Fade the Fed? | Bloomberg Surveillance 04/29/2024

inflation is not coming down as fast as we expected inflation just has stopped going down it's stalled at a level that's uncomfortable for the FED they're going to want to be more patient inflation is going to be top of mind I think the clear part of the new narrative is high for long on Race the question is where does that take us you can't keep rates up here forever the fed's going to start to cut and you're going to have a massive rally this is Bloomberg's surveil with Jonathan Perell Lisa abowitz and Anar hurn this is a proper Monday morning so bro's out long weekend amh partied too hard can barely speak what time did you go to bed Saturday around 1:30 that sounds like 3:30 that sounds like a 3:30 voice we'll get to amh a little bit later in the show if she can actually speak live from New York City this morning good morning good morning for our audience worldwide let's get your week started EOD Futures positive by 0.1% on the S&P 500 what a week ahead we've got for you here's your top four tomorrow earnings from Amazon then on to the Federal Reserve on Wednesday decision day and news conference with chairman pal Apple earnings coming on Thursday payrolls on Friday if you want a sneak peek of Friday the estimate in our survey 250k and as you all know payrolls has been absolutely dominated by a series of upside surprises this morning dominated by one chart it's dollar Yen could we throw up dollar Yen and can we talk about the range we've seen on dollar Yen today this is not a monthly range this is an intraday range we've been through 160 already in the last 12 hours doly y back down to 15576 we've had a break of 160 for the first time in more than 30 years we started the month focused on 152 152 they wish at this point and they being the Ministry of Finance in Japan no comment that's what we heard from the Ministry of Finance no comment no it was no comment for now so what they're doing is they're being very fuzzy about what's going on people are talking about potentially was this a fat finger was the fact that there's a public holiday in Japan low liquidity but I love the fact that they come out and the top currency official says no comment for now may will we get a comment did they intervene we don't know I think that was a comment it's just sort of like no comment for now apparently if you wanted to make a statement it's a great time to do it AMX just said low liquidity national holiday it makes a whole lot of sense this is what misso said will a dog chase an airborn frisbee this is helpful yes markets appear to be trying to push Dolly Yen towards 160 in the absence of official intervention and it's still unclear whether we've had so-called intervention kit Joseph sock genen really putting forward I think the statement of the morning what we actually need to see to put a durable floor or rather durable ceiling on top of dolyan this is what kit has to say more aggressive policy action from both the Ministry of Finance concerted and repeated intervention and the boj signaling a willingness to normalize policy further unnecessary to stabilize the currency and clearer signs of stronger growth across the wide economy as well as signs that treasury yields of Pete will be needed before a sustainable Yen rally can actually get going that's the push back from kit this morning that currency pair has been an absolute mess so far in April 15574 is where we trade coming up this our fantastic lineup to get through a week of events for you lorri Cav CER of RBC a stocks rally ahead of earnings from Amazon and apple m mccor a TD Securities as the Yen bounces off a 34-year low and Wells faros J Bryson looking ahead to the fed and us play rols we begin with our top story US Stocks coming off at their strongest week of gains so far this year thanks to a big Boost from Big Tech lorri Calo of RBC right in this we still believe our year end S&P 500 Target of 5,300 is a reasonable expectation the key thing we've learned from our survey is that even though higher rates are a headwind there's a confidence in the stop picking community that this challenge can be managed Lor's with us for the hour she joins us around the table Lori good morning to you thanks for having me fantastic to see you I want to start with this this came from p sh Academy and he went through some of the big names in big tag over the last week and he started with Nvidia two Fridays ago so two Fridays ago we had a 10% move on absolutely nothing a $2 trillion company 10% move just like that Tesla last Wednesday moved the 10% on a 500 billion doll market cap meta another move of 10% this time to the downside on a 1 trillion doll market cap and then we had alphabet with a move of 10% on Friday on a $2.1 trillion market cap Peter Cher asking the asking the big question is 10% sent the new 1% for Mega cap Tech and what's the message you take away from that so um I'll go back to my small cap days if I can and I know these are the farthest feels like yeah this is how small caps have always traded um you know I think some of the price reactions in small cap to prints have gotten a bit worse than that but you know I think in in small cap this is just something that was a normal you know sort of reaction to earnings for a long time so it doesn't maybe throw me quite as much as as it might some other folks what should we take away from the fact that Uber cap stocks are behaving like small caps though well I think what we're seeing if we look at the earnings data and Bloomberg does some great work just forecasting where the earnings are expected to go based on bottomup consensus forecast we've been talking about this since January and you see a decelerating growth rate so coming off around I think 35% in 2023 if you look at the basket as a whole for the mag 7 that's forecasted to drop to about 15% or so in 2025 and really basically come in line with the rest of the market and there's one thing I've learned over the course of my career is that when you have uh these you know powerful momentum stocks and growth rates decelerate it doesn't matter how good the growth is growth investors get angsty and that's what I feel like you're seeing in the stock price reaction it raises big questions right now about what's being rewarded and what's been punished going into numbers from Apple and Amazon we talked about the dates for those two names Amazon earnings coming tomorrow Apple coming on Thursday can we focus on that a little bit more what do you sense has been rewarded really well this earning season what's getting punished so if you look at the Russell 1000 and we have to look that big this early in reporting season the Beats aren't getting rewarded I mean they're underperforming they're not performing as well as they typically do in kind of the one to two Day post post uh prints so I think what I've noticed as we're going through commentary and again it's still very early we're reading as much as we can we don't get through everything you know they're fast reads um but what I feel like I'm seeing is just kind of an intolerance for the we need to be patient uh conversation we sensed a lot of that early on I sort of felt like there was a shift last week kind of midweek where companies who were saying okay we're getting the benefit of these things now and I'm thinking about specifically on the AI discussion you know we're benefiting from the ramp that's going to continue in coming years investors were okay with that but the sort of wait and see this is going to take time again we've got decelerating earnings growth at you know kind of 27 times multiples on a median PE in those biggest tech stocks investors just don't have a lot of patience for that right now so is there time for a pullback now so we've been getting a little bit of a pullback and a lot of that has happened as we've had some volatility in these bigger names um you know look I'm not looking for any kind of massive pullback in those names or massive pullback in the markets we've said we thought the pullback would be worth about to 10% we've had more than five I don't think we're quite done yet if you look at cftc data on positioning in either NASDAQ 100 Futures S&P futures or the broader Market you know we haven't even begun the correction if you look at a AI we've done some damage but we still got you know probably at least a couple more weeks of damage to do there so if you look at the Peter cheer note and he talks about how these big companies are trading like little companies who's going to be leading if there's not a pullback right now how do you see this rotation so you know I think the financials have come through this reporting season so far reasonably well um I personally on my team read a lot of Industrials and materials I'm not really seeing any big kind of demand problems you know I'm seeing companies that are talking a lot of being able to manage through headwinds I think it's it's not so much a particular sector I think it's looking for Industries for companies within the value cyclical cohort of the market so that could be energy materials Industrials I think certain small caps as well want to talk about another big Uber Camp company Apple on Thursday this from Bernstein this morning latest note dropping from them by the fear of grading the stock to to outperform Apple has derated significantly amid a weak iPhone 15 cycle and fears that Apple's China business is structurally impaired they're taking the other side of some of this Lorry I won't ask you specifically about Apple but maybe some of the forces associated with that name at the moment the difficulty navigating international waters particularly China the strength of the US dollar a factor I think as well I was reading through your note overnight how many times have those two themes come up on earning sces so far so the FX headwinds are coming up I'm noticing it more with the tech companies to be honest than other when we'll see you know we've got a lot of stuff in the other parts of the market to hear from but so far it seems mostly to be a tech company phenomenon I will say on the geographic commentary and it it's may be a little hard to say because we've had a lot of financials so far but at least in what I read last week the geographic commentary so Europe China kind of Trends versus the US things seem a lot more balanced whereas if you look last year it was all China's not coming through as well as we anticipated there's a lot of uncertainty things haven't bottomed yet and I wouldn't say I'm seeing a lot of you know jumping up and down and celebrating on China but it just seems more balanced what do you think the difficulty has been in China for Tech firms specifically what is unique about China to them you know I'm not sure I know the great answer to that question to be honest I know it's been a growth part of the business uh for many of these companies and when you're encountering you know sort of difficulty in the post-pandemic world you know there was so much excitement a year ago that we were sort of finally getting that recovery and that normalization and that normalization I think just hasn't been as clean as a lot of companies would have anticipated I think there's just not a lot of visibility necessarily on when that was going to turn around when you read through these earnings reports I think back to what Muhammad Alan recently told us about how a lot of people missed what CEOs were saying and they bought into this transitory inflation but CEOs were saying actually we still feel inflation coming down the pipeline what do you gather from reading all these reports about where inflation is right now for these corporates so you know it's funny back in the last reporting season so kind of calendar one Q for the 4 q numbers um companies were raising the red flag right like they were really complaining about C margin pressures I'm not sensing quite as much of that now it doesn't sound good it sounds you know some companies are complaining a lot about inflation some people are talking about moderating disinflation deflation it's a little more mixed but again it is still very early Lori this was great it's going to be fantastic to run through some of the top stories 10-minute conversation with lorri Cal Senor of RBC not a single mention of the Federal Reserve going into that decision on Wednesday which I guess is a good thing because we've actually been talking about nothing but the Federal Reserve over the last month or so let's turn to the price action let's get the cross asset board up and start with equities Equity Futures on the S&P 500 positive here by 0.1% that move has been fading through this morning so we're near session lows on the S&P 500 in the bond market yield a lower by three or four basis points on a 10-year 46239 and in foreign exchange the Euro a little bit firmer here Dolly end turning around big time we'll talk more about that a little bit later the Euro 10715 that currency pair positive by 2/10 of 1% let's give you an update on stories elsewhere this morning here is your Bloomberg brief with Danny Burger hey Danny hey John Elon musk's quick visit to China has paid off almost immediately Tesla now has cleared two key hurdles for its driver assistance system Tesla will be partnering with Buu for mapping and navigation to support its full self-driving function sources say I spoke to saxo Peter Garder earlier this morning who told me that must visit to China was an acknowledgement that he needs to change the market narrative But ultimately Tesla still won't be a top player in China's EV Market Philip shares soaring in the European session this morning up 46% the company reached a lower than expected settlement on us claims over faulty sleep apnea devices the deal they reached with authorities was for $1.1 billion that compares to what analysts were expecting of $4.5 billion the expectation is also that this will draw a line under us claims but Phillips for their part are still conducting toxicology tests related to the devices now the Redstone family and David Ellison are trying to appease angry Paramount investors sources tell us that the Redstone family which controls a majority of shares and Ellison of Sky Dan are both making appeals and concessions Ellison is offering to buy a block of paramont shares at a premium his bid described as the quote best and final offer as board members remain undecided about a sky Dan takeover CEO Bob bakish could be ousted as soon as today by a management committee that's your Bloomberg brief John Danny appreciate the update that story has been an absolute mess over the last few weeks look out for updates on that got updates on this from the world economic Forum Summit been held in Riyad Saudi Arabia secretary blink's been speaking in the last few minutes saying this the Israel ceasefire proposal he calls it quote extraordinarily generous howas is the only thing standing between a ceasefire in Gaza that's the latest from security blinking this morning I imagine we'll get more headlines throughout today up next on the program the 2024 presidential race ramping up the 2024 elections in full swing and yes age is an issue I'm a grown man running against a six-year-old that conversation just around the corner live from New York City this morning from a beautiful New York good morning Wednesday the FED decide Shay pal pumping the brakes on rake Cuts hikes are off the table no Cuts looking perhaps a little bit more likely you can't say there's a whole lot wrong with the US economy trust Bloomberg to bring you the fastest coverage and exclusive analysis including Powell's press conference our policy rate is likely at its peak the threshold to cut rate is a little higher we're redefining patience Bloomberg surveillance the FED decides starting at 1:30 p.m. Eastern context changes [Music] everything Equity Futures on S&P 500 positive here by 0.1% last week the biggest weekly gain on the S&P 500 of the year so far just remember that followed the biggest weekly loss on the S&P 500 of the year so far in April we still down about 3% in the bond market yields are lower by three or four basis points 46259 two big events this week outside of earnings Federal Reserve Wednesday payrolls report on Friday under surveillance this morning the 2024 presidential race ramping up the 202 24 elections in full swing and yes age is an issue I'm a grown man running against a six-year-old well I feel great I really feel great I'm campaigning all over the country Pennsylvania Georgia North Carolina I've always done well in the original 13 colonies the president of the United States over the weekend just a few things to say I know the president likes ice cream so let's run with that theme if you order vanilla and you get vanilla you can't complain after that if you get a vanilla comedian to do the so-called grilling and you get a vanilla grilling what's the complaint who is surprised I mean I like the guy he's very pleasing just to listen to what's the surprise he's a vanilla comedian on Essa now and he delivered vanilla he had some funny moments but at the end he almost endorsed the president he talked about his grandfather who voted for Joe Biden and he and he explained this whole story saying that he thinks he's a decent man and that's not really the job of the comedian the comedian is there to roast the administration and the journalist in the room goes both ways and maybe he was just too friendly Shane Gillis can we just book Shane Gillis for next year just get it done at proper roasting from Shane wouldn't everyone love that it would be pretty funny that would be pretty funny that would be better than good here's the latest this morning new polling from CBS in three swing States showing President Biden with a single digigit lead in Michigan former president Donald Trump with a slim lead in Pennsylvania and Wisconsin Terry Hayes of Pangia policy writing this Biden is still likely to be reelected by the skin of his teeth Po's are leveling out Trump is still weak and rfk's balloon is punching and slowly running out of air Terry joins us now for more Terry wonderful to have you with us on the program this morning you've maintained this view for quite a while what is it that you see in our future that ultimately ends at this destination well fundamentally it's uh it's that uh Trump is kind of topped out uh and Biden's got a Biden's got a floor with some room to run and room to grow and that's fundamental uh you know Trump is ever since mid January Trump's been awfully weak uh you know what you've got is you've got splits you saw this in the primaries you've got splits of 20 to 40% of the party regulars not voting for him you've got independence not breaking his way he needs a unified party and he needs Independence to uh to be more for him than not uh in order to win right now that's not happening uh you combine that with a uh an electorate that really hungers for a credible serious third-party candidate for a while it looked like you'd either have Bob Kennedy or a no labels candidate or both uh in those in those shoes uh no labels dropped out for a lack of ability to convince anyone and uh and Bob Kennedy I'm sorry to say has made his uh his candidacy into a niche one uh and far less serious so uh what you got here is you got a situation where U uh where where Biden I think is going to have a superior organization Superior get out the vote and uh and 6 months from now uh I think that's what you see is the skin of the teeth win Terry you know the cheat code for amateur political pundits like me you turn around you bang the table and you say it's all going to be a bad turnout it's all going to be about turnout and Terry you just say that and repeat to try and sound smart Terry can you tell us about turnout the potential for people just not to turn up to election in November given how disappointed they are with the two candidates in front of them yeah I think there's uh I think there's possibility for that you know it is all about turnout of course but the at the same time folks tend to overestimate how much turnout goes up or down uh the famous Obama surge in 2008 turned out to be something like 1.7% of the electorate uh you know and it seemed much bigger than that even uh even on the ground at the time uh but uh you know what you got here is a situation where you you've got a couple of candidates that aren't actually uh uh exciting people generally speaking there was one one Joke Factory called it a gesture to Earth Day by you know recycling presidential candidates uh but that's going to get replaced I think by a uh by a surge by some on the right kind of the Trump loyalists who haven't increased their numbers since 2020 but but are still quite passionate but you're going to have the social issue Democrats particularly in swing States and that's exactly what Biden's counting on the third thing they'll count on is as Jim massina Obama's former campaign manager said is uh is driving third party numbers through the floor in the next six months and they'll try to achieve that too by making Kennedy into a nut Terry this is Lori calvasina as you think about the polling data and and just sort of Biden's low approval numbers favorability is there anything that can turn those around you know when markets were watching inflation we're watching foreign policy do any of those things you know matter for Biden's polling stats at this point uh I you know good morning Lori I think uh the way I would look at it is Biden's numbers are going to be what Biden's numbers on favorability and all the rest are pretty much going to be what they are you know the uh and you know I take issue with a lot of of where the White House has been on a number of these issues you know saying that you're going to uh deal with inflation and then you know having people still dealing with high prices and unsatisfied is not exactly a a smart political strategy among other things but you know what I tend to look for is not so much whether or not his numbers on favorability likability anything else go uh you know another uh another amateur table pounder is always you know it's always a choice right you're whether you're choosing for somebody or against somebody Biden's uh Biden's Gambit is going to be uh that he's going to make it not so much about him he's going to have a record but he's going to make it about the other guy and uh you know what you saw at the course respondence dinner you're going to be treated to six months more of that as part of that strategy uh you know and I think that uh you wanting less of the Trump circus is part of the Biden campaign strategy I think it actually helps him and Terry one more just as we think about the intersection of politics and markets when you're thinking about policy from these two candidates what are the one or two things you're saying if Trump wins or Biden wins investors should really be expecting to happen in terms of Trades they can make well uh I'm not going to recommend specific trades but what I will say is that you've got a situation where you know Trump's going to be stronger on kind of traditional uh firstly uh traditional uh Industries and sectors uh defense fossil fuels uh you know things like that generally speaking uh there will be a a lighter hand regulatorily uh you know none of this foolishness coming out of the FTC uh you know trying to have antitrust antitrust cases against uh luxury handbag makers and the like so uh you know so that that will cheer markets what will worry markets about Trump frankly is the kind of stuff that's coming out of uh of hyperventilating staff these days trying to uh trying to medal in the FED Independence that sort of thing anything that that medals with the the fundamentals of markets and that includes the fed's ability to do its job is going to be a negative for markets and uh you know that's happening now a little bit but I think think should Trump be president uh markets will very much need to look out for that Terry I want to go back to the CBS News poll Biden and Trump are neck and neck when it comes to the blue wall what levers can Biden pull before the election to help three these three states sh up support Michigan Pennsylvania and Wisconsin now let me speak to Pennsylvania specifically because I know the most about it uh in a granular sense uh you know Biden thinks he's going to he goes to Philadelphia he's going to Pennsylvania that's not true true uh there's Philadelphia then there's the vast rest of the state the vast rest of the State uh is uh speaking broadly is red they don't like him they don't understand what what he's doing uh they what they understand is that their prices are up and uh and their their core Industries including energy Industries LG and the like are under attack uh Biden needs to do more than get into Pittsburgh let's say and talk about to talk to the steel workers for 15 minutes he needs to go 15 miles south uh to Canonsburg which is the world capital of fracking essentially and talk to people in Washington County Green County fyat County about why he's trying to do what he's trying to do for them uh it can't just be about the uh the groups that in kind of traditional democratic Politics the groups in which you get turnout it's got to be about more than that the more he actually tries to connect with real citizens who might be skeptical about him you know the better he'll do and that's going to be key in a place like Pennsylvania it's got 10 seconds should Saturday's dinner be the last dinner it should have been the last dinner about 10 or 15 years ago all I have to say to you is you know look look to Jerry Seinfeld's great quote about uh uh you know about the death of comedy and you see everything you need to see in that dinner it died on Saturday night Terry Hayes of panger policy that's brutal sound like the New York Times Terry thank you sir they had a brutal review of Saturday night I didn't think it was that bad until the very end I'm not sure I'm interested in which way he thinks we should vote but anyway this from DJ Dow Jones Japan Financial authorities did intervene in the FX Market that's the report coming from sources according to Dow Jones today the official on the record point of view from the ministry of finances no comment this is the story coming out of Dow Jones dollan with a big swing breaking through 160 overnight back down to 15585 we'll catch up with Mark mccor at TD Securities up next from New York this is Bloomberg [Music] welcome to the program sneak peek of Summer a little bit later today in New York City wishing you all the best for the week ahead Equity Futures on the S&P 500 it's going to be a warm one here in New York on the East Coast Equity Futures positive by 0.1% on the S&P on the NASDAQ up by 0.2 really strong week of gains in the equity market last week strongest week of gains we've had so far in 2024 if you switch at the ball and get to the bond market 2E and 10 year let's focus on the 10-e we've had five weeks five weeks at a 10-year yield climbing Kia a little bit lower this morning down four basis points last week briefly through 470 46239 on 10 on twos 497 just in and around 5% over the last few weeks or so if you turn aboard and turn to Foreign Exchange the only thing we're talking about today in foreign exchange is what is happening with dollar Yen so let's go through the range together on dollar yen overnight late last night us time we broke through 160 so the higher the session 1617 the lower the session 15454 and the price right now 15583 the official line so far from the Ministry of Finance in Japan there's no comment at the moment this is coming from Dow Jones just moments ago that Japanese Financial authorities did intervene in the FX Market overnight there was a public holiday low liquidity really the perfect time in either direction if you wanted to bullly the Japanese yen in either direction so what we saw was dollar Yen Gap higher and then ultimately potentially reportedly authorities coming out and pushing this one back down again big week ahead for this Foreign Exchange Market with the Federal Reserve on deck on Wednesday and payrolls on Friday under surveillance this morning the latest fed decision and news conference from Fed chair J pal coming on Wednesday investors looking for a hawkish tilt after a string of hotter than expected inflation prints us payrolls running out the week on Friday Bloomberg survey the meeting estimate 250k 2 50k does not scream recession the previous month doesn't scream recession either it screams boom 303 was the previous month we're looking for 250 in the number on Friday Lori cavis of RBC with us around the table for the rest of the hour Lori let's talk about the Federal Reserve we haven't mentioned it yet Wednesday what are you in the team looking for so look I feel like the equity Community has already gotten into its head you know at least a decent number of people I talk to that cuts aren't going to happen this year right and that's not necessarily what you're seeing in market pricing but I I've been hearing this since February right so I have a hard time sitting here with 166 companies coming out saying Equity investors are really going to be focused on the press conference on Wednesday afternoon now I know we always have a lot of drama around it it always comes back um but to me frankly it's a little bit of the b-plot this week I'll be really kind of listening to see if there's anything the market takes out of it suggesting there might be hikes coming because I do think that would be really disruptive to equity investors but that's not something I'm really anticipated so give the choice right now in front of you and we can go through the week ahead again tomorrow Amazon Thursday Apple so that's ear data on Friday the big one payrolls we've got some isms through the week as well then you've got monetary policy which you think is sort of like the be list this week what's the A-list what's the number one for you the A-list is just the earnings themselves right I mean I think as long as we've got a reasonably strong economy I think the market can handle the FED just sort of staying steady you know admittedly when I look at my valuation work there is some downside potential if we don't get any Cuts this year we have a whole big model that looks at inflation fed 10e pees uh we look at it against our earnings there could be you know some downside to say 4900 5,000 that doesn't feel good but it's not exactly a disaster from where we're sitting today one thing that isn't steady in the pre market is Tesla Tesla rallying pretty hard here's the news on that the CEO Elon mus you might have noticed over the weekend making a surprise trip to China Bloomberg reporting the EV maker will partner with China's Buu for mapping and navigation to support full South driving in the country the technology does not make the cars autonomous but the software is sold for $88,000 or 99 bucks a month that's stock amh is up by 8.5 8.6% this morning and the surprise visit Dan IES is calling a home run by this visit by Elon MOS they also seem to pass this key data security that they would need from Beijing in order to be able to use FSD in that market it just goes to show how important China is for Elon Musk he was supposed to have a sit down with Modi of India that got pushed to the side and yet his first trip after a little bit of struggles immediately to China Great true now of blimber joining us out of London on our latest reporting a little bit later this morning look out for that want to turn to the main event in foreign exchange the Yen bouncing office weakest level in 34 years dollar Yen falling to 160 before rallying back on thin trading due to a local public holiday Japan's top currency officials saying no comment for now when asked by reporters if the government intervened Mark McCormack at TD Securities joins us right now to comment officially on the situation Mark McCormick what happened overnight yeah I think it's pretty clear if you think of the sequence we had some hot inflation come through last couple of weeks in the US then we basically had boj that was standing Pat basically said we're pretty much not changing our stance we're not doing anything uh I think one of the things is boj is very good at telling us what they did historically but I don't think you should look at the boj for forward guidance on what they'll do in the future uh so dollar Yen moved rapidly higher uh after those events and essentially what you have is the boj and the Ministry of Finance seem to not have the same opinion about where the Gen should be and it looks as if overnight the Japanese officials had intervened in the Market to try to uh strengthen the end mark let's get into that distinction it's important so we've heard complaints from the Ministry of Finance we've heard next to nothing from the bank of Japan we have to deal with the the big question is it a problem or not do you think it is a problem well I think part of it is the problem is is is it speculative and does it have kind of somewhat of a a negative impact I think part of it with FX is there's always winners and losers uh so you know if you think about it from one perspective the boj they're helping tourism they're helping profit margins those things are good uh you can see the exporters are are accumulating larger surpluses but again at the same time if you look at the correlation to the you know whether or not the the uh politics and the politicians are actually doing their job properly I think what we can see is there's a very strong correlation with the disapproval rating in the diet versus the movement in dollar Yen so this is a big pain point for consumers also if you look at oil based in Yen prices we're back to where we were in 20072 2008 so there is a massive consumer shock here that's going on from the the we n in the end so I think the Ministry of Finance is more focused on the broad-based movement and whether or not it's kind of dislodged to tell from fundamentals and the boj is essentially just kind of sticking to their party line that this is not something that they want to control they basically control interest rates and monetary policy and the FX is basically a function for the Ministry of Finance this currency has been bullied all month mizo describing it as a dog chasing an airborn frisbee which made me laugh at least this morning Mark looking at the direction of travel over the last month or so I want to know whether you believe we've actually put a sustainable ceiling now in this currency pair on dollar Yen and I want your opinion on this from kit Jukes of sojen who said basically what we need to achieve that is more aggressive policy action from both the Ministry of Finance and from the boj then the boj would need to Signal a willingness to normalize policy even further which so far markers you know they've been reluctant to do so so do you think we've established a pretty durable solid resilient ceiling on Doan around 160 I think we have in part on the fact that what intervention does is it doesn't change the trend it changes the psychology so you know typically what we could see is at least two weeks of this intervention working uh I would say what we need on the other side is we do need to see the the trajectory of the dollar change we do need to see the fundamentals in us change I don't think that's going to change in favor of a stronger again in the short term but as you mentioned the boj does have an impact and you know I think part of what if we go back to like every major Central Bank when they started normalizing policy over the last couple of years everyone chronically underestimated what the terminal rate was and I think this was a part of it it's price Discovery we're in New World central banks are are essentially their forward guidance and their their forecast themselves have not been able to articulate exactly where they think the terminal rate should be either so it's been basically you know the market has basically been forced to kind of go through this process of figuring it out through trial and error and I think basically what we should think about is that the boj and the Japan uh policy rate the the natural policy rate is much higher than what's being priced in the markets if you look at one year one year uh Japanese uh basis price swaps were basically around 50 basis points I would argue it's much higher than that it's probably above one so I think at some point whether or not it's because of the currency or whether or not just because uh you know the level what's priced in the market and where inflation is a bit more sticky in Japan you know if you look at some of the stuff that's dropped out of the inflation Basket in Tokyo and uh some of the other indicators you track in Japan they're more temporary they're related to uh fiscal stimulus that's come through if they've come through on subsidies so but the level of inflation in Japan is generally pretty higher so I would argue here that the boj is going to be forced to tighten more aggressively at what's pric in the market that will help stabilize the end but for the process to turn lower you just need a much more doish fed which looks increasingly unlikely at least for the remainder of this year well Mark that's what I wanted to ask if short term the US dollars not going anywhere won't the boj thei financial Chiefs in the currency Chiefs in Japan just be dealing with this episode again well I think a big component here is if you think about what drives dollar Yen uh I think there's two factors right now that we can kind of see in some of the models in data we track it's hedge funds because there's a trade in it and it's Japanese institutional investors so I think a big piece of it is the market wants to see institutional investors kind of front run uh movement in the policy and I I would argue that they are lagging indicators so if you think about Pension funds insurance companies uh even corporations you know essentially these are probably some of the the institutions that are caught on the wrong side of this trade I think a lot of these places we're probably thinking between 140 145 that's top in dollar Yen uh so a lot of these institutions were probably essentially short dollars long Yen and basically the move to 160 just was too much too fast so that's where you start to see the shoulder Taps but I think in terms of the movements dollar Yen over the longer term the pension fund rebalancing the insurance companies all these these institutions that are really running low unhedged levels in dollar Yen these are the ones that will start to repatriate that Capital yes you need uh some movements coming from the fed and from the US curve uh but essentially at the same time you also if you have boj tightening policy a little bit more aggressively than what's markets are pricing we will see the repatriate of those flows over time uh which is our expectations but that's not going to be the short-term trade that is a process of how they look at an investment which uh those rebalancing usually come quarterly or even annually if you are just joining us big moves overnight in the FX Market allow me to run through them for you we broke through 160 late last night on dollar Yen this Market's just been bullying the Japanese Yen pushing it ever higher over the last month or so some big numbers taken out numbers we haven't seen since the early 1990s that range this morning 167 at the high then the low 15454 Japanese Yen kicking in some strength big time in the last few hours or so and a lot of suspicion that the Ministry of Finance has intervened in this market the official comment from them so far is no comment this from Dow Jones that Financial authorities have intervened in the FX Market Mark I want to wrap things up more broadly in foreign exchange this came from Eric Robertson of stanchart he said this for em the combination of weaker currencies and stronger commodity prices you alluded to that is creating a major dilemma that could put rate cuts on hold indefinitely Mark how do you think this story the moment pair what's happening with the US dollar with what's happening with commodities how does it shape Central Bank decisions worldwide yeah it's absolutely critical it's a a very strong point there's two there's a way to think about it right if you have strong growth and strong growth is leading to Central Bank changes that has one way of thinking the FX Market if it's strong growth and generally contained disinflation that is bearish for the dollar and that's where the commodity story kicks in you get a turn to trade shock that's good for em especially in the context that they have really high high level of interest rates in terms of carry what we've seen recently though this is how it changes the market these are policy shocks and the policy shocks driven by inflation is what causes rate differentials to matter a lot so I think you could see this last week Bank of Indonesia surprised markets by hiking rates no one was expecting that we are now dealing with a policy tradeoff for G10 and Emerging Market central banks that if the FED uh is basically priced to the point where they can cut once or cut not cut at all or even depending on who wins the election whether or not they actually have to hike next year what we're seeing is these policy shocks are usually riskof good for the dollar I think in the context of Commodities there's some cushion for the commodity exporters like Brazil um and some of the other countries around the world but it's very small and it's going to be marginal in terms of the context of whether or not these policy shocks driven by US inflation which is starting to accelerate relative to other currencies that we track and is more bullish for the dollar uh that's going to force central banks that will have the ability to cut to change their perspective and that changing of perspective is what tightens Financial conditions and it's what changes the growth outlook for the next 6 to 12 months which can be mutually reinforcing and negative for risk and strong for the dollar hey Mark this was great just fantastic to get your view on events overnight Mark momic there of TD Securities rate cuts are luxury that many central banks do not have right now Equity Futures positive by 0.2% let's get you up to speed on stories elsewhere here is your Bloomberg brief with Danny burer hey Danny hey John China's president she will VIs visit the European Union for the first time in five years next week she is going to visit France as well as Hungary and non-member Serbia it'll be a Six-Day trip there are visible tensions right now between Europe and China for things like trade and spying allegations but perhaps top of those tensions is beijing's support for Russia's invasion of Ukraine Beijing is pushing to repair relations with the EU while leaders there have become more assertive in responding to China's trade policies senators are dismissing house speak Mike Johnson's call to send the National Guard to college campuses Johnson visited Columbia University last week he condemned Pro Palestinian protest and said there that it would be quote appropriate for the National Guard if demonstrations were not contained both Republican and Democratic senators have dismissed the idea JD Vance of Ohio said maybe just call the police while Tim Kane of Virginia called it a very very bad idea Apple yet again facing antitrust headwinds in Europe this time it's the iPad it's going to be added to a list of products that fall under the eu's digital Market act now Apple has 6 months to comply with a whole set of new obligations and prohibitions it's things like allowing the iPad users to download apps outside of Apple Store it is a clear loss for Apple but it also underscores the willingness of EU officials to go after big Tech already having taken aim at Microsoft meta alphabet Amazon and bite dance that's your brief John hey Danny thank you we'll catch up with Danny at about 30 minutes time up next on the program the feds change in tone there's both a story here about the economy holding up very well with high interest rates as well as inflation pressure is being persistent I think the case for fed easing here is pretty is pretty small anytime soon the Federal Reserve decision 2 days away that conversation up next [Music] equity's positive here by 0.22% on the S&P 500 a lift again adding some weight to the rally from last week yield to lower that's helping things we're down four basis points on a 10year 462 18 under surveillance this morning the feds change in tone there's both a story here about the economy holding up very well with high interest rates as well as inflation pressure is being persistent I think the case for fed easing here is pretty is pretty small anytime soon we'll see where we are 6 months from now uh but certainly the fed's going to have to change its tune about its uh its view that there's a fair amount of easing that's coming down the road it's the latest this morning sticky inflation data reinforcing the high for longer narrative as the FED kicks off a two-day meeting tomorrow J Bryson of Wells Fargo writing there stubborn inflation and resilient economic activity through the first few months of the year have left the FWC little reason to ease policy in the near term we currently expect the FMC to first cut the FED funds Target rate by 25 basis points at his September meeting Jay Bryson joins us now for more so Jay before we get into the FED call I want to talk about the data from last week for all the talk of us exceptionalism over the rest of the word how how exceptional was the first quarter in US growth well I mean the US clearly uh grew faster than than the rest of the world in in the first quarter now we grew 1.6% annualized um I would say it was actually stronger than that a lot of that drag was from inventories and imports and you know Imports show that domestic demand is actually pretty strong here but if you look around you know the rest of the world maybe you're eeking out positive growth rates you know in in uh the EU maybe get to eek out a positive growth rate in in the United Kingdom but you know in general the US is is outpacing it's its major trading partners at this point Jay you kind of alluded to it just how compatible was that downside surprise on GDP with the rest of the data we had for the first quarter yeah so you know again it comes down to to inventories there was a fairly large inventory drag it's sliced off about a full percentage point and if you look at net exports that was also close to to a half a percentage Point as well and and so if you you know you dig down a little bit further consumer spending grew 2 and a half% that's a solid growth rate we eak out a positive growth rate in terms of fixed investment spending as well so if you look at the underlying core of the US economy right now growth in those main drivers of of GDP growth is is pretty strong let's s into your fed call and a month the month jumps off the page for me September Jay we've had a lot of characters around this table who have said September is not doable because it's too close to the election why are you running with September so so first of all John what I would say is the rist to that view of of September are probably skewed to the to the to the backside right you know after um you know towards the end of the year I certainly acknowledge that but between now and then you will get three pce prints you'll get three more um non-farm payroll prints as well you know could they raise cut rates in September if things are slowing down enough then yes you know does does the election just freeze September no um the FED would prefer not to be moving in September but if you do see you know a significant deceleration in the economy if you do see the three-month annualized rate of inflation coming back down to two and a half 2% you could potentially see a rate cut in September so this is Lori um one question for you on your September call is what really gives you the confidence that the inflation data is going to cooperate by September to give the FED permission to go ahead and cut and I would say number two when you're thinking about you know the potential for the hike conversation to come back in how bad do you think the inflation data would have to be for that conversation to pick back up in markets again yeah so laori let's take the second question first I mean I think what you would need to see for um you know the rate hikes to come back onto the table I think you would need to see a string a continued string of0 3.4 in terms of the month-on-month change in the core pce that would show you that in inflation is just not coming back down to you know the 2% sort of Target that the FED is looking for and I think that's what you kind of need to see that now so what what are we going to what are we looking for going forward so we do think that you know and the data would show this that if you look at housing prices housing prices continue to decelerate at least in terms of you know what you're actually seeing out there in the real market in terms of rents we think that will come down the labor market is also getting into better balance in terms of supply and demand the quit rate is back below where it was before the pandemic the the vacancy rate is also coming back down to where it was before the pandemic and so as the labor market gets into better balance that should slow the the rate of wage growth and then that brings back down the super core uh rate of inflation so that's kind of what we're looking for in terms of you know the FED easing later this year Jay you say that the election doesn't make September unmanageable but what about November could they the day after two days after the election come out and do something in November yeah and so you know that that's that's again that's kind of tricky right if they're if they are on pause in September they're going to get a lot of push back from one side and then if they go ahead and and two days after the election they're cutting rates they're going to get a lot of push back for saying ah these guys just you know held rates in September you to help one one side here so the election does um does complicate things for them but if you go back and you look at you know other election years they have moved before right you right on the eve of an election so it doesn't it doesn't rule it out it complicates their their messaging it complicates what they're trying to do but it doesn't necessarily rule out a ratee move in September Jay just on the politics the report from The Wall Street Journal last week that the former president and a team around him reportedly are considering how to be a little bit more assertive around Central Bank decisions in the Federal Reserve I'm being diplomatic here Jay J I just wonder what your response to that actually was do you know how that would work in practice so you know so um I guess I don't really fully understand the question John but I guess what you know what you're you're alluding to here is I I think there will potentially be more political pressure on the FED um if former uh the former president is is reelected you know he put some political pressure on the FED before and you could you could imagine that um going forward as well you answered the question in the spirit in which it was intended Jay thank you sir Jay Bryson of w Fara Jay appreciate it follow in that Wall Street Journal report just last week amh what did you make of that well let's go to what Terry Haynes had to say over the weekend he came out with a note saying quote forget about it because when it comes to the central bank the FED monetary policy is congress's job to mandate and to give that to the central bank to look at their dual mandate has nothing to do with the president but of course when you look up potentially who's going to be around the president you can have some sort of initiatives that would potentially make it a d ization path forward they want a weaker Dollar in terms of exports but nothing at least to Terry Hayne says that Congress nor other courts are going to be able to do to give that authority to the president I'm guessing Jay knew exactly what I meant Amar mentioned a little bit earlier in the program should the FED be guided by the economic data or Guided by the communication we're getting from Corporate America Lori can we finish on this quote from Walmart at Walmart we're now seeing prices that are in line with where they were 12 months ago I haven't been able to say that for a few years now that's an executive speaking to ABC we've heard echoes of that coming out the company what do you think we are learning from Corporate America so I I do feel like the inflation commentary is a little less hot than what it was in the last reporting season and that's a good sign right we still H we're not even halfway through this thing yet right so we've got to see what comes out in the next few weeks but I do feel like it's just a more mixed more nuanced conversation um you know I think companies's last quarter seemed to really do a good job of keeping expectations in line and talking things down I'm not noticing that this time around and we've actually seen S&P EPS the bottom up consensus has moved up two bucks so we'll see if that continues but I feel like they've done a good job the last year or so clamping down expectations and the setup's actually pretty decent big big story later this week on the enx front Amazon coming up tomorrow apple on Thursday Lori love this it's good to see you thanks for having thanks for being with us for the hour Lori C there of RBC Capital markets let's set up the second hour of blomberg surveillance joining us for the next 60 minutes we'll catch up with Jay Pelosi of tpw Bloom crater down the latest with Tesla Tom Forte of Maxim group looking ahead to earnings this week including Amazon tomorrow and we'll catch up with the brilliant chanala ey a Franklin Templeton on this bond market going into payrolls and the Federal Reserve Equity Futures positive here by 0.2% on the S&P Bon yield are lower by four basis points on a 10year 46226 live from New York City this is Bloomberg [Music] the stocks are starting to get a little flashy we liked them more a few months ago when they were a bit more humble we think that valuations are fair for the S&P to work as we go through the rest of the year we need to continue to deliver on earnings growth the risk for equities now is less about earnings and more about valuations we certainly see more value uh in being able to find opportunities in the US there's been a lot of good news priced into lot of the big tech companies this is a chance to really kind of show me what is the rest of 2024 look like and then we can go from there this is Bloomberg surveillance with Jonathan Perell Lisa abitz and Anar hurn two more trading days left before we kick off mag where is this year going April has been absolutely bruising so we closed out last week and the headline runs biggest weekly gain on the S&P 500 of the year so far and I remembered the headline from the week before which was the biggest weekly loss on the S&P 500 of the year so far we have been absolutely everywhere and we'll be everywhere this week as well we've got earnings data and a big Federal Reserve decision here's your week ahead it looks a little something like this the Amazon story kicks off after the closing bell tomorrow Wednesday Federal Reserve rate decision Apple earnings coming on Thursday lots of trouble down double digits through most of this year big problems in China we'll be talking about them in just a moment Friday the payrolls report the Medan estimate in our survey so far 250,000 if you want to kick it off with this Market this morning before we get to all of those events we need to talk about not the equity Market not the bond market we need to talk about foreign exchange and this currency pen right here dollar Yen overnight all over the place so let me give you the range higher the session 167 lower the session 154 54 current price 155 this is the official line from the Ministry of Finance no comment that's the official Line This Is The Story coming from Dow Jones Japan's Financial authorities intervene in the FX market so we had a public holiday low liquidity Yen's been bullied all month and it looks like based on reports that the Ministry of Finance stepped in we'll try and get you some more details on that throughout this morning if you want to know where the price action is in the equity Market Equity Futures adding some weight to last week's rally we're up by 0.2% on the S&P 500 a little bit of a lift there in the bond market yields a lower by four basis points on a 10-year 462 on a twoe we're down two basis points at about 498 outside of the year in FX on a euro with Firma here 10716 euro dollar positive by 210 of 1% coming up this hour we'll catch up with tpws J Pelosi on why the dollar could be right for a selloff Tom Forte of Maxim group previewing earnings from Amazon and apple and Son desire Franklin tempton on why this will be a quote sure and shallow rate cing cycle we begin with our top story kicking off a week of jam-pack data a Fed decision some big Tech earnings as well and a US jobs report to wash it all down J Pelosi a tpw advisory writting this we remain constructive on the fundamentals for the US and global economy we are developing a line of thinking on the dollar that suggests it could be ripe for a momentum selloff Jay's with us for the app he joins us around the table Jay good morning to you morning John let's start there that smells like Peak us exceptionalism to me that Co is that what this is well it's kind of like that John right I mean you read about the wrecking ball of the dollar and you read about how strong uh the dollar has been and yet the reality is that over the last 6 months the is actually down 1% dxy you look over the over the last year the Dollar's up less than 4% so the dollar again is a one-off situation right it's the extreme because it's the most extreme interest rate differential right rates in in Japan virtually zero rates in the US 5% obviously that's where people are going to play uh the game and so the rest of the world that's nowhere near as Extreme as that and our our view is that the rest of the world is starting to recover the US has already had its peak exceptionalism right it was last year uh this year going forward the rest of the world recovers China's growing at 5% Europe is actually escaping recession Japan is doing well and therefore we think like big Tech right there was that momentum run they all ran the Magnificent 7 then they rolled over very hard and very fast Nvidia down 20% uh in less than a month okay the poster child for AI so for us plus the dollar uh is ripe for a selloff you have the longest uh speculative position in 5 years in the dollar biggest short uh biggest long position in 5 years you have uh the ECB getting ready to cut rates the FED not ready to cut rates and what we're looking for is kind of like the Catalyst right what's going to be the the tell what's going to be the signal we're setting the story up with that comment we wrote uh on Friday the tell could be ECB cuts and instead of the Euro falling it rallies it rallies and that suggests growth and therefore and we think then the dollar could roll over quite hard and hit a couple technical levels and instead of talking about 106 to the dollar uh in in dxy it could break one and therefore uh break a 100 and therefore that could be significant for us because we're long Emerging Markets we're long Commodities and a weak dollar is very supportive of both of those asset lost to unpack there I with Europe I'm seeing Echoes of that in the Southside research this morning particularly from JP Morgan and mlav Mater I'll share this quote with you Jay we continue to see an improved relative risk reward for Eurozone equities versus the US even in the event of further Market weakness and would look to have as the next step an upgrade of Eurozone versus the US to an outright overweight so people are starting to pay attention to this theme what was it that we learned from the Dow draft in the last month about what was happening elsewhere and just how well priced the negativity already is well certainly for when we think about that we look to China right and China has been the epicenter of negativity right uninvestable we've talked about it on the show before right with the pro tip when you hear uh when you hear uninvestable you go long and so uh China to us is the real opportunity and we've talked about that through things like kweb and and elsewhere um but when you think about Europe what's interesting to us is that people always make this mistake they focus on GDP and not earnings stocks move off of earnings not GDP if they moved off GDP China would be the best performing Market in the world because it's been the fastest growing economy and that's absolutely not been the case so in in in Europe you know companies are doing well a big part of Europe's Equity Market actually generates its revenue and profits from outside uh of Europe and so to us the opportunity is in Europe we're long there the European Banks John you and I have gone back for years they've been massive but but they've been massive outperformers here massive outperformers and so you got to you know you got to recognize that uh European Banks Japan China Emerging Markets you know to us there's a lot of opportunity in the world Jay you say go long China but for how long well I think China has uh the best risk reward of any of the uh markets out there right it all the negativity is priced in none of the upside is priced in K web's a perfect example right the e-commerce Market in China is two times the size of the United States it's growing at 15% per anom the stocks are trading at a 40% discount to the US equivalent uh kweb could double from 26 now it's 28 when we were on last it was 25 28 250 whatever and then double again to over 100 the 2021 high for kweb was $102 it's at 28 it could it could as I said could double and double again so the upside I think is absolutely dramatic so US tech firms are having some difficulty at the moment in China up until this morning Tesla was one of those apple was another I want to talk about your original take I think on what is happening for Chinese firms in China you're basically saying they've got the whole Market to dominate themselves is that starting to work I love it John when you remember it better than I do of course it's my story and you remember it better than me thank you very much I had had a chance to look at my notes but yes absolutely right we call it the two Tech stack divide right basically the US and China are Walling off their Tech Stacks from each other and people have focused on that as a negative for Chinese stocks because they're not going to be able to participate here they haven't yet caught ined on to the reality that that means China companies will dominate that e-commerce Market we just talked about which is growing it's twice as big as the United States growing at 15% perom it's going to be only available to Chinese companies and apple is the US poster child of what that means for us companies because Apple is very dependent on China positive for Chinese firms is it negative for us firms exactly there you go yes China is the the biggest grow story in the world uh in the biggest fastest growing region of the world which is southeast Asia which China is increasingly moving to kind of dominate economically us companies are going to have much less of an area of opportunity there Mining and commodities we need to talk about that as well and copper specifically so BHP wants a piece of anglow we know why and it's not the diamonds and we said on the program last week the new diamonds it's copper what does that tell you about the future here in this trade and the amount of copper that we need and how you want to get exposure to this through 10K last week on the lme mhm yeah we're we've been long copper very bullish we've been very bullish Commodities we have a double overweight Commodities in our Global multi-asset Flagship uh model portfolio and we play it through copx which is the copper ETF and it's been a monster and it's breaking out and I think it will continue to do very well because look the another theme that we're starting to develop there's just so much going on so so rich in opportunity to talk about things is an investment age right and one of the ages is AI right you look at this the spending alphabet in Microsoft last week right 45 billion each on AI the other is on the whole infrastructure in clean energy and renewable and electric vehicles and that is copper and that is Commodities and so to us that investment age that we see rolling out really supports our kind of mult multi-year positive view right we have we have a view that 2023 to 2027 is going to be a blue sky Global macro period and this investment buildout that we're hearing from companies is really going to underpin that and supports that so that makes us more bullish and it makes us want to be long the pick and shovel of AI which we've talked about semis right and long uh Commodities physical commodities for the buildout and so it's really semis and coer I want to talk about the actual physical pcks and shuel and you touched on it just then and I want to talk about the last 15 years in metals and Mining which you know well but it's worth going over again so we come out of GFC China's booming so everyone digs a hole and they keep digging holes and you give a dollar to a minor it digs the hole deeper we see that repeatedly then comes the bust we've had some big deals I was thinking back to exr and glenor monster deals everything starts to move South and they become really really reluctant to invest and I remember Jean Sebastian Jack over a Rio used to catch up with him often he's the former CEO he'd come on the program and he would say look now is the time for Value over volume so these guys haven't been building the mines they've been reluctant to for a long long time are we going to move back into that stage where you give a minor a dollar they dig a hole or they actually going to be really reluctant to do so from here well I think there's going to be some of that and and you're seeing the consolidation first and then those winners are going to make the decisions on where to put the build the hole or dig the hole but I mean to us it's a supply and demand right you're touching on the supply side right the supply side is constrained because there hasn't been investment in mining for a decade and these are not projects that you turn on as you know very well right you don't turn them on in a week years takes years from from planning to implementation to then providing Supply so that's the supply side and then you have the demand side where copper uh demand and demand for other metals and minerals is growing dramatically in part because we're reshaping the entire Energy System of the globe and so these two things together we think are massive and you know you've had interesting shakeouts so you talk about the ShakeOut in the mining right yeah the other side we're having the ShakeOut on the queen energy side and the renewable side right with the EVS you you touched on Tesla you know oh my God the solar companies the wind companies they're we're in that space cuz our other model was a thematic model right our tpw 20 is thematic so future Tech in the two big drivers there and that that climate segment has been really really tough the last couple of years in part because of the interest rate structure Etc so that also could start to pick up pretty significantly at at a time when Supply is constrained and we know what happens right what makes what what brings the two together price price and so for us we think that you know 10,000 on copper is not the end of the story 10K this morning on the lme up another 3/4s of 1% Jay's going going to be sticking with us through the next hour or so let's give an update on stories elsewhere we can do that with your Bloomberg brief let's get to Danny berer for more hey Danny hey John US Secretary of State Anthony blinkin arrived in Saudi Arabia this morning it's his first stop on another round of visits in the Middle East in it the US is expected to push for a truce in Gaza in exchange for the release of hostages an Israeli official says that if a deal is reached the country will hold off an invasion of Rafa blinkin is expected to meet with representatives of Qatar Egypt the UAE and geordan while in Riad and then he heads to Israel in Jordan Apple facing more antitrust headwinds in Europe now the iPad has been added to a list of products that fall under the eu's digital Market act it means that Apple has 6 months to comply with a whole set of new obligations and prohibitions things like allowing iPad users to download apps outside of Apple Store it is a clear loss for Apple but it also underscores the willingness of EU officials to go after big Tech saxo told me earlier this morning it's it's not clear that the sector can outperform now with the growing scrutiny it's been a tough go for Mackenzie employees after the firm cut hundreds of jobs and more and thousands more that the performance needs Improvement but at an event with fellow Partners in mid April Global managing partner Bob sternfeld said now is a quote Turn the Page moment according to sources the event was held in Copenhagen and it was dotted with upbeat declarations the best part was probably the Musical soundtrack and included songs by Eminem and Bob Marley and tub thumping by chumba WBA I'm not sure what's more motivational than that John Danny appreciate it I think we all needed that I'm next on the program a potential game changer for Tesla that conversation just around a corner that stock is higher by almost 10% in the pre-market from New York this morning good morning [Music] Wednesday the FED decides Jay pal pumping the brakes on right Cuts hikes are off the table no Cuts looking perhaps a little bit more likely you can't say there's a whole lot wrong with the US economy trust Bloomberg to bring you the fastest coverage and exclusive analysis including Powell's press conference our policy rate is likely at its peak the threshold to cut rate is a little higher we're redefining patience Bloomberg surveillance the FED decides starting at 1:30 p.m. Eastern context changes everything this is what it's all about a wig full of event risks bro back with us tomorrow morning hopefully am's voice joins us in the next couple of days Equity Futures positive by 0.1% on the S&P 500 you like that you can't say you didn't you can't speak we down four basis points on a 10 year 46239 under surveillance this morning a potential game changer for Tesla I think longterm China there was definitely a push inside China to pursue National Brands apple is feeling that Adidas Nike is feeling that and Tesla ultimately will will will feel that as well I don't think Tesla will be a a top three or potentially even a top four brand in the future in in in China so um but for now musk is playing this game in the short run and let's see how how things develop from here here's the latest this morning sh of Tesla driving high as Elon Musk surprise visit to China appears to pay off blomberg reporting Tesla will partner with Chinese Tech giant Buu for mapping and navigation functions to support its full self driving Tesla also passing a key data security and privacy requirement which could help the company take the software to its cars in the Chinese market Dan IES of wedbush join just now for more Dan I appreciate you jumping on in front of the camera for us to break this down how big a deal do you think this could be it's a watershed moment I mean this is three years in the making that Tesla has been trying to G the trainer from an FSD perspective and this un box a golden opportunity not just for Tesla and China but I think globally it's a game Cher in my opinion that's what I wanted you view on okay Dan so China is one thing what does it mean for the United States and the same thing look it's important because it's also shot across the bow shows what's happening in China and from a miles run perspective so from a data perspective China That's The Golden Goose so this is going to serious serously Advanced Tesla from an FSD perspective and musk knew that that's why he did this trip it was obviously a surprise one and I think it's going to come as a surprise in a good way to investors long time in the meeking it's a trophy case moment for musk getting back on that plane come back from Beijing hey Dan Jay paloski here uh really enjoy your work um when you say a game changer and a global Game Changer what what exactly do you mean is this the does this mean the robo taxi is coming sooner does it accelerate that process I mean what's really the the game-changing nature of this uh particular move yeah that's a great question autonomous FSD when you talk about the golden Vision it can't happen without China so this was a missing piece in the puzzle the fact that they got this clearance from Beijing it unlocks really now the whole vision and and I think that's why it's important in terms of the longer term what Tesla could achieve not just in China but globally when it comes to FSD and I think this is just the start it's obviously a win for Buu as well but it really shows and now finally it's not just talk it's walk in the walk this is I think it's a historical moment for Tesla in its FSD efforts and Dan if I could just follow up a little bit on that we have a thesis at tpw advisory that uh it's kind of we call it a two Tech stack world where China and the US are kind of isolating their Tech stxs and that really creates a lot of opportunity within China Tech and I wondering how you think about that and you said this obviously benefits B BYU as well um what about China Tech versus US tech look I think right now us Tech's ahead of China when we talk about AI I think what Tesla they're trying to thread the needle here they're trying to take that technology even though B it's stored in Shanghai to TA should be able to use globally and I think it just comes down to there's only two companies that been able to threaten the in terms of China us it's cook and catino and it's musk and and that's why this is a huge win for mus even domestically for him just to come in there during the auto show come out get FSD approval so Dan let's stress test that a little bit more Apple China right now not even a top two smartphone player then can we get into that a little bit more what Jay is making the point that he's making is that ultimately the Chinese market will be dominated by Chinese Brands potentially in EVs and likewise in smartphones why is he wrong because you make the best products in the world consumers are going to buy them and that's why at the top of that mountain the mount Rush more it's cook and certina now they're clearly going through growth headwinds now but I believe 6 12 months from now they're not I think we'll start to see that Thursday when they report look I think this starts betting against Apple in China has been in the wrong mood and in our opinion it's 220 million iPhones there 130 million have not upgraded four plus years that growth opportunity will be on the horizon you say it's the wrong move but that Short's been paid this year I've said that to you before we're down 12% year today and China's been a big feature of that you're not alone this morning Dan by the way I'll throw this out there this came from Bernstein this morning they say by the fear they say apple has derated significantly in made a weak iPhone 15 cycle fears that Apple's China business is structurally impaired they're taking the other side of it you mentioned the numbers on Thursday what are you looking for Dan look in near term John that that's been the right move right in terms of the shorts but it's like betting against Brunson in one game that's going to be a bad might be a good move for one game for the long term it's not and I think Thursday it's really about Apple showing that growth as you go into the June quarter September what we're seeing in China that turnarounds there and this all sets up for AI cominger copertino and that's what I believe is going to really be the massive drum over the coming months hey Dan it's Jay uh again what what about the case for AI opportunity in China um do you look at any of the Chinese companies as you want to pair like almost like a global pair trade uh you know you have apple you have Tesla okay those are the two US companies that are going to have an opportunity in China what about on the Chinese side yeah I think Alibaba in my opinion that's the play in China from a cloud perspective everything they're doing and I think Sim almost like a Microsoft Google Amazon what they're doing on the cloud I think that's in our opinion the probably the best China Cloud play when we look at Beijing Dan love it it's great to catch up Sir no doubt we'll catch up later this week going into that big earnings report on Thursday Dan Ives there of wed Bush so here's the argument that you're making Chinese market dominated by Chinese firm argument that Dan Ives is making is that us firms make the best technology consumers are going to buy it why is he wrong well I think China is trying to catch up he's not wrong today right obviously that's that's the case I think the issue is you know where price for that is one right he talked about alib baba alib baba trades at eight times earnings eight okay Apple even after the D rating doesn't trade anywhere close to eight times earnings so for one you know you buy the the the the cheaper version that's going to go up that curve because there's a national policy for Chinese companies to be dominant players in this space and he has been right about Apple being able to thread the needle in China I think that area that opportunity is getting narrower and narrower and when China feels like it doesn't need Apple to thread that needle Apple's not going to be able to thread that needle and so for now I'm buying the cheap Alibaba play uh where has dramatic upside and thinking that over time it's going to dominate more and more of that Chinese market Jay fosi of tpw sticking with us coming up on the program big Tech earnings continue this week for two companies with very different fortunes so far this year Tom for of Maxim group joins us next to preview apple and Amazon Equity Futures right now on the S&P just about positive by 0.2% in the bond market your 10year yield at 462 and for those of you on dolyn watch 3 160 and back down again 15589 two days left in the month of April Equity so far this Smalling up a quarter of 1% on the S&P 500 other than has that up by a third of 1% for the month of April we're heading for the worst month for the S&P 500 since September it's been a really choppy month but it's been a very aggressive rally since the end of October we're down this month by something like 3% and last week's big week of games the biggest week of games of the year so far happened just chip away take a bite out of those losses for April let's see if we can do some more work for the next couple of days let's do some work in the bond market on a 2-year 10 year 2ear still around 5% at 497 47 down two basis points this morning a 10e around 460 after breaking through 470 just last week 461 97 down by four basis points we've added a lot of weight to that yield over the last few weeks in April so far still up by more than 40 basis points on a 10-year and up by something like 30 yard on a 2year something like 30 5 basis points through the month so far what that's meant is a really strong resilient US dollar through the year so far what that's done to the Japanese yen is absolutely crush it dollar Yen through 160 earlier 15591 on that currency pair right now down by 1.5% and a report from Dow Jones that there was some intervention we'll talk about that in just a moment under surveillance this morning a key week ahead for the US economy the FED set to keep rates on hold on Wednesday with all eyes on fed sh J pound's news conference for close on when and if the FED might cut rates this year on Friday it's the jobs report your estimate 250k Jay 30 minutes we haven't talked about the FED how good does that feel get a second guess this morning honestly we've worked through so many issues and have not talked about the Federal Reserve what does that tell you tells me that uh you know it's not really that important right the FED is in the rearview mirror we're focused on other things whether they cut in September or November or December is not important we are willing to trade Great Cuts for earnings growth and that's the trade that we're making and earnings growth is accelerating and stocks are going to be perfectly fine as long as that continues was last week evidence of that yes indeed it was exactly that and your your point is is evidence right we've we've raised Bas uh rates are at six-month highs and stocks are have powered ahead and yes we've had a little pullback in April but that's perfectly natural and healthy it's a feature not a bug to have a pullback every once in a while Lori cavas of RBC joined us on the program a little a little bit earlier has a focus at times on small caps and she said this reminds her of the price action in small caps the moves on Mega cap stocks in America and Peter cheer of Academy security basically asking a simple question is 10% the new 1% for Mega cap Tech these swings let's go through them Jay I did this earlier it's worth doing again so they started with Nvidia two Fridays ago on nothing 10% move lower then we start last week we get Tesla numbers come out we pop 10% $500 billion name and then we get numbers from meta we Dro 10% on a$1 trillion name $2 trillion name Google 10% move on Friday what's that about I think it's a people all have the same kind of technical levels that they're watching and Market is really increasingly controlled by algorithmic trading and so they hit levels and it's just an air pocket there's nothing there's no other side anymore right everybody hits things at the same time and that's why you have this momentum trade and people are still confused about really where are we going you know with the economy with the FED Etc so uh it's very much a trend following Market a momentum market and when that momentum ends then everybody is like boom we're out of here and so uh to us that's great that's healthy we don't want things to go to the sky because they never go to the sky we like pullbacks and to us as long-term investors we really think the opportunity is in things like some of these Tech names the particularly the semis right our our view is the AI age is real it's creating an investment age I mean the things that I took away from last week was that Apple uh sorry Google and um Microsoft both said they were going to spend $45 billion or more on AI okay that's two companies that's 90 billion so to us the semis are a no-brainer for just buy and hold and ride through these little uh you know mini blips it's not a problem yeah the Pix and shovels pi and shovels absolutely okay mentioned that a little bit earlier let's talk about air pockets in foreign exchange this one right here we're talking about levels in FX we haven't seen since the early 1990s the end weakening pass 160 against the US dollar overnight then rebounding really strongly question what happened Dow Jones reporting that Financial authorities intervened to support Japan's currency the country's top currency official saying he had quote no comment Jay Pelosi please comment what's the signal you take from this move uh it's not important John it really isn't well look I mean the real story is that here's a question I'll toss it back to you please do um what do you think fair value is on on the Yen dollar absolutely no idea yeah under 100 that's what you think fair value is not not not me that's what that's what foreign exchange strategists when you ask them what is the fair value what is the real effective exchange rate what should it be uh they say under 100 so the dollar yen is at an extreme position uh it it represents the uh the widest spread in the interest rate world world right where Japanese rates are are close to zero us rates are at 5% so this extreme this in my view should not be taken as a signal as to where the dollar is or is going it's a false signal because it reflects the unique characteristics of the Japanese us relationship on the rate side it does not uh translate into the rest of the world and I think this is setting up something that we're starting to pay attention to and we talked about it at the open poal for the dollar to roll over and have almost a momentum effect just like we're talking about with tech stocks let's get into that because you mentioned the Euro The single currency earlier why is the Euro against the US dollar maybe going to be a better example of that in weeks and months to come well in part it's going to be interesting right because the Euro people talk about it should be at parody should be at parody should be at parody and yet it's not at parody and this is after you've had Germany the supposed economic engine of Europe really struggling right Europe's very interesting cu the growth is in the periphery not in the core the growth exactly the growth is in Spain it's in Portugal it's in Greece it's in Italy uh and so we used to be you'd be really concerned about the rate spread between the Italian bonds and the German bonds nobody talks about that anymore because ital's doing fine Germany is the sick engine and yet the Euro doesn't want to go to parody okay the euro is fine at 106 107 105 fine uh and to us that really suggests that in in Europe the the bad news is already in the past we're moving out of the recession Germany is actually picking up and as China continues to improve the rest of the world improves Europe will improve as well on the trade side and they also like the United States have full employment and so full employment means consumption consumption means the economy is you know not going to go into a big a big decline so the euro is likely not going into a big Decline and here's the setup the setup is that the ECB is going to cut rates in June and most people would say oh that should be Euro negative right because it's going to widen that rate differential our view is it could be Euro positive because it suggests that the central bank is now underwriting the growth recovery and if that's the case we would look for the dollar to really uh take a little bit of a tumble maybe more than a little bit of a tumble uh if that ends up being the case and so that's what we're watching right now 10718 on the Euro that currency per positive by 0.2% if you want more data out of Euro in about 23 minutes time we'll get CPI out of Germany let's talk about some tech numbers earnings continue this week from Big Tech Amazon due tomorrow Apple to follow on Thursday Amazon stock up this year on the back of strong growth for its web services and demand for its Prime Membership Tom fory of Maxim group has a buy rating on the stock a 218 price Target joins us now Tom let's talk about the numbers from last week and how it informs your view on what we might get from Amazon tomorrow so we know that cloud spends pretty solid ad spend in places like meta regardless of what happened with a stock pretty decent likewise at Google Tom does that set the bar a little bit higher for Amazon tomorrow it it certainly does so the strength in the cloud computing results from Microsoft from Google has me more optimistic on AWS the challenge for AWS has been you're seeing a lot of Enterprise interest in artificial intelligence this has been the positive Global macroeconomic weakness has been the negative so you saw late last year some of the slowest growth you've ever seen from AWS but yes Google's comments Microsoft's comments on their cloud computing Revenue have me more optimistic than I was last week heading into those earnings Tom what T you that they weren't just getting a bigger slice of the pie and taking it from Amazon that actually overall the P was getting bigger for Microsoft I do think they are taking share from Amazon so I do think that partly what you're seeing is that Enterprise interest in artificial intelligence is starting to have a positive impact on cloud computing Revenue but do think that Microsoft is taking share from Amazon which is a big challenge for Amazon Tom can we talk about another challenge for Amazon it's e-commerce what is going on with things like Prime typically for many people they sign up to Prime and they just hope they can forget about it for the rest of the year if they pay annually and ultimately all I'm seeing now every single week is a new charge for an extra something that I used to get for free before Tom what is happening with Amazon so all right so I'm going to spin that very positively uh when Andy jasse took over from Jeff Bezos in July 21 he started implementing his vision for Amazon his vision for Amazon as essentially the creator of AWS is Amazon the services company so I think what you're seeing here is Amazon's much more interested in selling services to Enterprises via Cloud uh via AWS uh to businesses via fulfillment by Amazon things of that nature well that's higher margin Revenue which could have a positive impact on the multiple and the stock but unfortunately as Prime members I've been a Prime member since the late 90s uh you are seeing incremental cost and it is more expensive to be a Prime member uh such as they rolled out advertising now and if you don't want to see the ads you have to pay an incremental 2299 a month but it's all part of Andy's vision of Amazon as a higher margin services company which should be good for the stock but may not be great for Prime members and Tom with that in mind the vision going forward are we going to have another conversation about maybe spinning it off uh only if they have to so when you compare and contrast the antitrust lawsuits for big Tech the good news for Amazon investors is we believe that the sum of parts from Amazon in the event that they were forced to invest AWS is greater than the whole where the Stock's trading so I don't think they would do it unless they had to but the good news is if they had to it could be a creative for investors Tom can we finish on adspend I want to just reflect on last week briefly overwhelming obsessed with the direction of Metro on any single day especially with big moves like that off the back of the spend and everyone we talking about what's happening with the metaverse etc etc underlying numbers were really decent ad spend is really solid you saw that at Google YouTube Etc Tom what's happening there what's supporting those Trends and do you think it's durable through the year ahead so the good news for advertisers in general is that it's an election year so you should have an increase in ad spend because it's a presidential election year the other good news is you're starting to see the signs in the digital advertisement improving suggesting that the economy is holding up maybe better than expected so that's good news for digital advertising companies Tom I appreciate the update sir thank you looking forward to the numbers tomorrow tom for there of Maxim group looking ahead to Amazon tomorrow apple on Thursday let's get you some news elsewhere here is your bloomo brief with Danny Burger hey Danny hey John a Paramount takeover deal is hanging in the balance sources have told Bloomberg that the Redstone family which controls a majority of shares in the independ and film producer David Ellison of Sky Dan are both making concessions and appeals to the company's other investors Ellison for his part is offering to buy a block of paramont shares at a premium his bid described as the quote best and final offer as the board remains undecided about a sky Dan takeover CEO Bob Bish could be Ed as soon as today by a management committee and the bidding war continues Blackstone has made a new offer for hypnosis song fund this time for nearly 1 . 6 billion now surpassing a rival funds bid if successful it means Blackstone will gain access rights to a catalog of artists including Blondie Shakira and the red hot CH Chili Peppers the board of his hypnosis supports the new offer the company's been trying to turn music into something like a mainstream asset class but higher rates have been slicing into valuations Major League Baseball plans to address issues with its uniform after complaints from players and fans about changes they made this spring ESPN reports that the MLB will return to larger lettering on the back of jerseys F fix mismatch gra tops and bottoms and address the Nike Jersey's propensity to collect sweat in a memo obtained by ESPN The Players Association said quote Nike was innovating something that didn't need to be innovated but the players will have to wait until the start of next year's season for the new kits that's your Bloomberg brief John Danny thank you play complaints Nike not in a good spot right now that's for sure I'm next on the program a second chance fixed income only 3 months ago we were answering questions from investors did we miss the fixed income rally and we kind of had to say yeah you probably did miss a lot of it maybe all of it and investors now are getting a second chance the bran chenel Desai Franklin templon joining us next on the program counting you down to a Federal Reserve decision on Wednesday and payroll report this coming Friday live from New York this is Bloom pack [Music] [Music] equities on the S&P 500 higher here positive by quarter of 1% through most of this morning it's a quiet start to a very busy week yields a lower by four basis points on a 10year 462 18 under surveillance this morning a second chance in fixed income at some point the Market's going to recognize you can't keep rates up here forever the fed's going to start to cut and you're going to have a massive rally only 3 months ago we were answering questions from investors did we miss the fixed income rally and we kind of have to say yeah he probably did miss a lot of it maybe all of it and investors now are getting a second chance here's the latest this morning treasury yields holding steady ahead of Wednesday's fed decision Traders pushing back rate cut bets on sticky inflation data and a resilient US economy so not desire Franklin templon expecting cuts to start in September at the earliest and wri in this I believe this will be a short and shallow rate cutting cycle and expect that 10year notes will jump around in a 425 to 475 range after the shallow rate cut cycle is done we are likely to see long end yields moving higher due to fiscal pressures so now let's start the journey with Wednesday if we can and great to catch up with you as always what are you looking for from chairman pal in that press conference so I think it's going to be the usual I think uh unfortunately chairman poell has a very difficult time sticking with with a hawkish tone during the Q&A so I wouldn't be surprised if in the Q&A you know he turned a little bit doish left to open some roads for rate Cuts sooner than I think the FED probably will cut but you know this is a pretty robust economy we're looking at a strong labor market we're looking at decent wage growth we're looking at decent productivity gra gains and uh the underlying underlying GDP data last last uh last week was pretty darn strong and inflation sticky there's very little room for the FED to be particularly uh doish or quick in terms of rate cuts at the start of the year as you know they thought they were on a journey directly towards 2% and maybe cutting interest rates and the market certainly thought it was going to be set up to cut interest rates maybe as soon as March and ultimately we started to get these bumps and they refer to them as bumps in the road do you think they are just bumps in the road or if they change course I'll just say that if they bumps on the road it's a pretty bumpy road and it's a pretty long one so you I don't think that these are just bumps in the road I think what you're seeing is uh genuine stickiness in inflation and it's coming from a lot of misreading I think of what went on in the postco period where everyone assumed that you know the economy had fallen over and uh gone to sleep for an extended period And it hadn't and there was so much of fiscal expansion during that period and we continue to see the impact even today I think it's going to be a long time before uh we start seeing inflation going all the way back to two certainly not this year Sonia J palosi here we were talking earlier um before we went live about um why one should own bonds or buy bonds and we're not we're very underweight treasuries here at tpw advisory uh you talked about strong growth that's the reason why we're very uh underweight uh strong growth is not really constructive for treasuries so I'm curious uh what would be the the case um if you could make the case for buying bonds here at these levels or where what level would you suggest people should get long bonds I think it's I think it's very fair what you're saying is definitely a fair point uh on the other hand you would I would say that most institutional investors retail investors are massively underweight bonds I'm not suggesting going massively long here we were short and we did go neutral over the last several months and we're slightly long right now but I would say that that range that I'm talking about in anticipation of a rate cutting cycle albe it shallow and I don't anticipate that this is going to be the rally to end all rallies I see some point in actually diversifying fixed income ideally plays a diversification role in uh uh in portfolios and I think that's really the case to be made to hold treasuries when I talk about it being shallow I the reason is I think over the longer term it is inevitable almost that we see treasuries moving systematically higher for a while so we might see them come down and I don't expect them to Rally all the way down to 2% uh I don't expect the FED cut fed cuts to take us to 2% and certainly treasur is aren't going to Rally anywhere close to what we've seen in the last 15 years but then we will start seeing the sell-off which comes from the fiscal pressures which is going to go on for several years I would anticipate so it's a period it's uh it's a short cutting cycle I think that's really important to think yeah and I would agree with that completely Sonia what about credit versus treasuries and then could you just touch on that fiscal pressure because uh you're very you're absolutely correct people have very much underestimated the power of the fiscal side of things because we've been so used to monetary policy driving everything since the great financial crisis so help me understand the view between Credit in the US or globally versus treasuries and then this idea of fiscal how much of a window do we have between a rally in b bonds before that fiscal pressure really manifests so I'd say that the first bit on credit the reality is all in credit yields will still give you uh if you're talking about high yield 7 and a half% and so you can find pockets of value there the all- in yield is somewhat attractive and I can see that in spread terms we're looking at pretty tight spreads again the case can be made reasonably and I'm sure you would make this one uh that uh we're looking at corporates which are in better Financial Health than they have been his torically so I so I accept all that and I think that credit definitely has a space in portfolios despite how tight it is from an all-in perspective there is room for some credit in portfolios I'd say the second point that you were making which is uh when does the fiscal act fall we have begun to see it and we periodically see it when the market focuses on the fact that we're looking at 6 % plus uh 6% of GDP plus deficits in a forward-looking way and this is probably conservative in the event that we have a split Congress at the end of uh the next set of elections in the sense that there's it doesn't matter who wins right as long as you have a split Congress you're unlikely to see much fiscal consolidation that I think is an important factor I don't think it happens over certainly not this year you know we're going to see a lot of fiscal spending that's that's a given this year but I think you continue to see that when does that really drop that a I think we're going to need to see more of a buyer strike and as we see long-end yields move higher and higher I think the US will be forced to do a certain amount of fiscal consolidation but until we see until we see that I don't see that consolidation happening and treasury yields absolutely can go higher than 5% in that scenario do you think that's a challenge to treasuries as a diversifier scenario if you think about where the deficit is now that's going to Gap out if we go into an economic downturn and typically that's when you would buy treasuries is that going to be a challenge to that I think there is a challenge to that I think right now the growth of the economy is something that we all have to be really grateful for because right now there aren't that many silver bullets certainly not on fiscal and very few on the monetary side so it's uh the fact that the economy continues to grow is the one somewhat saving Saving Grace here though the fact that it continues to grow also indicates very clearly that neither fiscal or monetary policy are particularly tight yeah so thank you big questions for the news conference for chairman pal later this week son desire there of Franklin temperton what did you make of that point there yeah very solid I mean that was that was a really well-reasoned argument I think about how to think about things not with you know black and white but new ones fisal pressure specifically though J is that something that concerns you um you know I I fiscal has been a real boost to the economy it's been a real support it's helped that us exceptionalism uh that we talked about earlier going forward I think it becomes a little bit of a challenge particularly on the fixed income side and therefore you know those are some of the things that really strike us right I mean the IMF meetings last week we touched on them a couple weeks ago right 82% of those surveyed expect a stronger dollar right what we're talking about here fiscal pressures you know the US buyer strike I mean it could really kind of get going on itself s a little bit where the dollar goes the other way and it's set up to do that based on the fact that speculators have the biggest net long position in The Last 5 Years so there's something to that I think major question then as treasuries as a diversifier can you just walk us through in the next 30 seconds if you can what's your diversifier what works yeah well uh the diversifier right now has been Commodities right Commodities have had a negative correlation with the S&P they've sailed through this little mini correction very healthily uh our Benchmark is AI egg and uh Goldman Sachs commodity 50 4010 so we have a overweight INE equities we have an overweight in Commodities we have an underweight in treasuries because we are progrowth and so being PR growth we don't see the case for for treasuries we want to hedge out that risk exposure Jay this was awesome let's do it again soon absolutely John thank you Budd Marie hopefully you'll be able to speak next time the voice returns we miss you in the next couple of days J L tpw advisory thank you sir coming up next Sarah hunt of Alpine Saxon words man deep seeing of Bloomberg intelligence Stephanie Roth of wolf research and Bloomberg's Ed low big week ahead from New York this is [Music] [Music] Bloomberg inflation is not not coming down as fast as we expected inflation just has stopped going down it's stalled at a level that's uncomfortable for the FED they're going to want to be more patient inflation is going to be top of mind I think the clear part of the new narrative is high for long on Race the question is where does that take us you can't keep rates up here forever the fed's going to start to cut and you're going to have a massive rally this is Bloomberg surveillance with Jonathan Perell Lisa aboit and Anar hurn fantastic start of the week so far live from New York City good morning good morning the third hour of Bloomberg surveillance begins right now already this morning Jake Pelosi of tpw talking about Peak us exceptionalism we caught up with lorri calvero of RBC who reflected on Mega cap tech stocks behaving like small caps we'll talk more about that through the week no doubt we have a monster week ahead for you and it looks a little something like this tomorrow after the closing bound numbers from Amazon onto Wednesday you hear from chairman pal in that news conference at 2:30 Eastern time the FED decision 2: p.m. in the middle of this week Thursday numbers from Apple very challenged stock so far this year down by about 12% challenging China then on to payrolls Friday the estimate in our survey a sneak peek for you 250k the bond market going into all of that set up like this a 2ye 10 year 30e looks like the following very close to 5% on a 2-year at 497 we're down two basis points on the session up more than 30 on the month so far on the 10 year down five basis points on the the session up by 40 something in April at the moment 46156 on a US 10 year coming up this hour to discuss some of the big themes we'll catch up with Sarah hunt of Alpine Saxon Woods following the best week of gains on the S&P 500 so far this year we'll speak to Stephanie Roth of wolf research looking ahead to the FED decision and Bloomberg's Ed ladow previewing Amazon and Apple earnings we begin with our top story stocks rallying on earnings optimism ahead of the fed's two-day meeting Sarah hunt of Alpine Saxon Woods saying this there are plenty of unknowns in 201 24 the market may end up more dependent on earnings than usual if earnings can live up to or exceed expectations that may not be a bad thing Sarah joins us now for more for the hour Sarah good morning to you good morning let's get to those earnings you say earning season saved by just two names last week is that it well it's more the theme right so the two names really are the ones that most encapsulate the theme of AI they needed to show that there was big growth there they needed to show that there was profitability there and they needed to show that there was a lot more investment there all of those things happened you could even add meta to that because even though there was some disappointment on some of the capex that wasn't AI related I think the fact that they're talking about spending so much more money there is really important and I think that had that not occurred this is sort of what the market was hanging on and you had a huge Rally from September of last year or October of last year into this year and then a huge rally in the first quarter and if you didn't see that come through I think there would have been a lot more vulnerability than we're seeing I mean you certainly saw it before earning started we reflected on this last week we should probably do it again meta spends a lot and the stock got punished alphabet and Microsoft did something similar and got rewarded what was the big difference for you the big difference is that the question of what meta is spending on because the AI spend I don't think was the problem I think it was going back to those meta labs and how much money is being spent there and whether or not the discipline that that meta got when the stock had a real problem a couple of years ago and said no we're going to focus our spending in these ways and we're going to stop spending so much on what is more speculative but we think is the future I think there's creeping back in I think that that was a little bit and where the stock was too Mike Wilson and Morgan Stanley was with us last week and he was very keen to point out of course the usual which is the DAT is one thing how the stock responds to that data is just as in fact it's more important what did you take away from these big double- digigit moves on Uber cap Tech names 10% in either direction Peter shave Academy I've said this repeatedly through this morning is 10% the new 1% for some of these Tech firms and you anticipating more of the same this week I don't so I think that there is some oneoff reasons why those stocks moved so much and part of it was that the tech stocks had actually come off the most in April and the first quarter wasn't as strong as the back half of 2024 for some of those tech stocks and I think it was a huge relief because the concern was if this doesn't go the way that it is supposed to these stocks are expensive and can they grow into can their earnings grow into their multiples right because there's a lot of conversations about multiples and why isn't even though stocks have surprised to the upside why aren't stocks moving higher well those earnings needed to be there because those multiples had already moved so I think that that's a lot of where you were and I think for those two in particular it was just relief and it was like well this is great because you're seeing big growth and growth is what's really important for these stocks you say earning season has been saved what are you expecting now are you anticipating apple and Amazon to continue saving the earning seed well I think that for Apple there's more one-off issues right you've got the China issue you've got some current concerns I don't think longer term there's a problem for Apple but I think shorter term there's a reason the stock is not performed as well as the other ones Amazon is also a little bit let's see if AWS can grow as much as you did see the cloud grow for Microsoft and for alphabet and and we're AMD is this week too you know we want to see what the semiconductors have to say there's there's still a lot to go but I think that those two giant Bell weathers if they had gone if it had gone poorly it would have been a problem now saved forever I don't know but certainly like the beginning of of April was not pretty and we certainly saw that reverse a little bit last week what's your read so far on the international cyclical story and The Challenge from places like China the challenge but particularly for a multinational that's based here in the United States that has to have that stronger dollar translated back in from that foreign currency what's happening there how big a challenge is that well it it certainly depends on the company and it certainly depends on the country I mean we've been talking you've been talking all morning about the Japan versus US currency there's been a lot of other less severe movements in other currencies and I think that you know we're still trying to Grapple with how we came out of this pandemic right like we're still there's still not the normal Playbook of of X happens y happens recession happens this happens that just isn't it hasn't been what's occurred so we're still trying to figure out exactly what that means and how to work with it can we tease that out a little bit more because I think you're on to something really important when we come out of GFC we were always looking for the Federal Reserve to hike interest rates we had a lack of understanding about the current cycle so just anticipated a return to the previous one and it was false dawn after false Dawn waiting for those rate hies they just never came had to wait until 2015 for them and then you had to wait another 12 months to get another one after that do you think that's what's going on now there's just a lack of appreciation for where we are currently so we sort of gravitate towards what it used to look like pre 2020 well this is the whole question of where indust rate's going to go are we renormalizing to pre-financial financial crisis levels or are we are we just normalizing and then we're going to go back to the low interest rates post the financial crisis if you think that we're normalizing the pre-financial crisis levels 5% is not insane and it's also not so high that people can't manage it it was the speed that people were concerned about and rightly so it did catch up some banks and there's still some questions about commercial real estate there's plenty of unknowns and plenty of questions and things that you can get really worried about but the truth of the matter is 5% on the tenure 467 is not insane and if we think about more normalizing the idea that we're going to cut all the way back to two or all the way you know to some much lower number you have to wonder whether or not you you you cut back to at some point but not to some level that's more post-financial crisis than pre-financial crisis you mentioned we're not out of the pandemic era yet when do you think we would know when we're out of it that's an outstanding question for which I do not have an answer I think that you start to see things react more like you expected them to prein like the tech the playbooks start to work again and the things that are normally correlated correlate again because we have such odd correlations and we have so many things let's all these things move together when they don't usually in all them in positive or negative I think when you start to see some of those historical relationships if you keep interest rates in what is considered a more historical level those relationships start to reignite then I think you can say okay we have finally started looking at that but I mean what is that going to look like for commercial real estate for office I don't know because we're we're working three days a week in the office and two days at home I think that there are some things that are going to stay and that's a longer term Prospect to how that sorts itself out just for the record we're working five we're very happy about it very happy about it soah let's talk about sectors we started this month with this big hope about a rotation so a lot of that in the month of March then it's faded and Faded so rapidly in fact hardly any guest even brings that up on this program anymore going into small caps looking elsewhere Beyond big cap Tech particularly after last week where are we now with that question I think that it's it's it's B you have to have some sort of a balance right because that last year it was all about big Tech and that's all that worked this year there are more things there are other things that are working as well but when be big Tech reasserts itself people start to go right back to it it's the huge amount of cash flows I think balance sheets are going to matter sectors matter but balance sheets are going to matter you know utilities are the new hot sector because because of the fact that da data centers and AI need so much electricity so there will be ways that this broadens out but in terms of a wholesale shift away from technology it's difficult for me to see why that would be sustainable just because the cash generation is so insanely huge and that's really important and the growth is still there the growth hasn't gone away from that so it's all it's about broadening out and adding to as opposed to switching from let's talk about the financials banks have had a pretty decent run if I think about what's performed well relative to how much it's talked about this is hardly talked about the fact that we've got JP Morgan up this year by 14% Goldman up double digits City up 21 big turnaround story there with Jane Fraser Bank of America up by double digits even deuta Bank up by 24% what's supporting some of those banks at the moment well I think that some of it was a catchup trade I mean these stocks had been absolutely brutalized even though things were going okay there was the idea was if we're going to cut rates it's going to be better for banks and that's great and then that story started to fade and the banks just started to really not perform enormously well European banks have been under scrutiny for a long time so it's it's a little bit of a bounceback in hey if your if Europe is going to be okay then the banking sector should be okay and these stocks are really cheap in the US they were also less expensive but you've also had a consolidation so the bigger banks are doing better and the smaller Banks the regional banks are still struggling and I think that that's just going to continue that I mean it's sort of like the story of the mega caps not just in Tech but across the sectors Sarah hun is going to be sticking with us for the a I wanted to bring you this not from mlaker JP Morgan on Europe versus the United States I mentioned this earlier this morning interests me I'm not sure if you're all aware of this we don't expect Euro Zone to directionally decouple from the US but it's interesting that in the recent bad of Market weakness the S&P was down 5 to 6% in contrast to the euro stocks 50 which was down only 3% here's the quote the important one we continue to see an improved relative risk reward for Euro Zone equities versus the US even in the event of further Market weakness and we look to have as the next step an upgrade of Euro Zone versus the US to an outright overweight people getting more constructive on the European story relative to what's in the price relative to what's expected here in the United States and those comments echoed by J Pelosi of tbw in the last hour as well equities this morning on the S&P positive by a quarter of 1% Sarah's going to be with us for the hour I'm pleased to say let's give an update on stories elsewhere with your bloomo brief here's Danny Burger hey Danny hey John US Secretary of State Anthony blinkin has arrived in Saudi Arabia it's the first stop in another visit to the Middle East the US is expected to push for truths in Gaza in exchange for the release of hostages and Israeli official says that if a deal is reached the country has agreed to hold off from an invasion of Rafa blinkin on his trip is expected to meet with representatives of Qatar Egypt the UAE and Jordan all while in Riyad then he heads to Israel and Jordan China's president XI will visit the EU for the first time in 5 years next week she will visit France and Hungary as well as non-member Serbia there are heightened tensions with the EU at the moment over a number of issues from trade to spying allegations EU members have also knock Beijing for supporting Russia's invasion of Ukraine China for its part is pushing to repair relations with the EU leaders there have become more assertive in responding to China's trade policies and Spotify CEO Daniel eek is cashing in on big gains from the stocks rebound he filed to sell about $120 Million worth of shares Spotify is on the back of its biggest gain of almost two years it swung to profit in the first quarter it does appear to be the year of taking profits for Tech billionaires thanks to a neat runup in the sector Michael Dell Jeff Bezos Mark Zuckerberg all of them have cut stakes in the companies they founded over the past few months that's your brief John Danny thank you very much appreciate it more from Danny burer in about 30 minutes time Equity is doing okay up a quarter of 1% some big moves in the Japanese Yen overnight we'll update you on those in just a moment up next on the program Regulators taken another bite out of apple it's easier for Europe to do a lot of Regulation where in the US the technology sector plays a crucial role for economic growth I'm not so sure actually that the technology Mega cast will continue to be an outperforming force in the market going forward I think the tide is turning a little bit here Mand sing of Bloomberg intelligence weang in on this story and looking ahead to the numbers from Amazon and apple later this week that conversation on the other side live from New York City this morning good morning [Music] [Music] equities on the S&P 500 doing okay starting there on the S&P at the moment we're positive by a quarter of 1% a little bit of a lift following a big week gains last week the biggest weekly gain on the S&P 500 of the year so far you'll hear lots about that less about the fact that it followed the biggest weekly loss of the year so far on the S&P and in April we're still down about 3% the worst month going all the way back to September remember this rally has been a r roaring one since the end of October yield a lower by four basis points on a 10-year 461 97 the big story in foreign exchange is this one right here if you are just tuning in welcome and looking forward to spending the week with you this move in the Japanese yen is the one we're all talking about 360 for the first time since the early 1990s gapping a lot lower off the back of that all the way back down to as level as 154 54 at the moment about 156 plenty of speculation about so-called Yen intervention you get it yeah okay so-called intervention from Japanese authorities they haven't said they have they haven't denied it either they're just saying no comment Dow Jones says they have based on their sources Japan's Financial authorities did intervene in the FX Market overnight so that's where we are that currency pair negative 1.2% a stronger Japanese Yen after a much much weaker one overnight and through the month so far and surance this morning Regulators taking another bite out of apple it's easier for Europe to do a lot of Regulation where in the US the technology sector plays a crucial role for economic growth it creates a more difficult and less opportunistic environment but I think you know us technology companies will still continue to thrive it's just a different environment going um going forward there's just a lot of scrutiny going forward I'm not so sure actually that the technology maker c will continue to be an outperforming uh force in the market going forward I think the tide is turning a little bit here so here's the latest EU Regulators giving Apple 6 months to ensure the iPad's ecosystem complies with the new digital markets act despite the Crackdown Bernstein recommending investors quote by the fear upgrading shares to outperform with China concerns they say which are overdone the stock is up by 2.5% of the pre-market ahead of earnings on Thursday M singer Bloomberg intelligence joins us around a mandate let's start there what are you looking for from this big giant on Thursday well I mean to me Apple is always about the iPhone shipments and the services Revenue more and more given you know that's the high margin uh Revenue stream but in this case you know everyone seems to think Apple China issues are overdone to me what really stands out is how well Huawei has done in terms of developing an alternative and how well that phone is doing so as long as there's no alternative to the the phone we could argue you know it's a very sticky uh product people have to refresh there's no choice but now there is an option in China and I think that's what stands out can we get into that word overdone overdone because it's not as bad as everyone thinks it is in China or overdone because it's so well priced so far this year well I I think I mean again the 20% Revenue stream that you have you have to uh kind of model how much are they going to lose that share over the next 2 through three years previously people were modeling Maybe they will lose like one percentage point of share now we are talking about the revenue uh even disappearing over the next 5 years so that's a totally different assumption and if that plays out then clearly that's not reflected in the stock so when you say disappearing over the next 5 years are you talking about the market moving so far away from Apple that they're really not selling very much in China at all yeah I mean that's and and they have to obviously shift their supply chain so that's the other the cost side of the equation but in terms of the revenue hit now we are talking about tangible competition that can actually take share previously that wasn't the case and I'm I'm not even bringing in the AI aspect that you know it has got more AI features like the Android ecosystem it's just the fact that they have a domestic phone that's comparable in terms of features that's a big deal MIP how much is this driven by policy coming from Beijing versus actually demand in China well so again I I think it's hard to separate the two simply because there is is an outsize influence in in terms of what goes on uh you know with the people's preferences in the region and and how the government does have an influence so clearly whatever the government did with the you know preventing the government employees from accessing the iPhone did have a bearing in in terms of that early step and now we are seeing that trickle down to the consumer so to my mind as long as you know they can provide all the features and that experience on the phone that everyone is looking for people will migrate because that's coming from the government in the end you know they provide the infrastructure the towers and everything and they can make sure the domestic phones function better so that could be a bigger problem than I think anyone is really anticipating I also wonder from the consumer standpoint if you're going to see that much switching just because of the brand Consciousness and whether or not what kind of analysis is going on right now in China about how Huawei is positioned and how people perceive it because there is a luxury aspect to Apple so to the idea that it would go away completely I could understand on the functionality if the functionality was somewhat less practical but it's a little bit it's a little bit a lot to think that there's that that could just go away entirely again given the sort of the brand aspect of apple and what that stands for you're right there is a luxury aspect and people in China still buy the Louis Vuitton bags there you know with all the preferences they have so there is that aspect but look in terms of the phone it's about the features and the data the biggest lock in that apple had was it was very hard hard to move the data out of the iOS ecosystem now if people are switching they're moving to Huawei phones guess maybe that problem is solved and and that's where you know the stickiness suddenly gets questionable okay that's what I want to get into can you talk to us about how that stickiness has been reduced in China because the way they regulate the ecosystem and what China is allowed to do is so different compared to say the US and Europe can you go through the differences for us yeah I mean what we are seeing with digital markets Act is an example of that where they're saying the gatekeeper companies shouldn't have an undue Advantage with the default apps shouldn't uh you know just lock in their customers by virtue of holding all their data and not letting that data move out of the e that's already the case in China that's already the case in China I mean that's what they have implemented they've basically made sure the app stores complies with their set of rules and in their set of rules I mean if you have to operate there then you have to let all these things out so what argument will Apple have as the EU tries to do the same thing I mean they are complying it's just Apple's pitch has always been when you come to the Apple Market space marketpl you get access to the most consumers so if you're a company a new app developer who wants maximum access then you have to come to the Apple App Store as opposed to going to an alternative app store even if it charges less you're not going to get those you know 500 million plus users that you are going to get in the Apple App Store will the data security risks argument work I I think that's what's going to slow this thing down that even if you have an alternative app store the fact that if you download an app it's going to expose your operating system and your data why would you do that as a consumer and so that is a very powerful argument but uh the companies that are offering the alternative app stores have to make sure you know they really make they they kind of bring that offering uh that consumers are convinced so if it's a like of let's say Netflix or uh you know an Amazon that is offering that alternative app store then maybe it's a powerful argument to say this is safe enough for me to download an app and keep using that app store because I can save on that commission I think this is going to end up being one of those things where it's experience is going to teach us what's going to happen because it sounds like there's a lot of possibilities and there's a lot of reasons why you could say yes that works but it sort of reminds me of economics in general which is here's a bunch of data sets and we're not going to we're going to ignore all the other stuff and see how that plays out but it does sound like there's more there then I think the marketplace is appreciating at least and the payments aspect so I think the fact that they will have a lot more Alternative forms of payments everybody as a developer would try to save on that 3% payment cost if you can get it lower because you know Apple does have to allow alternative Payment Systems now so that I think that is the easy substitution that developers will look to make so mate two more mac 7 names to come this week the final Mac 7 name at the end of May I think on the 22nd right from Nvidia what's the big takeaway so far we've heard from the likes of meta alphabet Microsoft Tesla what's the big takeaway for you I mean capex is going up and it will go towards buying nvidia's chips so clearly there is that insatiable demand and everyone called out the supply constraints even Microsoft said there are Supply constraints so if a company with that kind of capex budget is saying they cap uh Supply constraint that tells you something do you think the bathroom video just got a little bit higher then over the last week it has and it's reflected in that uh runup in the stock over the last week so I I think again as I said previously in your show the next two quarters does look good for NVIDIA in terms of the demand and you know them coming out beating and raising but it's always about tougher comps what do you do after you you know are passed these comps and and I think it's a tougher bar as they continue to go along that just in the business over the last few years have' just beat and rais beat and rais beat and rais beat and raise M this was awesome as always m sing there of Bloomberg intelligence you will see plenty more of mandate through this week we'll get numbers from Amazon tomorrow apple on Thursday towards the end of May May kicks off in two days unreal towards the end of May you we he from Nvidia this just in from Goldman Sachs their view for Friday payrolls 275k is the estimate the median 250 this is really Punchy stuff going into Friday much more still to come we'll catch up with Stephanie Roth of wol research looking ahead to the FED on Wednesday and payrolls to round out the week live from New York good morning [Music] 60 minutes away from the opening B Equity Futures here positive by 0.2% on the S&P 500 on the nasn 100 doing okay as well up by 0.4 small caps up and down and all around it's been difficult for small caps since the end of March the Russell's just about positive by a quar of 1% turn to the bond market big moves there this month that's for sure up by more than 30 basis points at the front end of the curve on the month up by more than 40 through the month of April on a 10-year maturity we're down by three on the session to 46280 on a 2-year to 49766 Talked Lots about payroll we do more of that in just a moment but the median estimate in our survey at the moment 250,000 which is still pretty Punchy stuff considering at the start of the Year everyone was looking for a recession and they were looking for rate cuts to start by March yeah okay that didn't happen turn to this board in foreign exchange big moves here too coming into the month worried about 152 you got 160 overnight on dollar Yen 15639 gapping higher then gapping lower Big Move lower negative by 1.2% on the session now so that's a stronger Japanese Yen and plenty of speculation as you might expect on whether there was or was an intervention based on the Ministry of Finance which has control over this situation I do not put any emphasis on the word control whatsoever they said no comment Dow Jones said that there was intervention based on their sources overnight is it sustainable that's your judgment call at the moment that currency pair is 15634 under surance this morning a Paramount takeover deal hanging in the balance the CEO Bob Bish could be replaced as soon as today as the Redstone family and independent film producer David Ellison of Sky Dan appeal to other investors Ellison is proposing to buy a block of shares at a premium the redstones agreeing to let non-voting shareholders approve any possible transaction sources telling Bloomberg that Sky Dan's bid is considered the best and final offer amh talk about a mess this stock is up in a pre-market by 5% also we should note that Ellison is not just a producer but it's Larry Ellison's son probably why he has the capital to buy some of those shares that block for a premium price and does look like given that potentially this deal could go through although the market is interesting that the shares are rising they're going to get rid of the CEO and Jonathan this is what one uh report has out of Barons and quote Office of the CEO unit all the division's head would then start running the company it's been a fair bit of investor push back around the story as well that stock is high by 5% look out for more headlines on that a little bit later no doubt Ed Lam and Caroline Hyde will pick up that story on bloombank technology later on today as well we'll catch up with Ed in about 15 minutes time ahead of their program the Tesla CEO Elon Musk securing a crucial partnership during a surprise visit to to China this weekend Bloomberg reporting that Tesla will use Chinese Tech Giant by's mapping and navigation function to support self driving the partnership helping Tesla to clear two key hurdles in the world's biggest auto market Tesla also passing a key data security requirement that stock is up now look at this up by more than 12% in the pre-market Sarah Hunt's been with us for the last 30 minutes she's with us for the next 30 as well we were having this conversation this morning with Jay Pelosi of tpw and Jay made the point about Chinese Brands dominating the market in China and foreign firms struggling and Tesla is one of those companies we're talking about it's up this morning where do you see the ability of us firms to compete in the Chinese market effectively how difficult is that going to be I think it's quite difficult especially with what we've just been talking about with apple and Huawei but I also think that what this demonstrates is that there Elon Musk saw an opportunity to go in there and say look I want to do this because you've seen the the clashes that have been going on between the US and China he's trying to put a foot in both sides and say look I've got this technology and he had the premium brand in China and then all of a sudden the EVS in China started to get less expensive and Tesla started to lose share and he had to drop prices so to me this is a way to say I'm going to change up this this math for myself but also can if I can be successful in this then maybe I get to be the outlier do you think there are some CEOs that are better at this than others I'm thinking Tim Kirk Elon Musk are certain CEOs of American firms that can play the China story just a little bit more delicately diplomatically well you would hope that you could for Apple because they make so much product there right but I think that when musk is doing is quite smart and it's quite he's going in there and saying look I can bring you this functionality that you don't have and I can use Chinese technology to do it and I think that that is one of those he's the consumate salesman he's been able to explain to people I can do this I can do that even with what's going on with the numbers which weren't that great I'm going to bring a lower PRC car it's going to be fine and I think a lot of people were short Tesla I think a lot of people were worried about Tesla and I think he's done is he's just thrown a whole bunch of more information at you and said this is all going to be great and let's hope that the numbers can prove it out if you were short over night you're getting squeezed now in the pre-market up by double digits elsewhere investors looking ahead to a busy week on top of tech earnings the fed's two-day policy meeting starts tomorrow with a rate decision coming Wednesday afternoon fet J pal expected to hold rat steady Bloomberg economics anticipating more hawkish ret trick as us data continues to run H we'll round out the week with payrolls on Friday Stephanie Roth of wolf research looking ahead to those two big events us around the table Stephanie good morning to you good morning can we start with payrolls and skip the FED just for a moment sure 250 Med an estimate are you looking for a Punchy number as well we are looking for a Punchy number we're looking for 270 but we're looking for a softer average hourly earnings number which is arguably more important in this environment Supply Side Story Supply Side Story how much immigration are we getting we're getting a lot I mean if you look at the cbo's numbers versus where they were a year ago it's it's about 1 and a half to 2 million more people per year than they previously expected and this is why we're talking about 250 type numbers and we're not that scared of it which is such an interesting combination with the fact that we're looking for higher inflation in actual in in that people are spending money but our wages going up so much because we've got this influx of people and I think that that's where it's a tough thing from an economic standpoint because the wages can't move up as fast if I have plenty of Labor Supply so the labor people are getting hired but are they getting hired at high enough wages to deal with the fact that Goods have like essentially and food and things have shifted up in terms of pricing those levels AR come down even if inflation is slowish so I mean I think when you look at from the start of the pandemic we look at prices of most Goods core inflation they're up kind of in line with where wages are so far so consumers can generally afford what they're paying they just don't feel great about it which is why consumer spending has has held up fairly well if that wasn't the case then you would have seen a demand destruction type of environment but that hasn't been the case we've seen a resilient consumer because they've been Frank Frankly able to afford it on average it's just they don't feel great about it now looking ahead we should see core infl and never seen core inflation running at something like 3% it's not as if it was anything like what we saw and the consumer still in a in pretty good shape we saw that on Friday that was one of the the bigger expectations with the savings rate falling back down to 3.2% well that was going to be my next question which is the savings rate has come down and credit card balances are going up so when we can people can afford it but are they putting themselves in a financial position that's more precarious than they were you had this whole period of time during the pandemic where everybody bu built up their household balance sheets are we going back to a point where it's expensive I mean you just think about the rates on credit cards right now you you're carrying credit card balance that's so all of a sudden you're paying 21% on that yes when you look at consumer barwing overall it actually is kind of steady similar to where we were from a growth perspective in the last cycle credit card balances have risen slightly higher than average but not that materially so it's not really being driven by credit It's a combination of we still have this excess cash which there's been a lot of revision to the estimat but there excess cash is is still kind of there Nal income growth is really strong because we have strong wage growth strong employment growth uh so the consumer is able to to sort of spend because of of of things that are kind of combination of of income growth some some excess cash um so it's been a an environment that's not really being driven by leverage last jobs report though we saw the percentage of people who had to go out and get a second job or even a third job to support that cons spending that was up do you expect more people are doing that there's probably an element of that but I think it's it's more more driven by sort of domestic labor labor force growth from combination of of these new people um from an immigration perspective we've estimated that it adds about 20 basis points to consumer spending over the past two years which is decent but it's not it's not you know Monumental either so take me to Wednesday let's take the data and push it through Wednesday we've been talking about how confident chairman Powell is for the last four months he needed some more confidence he's clearly lost some confidence how much confidence should he take by that story you're telling in the labor market I think I think he believes it deep down but I don't think he can I don't think he can rely on it at this point I think after the third and he was the last one of the big fed fed speakers to come out and say okay fine we've kind of lost confidence and by March we're we're not feeling great about the data our based cases you'll start to see the the inflation data start to soften in the next couple of months and then there might be some restoration of of the confidence but he's not going to be able to communicate that on Wednesday it's going to be probably a fairly hawkish press conference isn't it at least better for him that there's growth that's coming through this that he's not in a position where the inflation is high and growth is slowing at the same time so dramatically that the stagflation story that's been around for a while that we were going to go back to the 70s it looks like we've got good growth and I think people can handle those higher rates if if growth is is pretty good and that seems to be what both the stock markets are reflecting and what the economy is reflecting what are you looking for in the next couple of months on the data points to see which way we're actually going and you think that the FED is going to end up being most focused on yeah and I think that's going to be one of the most important questions that might be asked for to Powell on Wednesday is are you now getting concerned about growth being too strong and that putting a a wrench in your inflation story I think he'll say it it you know it's okay we still have the supply side but we have to keep an eye on it um our base case is that you'll start to see core inflation run at about 0 2% and this is core pce 0 2% month on month and that's kind of the bogey that they'll they'll need to be able to cut but July is is probably looking a little bit soon it's a tough one tough hurdle but they'll still probably be able to cut this year um but it's going to be a you're going to need to get that that that inflation coming down closer to that 0 2% which is which is closer to the feds Target our base Cas is you have seen a lot of seasonality in the data in the first quarter so I we we genuinely agree with the FED that has been talking about the seasonality problems we were worried about the seasonality in Q q1 it goes the other way in Q2 and then throughout the rest of the year interesting Sarah this is a big Equity Market question isn't it are we putting off rate cuts for the right reasons or the wrong reasons from an equity investor perspective still the right reasons it's still looks like the right reasons yes and unless that changes I think that's another reason that with the earnings coming through people can look at the market and be comfortable with it and the question really is do if we started to see the wrong reasons I think that's going to be a much bigger issue the stagflation reill that some people thought we had in the data last week what did you make of that just walking away from GDP last week and seen some notes mentioning the SW word stagflation definitely not stagflation hard no hard no so when you look at the GDP data okay fine it missed on the headline number you had a you know one handle on your print but when you look at the detail it was driven by trade and inventories which are incredibly volatile Imports were up pretty strong that's not a sign of a a stagflationary economy so if you strip out trade inventories and government your your domestic demand was growing 3.1% that's not a stagflationary type environment Stephanie R the world for research Stephanie love it it's good to see you remind me of that number for Friday 270 270 0.18 on wages okay appreciate it that latter points the important point right impressive impressive okay let's give an update on stories elsewhere this morning here is your Bloomberg brief with Danny Berger hey Danny hey John senators are dismissing house Speaker Mike Johnson's called to send the National Guard to college campuses Johnson visited Columbia University last week there he condemned Pro Palestinian protests and said that there would be a quote appropriate role for the National Guard if demonstrations were not contained both Republican and Democratic senators dismissed the idea JD Vance of Ohio said maybe just call the police while Tim Kane of Virginia called it a very very bad idea us junk bond bonds finally eak out gains last week after suffering three consecutive weeks of losses Supply was light in corporate earnings were strong helping to prop up the market yet Mike Scott of mang group says the market is overlooking unsustainably overleveraged business models he spoke with me earlier on Bloomberg brief as rates start to percolate their way through through the economy through the refinancing Channel or through cash flows of businesses this becomes much more of a cyclical issue certainly not the case today but we certainly could could very much build uh a more negative view around the default rate cycle picking up uh from 2025 and you can watch the brief every weekday morning at 5:00 a.m. German bonds are retaining their bid this morning despite German inflation accelerating for the first time since December the Euro for its part is holding on to gains it had before the data ECB president lagard has already reiterated she won't pre-commit to any rate path beyond the summer helping to Anchor bone yields around current levels data for the full Euro zone is due tomorrow that's your Bloomberg brief John Danny thank you great work as always we'll see you tomorrow morning the ECB the next meeting June 6th I believe and we're looking for that first interest rate cut as Danny suggested after that kind of no man land up next Amazon and apple on Deck betting against Apple in China is been the wrong move and in our opinion it's 220 million iPhones there 130 million have not upgraded 4 plus years that growth opportunity will be on the horizon in just a moment we'll catch up with Bloomberg's Ed llo live from New York this bling [Music] back Monday morning good morning to you all we are about 45 minutes away from the opening Bal in New York City to kick off a brand new trading week with Futures positive by a third of 1% and around about a quarter of 1% higher on the S&P and the Sur this morning Amazon and apple on Deck betting against Apple in China has been the wrong move and in our opinion it's 220 million iPhones there 130 million have not upgraded four plus years that growth opportunity will be on the horizon I think Thursday it's really about Apple showing that growth as you go into the June course September what we're seeing in China that turnarounds there and this all sets up for AI coming to copertino it's the lest this morning Amazon earnings due tomorrow Apple Thursday following strong numbers from Microsoft and alphabet the latest results happen stocks record their best week of gains this year and sending a clear message to investors AI spending is paying off Ed llo joined us now for more to look ahead to what's happening in technology ahead of his program with Caroline Hyde a little bit later this morning at dominating the story this morning it's not Amazon it's not Apple it's right here with Tesla up in a pre-market by close to 13% following that surprise visit to China from Elon Musk Ed what was your reaction to that uh it's just a crucial step in the plan that that musk outlined for for full self-driving or this autonomous future you know I heard you talking to your guest earlier about there are some CEOs that that do China well and some that don't and Elon Musk has always had a uh a relationship with China frankly as a good base starting line it it's become a bit more complicated in recent years but Premier Lee Chung who who he met with Sunday was one of the kind of leading officials when Tesla wanted to set up Shanghai in the first place and his ability to go there and and and unlock that that key step a tentative or or prelim approval it it serves them in the short term because they can unlock software revenues much higher margin uh in in what's a competitive market for for driver assistance technology but longterm it feeds into what is now the sole thesis for many which is which is Robo taxi and autonomy anded who's actually got the IP here that's what I want to get into typically when we talk about a partnership a US firm or an international firm going into China pushed into a partnership often would' be asking questions about the Western firm sacrificing IP who has the IP here for me actually this is the key question and to answer your last question this is the big takeaway so it's a partnership with Buu according to Bloomberg's reporting for uh for incom mapping and navigation um specific to that market and the reason that's interesting is Tesla is actually used I do in China since 2020 um you know the the the car's ability to read the world around it is localized right you have eight on board cameras and the the algorithm or the artificial intelligence that powers FSD is trained on that camera data but in combination with the map that you're navigating against and so in this instance Buu has become an even deeper Stak holder in Tesla's future in that market and and I think you'll see that that bu's adrs at least are up in premarket as well so they're using Buu technology but where does the data get stored well this is the other key development overnight that there are many hurdles that Tesla would have to pass one of them is uh getting The Regulators green light on their data practices you know I mentioned musk's success in China and his relationship with the country's government but actually the data issue is still sensitive so for example Teslas cannot be in close proximity uh to Chinese military facilities because of the cameras around the car and the concern that they're capturing data the approval that Tesla got overnight is that that Regulators basically buy the idea that a consumer and I guess another entity that that has the power to can switch off the car's ability to to gather data uh if they feel that that's what they want to do um but I guess that was a key concern if there was ever an idea that well when's Tesla going to do this the buy do piece is interesting the relationship is interesting but this data approval is probably the bigger milestone in this instance does this then LeapFrog them on top of everybody else on the EV space in China and or is there anybody who's working on a similar set of abilities to do this or is this one of those ways where I just I've just jumped over the competition and therefore I can reap the benefits of that for some period of time good morning excellent question I mean in China just as with the EV Market more broadly the market for Advanced Driver assistance is also more developed and there's more Choice there are many more players xong and xiaoi uh Market this very heavily um you know in in North America you look at General Motors and and Ford which has its own issues with with Regulators this morning um are offering more limited versions of a driver assistance tool but it's more saturated and and it goes back to the idea of well why is BU do on the mapping side important there are actually 20 potential Partners in China Tesla could have gone to to for mapping so they're actually reinforcing an existing relationship but yes it's competitive and there's no guarantee that they'll suddenly start selling these $8,000 packages or have incremental subscription Revenue in the same way that they've been able to capture it here in the US did they lock up by that it can only be working with Tesla and not with some of these other players or is this one of those things where they said we're going to take the biggest player in here and we're going to put it together with Tesla and we are going to then become a juggernaut and too bad for the rest of you because you're not going to be able to catch up um good question Sarah I'm good I'm not that good I don't know about the exclusivity of buo and Tesla's relationship but one thing I would flag uh is that uh basically think of this as in the bigger picture Tesla knows it has to gather lots of miles to train its more promising neural Nets what I reported last week is there is a very top secret small batch of future generations of the underlying large language bottle that they hope will power Robo taxi Tesla has 1.7 million Vehicles sold in China so those miles driven under this Arrangement no matter whether they're exclusive or not will add Great Value to the longer term goal self-driving really Spooks regulator State Side Ed this is what we got just a moment ago from AP that the US is probing crash is involving Ford's automated driving system he could you comment on that how difficult and complex things are for some of the US manufacturers trying to ultimately deal with the same technology and roll it out a whole lot more quickly yeah I I mean this relates to Ford's blue Cruise right which is as I kind of outlined ear it's a more limited advanced driver assistance tool you know Ford and General Motors have been much more careful not to Market it as true autonomy and yet you know niter and other Regulators still take a very close look there have been incidents right you know we're talking think of all the people driving every day here in America I think in Ford's case we're talking about 20 or so uh situations that occurred or accidents that's how high the bar is is you know how many people drive every day in a Ford and and 20 or so lead to it to to Serious looks by the regulator it's very tough um and then you know as you know full well John Ford's got some other problems in its in its structure and its its transition to EV that it that it's dealing with at the same time yeah that's for sure perhaps handling them better than others though Ed let's look ahead to next week together the next week we've got Amazon tomorrow apple on Thursday for you and Caroline throughout this week what's the big Focus going to be for you and a team yeah the bar's really high Amazon now or or there's a lot of pressure on Amazon you know what we learned from uh Google and Microsoft the number two and three in the market is is not just that there is actually some growth being jued out from AI but actually spending broadly on cloud has been quite good so if you take the Microsoft example 31% Topline growth in Azure they gave us a tangible 7% contribution within that 31 was specifically from AI but that also means that you have a 24% grow growth coming just from corporate spending on cloud and and whether Amazon which is the clear market leader AWS in Cloud gives us the same is important you know because then you'll learn whether or not they they're holding market share or seeding market share to those names but that's kind of the big story for them AI now shows up in the financials good we've been talking about it for quite a long time until that was the case and then on Apple I think you know we know it's a China iPhone story Big Time Ed thank you buddy looking forward to catching up with you through the week Ed llo there of Bloomberg technology you look out for Ed alongside Caroline at 11:00 a.m. eastern time on Bloomberg TV equities right now positive by third of 1% let's get that graphic up again the week ahead in US markets in fact Global markets we're looking for two big Tech names Amazon and apple the Federal Reserve sandwiched in between and the cherry on top is payrolls on Friday Sarah hun of valpine Saxon words with us through the last 50 minutes or so Sarah just a final word on that if you could take your pick right now the data the FED decision or the earnings what would you take the earnings why so important because I think that the market has already started to game out the FED decision they've already started taking rates off the table and I think that somebody made the point earlier this morning that we're already possibly even thinking about no cuts at all at least quietly if not in the in the situation and I think that the data is has been mixed enough that anybody could pick and choose the right data that could whatever thesis they had they could have it earnings are earnings and cash is cash and so that is what people are looking at to say okay you've had these big valuation moves you have you've had these big multiple moves am I keeping up with that on the earnings and on that cash generation and I think that that is critical and if they and if companies can continue to do that then I think there's less vulnerability it's when that starts to slip that you see more vulnerability Sarah I've love this been great to catch up we'll do it again soon Sarah hunt there of Alpine Saxon Woods big week ahead going into the opening bell about 35 minutes away Equity Futures are positive here by let's call it third of 1% and be generous after a big week of gains last week we're adding a little bit of weight to it in the market this morning in the bond market you just steady compared to what we have seen through the month of April on a 10 year we're down by about three basis points 4 63 tomorrow Grandma will be back this is the lineup for you former fed Economist Claudia Sam black rocks Amanda linam Ron Temple of Lazard and cities Rob sakin alongside amarie's voice making a comeback live from New York City have a fantastic week ahead this was Bloomberg surveillance [Music] [Music]

Channel: Bloomberg Television

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Keywords: Annmarie Hordern, Jon Ferro, Lisa Abramowicz

Id: x6Op_H8BaSs

Length: 147min 59sec (8879 seconds)

Published: Mon Apr 29 2024