMS AND AN ATTIC STAGE IN THE MIDDLE. WILL HAS BOTTOM -- PRODUCTS ACROSS THE STACK. IF YOU WANT TO ADVERTISE ON ANY GOOGLE PROPERTIES, MAPS, ETC., YOUR BEST BET IS TO USE A GOOGLE AD EXCHANGE BECAUSE THAT IS HOW YOU WILL GET THE MOST TARGETED ADS. THAT IS WHAT THE DEPARTMENT OF JUSTICE IS LAYING OUT HERE IN A VERY CLEAR WAY, HOW THEY HAVE USED THAT ACQUISITION.
THEY HAVE ADDED MORE TO KIND OF SOLIDIFY THAT BECAUSE THAT ACQUISITION WAS GEARED TOWARD THE WEB ERA, THEN YOU HAVE A GLOBAL ARROW SO GOOGLE CONSOLIDATED THAT. ESSENTIALLY THE CASE THEY ARE MAKING IS WHY DOES GOOGLE NEED TO BE AN OUT EXCHANGE WHEN THEY ARE ONE OF THE BIGGEST PUBLISHERS OUT THERE AND ONE OF THE BIGGEST DEMAND-SIDE PLATFORMS OUT THERE? TOM: ON THE DAY OF AT&T EARNINGS, IS THIS EQUIVALENT OF A REQUEST TO DO A MA BELL AND BREAKUP THE REST OF THEM? IS THAT WHAT WE ARE TALKING ABOUT, GOOGLE SAYS WE ARE TOO BIG AND WE ARE GOING TO DIVEST AND TAKE AN INTEREST IN DDM? MANDEEP: IT IS NOT THAT SIMPLE. INTERNET BUSINESSES, I'M GOING TO MENTION THE SCALE. THE WAY YOU GET IT IS BY
INTEGRATING THINGS ACROSS THE STACK. EVEN APPLE, THAT IS WHAT THEY HAVE DONE FOR THEIR APP STORE AND THEIR HARDWARE. ESSENTIALLY YOU COULD ARGUE THAT THE AD EXCHANGE PIECE CAN BE DIVESTED, BUT I DON'T THINK IT IS THAT SIMPLE IN TERMS OF TAKING OUT A PRODUCT AND SPINNING OUT A SEPARATE COMPANY. THERE IS MORE NUANCE TO IT AND
IT WILL BE A CHALLENGE. TOM: LISA, ARE YOU DOZING OFF YET? LISA: I THINK THIS IS FASCINATING. WE TAKE A STEP BACK AT A TIME WHEN WE ARE GETTING THESE DEPARTMENT OF JUSTICE EARNINGS, THEY WANT THEM TO DO A DIVESTITURE OF THE MAJOR BUSINESS MODEL.
WHERE IS THE GROWTH GOING TO COME FROM IN THE TECHNOLOGY SPHERE GIVEN THAT THE DEPARTMENT OF JUSTICE SEEMS MORE CONCERNED ABOUT ANTITRUST ISSUES AT THIS POINT? MANDEEP: EVEN AND THEY CALL LAST NIGHT FROM MICROSOFT, CLOUD CONTINUES, ESPECIALLY THE INFRASTRUCTURE SIDE CONTINUES TO GROW VERY WELL. 30% PLUS GROWTH. YES, IT WILL DECELERATE A LITTLE FROM ABOVE 35% TO THE LOW. BUT IT IS STILL VERY STRONG. IF THERE IS ANY RESILIENT PEACE, THAT IS THE ONE I THINK EVERY COMPANY IS TARGETING. EVEN GOOGLE FOR THAT MATTER, THEY ARE TRYING TO BUILD THEIR CLOUD BUSINESS AND THAT IS WHERE YOU ARE GOING TO SEE COMPANIES CONTINUE TO SPEND ON AI AND ALL OF THE TRENDS ARE FADING INTO THE CLOUDED FOR STRUCTURE. LISA: CAN YOU GIVE US A SENSE OF WHAT YOUR TAKEAWAY WAS FROM MICROSOFT AND THE MORNING OF THE SOFTENING INTO THIS UNIT, WHAT TO EXPECT FROM INTEL, IBM, OTHER TECH GIANTS SET TO REPORT EARNINGS IN THE NEXT FEW DAYS? MANDEEP: A BAD READTHROUGH FOR THE PC MARKET. REVENUE WAS DOWN 40%. IF THAT IS ANY INDICATOR, WE
ARE NOT IN FOR A QUICK REBOUND, THAT IS THE READTHROUGH FROM THE CONSUMER SIDE. THE PC SIDE OF MICROSOFT RESULTS. AS FOR DECELERATION, I STILL THINK THEY ARE A LITTLE CONSERVATIVE AS THEIR GUIDE. THEY HAVE TO HAVE COMPARISONS,
THAT'S WHAT MAKES IT TOUGH TO KEEP GROWING 40% PLUS. BUT IT IS RESILIENT. THE PRODUCTIVITY IS COMING DOWN BECAUSE YOU ARE SEEING THESE TECH LAYOFFS.
THERE IS THE SUBSCRIPTION DRIVEN MODEL. MICROSOFT IS STILL INDISPENSABLE TO ENTERPRISE -- WE ARE SEEING A SLOWDOWN AND THAT WILL HAVE A READTHROUGH FOR ALL OF THE SOFTWARE VENDORS. TOM: LET'S GO TO THE MIGHT -- UNITED STATES OF AMERICA THE MICROSOFT CORPORATION. ALL OF A SUDDEN THEY DROPPED THE LITIGATION. THEY WILL TEAR APART MICROSOFT. GOING TO GO ON FOR TWO YEARS, THREE YEARS, DARE I SAY A DECADE AND ONE FORM OF NEW POLITICAL WASHINGTON'S IS GOING TO WALK AWAY AFTER GOING FROM ALPHABET A-Z? MANDEEP: IT COULD HAPPEN.
THIS IS NOT NEW, WILL HAS BEEN FINED MULTIPLE TIMES. WHAT CREATES A SITUATION FOR GOOGLE IS THEY CAN'T MAKE ANY NEW ACQUISITIONS AND THEY HAVE TO CREATE A LEVEL PLAYING FIELD. THERE TRY TO DO THAT WITH THE DEPRECATION OF COOKIES, EVEN ON THE ANDROID ECOSYSTEM THEY ARE TRYING TO MAKE SURE THAT EVERY PLATFORM HAS A FAIR CHANCE IN TERMS OF BIDDING FOR THE ADS ON THEIR PLATFORM. THOSE ARE THE KIND OF THINGS, THE REMEDIES, THAT IS WHAT YOU'RE GOING TO GET. TOM:
REMEDIES? WE NEED A LAWSUIT, UNITED STATES OF AMERICA AGAINST APPLE. THEY NEED TO REMEDY THE FACT THAT WITHIN THREE WEEKS YOU LOSE ONE OF YOUR AIRPODS THINGIES. THAT WOULD HELP MORE. MANDEEP SINGH, THANK YOU. YOU AND I DON'T AGREE, I THINK THIS IS JUST A COMICAL NUISANCE AGAINST THE JEWELS OF AMERICA, OUR TECHNICAL SUPERIORITY VERSUS THE REST THE WORLD. LISA: THERE'S A QUESTION ABOUT
WHETHER YOU ARE CRAMPING AND IT IS A DEBATE CANNOT CRAMPING INNOVATION WITH TECH -- DEBATE, CRAMPING INNOVATION WITH TECH GIANTS. THAT IS THE ISSUE. SO IF THE DEPARTMENT OF JUSTICE WANTS TO STOP THAT, THESE CASH COWS TO BE ABLE TO GO IN AND TAKE ANYONE WHO IS A COMPETITOR IN ORDER TO FOSTER INNOVATION, DOES IT? DOES THAT INDICATE THERE'S GOING TO BE A DIFFERENT KIND OF SPENDING? THERE IS A BIGGER SIGNIFICANCE TO THIS ESPECIALLY AT A TIME WHEN THIS IS WHY THE QUESTIONS COME OUT WHERE'S THE GROWTH GOING TO COME FROM GOING FORWARD? TOM: I'M GOING TO DO A COMPARE AND CONTRAST. RYAN MOYNAHAN AND THE BANK OF AMERICA, A TRUE BANKING NERD, LINES UP WHAT BANK OF AMERICA IS DOING WITH THEIR COULD JILLIAN'S -- CAJILLIONS OF PROFITS TO HELP THE TOWNS AND THE HUGE PARTS OF THE NATION ON THEIR BACK. I DON'T SEE THEM DOING THAT. LISA: THAT IS AN EXCELLENT POINT. IF YOU TALK WITH THE BANKERS, THEY ARE INVESTING HOW MANY BILLIONS OF DOLLARS IN ISSUES OF CLIMATE CHANGE AND OTHER ISSUES THAT YOU CAN BE CYNICAL ALL YOU WANT, IT IS TO TRY TO CREATE A BETTER IMPRESSION AFTER A REALLY NEGATIVE IMPRESSION OF THE BANKING SECTOR FOR A NUMBER OF YEARS. HIS TECH GOING TO BE REQUIRED
TO DO SOME SIMILAR TYPES OF PR OUTREACH? TOM: THEY DON'T WANT TO DO IT. LISA: WHETHER THEY WANT TO OR NOT -- UNTIL THE GOP STARTS GOING AFTER THEM, THEY GET FINES, YOU HAVE TO HAVE MORE OF A LOBBYING EFFORT. YOU RAISE A GOOD QUESTION, ARE THEY GOING TO HAVE TO PUT MORE MUSCLE INTO THAT? TOM: WHERE IS FERRO TO ADJUDICATE? LISA: HE IS VERY HAPPILY NOT SHAVING. YOU ARE NOT GETTING A LOT OF MAIL. PEOPLE WANT YOU TO HAVE A BEARD?
HOW LONG WOULD IT TAKE YOU TO GROW FULL WOLF? TOM: TWO OR THREE DAYS. I DID NOT SHAVE FIVE DAYS A WEEK UNTIL I WAS 43. MEDICS SINGH COME OUT WHEREVER DOING THAT AGAIN. THANK YOU COME BLOOMBERG INTELLIGENCE. FUTURES -- SHOULD YOU BE IN THE
STOCK MARKET? NEXT. >> WE ARE SEEING UPSIDE SURPRISES IN THE DATA. >> ONE THING WE DON'T HAVE AS GLOBAL GROWTH.
>> WE NEED TO SEE IF THE DYNAMICS PLAY OUT. >> THE IDEA IT IS ALL BEHIND US, I DON'T THINK THAT IS TRUE AT ALL. >> IT IS TOO EARLY TO SAY A RECESSION WILL NOT HAPPEN AS A GENERAL RULE. I THINK ALL THE PAIN IS STILL TO COME. >> THIS IS "BLOOMBERG SURVEILLANCE." TOM: GOOD MORNING. "BLOOMBERG SURVEILLANCE."
JONATHAN FERRO IN LONDON. ECONOMIC ATTRACTION IS OUT THERE. WE ARE GOING TO PUSH AGAINST THAT HERE IN A NUMBER OF MINUTES. FOR THOSE OF YOU OPTIMISTIC AND SAY OVER MY DEAD BODY, BANKIM CHADHA WILL BE WITH ASTANA MOMENT. -- WITH US IN A MOMENT. LISA: PEOPLE ARE GETTING A SENSE OF
WHAT'S GOING ON ON THE GROUND. WHAT IS PRICED IN AND WHAT IS NOT? MICROSOFT COMING OUT WITH BETTER-THAN-EXPECTED EARNINGS. THE LOOKAHEAD LITTLE DISAPPOINTING. TOM: TO WHAT YOU AND I TALKED ABOUT YESTERDAY WITH MINNESOTA MINING, IT'S AWAY FROM THE NAMES WE LOVE AND FOLLOW. I'M INTERESTED HOW INDUSTRIAL AMERICA REACTS. JULIAN EMANUEL HAD AN IMPORTANT POINT.
EXCUSE ME, TYLER RADKE SAID MICROSOFT IS DOING WHAT YOU DO. YOU CUT YOUR OPERATING EXPENSES. BECAUSE YOUR CAPEX DOWN AND THE TIME OF STRESS. LISA: MICROSOFT IS ONE EXAMPLE.
THE 3MS CUTTING AT 2500 PEOPLE, IT'S A VERY DIFFERENT KIND OF COMPARISON. IT'S A LITTLE PERHAPS MORE HINGED TO THE REAL ECONOMY. TOM: I LOOK AT THE MARKETS AND THE BIG CHANGE IS A REAL BET ON DISINFLATION. DOWN SUBSTANTIALLY. WE ARE NOT IN THE 3.99% YET. LISA: A LOT OF PEOPLE LOOKING AT REAL INFLATION AND SAY IT HAS ALREADY FALLEN TO 2%.
DOES IT MATTER? ONE MONTH DOES NOT MEGATREND. THREE MONTHS MIGHT BE THE REAL ISSUE. I'M CURIOUS ABOUT AUSTRALIA AND THE WAGE INFLATION AND INFLATION ACCELERATED IN THE LAST THREE MONTH OF LAST YEAR, PUSHING AGAINST PAST PEAK INFLATION. TOM: WE NEED REPORTING ON THIS. WE WILL DO THAT FRIDAY EVENING.
MANCHESTER CITY AGAINST ARSENAL. JON FERRO JOINS US NOW. IS MANN CITY THE ONLY ONE THAT CAN BE ARSENAL? JONATHAN: THAT'S WHY I'M HERE. I TELL YOU WHAT I'M INTERESTED IN, THE DATA. ECONOMIC DATA RELATIVE TO EXPECTATIONS AND DIFFERENT PLACES. IF YOU LOOK AT THE ECONOMIC DATA RELATIVE TO EXPECTATIONS, THE SURPRISE INDEX STARTING TO ROLLOVER. THAT TREND IN EUROPE STARTED
LAST SUMMER. WHEN YOU PUSH THAT THROUGH THE MARKET THINK ABOUT FOREIGN EXCHANGE FOR OBVIOUS REASONS. LOOK AT THE BOND MARKET. TAKE THE GERMAN 10-YEAR U.S. SPREAD. TO WHAT DEGREE CAN WE CLOSE
THAT GAP EVEN MORE? THE ECB HIKING INTEREST RATES LAST YEAR TO 250, EXPECTED THIS YEAR TO PLAY CATCH UP. TOM: I'M SEEING DIFFERENT SERIES INCLUDING "REAL YIELD." THE BOTTOM LINE TO ME IS, IS THIS AN ECONOMIC SLOWNESS THAT FORCES THE ATTENTION OF THE CENTRAL BANKS? THAT IS THE FEBRUARY QUESTION. JONATHAN: IT FORCES THE ATTENTION OF THE FEDERAL RESERVE RIGHT NOW. IT'S A GREEN LIGHT FOR THE ECB TO KEEP HIKING. WE GOT THAT FROM GERMAN BUSINESS CONFIDENCE THIS MORNING. I ASKED ABOUT AN HOUR AGO ON
THIS PROGRAM. ARE THERE DURABLE TAILWINDS TO THE EUROPE STORY? IS THIS ABOUT A POSITIVE SURPRISE, A READJUSTMENT, OR GOING INTO RECESSION? THEN WHAT? THERE'S A DIFFERENCE BETWEEN RECESSION AND STAGNATION AND STAGNATION IN RECOVERY. WE ARE TALKING ABOUT STAGNATION. THE PROSPECT OF A REAL EXPANSION IN EUROPE. I DON'T THINK ANYONE IS LOOKING FOR THE LATTER JUST YET. TOM: WE HAVE TO WAIT TO SEE THE DATA ON THAT. JON FERRO WITH JANE FOLEY IN A BIT ON FOREIGN-EXCHANGE.
LET'S TURN TO THE MARKET. YEN OFF THE RADAR AFTER THE LAST 10 DAYS. STERLING AT 123. THAT'S ENOUGH TO GET HIM TO MANCHESTER CITY ON FRIDAY. THAT WILL BE AN EXCEPTIONAL
GAME. LISA: 10:00 A.M., THE BANK OF CANADA RATE DECISION. IT TENDS TO BE A FRONT RUNNER OF WHAT HAPPENS AT BOTH THE BANK OF ENGLAND AND THE FEDERAL RESERVE. 1:00 P.M., $43 BILLION OF FIVE-YOUR NOTES. -- FIVE-YEAR NOTE. IT IS PEOPLE WHO WANT TO OWN THE DEBT BECAUSE THEY THINK IT IS OF VALUE WITH THE YIELDS WHERE THEY ARE. THIS IS A FASCINATING MOMENT CONSIDERING A LOT OF PEOPLE ARE SAYING THE FED WILL PUSH BACK AGAINST THE MARKET EXPECTATIONS.
EARNINGS A FOCUS FOR ME. TESLA, IBM AFTER THE BELL. SOME SAYING TESLA EARNINGS WILL BE THE SUPER BOWL OF THE SEASON. MICROSOFT DOWN 2.8% AFTER A DISAPPOINTING GUIDANCE. WE HEARD PERHAPS THEY ARE BEING OVERLY CONSERVATIVE ABOUT EXPECTATIONS GROWTH IN THEIR CLOUD COMPUTING BUSINESS. IT SHOWS THE IMPORTANCE OF THE AZURE PLATFORM FOR BIG TECH.
TOM: THIS IS WITHOUT QUESTION YOUR INTERVIEW OF THE DAY. IF YOU NEED TO BE OPTIMISTIC, THERE IS NO BETTER PLACE TO BE THAN AT DEUTSCHE BANK WITH THE CHIEF GLOBAL STRATEGIST BANKIM CHADHA. PLEASE MAKE CLEAR HE'S ENTHUSIASTIC. HE SIMPLY MOVED HIS TIMELINE OUT. WE GET AN UPDATE THIS MORNING FROM BANKIM CHADHA. YOU ARE AT 4600. YOU HAVE NEVER BEEN THIS LONELY IN YOUR STORIED CAREER.
ONE IS THE TIMELINE WHEN IT HAPPENS? BANKIM: WHAT WE HAVE IN TERMS OF OUTLOOK FOR THIS YEAR IS REALLY THE RALLY IN Q1, WHICH WE THINK OF AS A CONTINUATION OF THE RALLY THAT BEGAN LATE LAST YEAR. I WOULDN'T NECESSARILY DESCRIBE IT AS A BULLISH VIEW ON FUNDAMENTALS. THE BASIC DRIVER OF THE RALLY IN OUR VIEW IS A POSITIONING SQUEEZE. SINCE LATE APRIL OF LAST YEAR
IT HAS ALL BEEN ABOUT THE CENTRAL BANKS. IF YOU LOOK AT OUR MEASURES OF POSITIONING, YOU KNOW, THE FUNDAMENTAL INVESTORS, THE DISCRETIONARY EQUITY INVESTORS VERY QUICKLY MOVED OUT TO NEUTRAL TO SLIGHTLY NEGATIVE. WHAT GOT SQUEEZED IS SYMPTOMATIC STRATEGIES.
THEY TEND TO FOLLOW THE MARKET. TO HAVE THIS BIG DIVIDE -- TOM: I FLUNKED THAT ON THE CFA EXAM. TECHNICAL ANALYSIS IS ADAMANT WE MADE IN OCTOBER LOW IN THE DOW JONES INDUSTRIAL AVERAGE. HE IS AS BULLISH AS YOU ARE.
THERE IS A SHORT SQUEEZE. WE ARE SQUEEZING OUT THE GLUE. WHAT'S IT LIKE AFTER WE SQUEEZE OUT THE GLOOM? BINKY: WE HAVE OUR YEAR-END TARGET WHICH LOOKS BULLISH. I WOULD SAY IS LITTLE BIT MORE THAN 10% UP FROM WHERE WE HAVE BEEN RECENTLY. WE SEE MOST OF THAT HAPPENING IN Q1. WE HAVE BASICALLY A CALL FOR A
RECESSION IN THE U.S. STARTING IN Q3. THE SECOND QUARTER KEEPING IN LINE WITH THE RECESSION PLAYBOOK HISTORICALLY. WE HAVE THE MARKET GOING SIDEWAYS. THAT IS STILL 4500.
IF THE RECESSION HAPPENS IN Q3, A PRETTY SEVERE SELLOFF OF TAKE US ALL BE DOWN TO 3250. VERY IMPORTANT ASPECT OF THE RECESSION PLAYBOOK TO KEEP IN MIND IF YOU'RE THINKING OUT 12 MONTHS IS EQUITIES ARE PRETTY ROBUST. IF YOU HAVE A TWO-QUARTER RECESSION, THEY WILL COME BACK IN Q4. MY Q1 TARGET IS MY YEAR-END TARGET NOW. LISA: YOU SAID SOMETHING PRETTY RADICAL.
IT HAS ALL BEEN ABOUT THE FED, NOT OTHER ISSUES LIKE EARNINGS WHICH PEOPLE KEEP LOOKING AT. HOW DO YOU PUSH BACK AGAINST THAT? HOW MUCH STEVE EXPECT TECH TO LEAD REGARDLESS OF THE UP OR DOWN BECAUSE OF THE MACRO PLAY? BINKY: OUR CALL IS TO BE THE RALLY WILL BE LED BY TACK AND FINANCIALS. -- TECH AND FINANCIALS. CYCLICALS WITH A PRICE AND 120%
OF AN AVERAGE RECESSION. IT STARTS TO MAKE THINGS ASYMMETRIC. I'M SORRY. I LOST THE LAST PART OF THE QUESTION. TOM: I DO THE SAME THING. DON'T SAY YOU'RE SORRY. LISA: IT'S AN INTERESTING ISSUE. I'M WATCHING EARNINGS AND
THERE'S A REAL FUNDAMENTAL SHIFT UNDERNEATH THE MARKET. YOU HAVE TECH THAT WILL NOT NECESSARILY LEAD IN GROWTH. I'M WONDERING IF YOU SEE THAT OR IF WE ARE HEADING BACK TO A DIFFERENT NORMAL IN TERMS OF LEADERSHIP BACK TO THE SAME REGIME. IT IS DEPENDENT ON THE FED. BINKY: IN TERMS OF EARNINGS FOR THE YEAR AS A WHOLE, IF YOU PUT IN THE RECESSION LIKELY HAVE, TALKING ABOUT $195. WHAT HAPPENS IF THE ALTERNATIVE, WHICH IS A POPULAR QUESTION GIVEN THE MARKET PRICE ACTION, AND IS MORE LIKELY TO GO SIDEWAYS. YOU CAN START TO RECOVER. IN TERMS OF EARNINGS EVERYBODY
TALKS ABOUT GROWTH RATES. IT'S IMPORTANT TO KEEP IN MIND WITH A LEVELS ARE. EQUITY VALUATIONS COME OFF THE LEVELS. EARNINGS HAVE BEEN RUNNING WELL
ABOVE TREND LEVELS. WE HAVE THIS ISSUE. IF YOU LOOK AT REAL ACTIVITY ON THE GOOD SIDE OF THE ECONOMY, IT HAS BEEN GOING SIDEWAYS FOR TWO YEARS NOW. TOM: 4500 ON SPX. WHAT HE SAID IS RELIGION TO ME. IS IT FINANCIAL TV ADDICTED TO CHANGE MOVEMENTS. MICROSOFT RIGHT NOW DOWN UNDER $236. HE'S LOOKING AT LEVELS. THIS IS THE BATHTUB STORY. LOOKING AT THE WATER COMING IN AND OUT OF THE BATHTUB.
LOOKING AT THE LEVEL. LEVELS MATTER. THE LEVELS, THE SCALE, THE MASSIVE MICROSOFT MATTERS. LISA: THAT'S WHY YOU HAVE A REAL BATTLE RIGHT NOW OF HOW DISAPPOINTING SOME OF THE GUIDANCE WAS. THEY ARE STILL SEEING A LOT OF GROWTH.
THEY ARE STILL ROLLING OFF CASH AT A TIME WHEN THIS IS STILL SOMETHING THAT GIVES THEM A LOT OF POWER. TOM: IT'S OUTRAGEOUS. WE HAVE A MODEL OUT 12 MONTHS. MICROSOFT FREE CASH FLOW OF $75 BILLION. 75,000 BILLION DOLLARS. LISA:
PLEASE CORRECT TK. IT'S CLUMSY. IT'S AN EFFICIENT. IT IS NOT THAT OPTIMISTIC COMPARED TO OTHER PEOPLE NOW. TOM: HE'S GOING UP TO 4500. LISA: IT IS THE SAME AS THE YEAR-END.
TOM: DAVID CALLED UP AND SAID MY DEEPEST SYMPATHIES AT DEUTSCHE BANK. THIS IS BLOOMBERG. ♪ >> KEEPING YOU UP-TO-DATE WITH NEWS AROUND THE WORLD. THE U.S. AND GERMANY WILL PROVIDE
UKRAINE WITH A SIGNIFICANT UPGRADE AND FIREPOWER TO USE AGAINST RUSSIA. BERLIN CONFIRMED IT WILL INITIALLY SUPPLY THE UKRAINIANS WITH 14 OF ITS LEOPARD MAIN BATTLE TANKS. THE FIRST TANKS WILL DEPLOY IN THREE MONTHS. THE FIGHT ADMINISTRATION IS EXPECTED TO ANNOUNCE AS SOON AS TODAY IT WILL OFFER UKRAINE THE M1 ABRAMS TANK. IN THE U.K., THE GOVERNMENT SPENDING WATCHDOG IS CUTTING THE FORECAST FOR GROWTH.
THE OFFICE FOR BUDGET RESPONSIBILITY TOLD CHANCELLOR JEREMY HUNT IT OVERESTIMATED THE PROSPECTS FOR MEDIUM-TERM GROWTH. THAT WILL LEAVE THE GOVERNMENT WITH A MULTIBILLION POUND HOLE IN ITS SPENDING PLAN. CHUCK SCHUMER IS TELLING REPUBLICANS SHOW US YOUR PLAN. THEY WANT THE GOP TO OFFER PROPOSALS FOR RAISING THE DEBT CEILING AND AVOIDING A DEFAULT. KEVIN MCCARTHY AND OTHER
REPUBLICANS ARE DEMANDING SPENDING CUTS IN EXCHANGE FOR INCREASING THE BORROWING LIMIT. AT&T FORECAST PROFIT AND FREE CASH FLOW MISSED ESTIMATES. IT'S ANOTHER SIGN HIGH-COST OUR ARE HURTING PROSPECT FOR THE INDUSTRY. AT&T ADDED 650,000 NEW SUBSCRIBERS. A DOWN FORECAST FOR MICROSOFT. THEY SAY REVENUE GROWTH IN ITS CLOUD BUSINESS WILL DECELERATE IN THE CURRENT PERIOD AND IT WARNED OF A SLOWDOWN IN CORPORATE SOFTWARE SALES. MICROSOFT HAS RESULT WIDESPREAD PROBLEMS WITH ITS ONLINE SERVICES, INCLUDING OUTLOOK AND TEAMS. THE COMPANY SAID IT WAS
DUE TO A RECENT ALTERATION TO ITS NETWORK CONFIGURATION. GLOBAL NEWS, 24 HOURS A DAY, ON AIR AND ON BLOOMBERG QUICKTAKE, POWERED BY MORE THAN 2700 JOURNALISTS AND ANALYSTS IN MORE THAN 120 COUNTRIES. I AM LISA MATEO. THIS IS BLOOMBERG. >> FOR 15 YEARS, WE HAVE -- GOOGLE HAS HALTED THE RISE OF RIVAL TECHNOLOGIES, MANIPULATE AUCTION MECHANICS, ISOLATED ITSELF IN COMPETITION, AND FORCE ADVERTISERS AND PUBLISHERS TO USE ITS TOOLS. IN SO DOING GOOGLE HAS ENGAGED IN EXCLUSIONARY CONDUCT THAT HAS SEVERELY WEAKENED IF NOT DESTROYED COMPETITION IN THE TECH INDUSTRY. TOM: GOOD MORNING. THE ATTORNEY GENERAL OF THE
UNITED STATES MERRICK GARLAND. THANK YOU TO MANDEEP FOR A LOOK AT THE LAWSUIT. LISA: IF THIS IS A HARDER LINE FROM THE DEPARTMENT OF JUSTICE, DOES THAT INDICATE YOU WILL SEE SPENDING FROM BIG TECH GO ELSEWHERE? WHAT DOES THAT MEAN IN TERMS OF OTHER TECH GIANTS? TOM: I DON'T THINK I WILL CATCH YOU UNAWARES. IF WE GET A REPUBLICAN PRESIDENT OR A REPUBLICAN THIS OR THAT, DOES THE SUIT CHANGE? I DON'T KNOW. LISA: DEPARTMENT OF JUSTICE IS USUALLY INSULATED FROM THE POLITICS. THE FOLLOW-ON SUITS. THE EXPECTATION WILL BE LESS.
IT IS TYPICALLY THE REPUBLICANS WHAT, WITH A LESS ANTITRUST TRUST THAN THE DEMOCRATS. TOM: AND RECORDER -- ANNMARIE HORDERN HAS REAL-WORLD EXPERIENCE IN EUROPE. OVER THE MOSCOW OVER THE RECENT YEARS. WE ARE THRILLED SHE CAN JOIN US RIGHT NOW. HAVE YOU EVER BEEN IN ONE OF THESE TANKS? HAVE YOU BEEN ON A JUNKET WITH A HELMET ON? HAVE YOU EVER BEEN IN ONE OF THESE TANKS? ANNMARIE: NO, I HAVE NOT. SEND ME. TOM: POND DAZZLED BY THE TECHNOLOGY LEAD. CLEARLY SUPERIOR TO WHAT THE
RUSSIANS HAVE. GENERAL BEN HODGES HAS BEEN BRIEFING WITH HIS EXPERTISE IN THE ARMY WITH ACTUAL KNOWLEDGE. WHAT CAN THEY DO? IF THEY GET THEM ON THE GROUND AND THEY HAVE A RANGE OF DIESEL ENGINES OF 200 MILES EVERY FILL UP, DO THEY JUST MOVE FORWARD? IS ANNMARIE: IS DEFTLY WHY UKRAINE WANTS THEM. THEY WANT TO BE ABLE TO NOT JUST HOLD THE LINE IN EASTERN UKRAINE AND BE ABLE TO GET AHEAD OF WHAT THEY THINK IS GOING TO BE A SPRING OFFENSIVE BY RUSSIA, THEY WANT TO MAKE THE INROADS INTO EASTERN UKRAINE AND GET BACK THAT LAND THAT RUSSIA HAS OCCUPIED AND HOLDING. THE MAIN POINT YOU MADE WAS THAT THESE TANKS ARE FAR MORE SUPERIOR THAN THE RUSSIAN TANKS. I DO KNOW THE INS ANNOUNCE.
I'M NOT A TANK EXPERT BUT THEY HAVE THERMAL IMAGING. THEY ARE INCREDIBLY HIGH-TECH. THEY HAVE BEEN USED ALL OVER THE WORLD. THESE ARE THE TANKS IN KOSOVO, THEY SHOWED UP IN AFGHANISTAN. I THINK THE MAIN POINT IS THAT THESE ARE THE TANKS UKRAINE BELIEVES THEY NEED TO CONTINUE FIGHTING THIS OFFENSIVE AND MAKE INROADS IN THIS OFFENSIVE.
THE FACT OF THE MATTER IS, ONCE AGAIN, YOU HAVE SEEN THE WEST UNITE. GERMANY WAS PRETTY DIRECT. WE WILL NOT SEND LEOPARDS IF THERE IS NO ABRAMS AND NOW YOU ARE GETTING BOTH. TOM: IN THE BRITISH TANKS AS WELL. WHY DOESN'T THIS JUST EXPAND TO SUPERIOR HARDWARE ON CRIMEA? CRIMEA IS THE UNSPOKEN STORY HERE. IS THAT PART OF THE STORY?
ANNMARIE: IT WAS REPORTING RECENTLY FROM THE NEW YORK TIMES ABOUT U.S. OFFICIALS MAY BE WARMING UP TO UKRAINE LOOKING UP POTENTIALLY HAVING AN OFFENSIVE IN CRIMEA OR USING WEAPONRY TO MAKE INROADS IN CRIMEA. CRIMEA OBVIOUSLY IS A LITTLE BIT DIFFERENT WHEN YOU ARE LOOKING AT THE FIGHTING GOING ON. RUSSIA HAS HELD CRIMEA SINCE 2014. THE NEW FIGHTING HAS BEEN MORE
IN EASTERN UKRAINE AND THE MAINLAND UKRAINE. LISA: WHY HAS THIS BEEN SUCH A CONTROVERSIAL PUSH? THESE TANKS FROM GERMANY HAVE BEEN INCREDIBLY CONTESTED WITHIN THE NATION. WHAT IS BEHIND THAT? ANNMARIE: THE VICE CHANCELLOR OF THE ECONOMY MINISTER TOLD US ON BLOOMBERG THEY DO NOT WANT TO ACT ALONE.
THAT HE MADE A REFERENCE TO OBVIOUSLY WE HAVE LESSENED OUR DEFENSE BECAUSE OF OUR HISTORICAL PAST. THIS IS A HUGE REVERSAL FOR GERMANY. THIS IS LITERALLY LIKE MOVING A TANK FOR THEM. IT IS A U-TURN IN TERMS OF THEIR ENERGY POLICY, IN TERMS OF THEIR DEFENSE POLICY.
GERMANY DOES NOT WANT TO BE THE ONES THAT PROVOKE RUSSIA ALONE. FOR THEM TO MAKE THIS MOVE -- THEY WANTED TO MAKE SURE THE U.S. WAS ON BOARD. THE U.S. ARGUMENT IS THE ABRAMS ARE MUCH MORE SOPHISTICATED, MUCH MORE DIFFICULT TO OPERATE. THEY DO CONSUME A TON OF FUEL.
THEY HAVE A JET ENGINE IN THEM. THEY ARE JUST NOT AS LOGISTICALLY FEASIBLE AS MOVING THEM TO UKRAINE AS IT WOULD BE THE LEOPARDS. GERMANY WAS CLEAR. WE NEED THE U.S. TO ACT ALONGSIDE WITH US. THE WHOLE THEME AS THEY ARE
CONCERNED ABOUT PROVOKING RUSSIA. THEY WANT THIS CONFLICT TO BE WITHIN UKRAINE. THEY DO NOT WANT THIS SPREADING TO NATIVE NATIONS. -- NATO NATIONS. LISA: HOW HAS THE PSYCHOLOGY SHIFTED? ANNMARIE: GREAT QUESTION. WHAT THE KREMLIN SAID AND
RETURN TO THIS ANNOUNCEMENT OF MORE TANKS, THE NATO WEAPONRY GOING TO UKRAINE, THEY WILL JUST BE DESTROYED AS ALL OTHER MILITARY HARDWARE HAS BEEN IN UKRAINE. BUT WHEN YOU HEAR FROM MEDVEDEV WHO WAS TALKING ON TELEGRAM ABOUT ALL OF THIS, HE'S TALKING ABOUT THE FACT HE IS PREPARED -- RUSSIA IS PREPARING FOR A PROLONGED WAR BECAUSE THE WEAPONRY THE U.S. WILL SEND TO UKRAINE. IT SEEMS RUSSIA IS POTENTIALLY GOING TO VIEW THIS AS THE WEST IS NOT BACKING DOWN. EVEN IF CRITICS SAY THEY DRAG THEIR FEET -- I SPOKE TO UKRAINIANS, AND ADVISOR TO THE DEFENSE MINISTER HERE IN THE UNITED STATES. WHEN YOU GOING TO SEND THE
TANKS? RUSSIA IS GETTING THE SIGNAL THEY NEED TO PREPARE FOR A LONGER PROTRACTED WORK. TOM: ANNMAIRE, WE HAVE LEARNED A LOT -- ANNMARIE, WE HAVE LEARNED A LOT. THERE ARE HEADLINES HERE. THEY SWAMPED THE EXCHANGE. I GOT A REPORTER WITH 80 STOCKS. OTHERS WITH 200 SOMETHING STOCKS. THEY HAVE ALGORITHMS THAT COME UP WITH A PRICE AT 9:30 IN A DID NOT HAPPEN. LISA: WHAT HAPPENED AT THE OPENING
BELL OF THE NEW YORK STOCK EXCHANGE WAS THAT BREAD-AND-BUTTER STOCKS -- MCDONALD'S, WELLS FARGO -- PLUNGED BY BILLIONS OF DOLLARS IN MARKET VALUE. THEN WERE HALTED. TOM: MORGAN STANLEY WOULD DOWN 13%. LISA: WHAT IS GOING ON HERE? IS IT SOMEONE JAMMING THE SYSTEM? IS IT A GLITCH IN THE SYSTEM? THE STOCK EXCHANGE SAYS THERE IS A SHORT SALE RESTRICTION THAT IS GOING TO BE LIFTED IN A SUBSET OF SYMBOLS. SOME SHORTSELLING RESTRICTIONS WERE WRONGLY TRIGGERED YESTERDAY. THERE WERE ISSUES HERE BUT TO
ME HOW VULNERABLE IS THE SYSTEM THAT HAS MORE VOLUME GET PUMPED THROUGH IT? WHAT IS THE POTENTIAL LIABILITY? IS IT JUST A GLITCH? THEY DID NOT NECESSARILY HONOR SOME OF THE TRAITS SO IT WAS NOT NECESSARY -- NECESSARILY THAT MONEY WAS LOST. TOM: IT WILL BE INTERESTING TO SEE HOW THEY MOP UP PEOPLE THAT TOOK ADVANTAGE OF THIS IN A CONSTRUCTIVE WAY VERSUS PEOPLE -- IN AN AMATEUR SENSE OF NEFARIOUS. IT IS NOT LIKE THE CRASH OF 1987 WHERE WE DID NOT KNOW FOR THREE TO FIVE DAYS. THIS IS THE MICRO SPEED WE ARE GOING OUT TODAY WITH THE SPREADS. LISA: IS IT ENOUGH FOR THE NEW YORK
STOCK EXCHANGE TO SAY OUR BAD? IS THERE SOMETHING THAT NEEDS TO BE DONE TO MAKE SURE THIS DOES NOT HAPPEN AGAIN? THIS HAS BEEN A BIG CONCERN. SPLIT-SECOND TRADING AND HUGE VOLUMES THAT ARE TRADING ON THAT. WHAT HAPPENS IF THERE IS A GLITCH OR A HACKING? ALL THESE ISSUES PEOPLE HAVE BEEN RAISING. DOES THIS RAISE THE ANTE A LITTLE BIT? TOM: CAN I ASK WHY THIS DOES NOT HAPPEN MORE OFTEN? IT IS LIKE THE FAA AND THE PLAIN COMPUTERS OF A WEEK AGO -- PLANE COMPUTERS A WEEK AGO. WE ARE ALL SLAVES TO THESE COMPUTERS. LISA:
THAT'S A GREAT QUESTION. THAT WAS GOOD. THAT IS THE GLASS HALF-FULL SIDE OF THINGS THAT PERHAPS WE SHOULD BE IMPRESSED IT DOESN'T HAPPEN MORE OFTEN. TOM: LOOK, IF YOU WERE TRIPLE LEVERAGED IN THE CASH FUND, THIS WOULD NOT HAPPEN. YOU WAKE UP, LOOK AT LIVE BOARD
AND GO BACK TO SLEEP. TOM: "BLOOMBERG SURVEILLANCE." IN WASHINGTON, JENNIFER JACOBS AND ANNMARIE HORDERN CONFIRMING FRONTRUNNER STATUS AT THE VICE-CHAIRMAN OF THE FEDERAL RESERVE LAEL BRAINARD TO BE CONSIDERED TO ADVISE THE PRESIDENT AND THE POSITION NOW HELD BY BRIAN DEESE. THIS WILL BE -- I WOULD SAY A DIFFERENT VICE-CHAIRMAN POST AT THE FED. LAEL BRAINARD IS VICE-CHAIRMAN IS DIFFERENT THAN RICHARD CLARIDA AAS VICE-CHAIRMAN.
LISA: SHE IS NUMBER TWO AT THE FEDERAL RESERVE AND HAS BEEN PUSHING BACK ON THE MARGINS. WRIST TO THE DOWN SIDE IN TERMS OF ECONOMIC PAIN. THERE ARE QUESTIONS OF SOME OF THE POLITICAL INTERFERENCE PEOPLE ARE RAISING. TOM: IF SHE WAS TO GO BACK, AND THE WASHINGTON POST WAS SUGGESTING THE SECRETARY OF COMMERCE MAY BE SHE DOESN'T WANT TO DO THAT. THAT IS SPECULATION AT THIS TIME. THEY ARE REPORTING HERE ON SOMEONE WHO IS COMFORTABLE WITH POLICY WORKING WITH BILL CLINTON ON THE SAME COUNSEL OUT OF WESLEYAN. I BELIEVE SHE WAS TEACHING AT
M.I.T. AT THE TIME. I WOULD SUGGEST THAT POLICY IS WHERE SHE IS MORE COMFORTABLE THAN WORRYING ABOUT DYNAMIC STAY CASTING -- STOCHASTIC EQUILIBRIUM THEORY. LISA: SHE IS A RESPECTED ACADEMIC MIND AND POLICY MIND. PEOPLE MIGHT GET A LOT OF SUPPORT BEHIND HER EVEN THOUGH PERHAPS THERE WILL BE QUESTIONS AROUND THE FED LEADERSHIP AND WHO REPLACES HER AND WHAT THAT MEANS FOR THE FEDERAL RESERVE. TOM: BRAINERD IS THE FRONT RUNNER TO RUN THE BIDEN ECONOMIC COUNCIL. DETERIORATION THROUGH THE
MORNING. MICROSOFT LEADING THAT DETERIORATION. -33. VISITING $236. JON FERRO MAKING NOTE OF THAT FROM LONDON. THERE IS NO QUESTION. IT IS EARNINGS SEASON. INDIVIDUAL NAMES? LISA:
BOEING JUST CROSSED. THEIR FOURTH-QUARTER ADJUSTED FREE CASH FLOW IS $3.3 BILLION. WE ARE GETTING A PICTURE WITH COMPANY TALKING ABOUT PRETTY GOOD EARNINGS, AT LEAST SO FAR. WITH A BIT OF A SOFTER PICTURE AHEAD. MICROSOFT KEY AMONG THOSE SAYING THEY ARE EXPECTING A BIT OF A DECELERATION IN GROWTH IN THE AZURE PLATFORM.
GAINING BACK FROM SOME OF THE LOWS EARLIER THIS MORNING. TESLA SHARES DOWN 1.1% AHEAD OF EARNINGS LATER TODAY. A LOT OF PEOPLE LOOKING AT NOT ONLY TESLA SALES, WHY THEY ARE DISCOUNTING VEHICLES, BUT WILL ELON MUSK TALK ABOUT THE NEXT PHASE IN THE TWITTER SAGA, WHEN HE STEPPED DOWN, WHO IS GOING TO REPLACE HIM. AT&T CAME OUT AND THIS IS ALL THE INTERESTING. AT&T GAVE A DISAPPOINTING FORECAST GOING FORWARD. THIS FOLLOWS FROM WHAT WE HEARD
FROM VERIZON YESTERDAY. SHARES ARE UP 2.3%. HOW MUCH BAD NEWS HAS ALREADY BEEN BAKED IN? HOW MUCH PESSIMISM HAS BEEN ESTABLISHED AND WHAT LEVELS? TOM: WE WILL HAVE TO SEE. THE SHOCK TO ME AS IT IS TO ANYONE WORLDWIDE WHO FOLLOWS AVIATION, LIKE JON FERRO, TO SEE THE HEADLINE FROM THE BOEING COMPANY IS THAT OF ARLINGTON, VIRGINIA. THAT WILL BE A SHOCK TO ALL IN THE MIDDLE-AGE. THAT DESCRIBES THE TRAVELING SYRIANS OF JON FERRO IN THE LAST NUMBER OF WEEKS. HE JOINS US NOW WITH AN IMPORTANT INTERVIEW AND CONVERSATION WITH JANE FOLEY.
JONATHAN: I HAVE TO SAY THE TRAVEL HAS BEEN PRETTY SMOOTH. LET'S FRAME THE LAST 12 MONTHS. WE HAVE BEEN WRESTLING WITH INFLATION AS CENTRAL BANKS HAVE MADE A MOVE. ECB HAS GONE TO 250. THE FEDERAL RESERVE HAS GONE TO 450. THE BANK OF JAPAN HAS DONE ABSOLUTELY NOTHING. IS THAT GOING TO CHANGE THIS YEAR? JANE FOLEY IS WITH US. FANTASTIC TO CATCH UP WITH THE.
SUBZERO AT THE BOJ. WILL THAT CHANGE THIS YEAR? JANE: IT MIGHT BUT IT MIGHT NOT. THAT'S THE CRITICAL POINT. WE SAW THE MEETING IN JANUARY AND SPECULATORS EGGING ON FOR A CHANGE. WHAT DO THEY GET? NOTHING. THIS IS THE RISK. THE MARKET IS ASSUMING WE WILL GET A REPLACEMENT FOR KORODA.
MAYBE A SIGNIFICANT CHANGE IN POLICY. WE MIGHT GET A CHANGE IN POLICY THAT IT MAY NOT BE SIGNIFICANT. WE MIGHT GET ANOTHER INTEREST RATE HIKE OR WE MAY NOT. LOOK AT THE TIMEFRAME FOR THE BANK OF JAPAN.
THEY WILL PROBABLY NOT BE HIKING INTEREST RATES NEXT YEAR. YOU HAVE A LIMITED TIMEFRAME. LOOK AT THE FUNDAMENTALS. YES. INFLATION IS ABOVE ITS TARGET BUT THAT'S BECAUSE IMPORT PRICES ARE NOT DOMESTICALLY GENERATED WHICH IS THE GOLDEN GOOSE FOR THE BANK OF JAPAN.
IF KORODA IS REPLACED BY A DEPUTY OR SOMEONE ELSE IN THE BANK OF JAPAN, ALL OF WHICH IS SUPPORTIVE OF THE ACCOMMODATIVE POLICIES FOR A LONG TIME. DISAPPOINTMENT COULD BE COMING. JONATHAN: I THINK THAT IS WHAT IS GETTING EVERYONE'S ATTENTION. WE HAVE THIS FINAL MEETING WITH KORODA IN MARCH AND HANDOFF IN APRIL. WHICH CHALICE CARRIES THE MOST POISON? DOES A HAND OVER A POLICY SET ON A PATH TO MOVE AWAY FROM THE YIELD CURVE CONTROL OR DOES A HAND OVER WHAT THERE IS RIGHT NOW? WHICH CARRIES THE MOST POISON? JANE: IT DEPENDS ON THE OUTCOME OF THE SPRING RATE RUNS. INDICATORS ARE THEY WILL BRING
MODERATE INCREASE IN DOMESTICALLY GENERATED INFLATION, WHICH IS WHAT THEY WANTED TO SEE. THAT COULD LAY THE FRAMEWORK FOR A CHANGE IN CONTROL, ANOTHER TWEAK. WILL IT CHANGE INTEREST RATE POLICY? THAT'S A LITTLE FURTHER DOWN THE LINE AND I DON'T THINK WE CAN MAKE THAT DECISION YET. KORODA MIGHT BE LEADING THE BANK OF JAPAN BUT IS NOT THE WHOLE BOARD. THAT FORD WILL NOT NECESSARILY BE CHANGED THAT MUCH. THERE IS NOT GOING TO BE THIS MASSIVE CHANGE TOWARDS A HAWKISH CENTRAL BANK.
YOU MIGHT GET A LESS DOVISH CENTRAL BANK. JONATHAN: THIS WAS PERHAPS A WANT IN A GENERATION OPPORTUNITY TO RESET INFLATION EXPECTATIONS HIGHER. HE'S BEEN DOING THIS FOR 10 YEARS. PLEASE REMEMBER WHEN HE TOOK US
ON BACK IN 2013. DOES HE LEAVE, WALK AWAY WITH ANY SUCCESS WHATSOEVER? JANE: I THINK THERE IS SOME SUCCESS. THE WHOLE PETER PAN ISSUE, THE WHOLE PSYCHOLOGICAL ISSUE HE THOUGHT THAT IF YOU BROUGHT IN AN INFLATION TARGET PEOPLE WOULD ASSUME INFLATION MIGHT BE HIGHER AND WOULD ALTER SPENDING BEHAVIOR ACCORDINGLY. THAT REALLY HAS TAKEN A VERY LONG TIME. WITH INFLATION AROUND THE
GLOBE, THIS PERHAPS HAS GIVEN A LITTLE BIT OF AN IMPETUS INTO INFLATION. THERE IS A LITTLE HERE. YOU HAVE THE GOVERNMENT OF THE BANK OF A HAND -- BANK OF THE PAN BEHIND KORODA SAYING YOU NEED TO RAISE WAGES. THEREFORE YOU GET WHAT THEY ARE LOOKING FOR, WHICH IS A VIRTUOUS CIRCLE BEHIND HIGHER WAGES, HIGHER DOMESTIC DEMAND, HIGHER PROFITABILITY, ETC. THERE IS SOME OPTIMISM THIS
MIGHT BE COMING BUT I DON'T THINK THERE IS A HUGE AMOUNT OF CONFIDENCE THEY ARE THERE YET. JONATHAN: YOU IMPLIED THAT COULD BE DISAPPOINTMENT. PUSH THAT THROUGH THE MARKET FOR ME. JANE: WE COULD STILL SEE 128 IN THREE MONTHS. WE ASSUME THE DOLLAR IS WEAK AND THAT'S A LARGE PART OF THE MOVING BACK FROM 150. 128 IS POSSIBLE.
THERE'S THE POSSIBILITY OF ANOTHER MOVEMENT. THEY COULD MOVE AWAY FROM THAT IN THE MONTHS AHEAD. THE PROBLEM IS THE WINDOW OF OPPORTUNITY IS QUITE SHORT. 128 POSSIBLE. MAYBE 126 IN THE MIDDLE OF THE YEAR. I DON'T THINK WE WILL BE FALLING HUGELY. JONATHAN: YOU MENTIONED THE U.S. DOLLAR. WE SAT HERE WITH YOU MAYBE IN
SEPTEMBER, THE BACK END OF SEPTEMBER. LOOKING AT A STRONG DOLLAR. EURO-DOLLAR WAS 95 SOMETHING. IT HAS ALL BACKED AWAY FROM THAT. A 10% MOVE ON THE X, Y. WHAT IS DURABLE ABOUT ALL OF THIS? THERE WAS A POSITIVE SURPRISE. THERE IS ADJUSTMENT AS WE MOVE AWAY FROM THE RISK OF RECESSION. WHAT IS YOUR OF ALL ABOUT WITH THESE TAILWINDS? -- WHAT IS EUROPE ALL ABOUT WITH THESE TAILWINDS? JANE: THE MARKET HAS PRICED IN A BETTER SITUATION THAN IT WAS SUPPOSED TO BE.
WE WERE SUPPOSED TO BE IN RECESSION FOR GERMANY. NOW WE HAVE SCHULZ SAYING NO RECESSION FOR GERMANY. THE GOVERNORS OF THE BANK OF FRANCE, THE BANK OF ITALY SAYING OUR OUTLOOKS ARE IMPROVING. YOU LOOK AT THE PERFORMANCE OF EUROPEAN STOCKS THIS YEAR RELATIVE TO THE U.S. THE MARKET HAS BEEN BUYING INTO
THIS BETTER-THAN-EXPECTED STORY FOR EUROPE. WE HAVE THE EURO-DOLLAR AT 109. HOW MUCH OF THAT IS PRICED IN AND HOW MUCH FURTHER CAN THE EURO DINE OUT ON THAT STORY? IT LOOKED THIS WEEK AT THE PMI'S. THEY WERE NOT THAT GOOD.
AS A MOVE INTO THE SUMMER AND THE AUTUMN WE COULD HAVE ANOTHER ENERGY CRISIS. WE DON'T KNOW HOW COLD MAKES WINTER IS GOING TO BE. THERE ARE HEADWINDS FACING THE EURO. THE MARKET IS QUITE LONG ON THE EURO. I DON'T THINK IT'LL BE EASY TO
PUSH UP TO ANOTHER LEG. A CRITICAL ELEMENT IS THE DOLLAR AND WILL THE MARKET CONTINUE TO BELIEVE THE FED GUIDANCE ABOUT THE INTEREST RATE OUTLOOK FOR THIS YEAR. JONATHAN: I HAVE ASKED THIS QUESTION THREE TIMES THIS WEEK. TWO HIKES MORE THIS YEAR?
-- WHO HIKES MORE THIS YEAR? JANE: IT IS THE SAME AS EVERYBODY ELSE. THE ECB IS LIKELY TO HIKE MORE. THE QUESTION REALLY IS, IS THAT IN THE PRICE NOW OR NOT? JONATHAN: FOUR FOR FOUR FOR THE IMPORTANT QUESTION. REALLY IMPORTANT QUESTIONS FOR THIS CONTINENT, FOR EUROPE AND THE SINGLE MARKET FOR EURO-DOLLAR. TOM:
THE YEAR AHEAD UNCERTAINTY. I LIKE YOUR IDEA. WE SHOULD DO A YOUR HEAD ON MARCH 31. YOU ARE DIVING INTO YOURS RIGHT NOW. JONATHAN:
I WILL SHARE MY OUTLOOK LATER THIS WEEK BUT I AGREE. IT ALWAYS RESETS. WHY NOT JUST WAIT TO LAUNCH? I DON'T KNOW. TOM: BECAUSE WE ARE MEMBERS OF THE MEDIA. A GREAT DAY THERE WITH ST. PAUL'S MIRED IN MISSED.
THE THEORETICAL PHYSICS PHD FROM NEW YORK INNER-CITY MARCO KOLN VICH. WE COULD SPEAK ABOUT HIM TRYING TO EXTRICATE HIMSELF AS AN UBER BULL FROM LAST YEAR. LISA: NOW HE IS UBER BEAR. HE SAYS PEOPLE -- AT ONE POINT IS HE A CONTRARIAN AND HE'S REALLY ONTO SOMETHING? THE FUNDAMENTAL DATA IS SENDING A MESSAGE THAT IS DIFFERENT TO SOME OF THE ENTHUSIASM WE ARE SEEING. TOM: A HUGE LESSON HERE. THE DISTINCTION OF HOW MARCO
KOLANOVICH APPROACHES THIS COMPARATIVE THINKING -- BINKY CHADHA. MARCO IS TRYING TO BE MORE ABRUPT AND STOCHASTIC. LISA: A CHANGE ON THE GROUND AND HE HAS CHANGED IN THE OPPOSITE DIRECTION. IT IS FASCINATING TO ME. TOM: FUTURES AT -32. GOOD MORNING. LISA: KEEPING YOU UP TO DATE WITH NEWS AROUND THE WORLD, I AM LISA MATEO. THE U.S. AND GERMANY HAVE OVERCOME A DISAGREEMENT AND AGREED TO GIVE THEIR MAIN BATTLE TANKS TO UKRAINE.
GERMANY CONFIRMED TODAY IT WILL SEND 14 OF ITS LEOPARD TANKS TO UKRAINE AND EVENTUALLY THERE WILL BE MORE. THE ADMINISTRATION IS INSPECTED TO ANNOUNCE AS SOON AS TODAY IT WILL OFFER UKRAINE THE M1 ABRAMS TANK. IN CHINA, LUNAR NEW YEAR TRAVEL AND MOVIE BOX OFFICES ARE SHOWING SIGNS OF RECOVERY. IN THE FIRST FOUR DAYS OF THE
HOLIDAY THE NUMBER OF TRIPS WAS OVER LAST YEAR. THE NUMBER OF MOVIE TICKETS SOLD WAS HIGHER IN 2019 BEFORE THE PANDEMIC. GOOGLE SAYS THE U.S. JUSTICE DEPARTMENT IS DOUBLING DOWN ON A FLAWED ARGUMENT BY SUING THE COMPANY ON ANTITRUST GROUNDS. EIGHT STATES JOINED THE GOVERNMENT IN CALLING FOR THE BREAKUP OF THE SEARCH GIANT'S AD TECHNOLOGY BUSINESS. THE SUIT CLAIMS GOOGLE HAS ILLE
2023-01-28 07:46
