Bloomberg Surveillance 05/06/2024

very hard for me to see given everything we know a hard Landing scenario playing out anytime soon the equity Market has been you know much more resilient to these shifts in the interest rate narrative we have to give markets the benefit of the doubt here irrespective of what the data looks like at some point you will have to pay the piper fed policies only become really restrictive relatively recently this volatility which are continuing to see in rates risks I'm afraid risks breaking something elsewhere this is Bloomberg surveillance with Jonathan Perell Lisa abowitz and Anar hurn let's get your week started coming off the back of a second week of gains on the S&P 500 live from New York City this morning good morning good morning for our audience worldwide this is blomberg surveillance your Equity Market on the S&P 500 positive here by a quarter of 1% the calendar is super light this week for ear in for data it is super heavy for fed speak check out the FED speak through the week you'll lose count of how many scheduled speeches there are the Highlight today is the New York fed President John Williams following a downside surprise on Friday on payrolls the question brammo are we quickly reintroducing summer rate cut talk after that job data if they do how much do they risk kind of exacerbating some of the volatility that we've seen in markets in a way that isn't really conducive to any sort of policy at what point are they going to going to risk some sort of credibility gap if they really start talking about rate Cuts after trying to push back so aggressively two weeks ago a favorite quote from City Andrew horsse and we'll catch up with Veronica Clark a little bit later this morning summer doen happen so fast you can sing that a little bit later I'm not going to sing it right now nobody wants that but this is a big big question how quickly things have changed off the back of one downside surprise and to be fair it hasn't just been one if you look at the economic surprise index coming out of City the US economic surprise index it's just dropped into negative ter you look at the performance elsewhere outside of America is starting to build just a little bit and I think a thing we've got to get through this morning have we seen Peak us exceptionalism will we see more guests around this table talk about convergence versus Divergence Peter Shear put it best I like my exceptionalism to be exceptional he came out and he was talking about how it's really important for the US to kind of be alone for people to really buy into the US story it's very hard to understand whether the inflation is the same in the US as it is in other places whether it's really coming down as quickly in all of the places but to me I think that probably the week starts Thursday or maybe it never starts but Thursday we get the bank of England decision I think it'll be interesting to see how they kind of parse through some of the less exceptional aspects of their economy and how they're going to respond with uh with the rate with the r perspective another classic bro promo for the week ahead don't tune in until Thursday when you hear from Governor baile on thread needle Street we also have to talk about the range we saw in the bond market let's take the front end of the yield curve on treasuries last week the two-year the higher two year was post ECI it was on Tuesday it was 5.04% the low was on Friday in the low 470s post payroll so we're talking about a 30 basis point plus range on a 2-year yield Muhammad alarin talked about it a few times just how high perative this Market seems to be to incoming information because of the federal reserve's reaction function now we've got to ask ourselves do you think that is a feature a Fed communication or a bug you know and I don't know the answer I don't know if they have an answer either I think that probably individual fed official has a different kind of perspective at a time where ultimately they don't know what they're going to do they don't have a framework as Muhammad alian has put out there we don't have a sense of the longer term trajectory of Base Baseline rates that actually was an area that J Powell steered away from completely in the conference so if you don't have a sense of what the destination is how do you even understand how to calibrate the journey if you're confused by Federal Reserve communication it's going to be more of it through the week I'm not sure if that helps or harms the cause Equity Futures right now on the S&P 500 positive here by a quarter of 1% remember it is a bank holiday in London a holiday in Japan so cash treasuries haven't started yet we will get that opening in the next hour or so at the moment looking at Burns yields are lower by five basis points at two 44 outside of that in foreign exchange the Euro a little firmer at 10769 and crude in the high 70s here Lisa we're positive by 1% at 7899 all right this week very exciting week it's not a very exciting week There's kind of an absence as John was saying of uh us data we do get the SLO the senior loan officer opinion survey today we also hear from fed Tom barket and John Williams will be speaking at the melin conference in California which we will be hearing from a lot of luminaries there as well Tuesday we get earnings from Disney lift Spirit Aeros systems feds kashari is also speaking just want to point out about 90% of the S&P has already reported earnings so we've really gotten a good sense of what is going on on Wednesday we hear from uh you mentioned Jefferson Collins and cook we also get earnings from Uber Thursday the big day Bank of England decision we also get jobless claims and on Friday University of Michigan sentiment survey I will just add something else we get a slew of bond auctions and this might be the most important part of the entire week we get something like north of hundred billion dollar of auction starting tomorrow uh with a three-year auction I've never seen an American so hyped up about a bank of England rate decision Greg Battle of you ever is that have you ever seen that before no I think that says something about the number of catalysts and information get and do you disagree okay uh not really no coming up Greg bow of BNP parabal with stocks climbing as Traders revive fed easing bets Greg valer with tensions rising in the Middle East and we'll catch up with Luigi vanales of the University of Chicago on us exceptionalism we begin with that top story stocks extending gains as Traders focus on the prospect of Fed rate Cuts Greg ble of been p with this to say over the last month 80% of the S&P 500 by market cap have reported earnings whilst there were some notable misses and rotation between winners and losers the net read was positive with revisions higher to EPS numbers for 24 and 25 Greg is with us around a table Greg hello a proper good morning to you sir back in March when we caught up you said the bigger risk to the market was hot data we're not getting hot data is this good yeah I think so I think we've gone from an environment where the data was too hot we said it was too hot to be too bearish on earnings but it was also too hot to get too carried away of equities cuz we got this counterweight from the rate market and what was going on with the Fed so I think we've moved from an environment where the DAT was too hot to starting to cool down the initial leg of that at least is positive forgive me for getting into children's Fair retails so early in the conversation but Goldilocks was mentioned a few times on Friday does it risk getting too cold too quickly I think it can do but I think it's very hard for it to go directly from too hot to too cold so you do get that bit in the Middle where it does feel just right that can be pretty shortlived but for now at least that feels like where we are do you believe in the sort of spreading out of exceptionalism let's not focus on the US because nobody else is this week because we're not getting any data except for the FED officials we're going to we do you think that we truly are seeing a broadening out in the story of Immaculate disinflation um potentially in the short term but I think it can be quite tactical so we've had some policy Tailwinds from China which I think has helped the rest of the world EX the US um I think we've had the bull run from us equities driven very much by Tech and the AI story and I think that's a secular theme that makes the US stand out on a structural basis but I think from a more tactical view we are potentially seeing a bit more convergence and a bit of a catchup trade from some parts of the market that lacked so do you find at this point that some of the areas that have led are kind of Shifting and becoming laggards and that actually there is a big rotation underfoot that feels sustainable to you not just necessarily A broadening out but away from Big Tech away from just us big uh big cap large cap uh Focus toward the rest of the world toward consumer cyclicals I don't think it's necessarily sustainable on a longer term view I think this is a bit more of a tactical reversion from those parts of the market that have lagged into what could be a bit of a lull in terms of the summer but we've already spoken about how light it is in terms of catalysts so there's an environment where you do get mean reversion there's one way or rather two ways of spread can close something can get better or something can get worse when we T start to talk about convergence over Divergence are we talking about something improving or something getting worse yeah it feels like it's a bit of a catch-up trade from those parts of the market that have lagged and that's not just globally I think you can also look at some of the lower quality parts of the market in the US that have lagged and that's very much linked to the story of you know pressures easing up a little bit from the rate side and that goldilux narrative what time ofh is not durable that it's just sort of a tactical short-term trade well I think part of it is just you need to think about what is driving this uh structurally and we've been in an environment where I think the key driver for us equities has been earnings and that has been driven by large cap Tech and the AI trade and it's not obvious to us that we're a point where we can call time on that you don't sound very excited about this week do you I'm not very excited about this month or maybe this enti entire summer if I'm honest we have an environment where we Look Backwards we've had that glut of S&P earnings we've had some kind of pivotal moments from the fed from the macro data payrolls ISM when we look forward to the next month there a couple of catalysts that stand out but outside of that we really think we could have a midyear low how about Bond auctions is that where the fireworks are I think potentially not I think given that the data we've seen this last week we're potentially in an environment where we're going to get less volatility transmit from the bond market to the equity Market rather than more in the coming weeks is this basically the result of people just having no conviction and being whips so much and having so much narrative creep a narrative shift and narrative swing that they just are exhausted and they're just basically like you know we're just going to set this one out I think low conviction and positioning so we think we saw a real wash out in terms of positioning over the last month that has maybe der risked things a little bit on the downside and then I think to John's Point people are a little bit worried about you go from too hot to too cold maybe it feels okay in the middle but it's something that's really hard to have conviction on when the narrative is shifting so quickly you two deserve each other I've never heard such a boring start to a Monday morning honestly should we talk about the election let's really make it interesting when do you think is going to be that point in the calendar where you arrive around this table and it just feels natural for us to ask that first question about pricing in the US election I think it's going to be after the summer so you know whe whether it's whether it's August whether it's in the months coming into the election when you look at it statistically in election years what you do tend to have is a real L and volatility through the summer um and and then things pick up a bit more in the in the kind of coming months so I think at the moment it's a topic that every meeting I'm going into of clients everyone's talking about the election and when you ask people have their position for the election generally the response is not yet what's your response how do you tell them to think about the risks on the horizon so I think there's several ways we can look at it one is like what's priced in terms of the volatility market and it's clear that there's a very big kink in the options curve around that election date and then the second one is thinking about rotational trades um what are the relative winners and losers potentially for the election trade and are there any of those trades that we like in the steady state in the kind of months from running up to that as well as just for a pure election trade well I will say that right now you mentioned China sort of the bleed through to the rest of the world including in Europe and China uh Chinese president xiin ping is currently visiting Europe are you watching that I mean how much do you sort of gauge what that kind of interference is going to look like how you sort of price in fraying to fraying connections at a time when we've heard a lot about this and not a lot of yeah so I think that the kind of De globalization trade is one that we think is interesting to run through the election and it's something that I think is you know seeing the data that we've seen the last couple of weeks and seeing some of the kind of procyclical Pro policy responses and subsequent Market reaction from China equities I think is something that's interesting and it does Drive some of that kind of convergence not only globally but within sectors so we think some of those kind of commodity sectors link sectors industrial cyclicals have performed a little bit better but as we run run into that election I think that you know tariffs trade de globalization those are going to be big themes for the market Greg good to see you thanks for dropping by Greg battle have been par BMP parar getting your week started with Equity Futures right now positive by a little more than a quarter of 1% on the S&P 500 with some stories elsewhere here's your blimber brief with Danny burer hey Danny hey John Israel's military has begun moving civilians out of Rafa it's a possible Prelude to a long-expected attack on the gazen city there more than 1 million citizens Sheltering there many of whom LED after the initial outbreak of the war there were ceasefire talks between Israel and Hamas over the weekend but they appeared to have stalled the main sticking point is hamas's insistence that any truce be permanent credit sweet's CEO Ora corner is set to leave UBS in the coming weeks people familiar tell us Corner had hoped to leave the business sooner but he was persuaded to stay on until after the legal merger was completed he was also the only credit s executive to gain a board seat but during the integration kept a low Pro profile now cocoa prices may have subsided but now a new Supply crunch is roiling commodity markets it is coffee robust a coffee climbing to the highest price in 45 years that according to the international coffee organization last month Prices rose 177% it is a supply crunch that int intensified a variety of coffee used in espresso Blends and instant drinks it's blamed by poor harvest in Vietnam and now a drought and a heat threaten upcoming Harvest and that's your Bloomberg brief John hey Danny thank you we'll catch up with Danny in about 30 minutes time I'm next on the program the Yen back under pressure what the Yen has going for it is it's ridiculously cheap on any kind of um effective exchange rate valuation what it has going against it is the interest rate differential is still absolutely vast a weak of Japanese Yen this morning doly Yen at 15370 that conversation up next live from New York this morning good morning [Music] the Middle East and Africa vibrant resources and high yields investment opportunities abound join me on Horizon Middle East and Africa for the stories newsmakers and insight from this exciting region now we day only on [Music] Bloomberg Equity Futures on the S&P f 00 positive here by 0.3% there's a lift to this Market if you're looking for the bond price action this is Friday's move in fact I don't know what move that is at all are we open now on treasuries or is that the wrong board I think that's the wrong board anyway let's look at foreign exchange the Euro 10768 positive by 0.1% I'm guaranteed that we've got the right price for dollar Yen so let's do that now under sentus this morning the Yen Under Pressure what the yen has going for it is it's ridiculously cheap on any kind of um effective exchange rate valuation what it has going against it is the interest rate differential is still absolutely vast and the cheapness of the currency hasn't turned up in awesome export data by and large it's turned up in a lot of tourists arriving in Japan this year toward my cherry blossom and things here the lers this morning the en whip soaring into losses today raising Friday's gains that saw the currency jump as much as 1.2% on soft us jobs St to investors now shifting their focus back to Japan's interest rate Outlook Mark Chandra vanburg writing this Japan remains on holiday today but the lingering aftertaste of the two bouns of material intervention last week has subdued the momentum Traders and Trend followers Mark joined us now for Mark let's kick it off with what's happening with dollar Yen have we reintroduced some real two-way risk into this currency pair that would benefit Japanese officials well I think that it had but you know over the weekend treasury secretary Yellen all this talk of intervention speculation and she seen the hint that we shouldn't expect it to be repeated she said she expected intervention to be RAR and for the US to be consulted about it and so I think this was a uh a sign to the market or the market took it as a sign that we shouldn't expect boj intervention today or in the near term markets have steadied uh that is the one-way Market that we wor seeing and the higher volatility has eased a bit so basically are we talking about people who can reinstate some of the shore positions on Yen are we talking about basically there's a sort of risk out there that the Japanese officials have raised that's going to keep them out of the water well I do think that the market has to respect uh this 160 level uh maybe even 158 at the top side so I do think that the Japanese intervention I do think it was intervention that we won't get it confirmed really until the end of this month but I do think that it was sufficient to break this one-way Market that was happening and give the Market Fair again of of intervention or of action I don't think it's going to take I don't think it's going to a boj rate hike uh which the market doesn't expect till September October will really be sufficient look what's happened since the boj raised rates uh call it 10 basis points the US two-year yield is up about 40 basis points well this raises this question about whether Japan's sniffing out something that's going on in the US maybe not necessarily the end of its exceptionalism but that other areas are exceptional too and that you're going to start to see the dollar of weaken on some sort of maybe unsteady but direct trajectory uh to a different place do you think that that's a correct way of characterizing it that we've sort of seen Peak dollar for the cycle well I I think so but it's not I'm not 100% sure yet but I think you're right Lisa that the what made the intervention in October 2022 so successful was that the Japanese uncannily picked a top two US yield and now we've seen a batch of softer than expected US economic data not just the jobs data but their service ISM and then when we look forward you know this is going to be a quiet week for us data but next week we get both CPI and retail sales and both of those look to be a little softer so I would think of it more like this the Japanese again have have likely pick a top to us interest rates and therefore also maybe a near-term top to the green back so Mark let's build on that just a little bit you mentioned us CPI last week a big factor or rather next week a big factor of last week was this asymmetric risk the so many people in the market were talking about this idea that we're more sensitive to downside surprises than we are to upside surprises given the repricing we've seen this bond market with a 10-year back down to 450 on Friday how we set up going into next week well we got to get through this week first of course but I do think that with the combination of softer CPI softer retail sales this could put a cap on the US yield you know what's surprises me is the market came away from the fomc meeting last week thinking Powell sounded doish because he didn't endorse a rate hike and now after the jobs data after the service ISM the market now is pricing two rate Cuts over the course of the remainder of the year mark let's talk about the swings we're seeing at the front end of the curve they're major massive post ECI last Tuesday we were through 5% and talking about the potential for rate hikes going into a Federal Reserve decision that didn't discuss it at all based on that news conference by Friday post NFP we dropped as low as 470 Muhammad was on the program Muhammad Del and we talked about it with him we were trying to wonder work out whether this is a feature or a bug of fed communication which one is it yeah I don't know I think that the market Works itself up into a lather on its own you know and think about what happened in December the Federal Reserve said they would likely cut rates three times this year and the market by the middle of January was pricing in six Cuts I don't think that can all be blam on the Federal Reserve and communication right now I'm focused on the idea that we're at 5% for basemark rates and what that's doing for a lot of investors over the weekend we heard from Warren Buffett he talked about how he has $189 billion in cash and that it's fair to see it go to 200,000 200 billion excuse me I'm even losing my denominators uh by the end of the quarter and that they really just aren't the opportunities to put it anywhere but get this he earned almost $2 billion do of interest on that because of where rates are what point is this basically an asset class in and of itself that makes cash for companies more attractive that really does change the dynamic in a more structural way yeah I think you're right Lisa I think that this is one thing that I don't think the market fully appreciates and that is typically we think about companies being net borrowers of capital but instead looking at the large S&P 500 companies they're net Savers uh offsetting the government dis savings and so yeah I think that companies have done well in this higher interest rate environment and we're talking about record profits even though you know uh which is really surprising just given the the so-called input squeeze from inflation so Us corporate are doing very well and they are net Savers meaning that they're net receivers of interest rates I think that the market is still seeing the the bill market and money market as a place to to sort of Stack cap up I'm not sure as an asset class uh that it's really the alternative I think that what what happens I think when Warren Buffett holds on to bills or holds on to his holds on to his cash that it tends to in the past be a Prelude to a spell off in the stock market and I think that when the stock market sells off this money on the sidelines will come back in or at least a good chunk of it Mark hasn't Warren Buffett been holding too much cash for a long time now too much cash I don't know you know I was looking at a study of 70 years of uh stock market performance and how much how many stocks that the US Bill Market has outperformed by so I I'm not so sure that this is too much cash I know people uh like myself for the first time buying some fixed income and taking our money out of the banks which are paying us hardly any interest rate and buying T Builder money market instruments hey Mark this was great to catch up it's been too long Mark chandel there of bitberg on this FX market and what it would take just at the end there to unlock some of that cash in Money Market funds let's talk about the data we've had payrolls on Friday 175,000 so that was the smallest gain in about 6 months that's the headline number take wages slowest pace of growth in nearly 3 years is go to the ism services that came out a little bit later I think a few of us were distracted by payrolls but ISM Services really disappointed the sector unexpectedly contracted in April for the first time since 2022 you go through the details a gauge of business activity fouryear low measure of input cost moving in the wrong direction Friday wasn't a great day for economic data and I don't want to say the sord Stag well some people did after that number sure except at the same time J poell very clearly said I don't see Stag and I don't see flation so stop kidding yourselves but there was that feeling of slowing growth with sticky inflation which is a pretty toxic recipe we did get data out of the Eurozone though that actually had more optimism which raises this question that you've been asking since the beginning of the show how much do we start to bank on the idea of the us being less exceptional and how are we closing the Gap is it the US actually decelerating or is it the rest of the world accelerating or is it more likely some combination of the two is something getting better or is something getting worse and at the moment it feels like a combination of the two if you look at Europe it's kind of getting better from a bar but only incrementally look at America yes the surprise index has turned negative but it's hard to say 175,000 jobs to the US economy in absolute terms is terrible yeah well you know I'm really struggling with the data you know this I found it very confusing it's very hard to come up with a narrative which is the reason why we've got narrative roulette Lori calvasina has been absolutely brilliant on this of RBC Capital where she's been tracking just the companies and corporate earnings and what she found was the sizable gap between uh earnings per share versus revenues earnings per share have been coming in much higher than revenues highlights how this is cost management this is a very different type of environment where you could see stocks actually continue to perform well but it doesn't necessarily bode well for the rest of the economy in terms of how Thrifty these companies might have to be more on that a little bit later Equity features right now on the S&P positive here by a third of 1% in just a moment we'll catch up with Greg valier of agf Investments with Rising tension in the Middle East that conversation up next [Music] good morning to you all getting your week started with Equity Futures positive by 13d of 1% on the S&P 500 equities up on the NASDAQ by a third on the Russ or the small caps up by 3/4 of 1% if you switch at the ball and turn to the bond market treasury should start trading in the next hour or so we're looking at buns yield a lower by five basis points on a German 10 at 244 bit at the front end as well we're down by about three basis points to 289 if you turn to Foreign Exchange lots to talk about in the FX Market Dolly Yen just short of 154 at 15374 last week was a big week for doly Yen biggest week to De Cline going back to 2022 Janet yanon the treasury secretary was talking about this over the weekend hardly a ringing endorsement of intervention in foreign exchange was it she basically said I'm not going to comment on whether or not they did intervene but I think that's rumor that said we would expect these interventions to be rare and consultation to take place that is a very interesting line when I'm sure that Japan would like consultation on the data ahead of time consultation on whether the fed's going to cut rates consultation on a whole host of things because they probably feel like the US currency market and economy has been you know switching around everything that they have so I don't know it's a little Rich yeah I think the problem the problem here is the the communication coming from the US side I imagine would be high interest rates if you're so worried about the FX Market hike interest rates and and there's a decent argument to say maybe they should and I would argue that probably would be the right response there's been so much sort of fraught diplomacy I should say between the US and Japan that everything seems a little bit more kind of heightened in terms of tensions between these two I will say what's Jan Ellen supposed to say I mean at the end of the day no much no I mean there's really there's no winning either way what was that line that we heard about uh J Powell I think that you can apply to jenet Ellen every time she opens her mouth she has only what to lose was that ass ass he should speak he did his best to not speak but he still evidently gave a d he did a Prett pretty decent job and not saying much at all which was in itself a message to this Market because he didn't talk about interest rate hikes and we knew that by the way we knew that if he didn't say anything that this Market which is looking for something to work with something anything that would go off of the nothing 15375 on doen under surveillance this morning fed speak picking back up this week we'll hear from president Barkin and Williams later on today Traders looking for clues about the the fed's path forward Friday's softer than expected payrolls report driving a conversation back towards maybe rate Cuts this summer we knew it would only take one downside surprise to encourage that conversation you know honestly if they did that though if they talked about potentially cutting rates this summer I'd be very curious to see what happens with the bond auctions this week I've been may be curious anyway I think that they're very interesting uh but part of the reason why is it what point does the long end really start to sell off If the Fed shows a willingness to cut rates on just one week or print we still haven't established what's going on with inflation and why it's been as sticky as it has people thought that savings were going to run out from consumers and they did and then they kept spending so people are trying to sort of wrap their heads around the unknown at a time where the FED clearly has a doish tilt and what's your impression of things do you think the chairman Pal's view is the view the consensus view on the committee or towards the doest end of the spectrum my guess is he's on the doish end of the pr Spectrum there is a deep fear about the fact that you do see delinquencies going up as much as they are the fact that you did have such incredible gains in the labor market particularly for low-income workers and they don't want to lose those and there's a big fear that the longer that they keep rates high they could lose those gains and that could be a real problem next time around that's a different type of policy than the Dual Mandate of inflation and a labor market in its totality it becomes a very tricky dance but I think that all of the FED officials are kind of working with this this uncomfortable feeling of an uneven recovery we'll hear from a ton of fed officials through this week New York fed President John William Willam as we say speaking a little bit later this afternoon big trip for Chinese president Xi Jinping beginning his European tour in France he's seeking to stabilize China's relationship with Europe as the EU forges a more unified voice with the US in opposing China's capacity for cheap exports and perceived National Security risks as well you'll all remember a visit from macron I think it was last spring to China coming back talking about having a different perspective to the United States on these issues having our own perspective in Europe and not just following whatever President Biden has to say basically we want to buy our Goods so come on over how much is this also part of the pressure in the Euro region of the fact that they want to get inflation under control and they will accept cheap goods from from China and say thank you unlike some people in the US will not say thank you anymore because it's no longer a gift of lower prices we've seen this kind of mly approach in Europe each country has a very different approach and how much is China trying to exploit that right now I mean that's what we hear from a lot of people they want to exploit those divisions there are some luxury firms in Europe that are probably very worried about that relationship going forward from here let's just put it that way almh companies like that tensions rising in the Middle East let's talk about those tensions Israel's military telling civilians to move out of parts of the gazen city of Rafa as ceasefire talk stall the main sticking point Hamas insists that any truce agreed upon becomes permanent Greg valer of agf Investments writing quote the war will be televised with images of high civilian casualties this will ratchet up protests in the west including the US President Joe Biden who gets poor grades from the public for his handling of the war has virtually begged Israel to hold off on an invasion to no avail Greg joins us now for more Greg let's talk about this and certainly not the military response you're not in a position to give us any perspective on that I want to talk about the political consequences for President Biden how great do you think they will be it's a really big deal John just as Biden sort of writed the ship and the the race looks like it's about tied if we have another uh horrific round of Civilian casualties and protests even though college campuses are emptied out for the summer there's going to be a lot of protest this summer including in Chicago in mid August that's not a good story for Joe Biden politically Greg those protests are hardly popular on the one side of the screen you've got campuses disrupted by protesters you've got graduations disrupted as well on the other half of the screen there is a president pledging to do more to for give student loans is that playing into the hands of the Republicans absolutely they already had quite a few issues immigration uh anxiety over the economy Urban Crime so now you add this issue and I think the Republicans will milk it for all they can making an argument that uh Joe Biden has not been able to dissuade the Israelis and that Biden has started this whole thing with his Hasty exit from Afghanistan a year and a half ago Greg if you were advising president President Biden's campaign what would you recommend they do how do they message how do they handle Israel given the fact that this is mass a massive political liability for them it's a tough question what what they are doing is sending Anthony blinkin over there to get him to try to put some pressure on nanahu even I think the Saudis are involved in a constructive way but I think that the pressure from hardliners in Net's cabinet is going to make it really difficult to get any kind of a breakthrough there have been a number of polls that have come out over the past couple of days including some that show uh Joe Biden losing a lot of support among the under 30 cohort how much of that do you think is due to the conflict that we're seeing uh in between Israel and Gaza and how much do you think that that's people who are going to go for Trump versus say just not vote at all yeah it's a huge element I I think Lisa you've got uh the young people leaving the Biden uh camp in Dres uh they feel he hasn't handled this well uh the campus protests uh have hurt Biden quite a bit so it's it's hard to say that he's going to do well with the three big wild card groups young people African-Americans Hispanics with all three Biden's numbers are well down from the last election that said there was a pretty fiery uh interview over the weekend yesterday on Face the Nation with christye Nome the South dakor uh Governor talking about her book and she was speaking with Margaret Brennan I'm wondering do you think that that features into the debate at all that just basically eliminates her completely from the vice presidential running does it kind of add to the sort of uh drama around the Trump campaign it adds to the drama I was a little surprised Trump said he wouldn't have a a pick until July I thought he would start teasing it tomorrow getting everybody all excited but no I think Christy Gomes has virtually no chance uh she's hurt herself in addition to shooting the dog she keeps talking about it this is a sort of story you want to maybe not publicize all that much so she's I my my Wild Card all along has been JD Vance of Ohio uh they'll win Ohio but I think Vance is so uh articulate he so good he he's on the short list uh there several others but I think we got a good two months to go before Trump makes a decision I had something about Commander meet and Cricket did you see that how it's like brutal conversations I don't know what it's about I've watched that over the weekend it was the most bizarre exchange I still don't understand it did she or didn't she meet with the North Korean leader yes or no how difficult is this to answer she said that she can't talk about where she's gone and who she's met and then uh Mar said so it's a secret Mar not a secret because it's in the book exactly she said you know but you know you haven't been to North Korea and she said well I have and she said really and she said well the demilitarized zone and it was quite an interesting thing that I mean the dog aspect she was talking and she's like well it was in in a chapter called what was it something like you know well I've not read the book so I don't is there a chapter called bad goat I'll look up I'll look up the exact thing but it was quite remarkable GRE you wanted to jump in you're just a very old adage that always proves to be true when you're digging a hole stop digging well she kept digging she's digging and digging herself into a hole and I think she will not be on the short list later this summer for the job let's finish up with the whole the president's in I want to talk about that Greg I think it's been talked about over the week is right to discuss this much has been said about the tension in the Middle East the amount of Civilian deaths in Gaza and what it means for the president's support here in America the protest taking places taking place on campuses and the risk he faces in places like Michigan and then Greg you look through the polls for the swing States and Michigan is the least of his worries in fact Michigan versus everywhere else he seems to be doing pretty well compared to the Gap he's got between himself and a former president Greg what do you make of that well there was a big Arab American population as you know in Michigan and that that doesn't help him I think at the end of the day John it comes down to the economy how people feel about the price of things and that's not a good story right now for Joe Biden GRE Val yeah of agf Investments the economy again and again and again brammo the jobs Market I go back to that consumer confidence figure that we saw just the other week that consumer confidence figure from the conference board not good at all not good we can sit here and you can have Economist around the table say 175 decent unemployment in and around below 4% absolutely tremendous when you ask consumers how they feel not good Sarah wolf of Morgan Stanley nailed it last week and she said basically the lower tier of income earners right now have been in recession and they've been in recession for a while that is being reflected in some of these sentiment surveys and you can see it in terms of just how much bills are going up being locked out of the housing market the fact that they can get jobs but not significantly they're still working several jobs there are a lot of issues that have really been difficult Equity features right now positive by thir 1% to kick things off for you this trading week let's get you an update on stories elsewhere here is your Bloomberg brief with Danny Burger hey Danny hey John so former Starbucks CEO Howard Schultz has some thoughts for his former company he took to LinkedIn on Sunday he wrote that quote at any company that misses badly there must be Contrition and renewed focus and discipline on the core he went on to say that they should reinvent the app they should do things like refocusing on customer experience of course the impetus for all of this was shares plummeting last week after star had its first sales drop since 2020 though he's no longer CEO Schultz is still Starbucks's fifth largest shareholder now the drama still has not ended in The Saga of who gets to buy Paramount this time around it's ended exclusive negotiations with David Ellison Sky Dan now Paramon is EV valuing the $ 26 billion offer from Sony and Apollo however a deal with Sony would likely draw regulatory scrutiny considering it would combine two major film studios and lead to foreign ownership over the weekend Warren Buffett said that Berkshire hathway had sold its entire Paramount stake saying he was responsible for losing what he called quite a bit of money on the trade and finally Max for stoen has lost a Grand Prix you can see where my bias is mcclaren's Landon Norris claimed his first F1 Victory this weekend in Miami the 24-year-old started from fifth but because of a mid- r safety car he was able to go on to First and win with a 7.6 second Gap veren did take second place and for Charles lir came in third that's your Bloomberg brief John Danny thank you fantastic imagery over the weekend you see the Lando Norris was standing with the former president yesterday Donald Trump taken in that win Trump had been into the McLaren garage yeah apparently that's why Lando won yeah oh former president attended endorsed it didn't they prevent him from having a massive fundraiser at this particular event this was a big issue can I just say it actually is to Danny's Point very nice that Max for stoppin did not come in first just simply because it introduces def thank you I'm sure it wasn't missed by many but I just love that the former president was supporting the orange car did you notice that all right don't think people miss that do you want to do you want to elaborate no I think that speaks for itself Equity features positive by third of 1% up next on the program Traders Reviving rate cup bets the more jobs reports you get like this where they're solid but it's clearly moving back into something that looks like preco the more confident uh we can be that the economy is not over heating we'll have that conversation on the other side live from New York this is [Music] Bloomberg live from New York City this morning equity's up by 0.3% under surveillance Traders Reviving Ray up bets we hit bump for sure at the start of the year on the inflation front is that a sign that the economy is overheating or is that a sign of some other thing the more jobs reports you get like this where they're solid but it's clearly moving back into something that looks like preco the more confident uh we can be that the econom is not overheating so here's the latest this morning Traders ramping up bets the feder will cut in September after a week April payrolls report fed speak picking back up with fed president Tom Barkin and New York fed President John Williams later today Luigi zingales professor at the University of Chicago Booth School expecting Divergence between the US Central Bank and its European counterpart projecting the ECB will cut rates first and likely in June Luigi join us now for more Luigi good morning good morning it's good to see how wide is that gap between the American economy and the European one I think in the short term is uh big in the long term seems to be huge in a sense I think that uh the the Europe European economy is not restarting at the level that was before and the prospect in the long term are not that great so I'm worried about uh the long-term fundamentals more than the cycle that hints at structural problems and we've been talking about those in Europe for a long long time what are they what are the big ones that still stand out for you I think that uh there are a lot I think one is that uh they don't have a common strategy and they don't have really development uh in the uh high-tech sector and so I think that the future does not look so so great especially they're very dependent on China export the Germany is dependent and the entire system is dependent and um uh the future Prospect with China might not be as great so let's build on that actually because you talk about Germany but right now xiin ping is over in France and he's on this five-day trip to France Serbia and Hungary how much do you think Europe needs them needs them to bring in disinflation needs to buy their cheap Goods to get out of the hole that they're in needs to be Tethered to them in a way that might be really punitive down the line I think it needs absolutely to be to them in in the short term for sure because there is no alternative to German export and Germany is the engine of the economic engine of Europe and uh that engine is not traveling so fast so the entire sort of uh uh ecosystem of Europe is low down by by Germany and so the pressure to sort of go along Ong with China are very strong I was looking through the services and composite pmis this morning from Europe and one thing that struck me was this question of how much the weaker Euro was helping the peripheral regions disproportionately still on an ongoing basis because some people have booked you know vacations to Europe for uh the summertime I'm just wondering do you read that kind of influence that that is part of what is Behind These stronger than expected numbers um certainly sort of uh tourist is a big resource especially for southern Europe especially for Italy so I think that a weak euro is a a boon on on that front but uh I think that uh Europe cannot leave of Tourism alone and I think that they need a strong industry they need a strong sort of a service sector and is not as strong as it should be so I think that long term that's a problem what is it going to look like it begs the question okay we know that tourism is important to places like Italy Spain France Greece what is going to be the industry of the future look at how AI is playing out at the moment America is dominating things again we're talking about American companies dominating another big Tech effort and we're talking about Europe coming up with regulations what are they actually going to do I think that's that's an excellent question uh to which I don't have an excellent answer I think that uh the the concern for privacy which is legit uh I think has uh overshadowed the ability of uh European companies to actually compete in the in the AI sector and so I think that they put themselves in a corner and it's uh difficult to find out and the fact that drug is coming out with a report soon and Etc is at least the sign that they are becoming aware that the problem exists whether the solution proposed the right one remains to be seen how much energy do you have to really focus on Euro Zone inflation and services Etc at a time that's incredibly fraught right now at universities including the University of Chicago which has been a leader with it comes to certain Free Speech uh Concepts how much do you think that this is a problem of universities own making I think that uh in my view is a problem of the governance of universities because uh universities are have been becoming more and more dependent on uh uh continuous donations uh and uh they want to be completely independent from donors and the two things are to some extent incompatible uh and I think that uh uh students and faculty have been sold this uh illusion because uh when you see the student say we don't want our tuition dollars to go to fund Israel they should be explained that is the other way around is the investment of the endowment is actually making tuition less expensive so um if I were a president I would say sure do you want to have a different system that where you pay more and you choose where to allocate your money fine but you have to pay more there is something that needs to there is a a tradeoff that needs to be considered so what what do you think needs to be done going forward to inform some of these debates and conversations especially at a time where a number of universities have agreed to rethink some of their Investments I'm thinking of Brown University among others in response to pressure from students so I think that uh some more transparency of where uh University invest their money is good I think that there is too much uh opaqueness particularly because you know there are the direct investment but there are all the indirect investment they make through private equity for example uh they don't disclose any of that and so if I am a donor if I am a faculty member if I am a student decided where to go why shouldn't I know how they invest their portfolio I think that that's a legitimate thing now this said this decision if is made on on the basis of values and not only value if is made on the fact that we decide for example to divest from uh private prisons because those are uh to whatever uh must be done by a broader community so I don't think that uh uh universi should be uh El hostages of uh some students that threaten to block uh commencement I think that there should be uh either a referendum among students and alarm and faculty if that's what we we are considered or uh having some form of representation to determine uh what to do I think that Northwestern in my view went uh in the right direction is my direct competi I shouldn't say that say that's Prett but but uh I think that they let some students at least be present uh at some of this decision uh which is some degree of transparency without conceding that the decision should be in the hands of a few students but in the past they've done it in this s think about uh Colombia the the investment from oil and from private prison Etc so they made the steps in the past so uh what's different now Luigi just quickly how long have you been teaching in this country 32 years I'm sorry to report and how much do you think the student body has actually changed over those last three decades the big criticism you might hear is that these students struggle with wrestling with ideas that they're soft they don't have resilience they can't tolerate someone with an opposing view of theirs is that something you've sensed on campus over three decades have you witnessed that change I think what I witness is students have become complexly more demanding I remember that when I joined the University of Chicago there was an old faculty member that say students are not customer they are patient and uh this this doesn't sound like a joke anymore because patients have become customers so I think that there's been that shift um this said I think the quality of my students have gone up uh over the years uh because Chicago is attracted brighter and brighter students so um and uh we have been very lucky because we had a president unfortunately pass away but we had a great president that uh uh Champion freedom of speech so I was always free to say whatever I wanted and the students have always tolerated what I said and I never encounter any problems so I think I consider myself really lucky Luigi we're lucky to have you this morning thanks for being with us my pleasure appreciate it Luigi girl is there at the University of Chicago which has benefited from having Bremo on campus over the years that's actually the reason why I went Bob Zimmer and some of the ideas around what was the you know just you need to be able to hear all viewpoints in order to go out there this is sounding like an advertisement I'm going to just stop right now freedom of speech and not preferred speech which is what m r talked about exactly you need to be able the whole idea of safety when it comes to intellectual thought you shouldn't feel safe you should feel challenged because that's essentially what a university should be but I'm going to get off my my soap now and we're over the weekend address this he was talking about you know wrestling with ideas you know not cuddling people it's not dayare I think he said here on surveillance yeah feels like daycare times you know hey used to be let's move on coming up way of Black Rock Hen trace of Vader Partners blimber Geth Ragan Aram genardi Goldberg of TD Securities that's the second hour of blimber surveillance next we have had something close to an immaculate disinflation we think that inflation will start to back again on that disinflationary Trend I think they can absolutely cut all the way up until November the FED is basically no longer willing to provide a forecast to stick with its forecast to give the market a clear trajectory and so we're really forced to react and change those expectations for timing there was a concerned that the FED is overly data dep pendo I think that may end up leading us into a Fed policy mistake this is Bloomberg surveillance with Jonathan Perell Lisa abowitz and Anar hurn live from New York City this morning good morning good morning for our audience worldwide this is Bloomberg surveillance alongside Lisa RIS I'm Jonathan phoh MH back in a seat tomorrow Equity Futures right now on the S&P positive by a third of 1% the range we've seen on the bottom Market in the space of a week think about how much this conversation has changed so last Tuesday we had the employment cost index coming in just a little bit hotter than expected we had two-ear yields absolutely flying back through 5% at the front end of the curve and a conversation going into chairman pal how would he answer questions about the potential for rate hikes fast forward to Friday twoe yields back down to the 470s following a softer than expected payrolls report and the conversation completely changes all of a sudden after one small downside surprise on payrolls we reintroduce the question of the summer are they going to cut rates uh really depends on what kind of data they get and whether it confirms what they're going to say we get a slew of fed speak this week you're going to go through all of that we're going to speak about it throughout the uh the day ahead but here's the question how much can they really have any kind of credibility if they come out saying yeah actually now we're going to cut rates in July after pushing back aggressively and only getting a couple weaker than expected prints and oh yeah that Services data on Friday was pretty negative for them it was right it was weak on the headline number and inflationary I don't want to call it anything that has anything to rhyme with W flary but I do think that there is this concern about what this says wack flation that's what you just said I don't know I mean come up with better words bro I'll try James of ay talked about narrative ping pong narrative table tennis that was last year that game is still going on just back and forth back and forth back and forth and I think that Peter Cher Academy asked the right question how quickly can things turn from being too hot to being too cold and I do wonder how quickly that conversation can change and I keep going back to what Muhammad Lin said on the program just last Friday following payrolls whether it is a feature or a buck that expectations are switching from one way to the other so quickly off the back of just a few data points mohammadan would say it was a bug not a feature and that it should be a bug and not a feature because ultimately it creates instability and something could break if you take a look at a number of volatility metrics they have not shown themselves to be particularly high but what you do see is a complete lack of conviction by investors which is the reason why people looking for an edge are swinging violently from one side to another I have to say people are buying in the bond market at a time when yeah there's a concern about default there's a concern about inflation but here's a story that just crossed at $2 million per minute treasury's mint cash like never before Warren Buffett talking about his almost $200 billion cash pile generating $2 billion in interest um in interest Revenue in just a short period of time you start talking about these numbers and suddenly people look for excuses to buy even if you have all of the nagers on the side raising concerns the nagers the nagging continues right now Equity Futures I don't know what they are Equity Futures on the S&P 500 it's Monday look like this it's don't worry just you know I'm making it up with you at the moment Equity Futures are positive by about a third of 1% treasury yield to low again by three basis points it's a break of 450 at 44752 it is a holiday a national holiday in the UK in parts of I think Japan as well so parts of Asia so I think liquidity and volume a little bit lighter earlier on this morning but as it picks up again it's pretty obvious it's some follow through Lisa from Friday and why not right I basically the asymmetric asymmetric risk really does come through most of all which is that the FED took the prospect of any kind of rate hike off the table at a time our companies are still doing pretty well I was looking at a number of compilations over the weekend summing up the earning season which is almost over we're most of the way through it's it's been really good it hasn't been Gang Busters it isn't companies able to pass along price increases dramatically but you've seen earnings beats more often than not and that really is giving people a sense that even if you have all these concerns out there that have been percolating for the past 5 years you could still say okay maybe we can feel comfortable couple of dates for you May 22nd if you're interested in earnings Nvidia then of course I think it's May 15th CPN about a week away so look out for that as well coming up this hour black rocks way Le on was pushing her to overweight us secr henred TR of Vader Partners as protests continue on college campuses and gardi Goldberg of TD Securities on why it's been a quote highly frustrating year in fixed income we begin with our top story us equities coming off the back of two weeks of gains on renewed optimism for Fed rate Cuts way Lee of Black Rock writing this our macro view has us neutral at The Benchmark level but the AI theme and its potential to generate Alpha push us to be overweight overall I'm pleased to say that back in New York it's wayy way good morning to you good morning what does Friday change for you and the team if anything at all um what we have seen last week was pretty remarkable the FED embraced high for longer markets priced in for high for longer and the FED indorsed that essentially and markets didn't blink right so this wildly swinging narrative I would say is a feature of this new mcro regime of elevated macro uncertainty where cyclical forces are interacting with structural forces in very unpredictable ways so having repriced number of rate cuts from Seven at the beginning of the year to one uh early last year early last week uh I guess it's not a surprise that on one weaker print on the payroll markets then jump to the other side but what is really remarkable is that the FED endorsed high for longer but Market are holding up against broadly supportive earnings backdrop and on top of that there is still room for repricing to take place which is why we overweight us equities does this mean you need to be hyper tactical or does it mean that you need to cling to different themes get away from the cycle and focus on the structural forces I think it means both I think given the very wildly swinging narrative that we're seeing in markets there is room to generate additional Alpha by leaning against some of those extreme moves and on top of that we have seen how Mega forces like AI how Mega forces like aging population Healthcare have been generating additional kind of return on top of what the cyclical uh um uh elements would suggest which is why increasingly we're baking in mega forces in our portfolio construction both tactically and strategically let's dig into that a lot of people have been talking about how if you want to own AI don't own meta don't own uh Microsoft and Google but own some of the other industries that are going to benefit from productivity gains more significantly as they deploy some of these tools which Industries are you targeting to see the greatest benefit the soonest as a way to play this in an area that's less Rich maybe than what we're seeing in some of the big Tech we still like the big Tech they have delivered on the earnings front they are now doing BuyBacks which is well received by markets uh but on top of that we're broadening out in terms of how we're playing AI if you look at the infrastructure Computing capacity built in AI we're talking about unprecedented historic level right so inevitably that's going to generate opportunities uh for both public market and private Market but your point about other sectors that can benefit from AI we identified uh Industrials we identified materials to support the infrastructure build we also like healthcare that has very clear use cases of leveraging AI as well as financials thinking about financial Innovation and and and disruption so there are signs of AI theme broadening out um both in the earnest report and also in the performance and this is why we like a as a whole but we're also seeing that it's benefiting the broader Market you like the United States more than the rest of the world still which is interesting at a time when some people people are talking about the broadening out and I'm not talking about Japan I know you like Japan as well but there's a question about Europe and Peter Shear put it well where he said I like my exceptionalism to be exceptional are you seeing any signs that Europe is catching up to the US or the US is weakening just just enough to come down to Europe are you seeing this sort of sign that maybe we're starting to shift just a little bit in terms of the exceptional narrative um yes we still like us better than the other part of develop markets except for Japan where we still keep our strong overweight uh but Europe is in an interesting place ECB may go first uh than the FED in terms of starting the rate cut but how far they will go actually depends on the fat so yes there is a bit of a Divergence in terms of starting point point but the magnitudes we're not expecting significant Divergence and growth Dynamics in Europe is just weaker than in uh in the US so maybe technically there can be some sort of relative value rebound because European equities offer better value compared to us equities and also compared to itself pre pandemic but over the slightly longer term Horizon we still like us for the U more appropriate sector composition better growth Outlook as mentioned Japan let's talk about Japan this time last week it was 160 on Dolly y we're back down to about 153 Lisa was asking the question quite rightly how close we were to a currency crisis in somewhere like Japan what is there to like about Japan and how' you navigate those very shoppy Waters in effect ah it's hard that's the short of it if you look at Japan nikai performance so far year today it's up 15% it's outperformed most of the Val market equities currency of course has added a wild volatility in terms of the performance in in dollar terms but uh uh we do see that uh currency intervention as a real kind of um I mean it's probably been happening let's put it that way which is why um 160 as a flaw for for Yen May well um May well hold because this is really at levels last see over 30 years ago now having said that we're not expecting significant appreciation of uh of the Yen FR here because real rate differential still exists uh in a meaningful way between the US and Japan and we're not expecting the bank of Japan embarking on a aggressively tightening cycle it's just normalizing this policy from negative interest rate environment so um maybe flawed at this point but uh but but it's really hard to uh be very tactical around how independent is your long call on Japanese equities from this conversation in FX The boj the ministry of how independent is it of those themes well Japan's uh acur performance in the latest kind of leg up has been mostly driven by micro developments we're talking about earnings continuing to deliver we're talking about uh that also benefiting from kind of U inflation Dynamics uh earnings being nominal and we're also talking about corporate reforms right you think about all these incentive schemes that the Tokyo Stock Exchange put in place to encourage companies to deploy their cash more effectively especially those that is falling below the price to book ratio of one times we're talking about you know 40% of the index looking to kind of get off that least so micro development is likely going to take over from macro development as the next driver of Japanese aqu upside which is why we still like it and having it on a currency on hge basis gives it a little bit of a auto hedging quality because currency is negatively correlated with the aqu Market in Japan so yes it's very volatile but it helps offset some of that volatility if you look at it from a currency on H basis I love I love your idea of Mega Trends just all the way around and I'm wondering if one Mega trend is going to be gold I mean I have to go if we're in saying in Asia there was an article in the New York Times over the weekend about not only are the Chinese authorities buying gold but also Chinese consumers are increasingly buying gold and this is like leading to more speculation to buy even more gold do you lean into that do you think that there's more to go as more people sort of I don't know whether it's valid or not jump on the gold bandwagon well for gold is really hard to think about what the right portfolio allocation should be from a traditional portfolio construction perspective that because there's no uh cash flow how do you discount future cash flow in a proper portfolio construction Capital Market assumption framework so it's hard now having said that it is related correlated with real rate so that's one driver of how you can think about gold uh forecasting and on top of that Supply Demand right it's not just the Chinese Central Bank that is buying gold central banks across the world have been buying gold to think about diversifying their Reserve so uh if you look at how recently gold has been heating alltime high and in fact being one of the few diversifiers that were working in the middle of geopolitical escalation it does make sense to own some golden overall portfolio especially as traditional diversifi buyers like duration haven't been acting as effectively as they used to in the context of higher inflation for longer so um the case for gold in the portfolio uh in that sense has become stronger well it's good to see you it's always good to catch up thank you Welly of Black Rock there gold is up by 0.8% on a session up by more than 12% on the year so far let's give you an update on stories elsewhere here is your Bloomberg brief with Danny Burger hey Danny hey John as you've been discussing Berkshire hathways cash pile has has hit a record 189 billion at the end of the first quarter Warren Buffett in lamenting the lack of deal opportuni said that it's a fair assumption that it'll hit 200 billion at the end of the quarter as it continues to Mint interest income he also tried to caveat his sale of Apple shares now despite selling about $40 billion he said that apple is one of the best company he owns and will continue to be its largest holding he then went on to imply that the sale was motivated by tax implications now it's been years of delay but now Boeing Starliner space taxi is set to launch humans into orbit the Starliner inaugural flight will take two astronauts into the International Space Station it will be key to prove that Boeing can transport humans safely to space but with confidence issues over its aircrafts Boeing faces questions about the long-term vision for its space business and baseball's biggest star is not slowing down Shani went four for four at the plate on Sunday including two home runs he powered the Dodgers to sweep over the Atlanta Braves in a three-game series now one of those home runs traveled 464 ft which is his longest of the season and close to the longest he's ever done it was otani's first multi-homer game with the Dodgers and the 17th of his career it means he's now tied for major lead long balls with 10 so far this season that's your Bloomberg brief John amazing absolute Beast Danny thank you up next on the program calling for discipline on campus you can't be shouting globalized the inap or Zionist don't deserve to live I'm proud of a lot of the young people who want to end the war but they need to show the discipline we'll talk about that lack of discipline um next on the program live from New York this morning good [Music] morning two weeks of gains on the S&P 500 equities adding to that this morning up a third of 1% on the S&P yields a little bit lower again we down three basis points on a 10-e remember all that chat about retesting 5% it's a break of 450 this morning on a 10year maturity back down to 447 92 under surveillance this morning calling for discipline on campus we have to understand that this is a defining moment for this generation similar to anti-vietnam protest anti- aparte protest you can't be shouting globalize the inata or zionists don't deserve to live uh what's being lost is that those protesters who are inciting violence or engaging in that kind of anti-Semitism are diminishing the thousands of young people who simply want the war to end I'm proud of a lot of the young people who want to end the war but they need to show the discipline so here's the latest police arresting 25 people for trespassing at a pro Palestinian protest at the University of Virginia as unrest continues on college campuses Across the Nation henr TR of Vader part is writing this many think recent public unrest will help Republicans in November a view that is plainly shared by republicans in Congress who were drawing attention to the protests with publicized visits and oncampus events henred joins us now for more henred let's talk about what's happening in the Middle East and what it consequentially could mean for the president of the United States much has been said about Michigan and yet it's interesting and I know lots of people wrote about this over the weekend and we talked about it earlier on the program Michigan is one of the Swing states that the president is doing better in relative to all the others so what do you think is really driving the polls at the moment right I I think that if you look at the polls this is a minute issue area it's just one that's being popularized because the Press Clips are so available you got viral video feed um and these are really Elite institutions across the US you're talking about UVA a tremendous school Harvard Yale this is not your run-ofthe-mill college experience and these Elite Ivy institutions are already polarized within the United States in fact if you look at data going back uh through history but most precipitously since 2016 Republicans specifically Republican views of K through 12 college education and unions drop off a cliff so this is a basket or an issue area that a basket of Voters are already predisposed to view negatively and so it's being exacerbated but to your point in States like Michigan where Biden continues to pull better than any other the other swing States um this is a huge educated population uh substantially large uh college education and this is not moving the needle the way that um you would expect to see if it was a major defining issue as your last segment said 25 students is not the same as the 1960s with the protest against Vietnam um further I think that the students are suffering from Mission creep as Bloomberg noted last week um and as they go home for the summer holiday this will sort of dissipate you're expecting that after the summer this won't be an issue anymore well I think that the Biden Administration is working uh sually on getting a deal with Saudi Arabia that would require relations with Israel um and would also according to reports require that Israel wind down this war so I I think that there are efforts that are going that are happening right now and could reportedly be announced within the next couple of weeks that are designed to end this um so things could escalate now but kids are already taking their final tests and are about to go home um when they come back as Lisa just pointed out I mean parents are going to say look I'm paying a lot of money for you to go to these fancy schools go to school go to class yeah that was the Saturday Night Live sketch over the weekend right basically if I find out my daughter's in a tent when I'm paying for a dorm room I'm going to have words there's a question Henrietta though you had confidence that there was going to be some sort of resolution even though over the weekend we saw discussions break down between Israel and Hamas and the delegations leave Egypt what gives you confidence that there are other deals in the works that could potentially draw an end to the conflict I think that Global sentiment and pressure around Israel is at a level we've never seen before literally since its creation um I think um Majority Leader Chuck Schumer and the Democratic delegation in the house and the Senate is acting in a materially different way than we've ever seen before and pressure from the Biden Administration whether it's in terms of sending Munitions or not or predicating Aid on um certain types of behavior is really morphed versus what we've ever seen in the past um again it's you know early May we've got a long time to go um and I think popular support for this is rapidly declining in in new and Noel always that sort of require this has been very much uh driving the headlines recently everything that's going on with the protests and of course the conflict itself and sort of the slight Side Story here is whether speaker Johnson's going to hold on to his role we heard more discussion there's going to be a vote this week on that I'm wondering given some of the polarization that you're just talking about do you think that it's feasible for Democrats to bail Johnson out I think it is feasible I I'm I'm really impressed by minority leader Jeff ability to say to the caucus hey I understand that this is unprecedented but I want everybody to vote to table the motion and the conference effectively goes along with him that's what you want to see in a post Pelosi leader and that's what they've demonstrated already and he's been able to generate wins for his caucus which is why they're able to follow him on this difficult vote with relative ease um so I I wouldn't be surprised if uh margorie Taylor green puts this deal up and the motion to table is what I understand will come up for a vote first that will pass there will not be a formal motion to vacate uh the speaker and even if they did move forward with the motion to vacate um there is no replacement for Johnson I think that needs to be appreciated by everyone here there there's no alternative so as long as there's no alternative there's no real external pressure point you know we're not facing a government shutdown or anything like that you're not going to ask the speaker at this juncture for now they're managing to play nice henretta down in Washington DC there is this question ongoing question about the future of democracy the president of the United States wants to make this an election issue do you think it is one it definitely is one in all the polls consistently and Biden polls much better there than former president Trump this election is really going to come down to two baskets of demographics Independent Women who are currently 7% undecided and double haters people who think that both Biden and Trump should not be on the ticket there's about 8% of the population that makes up that basket um and they are in most polls going two for one for Biden and the issue of democracy Trump's everything else um the issue of the economy is always up there but I've said and I've said this to clients as well I think it's sort of a useless measure people are feeling inflation they hate the economy I don't know if people have ever really loved the economy generally um and so what you see are other issues taking hold whether that's going to be immigration and crime or abortion or really this amorphous idea of like protecting democracy where Joe Biden wins by double digits so that's that's really the ball game and again with Independent Women and double haters H thank you hred tra there fader Partners breaking down the issues down in Washington DC did the double haters turn up or stay home that's what I want to try and get my hands around going into November the fear is that they stay home right or what are they going to vote for when they get there if they're just like I hate this I hate this are they going to vote for the third uh the Third Party candidate which is Raising this question of where do you divert more votes from in terms of that kinded run do you divert it from Trump or Biden and this is why you keep hearing the president the sitting president talk about this issue the future of Dem democracy there is a belief H just gave you the framework there that sure it might not be influenc in the polls right now but as you get closer to November those people that haven't decided yet they'll lean Biden over Trump on that issue we've got six more months of this yesterday was six months exactly it was the anniversary the pre pre-anniversary it's going to take a while it's going to be fun [Music] hey the rally continues we're up another third of 1% on the S&P on the NASDAQ we're up by 0.25 on the Russell a small caps up by 0.8 attempted to make May better than April because April was absolutely brutal for the small caps coming off two weeks of gains on the S&P the longest weekly winning streak going back to March April was pretty choppy if you switch up the board and go to the bond market we can check out treasuries now 2 year 10 year 30 year yields lower by a couple more basis points we're down in the 440s on a 10 year down two or three basis points 4 4792 Lisa not excited about the week ahead with the exception of maybe one thing which is some Supply so let's talk about it exactly $58 billion of threeyear notes coming tomorrow after that 42 billion of 10e notes then you get some 30-year bonds $25 billion doar worth and we've rallied hard into that issuance so I want to see the internals of these basically the idea of how well these go given the fact that recent longer duration Bond sales have not gone as well there is a Feeling that right now the treasury Department is moving around some things so that they can fund things on the front end and not really pressure the long end so much is the renewed enthusiasm around rate Cuts really driving people to lock in duration lock in those longer term yields for the for the longer period of time I don't know the answer to that I will find these auctions incredibly interesting this week I'm sure you will can we go back to the bond board can you just bring up the two-year again I'd like to look at that just for a moment so the two-year at the moment looks like this 47950 on Friday at the lows we trade as low as 470 could have broken into the 460s think about where we went on the week so the low was 4777 okay that was post payrolls on Friday the high was 5.04% on Tuesday post ECI and a question we've asked so far this morning is that a feature or a bug of Federal Reserve communication now Muhammad Alin said it's a bug then you heard from way Le she said it was a feature the basically this is what we're talking about a complicated cross current of lots of different drivers and you're seeing that born out in the data and Traders are responding to that it hasn't broken anything yet that is what a lot of people have argued although there was another bank failure Republic first which what is it about these names it was first Republic and then Republic first is it something like some order of those names and then you fail but there's a question of you know what's next the SLO that we get out later today remember when that used to matter that was the thing last year yeah now we get them again at what point do we start to see some of the fissures or have we completely moved past that to give people the sense we're out of the Woods The V can cut and everything can go on there is an impression over the last 12 months that we have moved past that but to your point we'll see let's T to Foreign Exchange Dolly end this time last week 167 at the high unreal where we were on Monday then all the way back down to 152 as early as this morning back to about 15378 at the moment so just another massive range today on Dolly Yen Lisa looking at the range right now the low was 15278 the high was 154 so again all over the place I love that you frame this though within the rubric of is this a feature or a bug this incredible uncertainty of what the new level is for the Japanese authorities to come in they like uncertainty they want to leave people guessing and they intervened in certain or suspected to intervene we'll find the numbers officially later this month but you know at a time of low liquidity so you have to wonder how much they were just trying to basically slap around the people who are trying to short them and speculate so that they didn't get back in are they getting back in now I mean these are really compelling movements but I also think it's a holiday in Japan so we certainly reintroduced some two-way risk last week let's put it that way and they can thank the United States for some of that the news conference with chairman pal the incoming information and getting involved themselves to your point just slapping things around a little bit reintroduce that volatility Steve Englander a standard chattered last week just brilliant on that if you want to check out that interview that's the story in foreign exchange under surance this morning plenty of fed speak picking back up today Presidents barin and Williams on Deck Traders paying close attention after a softer than expected jobs print renewed optimism that the FED would cut rates this year look out for Williams this afternoon elsewhere Israel's military moving citizens out of Rafa a possible precursor to a long expected attack on the gazen city it comes as ceasefire talks appear to have stalled with hammer insisting that any Tru Lisa is permanent and this definitely is not what uh B nanahu wants to see which is the reason why he's outright rejecting it interesting what we heard from Henri TR just moments ago where she was saying that she still thinks that there is a deal likely to happen just not necessarily in the same kind of way as talks between Kamas and Israel but probably more as part of some sort of deal with Saudi Arabia brokered by the United States by cter by a whole host of others I'd be curious to know whether the administration of Israel really is beholden to the pressure that she was talking about right now it is unclear whether it is survival for Netanyahu because he's politically challenged in a massive way or whether it's actually uh understanding what the intentions are what the risks are and moving forward on that front it was interesting what she said about the protest going away through the summer because you can see the campaign ads already you can imagine them they're pretty clear on the one side you have students shutting down campuses some of them using anti-semitic language on the other side you have the president of the United States talking about forgiving student loans then at the end it says vote Republican this is endorsed by the former president Donald Trump you can see how this works out basically what she's saying as an issue this goes away after the summer you sure about that I don't know how much is being D I don't understand what's driving these protests I do understand that on universities uh there has been a lot of concern and frankly among everybody who seen all the images of people in Gaza who are suffering and who are losing family members there's a question of what you do with that and how you sort of uh affect some sort of end to the conflict I don't know whether it's going to morph into something else we heard about Mission creep we don't know how much this is going to morph off of some of those college campuses it seems like there are a lot of people who are entrenched we heard about other actors reporting showed it kind of varied depending on the place in terms of other non uh non-university students who are on uh on campus I don't think we have a full understanding of what was driving these protests and until we do to really understand the trajectory that they will take is going to be tough and who's influencing them you've talked about that who's funding some of this stuff as well yeah well and this has been uh you know reporting has been percolating it out percolating out just having students go home to their parents saying we're paying $90,000 for you to be in University and going to uh the dorms every year and you're going to be in a tent protesting and not graduating and going remote again after starting the the beginning uh remote since it was during the pandemic seems a little bit uh misdirected at the same time you have to wonder about these students like they've lived through a pretty angsty moment and so I just wonder that's different you know psychological questions that come out too yeah plenty of those let's turn to this shares of Paramount rising in the premarket the company opening negotiations with a bidding group led by Sony and Apollo according to the New York Times it comes after an exclusive negotiating window with a movie studio Sky Dan expiring on Friday night GE ragath of Bloomberg intelligence joins us now for more with that stock Higher by almost 4% getha let's talk about the offer on the table from Sony and Apollo how great is that offer what is the opposite what is the opposite offer to what we've heard from Sky Dan yeah so uh definitely in terms of the financial terms of the deal um John the offer is way better it's $26 billion Allin a cash deal uh and what it basically promises to do and this is where it kind of really differs from the sky Dan deal is it offers to treat all shareholders equally now remember with the sky sky Dan deal there was so much of backlash there was so much of resistance because while the class A shareholders especially Sherry Redstone who is the controlling shareholder kind of gets a a preferred treatment all the other shareholders the nonv shareholders were really going to be treated unfairly with with Sony uh Apollo we're looking at at least a 50% premium to where this stock is was trading on on of last Friday so definitely from a financial standpoint much much better meanwhile people used to talk about concerns about antitrust and that was a reason why deals can't get done is that a concern here at all or is basically there's sort of been a shift in the tide with respect to concerns around antitrust and media another another subject for antitrust officials de with it definitely is uh a concern Lisa so you have two major Hollywood Studios that would be combining in this transaction uh you have Sony and you have Paramount that would be about 20 to 25% of the box office and really it has Ripple effects across the industry because this basically now uh reduces the number of content buyers from five to four uh and so it has ramifications across the whole of Hollywood in terms of demand for Content uh so that is definitely something that you know we kind of have to keep our eyes open for and then the other thing is with Sony being a foreign company uh there is this question of whether they would be allowed to own a broadcast network uh Paramount is the owner and operator of both the CBS broadcast network as well as broadcast stations and so there's a little bit of uh you know ambiguity there whether they'll be allowed to do that fascinating whether we're to hear National Security again uh raised with potentially uh that acquisition in the world of Acquisitions we do get Disney earnings after the Bell today and we've been hearing about questions what are they going to sell how can they raise money in other ways and one big question's been around ABC overnight ABC news's president stepped down do you think or are you hearing that this is sort of a predecessor to sort of jettisoning the news Outlet so last year Lisa you know there was a lot of back and forth I mean Bob Iger had said something about you know getting rid of the linear networks that it wasn't core to the Disney business then he kind of walked that back a little a little bit I think we've seen a complete change in sentiment uh at Disney right now uh they really have got their mojo back they do not need to sell any assets as we see it if and if you kind of look even at the linear TV networks yes this is the most challenged part of their business there's no doubt about that you have cord cutting you have TV ad pressures but it's still a cash cow for Disney it throws off about three and a half to4 billion in eida even with all the pressures and just because they have really must have programming you know they do have a lot of sports content on ABC we do think they'll be able to hold out pretty well can I just say that sha G and Hulu was excellent can I just throw that out there you have been trying to P that you need to watch okay I will and I will eat Humble Pie too because I miss Disney uh reports earnings tomorrow before the bill sure whatever it doesn't matter you will love that all right I will watch it I Love Game of Thrones and this is another version of in my opinion I was never a big Game of Thrones guy really too long took too long to get through don't have that kind of timeo oh give me a prep for stuff like this facts like this gether that the Fall Guy hardly took any money in over the weekend even though the production cost something like $125 million how soft is the movie slate for the theater business in the year ahead getha yeah this was a a little bit of an underwhelming start to the summer usually you have a big bang movie a Disney movie typically that comes out you know last year we had Guardians of the Galaxy yeah definitely a little bit of a soft start but there is a lot to come John so you know just talking about Disney itself we have two big things that we're kind of looking to inside out to which comes out uh a little bit later and then of course you have the really big one Deadpool which should be absolutely massive and then we have a lot of good content from other Studios too uh right now as we kind of look at the box office business it's tracking about 20% lower uh versus pre-pandemic levels so definitely this is not the big year of the rebounds if you look last year we had about $9 billion in box office this year we're actually tracking to about 8.2 billion but then next year is when we're going to see you know all the studios come out all guns blazing and a lot of this is because of those Hollywood strikes last year which is why you kind of have a slightly lighter slate a lighter pipeline but yeah summer is is going to be good but not great Mission Impossible next year I think wait another year that's your got to wait for that that's your gig what about thank you unfrosted you watch say thanks to G first gath BL intelligence thank you so much tomorrow Lisa mentioned disy interview with the CFO coming up Hugh Johnson tomorrow at 7: a.m. eastern time so look out for that as well all right fabulous well no there are some interesting movies coming down the pike I watched the full guy this weekend and what you think it's really good really yeah yeah do you want to put a plug in Gosling plan I just did one it was really good I enjoyed it it's one of those I don't care about reviews for movies I really don't I just couldn't care less really yeah you know go have a bit of fun that was a fun movie to go and watch there's no part of you that's thinking okay that part of the plot didn't really hang together no didn't really like that character I don't care you know Gladiator 2 later this year I'm gonna watch that I love Gladiator a little bit flat in terms of narrative development not bothered never nope okay have my own opinion on things brma and not be shaped by the elites let's give you an update on stories elsewhere this morning here's your Bloom V freef with Danny Berger hey Danny hey John Israeli officials have seed seized equipment from Al jazer on Sunday just hours after the government decided to shut its operations in the state Al jazer denounced the move calling it a quote Criminal act that violates human rights and access to information Israel has claimed that their reporting Echoes Hamas propaganda the decision has led to backlash within Israel with petitions filed to move the case to the Supreme Court and the credit s CEO Ora corner is set to leave UBS in the coming weeks people familiar tell us Corner had hoped to leave the business sooner but he was persuaded to stay on until after the legal merger was completed he was the only credit s executive to gain a board seat but he had kept a low profile during the integration and former Starbucks CEO Howard Schultz has some stinging words for his former company he took to LinkedIn on Sunday writing own the shortcomings without the slightest semblance of an excuse referring to Starbucks's first sales drop since 2020 and the 16% drop in share price that followed last week he said that they need to reinvent the app overhaul its marketing strategy and refocus on the customer experience Schultz is still the fifth largest shareholder of Starbucks and that's your brief John Danny thank you thank you very much that stock has had such a difficult time the one thing that wasn't mentioned there was the boycott yeah what's the advice there what' you do about that I hope it blows over I mean how much pressure but you have to wonder how many how much pressure some of these executives are putting on the White House to put more pressure on Netanyahu to put more pressure on I mean at what point out what is a consumer problem with the cycle and what is a problem around boycotting and develops in the Middle East the reality is you can't control that so you can control how competitive you are what you charge for a latte and how you draw people in was lavender the best way to go about it is pumpkin spice the best way to go about it these are key questions they obviously are key questions and they clearly don't have the priceing PA at the moment Futures are positive by third of 1% up next the case against data dependency this volatility which we are continuing to see in weights risks I'm afraid risks breaking something elsewhere that conversation coming up next you keep bringing up this lavender latte actually I think amh did that last week she did yeah yeah because they have big bu Billboards that say lavender you want to go try one later not really okay from New York this is [Music] Bloomberg informed by the team that the latte coffee with lavender tastes like soap was that the review well that's I mean look we're not in the view of putting views out there that you need to listen to try yourself I'm not saying anyone should follow those recommendations well it's kind of what you'd expect me lavender you think of a soap you put in your drawer to make it smell good okay but not to taste I mean with coffee some people like lavender okay we're saying that's why the stock is down 16% over the last month really all right let's move on evidently that was an 11year old Equity Futures up by a third of 1% on the S&P 500 you able to lower by a couple of basis points 44833 under surveillance this morning the case against data dependency this volatility that we're seeing in the interest rate structure it is causing Havoc elsewhere in the world when us rates swing as much as they do on a short on short-term basis um so this volatility which we are continuing to see in rates risks I'm afraid risks breaking something elsewhere it's the latest treasury surging after the US payrolls report came in below estimates with investors now upping their bets for fed easing this year gardi Goldberg of TD Securities writing quote this year has been highly frustrating for fixed income investors as markets continue to overreact to every data point the market will continue to Lurch from data point to data point with treasury yields likely to grind in a range for the time being gady joins us around the table gady good morning morning is it a feature or a bug of Federal Reserve communication to see swings like this this is exactly what they get when they say data dependent I mean if you provide no for Guidance the Market's going to overe extrapolate from every single data point and we're going to see this over the next couple of weeks you know you mentioned this week's relatively quiet we'll see what happens with CPI let's say you get another you know softer CPI print let's say you get a02 on core CPI all of a sudden this Market's going to overe extrapolate and say maybe the economy is slowing maybe they will yeah rate Cuts as soon as June remember a couple months ago we were pricing in a full rate cut by March Y and six and a half cuts at the peak this year that's gone down to one right before you know payrolls so this Market's going to keep swinging around but at the end of the day if you zoom out I think the valuations are quite attractive that's what you keep hearing from investors let's get into that further out along the curve is that where you want to look 450 on 10 does that make sense I think the 5 to 10 year point is your sweet spot I'm a little bit worried about going further out the curve so I do worry that the 30-year auction this year this week for example is going to be a little bit uh you know a little bit touchy just because of the amount of funding the treasury has to do over the next couple of years I think it's very important what they said in their last week's refunding statement the fact that they've paused auction size increases they haven't stopped them and they've asked us you know when we fill out the surveys they said when do you expect us to increase them further it's a very key point in the language where they're not stopping any time soon so term premium is going to have to rise but that 5 to 10e point from a fundamental standpoint makes a ton of sense at this point especially if they're basically waiting for people to want to buy it to then sell it so they're going to wait for yields to fall before they sell it and flood the market with some of the supply that they're expecting you talk about the income and that you're looking for entry points you're probably going to be one of the buyers on Wednesday at the 10e auction congratulations We'll be asking you about it there is a story I keep looking at this at $2 million per minute treasuries mint cash like never before how much is that essentially the reason why people are buying the reason why we're going to get stability here the reason why we're going to be in a Range not necessarily oscillating above that 5% Mark I think treasuries are attractive especially on the real rate side right if you look at 2 and a qu% on 5 and 10 year real rates roughly between two and 2 and a quar from a long-term standpoint that's super super attractive and the the flip side of that story by the way is it's $2 million a minute that we the American taxpayers are actually paying on the US debt and that number is only going to increase the fascinating thing to me is the average yield on the outstanding treasuries at this point excluding bills is 2.6% that's what people are getting at the moment now as the longer we stay at these 5% levels the more that's going to go up and the more that treasury debt Burton is going to increase and the more income that's going to kick off to everybody else which raises a question about the long and variable lags which a lot of people in the market say don't exist and other people say well actually uh that's the reason why we haven't seen the ramifications for this let's try to make sloos interesting we get them later today no I'm serious and let's say that this oh I know you're serious yeah yeah no one needed that look you get the sense of what banks are doing when it comes to lending if they're still lending at a pretty fast pace if people still are borrowing does that indicate that this rate can be closer to the neutral rate that this might be the new reality and that we could stay here for a very long time yes but I think the composition of the lending matters as well I mean what you're seeing right now is Banks actually tightening lending standards they know when rates are high when the folks are coming into the doors at this part of the cycle tend to be the ones who have higher credit risks that's why they've been tightening up lending standards because they're very careful F not to over lend at this part of the cycle before things really get kind of flushed out if you continue to see very very strong lending sure maybe rates are actually appropriate here I subscribe more to that camp that you know the lags are long and variable and it's going to take more time for the stuff to filter through into the system rather than rates are too low and that we actually need to hike rates in other you know 100 or so basis points to actually get an impact I think you're seeing it it's just not as fast as anybody expected what do you think is the main channel for that restrictiveness to reach US economy so typically a lot of it goes through the mortgage Channel I mean if you look at where the biggest sources of consumer borrowing are you know most of it is housing then you've got auto loans and credit cards it's acting on those last two but you know mortgages are basically 60 70% of you know in terms of volume of the borrowing the average rate on the US mortgage is still 3.6% that's not really going up and the housing Market's kind of an Al limbo it's stuck right so until that starts to filter through and I think it does over time slowly it's the same deal with the 70s well can I ask you sort of what overtime slowly is are we talking decades or months not at all I think over the next couple of you know call it 6 to 12 months it should filter through substantially into the housing market by just slowing down the levels of activity right if you're not moving you're not hiring movers if you're not getting new furniture and it trickles through into all of this the issue is we're coming off of extremely strong growth levels very supportive fiscal policy and now monetary policies become restrictive fcal is still easy so the question is where does that equilibrium come so for a while now it's felt like sufficiently restrictive has a question mark after it correct you don't think it does I don't think so I know I think we know we are restrictive the question in everyone's mind is just how restrictive are we the equivalent of unsustainably restrictive or are we in this you know to to leas this point are we in this neutral sweet spot where we can actually sustain this for a very long time that's what investors are trying to Grapple with that's why everybody's trying to kind of let into rates at this point realizing that these are high but they don't want to go all in here because they've been burned over the last couple years by by Rising rates oh everybody's super nervous you can feel it you can feel there is this nervousness around going from too hot to too cool too cold almost just like that you felt it on Friday afternoon I was going through some of the Southside notes we'll catch up with Peter Cher by the way of Academy in about an hour from now Peter was addressing this what is the risk of flipping from questions about things being too hot to being too cold and just like that yeah lack of convictions is not comfortable lack of conviction and understanding how to frame things out isn't exactly a nice place to feel I guess I see what happens and a lot of people come on yeah they might not be that interested in what the data is going to show but they have to be glued to it because something could burn them and that's been sort of uh percolating angs this year CPI about a week away you'll get the CPI report next week gady it's good to see you gady go back there of TD Securities coming up in the next day we'll catch up with Keith larner of truis Ken Leon of CF cities Veronica Clark what do they call it summer doing happen so fast I mean I love that we're going to quote that later for you okay Peter Cher I do not Peter cheer of Academy is going to join us on just how exceptional things truly are yeah he likes exceptional to be truly exceptional and if it's not then forget it can I just give you this statistic torson slock of Apollo 40% of homeowners don't have a mortgage 95% of mortgages are 30-year fixed that are not sensitive to the FED rates just giving you a sense of how stuck this Market really is you know those lags I was saying is it decades or months yeah 30 years it's it's decades apparently in some places B Gali disagrees because things will start to happen I'm not saying they won't by the way I know that sounded really snarky that's not what I meant okay Futures positive by 34% from New York this is Bloomberg very hard for me to see given everything we know a hard Landing scenario playing out anytime soon the equity Market has been you know much more resilient to these shifts in the interest rate narrative we have to give markets the benefit of the doubt here irrespective of what the data looks like at some point you will have to pay the piper fed policies only become really restrictive relatively recently this volatility which we are continuing to see in weights risks I'm afraid risks breaking something elsewhere this is Bloomberg's veillance with Jonathan Perell Lisa abowitz and Anar hurn live from New York City the third hour of Bloomberg surveillance begins right now with Equity Futures positive by a third of 1% and a very light calendar for the week ahead so light that brammo is doubling down on the importance of bond issuance through the week we'll talk about those numbers the treasury Supply in just a moment we'll talk about the data next week as well CPI on May 15th the last big stop for this conversation following the data we got on Friday and this Monday morning we still need to reflect on what we heard on Friday payrolls smallest gain in 6 months 175 wages slowest Pace in nearly three years and shortly after that payrolls report we got the ism Services index which is an important read on the US economy Contracting in April for the first time since 2022 Lisa the data not great that said prices paid increasing at the same time so it raises this question what is more important right now for the Federal Reserve is it going to be employment is it going to be the strength of the economy ongoing and the hope and the dreams of a soft Landing or is it going to be inflation front and center given the fact that it has come down a lot but still has a long way to go this would be the bearish argument you're going to like it okay some of you might like it at home as well this is what it would sound like let's take the ism on Friday so what you can hear are company's losing pricing Pad but still worried about inflation what do you have to do if you want to protect margins you cuss costs what's next is it labor that's where you can start to make the argument that you're going to start to see layoffs and as a result you start to see a broader slowdown too which really I mean that potential outcome is sort of hinted at in some of the earnings uh uh compilations that are talking about the fact that earnings per share came in stronger than expected on a much more consistent basis than revenues in other words companies are managing their costs much better and this is something that Lori calvasina pointed at at RBC over the weekend this raises the question how are they doing that how far will they have to go if they don't have the same kind of pricing power that they've had in the past in terms of cutting staff so far though this has been a story for a while and we still haven't seen it in a mass well initially we were talking about hoarding that we were coming out of the pandemic they struggled to hire so much that why would they fire so quickly you wait a while are we getting closer and closer to that moment and based on the employment component of some of these pmis we could just talk about how much weight you should put on those pmis single month the data we can talk about that with City a little bit later on the program but ultimately is that going to be a trend that starts to build bu especially given the fact that we're seeing more push back in a whole host of different consumer facing sectors think about some of the airlines particularly the domestic leading ones that are talking about much more costc conscious consumers right so there is this feeling maybe things are slowing but again this is a reason why way Lee has been so great on this about how it's so confusing and they're just sort of well what about Ai and what about you know this trend that comes in and what about this and all of a sudden materials so if you go work on an oil rig offshore for a couple weeks you're going to make a lot of money and they're they're you're in demand so you know all these sort of crosscurrents make it pretty messy yeah easy to focus maybe easy relatively speaking to focus on these secular themes and not get whips sored by the cyclical stuff from dayto day given the range we saw in some of these markets just last week should we talk about the numbers we can do that let's go through the supply I promised you this so here it is we'll start with a threeyear note that comes tomorrow $ 58 billion worth of three years the day after here's another number for you 42 billion 42 billion a 10 year notes and the day after that the 30-year issue $25 billion we it up with gardi Goldberg of TD who said he's more concerned about things further out along the curve than he is closer forward so this is$ 125 billion dollars of debt sales I think that he is correct to say maybe there's a little bit more concern over the very long term about what inflation and the risk premium looks like for the US I'm more interested in the 10-year note just simply because that is the Benchmark rate and so many people were saying maybe we could retest 5% is that really feasible if you have a really robust demand from a domestic base from International bases this to me is a key question Bon y to a little bit lower this morning we're down two basis points 448 54 tons of Supply that was just for you thanks I appreci tons of Supply coming this week coming up this hour we'll catch up with Keith larner of truist as stocks move higher post payrolls CFR ra Ken Leon on his downgrade of Live Nation citing antitrust concerns and cities Veronica Clark looking ahead to a parade of fed speak we begin with the big issue bad news is good news for stocks stocks climbing as a weak payrolls print gives investors hope for R Cuts Keith learner of truist saying this stocks should remain supported by a resilient economy record forward earnings estimates and positive technical Trends we see more upside than downside potential for equities over the next 12 months Keith is with us for more Keith buddy good to hear from you as always constructive by the sound of it can you just tell us how the data from Friday maybe influences those views yeah well great to be with you especially starting off this week so Jonathan you know after the the first quarter we had that big 10% plus gain we had came off for five months of of gains for the overall market and when you see that really strong type of momentum that tends to be a good thing but it Al also leaves you vulnerable to a short-term setback that we saw in in in in April and we use that opportunity that 5% pullback to actually increase our Equity position and now specific to your question around the payrolls I know people are characterizing it as weak we think it's actually relatively solid it's just more normalizing from a really strong level I mean if you have anything around 175 that's a strong number and that's still above the pre-pandemic trend you did have some positives as far as the inflation side cooling a little bit you guys talked about this earlier wages cooling as well it's one number that one number I would say was more Goldilocks I mean there was some offset from the ism services that you discussed as well but all in all I mean that that number was a positive and the market reacted accordingly you've upgraded equities you downgraded cash you also upgraded bondur ration Keith can you walk us through that and how it complements the other moves sure so when when we had that pullback of about 5% and then when yields were closer to 470 in the 10 year we basically said this is a point to deploy some of that excess cash which we know a lot of investors still have and the way we think about um you know the duration we went um we downgraded duration back in mid December when we were around 390 as we approached 470 we just thought the risk reward had improved not trying to call the top but we also at that point uh the market started to embed you know basically only one uh R cut so we think the the market moved too far and as you saw we see some relief we still think the 10year treasury is probably still in a broader range maybe you know this 425 level is going to be important but maybe 4% on the downside and maybe around 5% towards the upside so again I think it's more of a tactical trade I think that supply that you all talked about is probably going to keep the the low into that range higher than it had been uh previously but all in all I think the risk reward improved as we as we rebounded in yields that was right where I wanted to go Keith how much of this upgrade to equities and duration is a tactical play simply to piggyback on the selloff yeah I mean that that's it I mean you know the way we think about it is again we were stretched uh on a short-term basis sentiment got a bit stretched and even our studies um when we look at like a first quarter where you're you're up over 10% you look back historically it's happened about 11 times since 1950 by the end of the year you've been up 10 out of 11 times but one thing that we talked about a lot is the minimum draw down you see at some point the minimum was 4% so our message was you know we expect Market to move higher but it's not going to be a smooth path and then we overlay the forward earning estimates which you highlighted earlier Jonathan which are moving at a are at an all-time high and I think with all the volatility and the uncertainty and the data dependency of the fed the one thing you know overall that has been pretty steady has been forward earning estimates continue to make new highs each week and if you think about since the pandemic think about what these corporations have faced a once in A- lifetime pandemic a you know once lifetime inflation shock and what we see is that companies adjust and earnings continue to move higher and I think that's something where we're more focused on than the the day-to-day movement in interest rates when you say these companies are you talking about us companies or you talking about more broadly yeah I I've heard I heard your discussion about the globe uh you know this morning I think listen we're more specific on the US I do think we are seeing some better Trends globally but you know even if you look at the economic numbers which is what the main driver of earnings know the US is driving the the global GDP revisions upward China's actually just over the last month we've seen the first revisions in some time but if you look at Europe and Japan those GDP revisions continue to move down in this sub one% so we still have a more favorable view of the US overall um but those and those companies The Innovation we still think is in the US well the US economy or us markets and Keith the reason I asked that is sure that Chinese growth isn't tremendous but Chinese equities have ripped since February so I want to understand from a market performance perspective just how exceptional the performance in America actually is well it it's it's exceptional because the biggest driver has been the big tech companies and that's that's also where the big earnings have been as well so listen I think as we think about you know longer term we still think the US and the Innovation because they're they're global companies right they're selling Global AI to the world and other you know software and so forth the the one thing that would get us more constructive on the international side would be to see those International earning Trends St to move up and we're not seeing it in the same way as the US so that's what's keeping us in the US we're you know open-minded to a shift maybe because China gets a little bit better that feeds into Europe but we're not seeing it in the earning revision Trends yet so just to n it down on leadership geographically it's still America on a sector basis Keith what is it is it still Tech it's still Tech we're still overweight Tech and Communications but we have we have Bor and out to have things like Industrials I think energy is still a decent hedge as well so it's it's not just Tech this year it's boring up but I still think it's it's hard to be negative on Tech longer term one of the reasons why Tech outperforms is when the earning Trends outperform the other sectors that is still happening that's the other thing that we watch in our process to say is there a shift we haven't seen any give up on that overall trend uh as of yet hey Keith good to hear from you Keith learner there of truis upgrading equities following the small pullback we've seen in the last month or so upgrading bond duration into more attractive as well downgraded cash looking to unlock maybe some cash in Money Market funds sometime soon as we start to talk about rate Cuts all over again yeah essentially if you're not going to get that 5% or 5 and a quarter percent yields maybe lock in something longer I thought it was also interesting he didn't talk about this but he thinks that gold and commodities after their brief pullback is as a place to go I wonder how many people who thought of gold as a pet rock are now coming around to actually seeing it as something that is more potentially valuable in a portfolio like way Lee was talking about ralles do that don't they isn't that what happened well I mean if you yes yes they do I mean I think in this case there's this question about central banks there's a question about Chinese consumers you know lots of gold infused weddings I don't know gold infused weddings I don't know there was there was a time when people would buy gold depending on when the Indian wedding season was of course yeah I remember that yeah yeah yeah so I don't know if that's never been you remember that guy who had that shirt made of gold do you remember that don't it's like more than 10 years ago you remember that famous picture I'll send that to you in the commercial break give me a sec Equity Futures on the S&P positive by 0.4% here's some stories elsewhere your Bloomberg brief with Danny Burger hey Danny hey John so we are off the best two-day run in 10 weeks for US stocks and already the doubters are circling Goldman's David cson says that election volatility hasn't been priced in our uh bca's rukai Ibraham says there's still elevated odds of recession late this year or early next Ibrahim spoke with me earlier on Bloomberg brief us equities are already extremely value highly valued and so I think that that raises the likelihood that they're more vulnerable to the downside uh in our expectation if we do get this recession late 2024 early 2025 uh the S&P 500 is most likely going to fall to around 3600 and that's due to our expectations on growth estimates and on the forward PE just to put that into context 3600 on the S&P would imply a nearly 30% decline now Robusta coffee has climbed to the highest price in 45 years according to the international coffee organization in April Prices rose 177% it was a supply crunch that intensified for a variety of coffee used in espresso and instant drinks poor harvest in Vietnam have badly affected production and now a drought and a heat wave threaten upcoming Harvest let's get you a quick check on Spirit Airlines in the pre-market weaker by more than 3% it had a wider than expected loss in the first quarter blaming bad weather and air traffic control delays the results do emphasize the tough go for spirit that it will face as a standalone company or call a judge had blocked its merger with JetBlue earlier this year Spirit also said that 25 aircrafts will be grounded through the rest of the year that's about 1/8 of its Fleet that's your Bloomberg brief John Danny thank you appreciate it the latest from Goldman that note just dropped in my inbox I'll share some of it with you just quickly chairman Pal's press conference at the May FC meeting was davish the April employment report was softer but not weak their view continue to expect two rate Cuts this year July and and November July holding on to July a lot of people are I'm just I'm really distracted by this gold shirt it just is really amazing evidently a 45-year-old magnate in India I forget the gentleman's name he it's quite he thought that it would make him good with the ladies oh right would help him get married page all right sort of like playing into marriages though correct you by buying the shirt and you know yeah so getting ahead of the trade if you will and I saw that it doesn't need to be ironed so it's you know I mean Lisa obviously even if you wanted to could it would be heavy right sidetracked on gold up next on a program the morning calls just around the corner we'll catch up with cf's Ken Leon on his Live Nation downgrade citing antitrust concerns saw some of that in the note from Goldman from David Coston this morning more on that up next [Music] [Music] coming off the back of two weeks of gains on the S&P 500 Equity future shaping up as follows with positive by 0.4% let's get you some morning calls first up City downgrading pelaton to neutral encouraged by third quarter results but awaiting details on strategic Direction once new management is announced your second call from bed upgrading Micron to outperform adding the stock to its list of top semiconductor ideas the analyst seeing meaningful upside opportunities ahead for the chip maker and finally CF downgrading Live Nation to hold citing investor worry about overhang the doj's review of the ticket sellers business practices Ken Leon of cfra the director of equity research saying this at quarter end unearned revenue on future concerts was 4.4 billion with positive on Live Nation sponsoring 80 plus worldwide concerts in 24 for Taylor Swift's the eras tour and other big artists that benefit Ticket Master and select venues Ken joins us now for more on this conversation Ken let's talk about the overhang first before we talk about the reasons to be positive this doj overhang what you do you think the end results going to be I think there's going to be some tweaking in terms of best practices for Ticket Master and and John I really want to set the stage here is there's 18 to 21 analysts with a buy we went to a hold uh there's still Euphoria of consumers moving from product to experiences and Liberty Media John Malone owned 233% of this company so um and and all the media analysts are just have fatigue with video streaming so why not Live Nation uh we beg to different because the businesses are kind of um different concerts is almost like the supermarket a loss leader it's 80% over 80% of Revenue but doesn't really make money but that feeds into advertising and sponsorship Ticket Master the tickets is only 133% of last year's revenues but it's the majority of the earnings so that's the area to focus and that's why your question John on the do J on what will they do to maybe constrain this business as a concern there's lots of overhangs more broadly elsewhere not just in this sector but also for big Tech Ken this came from tavid Coston of Goldman Risk link to lawsuits filed by us authorities against big tech companies may also be underpriced Ken my question to you would be how are you meant to price this they have a dominant position in terms of ticketing and and fairness to management at Live Nation they have put proposals even to Congress uh to make sure that scalping of tickets uh some way there there's more transparencies and better control of that and I think for consumers uh that's what they want where they're exasperated when they can't get a fair price for a Taylor Swift or any major artist so that will continue but I want to point out again for Live Nation as as an investment um they're very concentrated to The Ticket Master business and we don't see this large exponential growth for the company which is why we have a $15 Target not 118 which is where the straight is Ken aside from live n Nation there's a larger question about Department of Justice hangovers with a whole host of different Industries and companies I'm thinking for example of some of the bids to buy Paramount we were talking about that earlier a question of is it a problem not necessarily Apollo but Sony with uh National Security considering the fact that it's not a US company and there's going to be broadcast material at what point are there certain industries that are immune from antitrust oversight and certain industries uh that are going to be that much more subject and you can have to you have to price in a very high-risk premium that's a great question I think corporates have to be very smart about what they do on Acquisitions either vertical or horizontal uh in the case of Apollo and Sony you also have uh issues related to FCC licenses um but I think uh deals can get done uh where it becomes a big problem Lisa is of course concentration and given that the world has changed in this case for entertainment uh with the likes of meta Google Amazon Apple coming in you know whether you put two Studios together and we have a buy on paramont at cfra uh I also as you know Lisa cover financials I cover Apollo um I I think that's the right deal and it's interesting Paramount's former independent director who left along with three other directors because there wasn't fairness for public shareholders was the former president of Sony USA I guess that heading toward the election this has been something that a lot of companies have been talking about including Brian Mahan of Bank of America that a lot of companies and corporate executives are not willing to pull the trigger on certain deals because of this concern about what could happen with the Department of Justice are you hearing or seeing that soften that there is a sense that maybe on a case-by casee basis things are going to start getting done in a way that they haven't over the past few years I I think corporates at large are going to have measured risk and I I think what's factoring now is that rates are not going to zero so the views in terms of buyers or sellers across Industries uh is that well rates are going to be kind of where they are now so when you look at cost of capital return on investment how you want to fund a deal with equity and debt uh those calibrations are already happening so we're we're very optimistic for a very improved uh mergers and acquisition and Equity underwriting market for the rest of this year even in banks at a time where a number of them have said we need to see mergers and Acquisitions but unless your name has First and Republican it it probably isn't going to happen oh that that's right and I I'd go back to last week to J pal because one of the questions most important for the banking industry particularly the largest banks who would be the acquires is the Basel 3 end game uh put that all in English the worry for investors is well whether uh The Regulators would require a a higher Capital uh increase um there's been push back not only from the banking industry but also Congress and its effects on the US economy so I think with the banking industry uh deals Acquisitions will be done uh when the large banks are comfortable with regulation and then again uh when we look at the smaller Banks which have less impact for investing but they're really important for the US economy K just how tight our lending standards at the moment one year ago we were meant to be going into recession following a Regional Bank crisis if we can even call it one now and the idea was that ultimately these Banks would need to pull back and the biggest data point every single quarter would be the senior loan opinion officer survey because Ken that was what was going to strangle this economy just how tight are lending standards I I think every it's conservative around the table but there is availability of credit there's also different uh Alternatives that you have not only from bank loans Public Credit uh but also private credit from the large firms as we mentioned before like Apollo um so I I I think at this point there's opportunity um but it's it's nowhere where we're in a risk on environment and they're letting uh borrowers have high leverage ratios Ken wonderful to hear from you sir keny on there of cfra on a range of issues bro trying to make Sol is great again Bob Michael or JP Morgan Asset Management what did Bob say last week or the week before I forget basically said it doesn't matter as much as it used to because the financing has come from elsewhere and you heard what Ken said there about private markets yeah in other words he made it less interesting too basically you were saying please can you make this something yeah nope not going to do it which is the reason why I think a lot of people have had a really hard time understanding this this economy that essentially if you do have that credit impulse coming from private credit if you have it coming from private uh other private sources of capital how do you really get a gauge on what the lending conditions actually are it is tough it speaks of that bicationic not everyone can tap private markets and public markets more broadly right that's correct available to everybody at the same time we've actually seen some of the laggards actually do okay right Triple C's have outperformed in certain environments it's been a tough time super tough equities right now positive by 4/10 of 1% it might be a tough week given there's nothing to talk about we try we'll make it happen City's Veronica Clark looking ahead to Fed speak that's coming up next this is [Music] Bloomberg coming off the back of the longest weekly winning streak going back to March two weeks of gains on the S&P 500 that's all it takes equities just moving forward last week following inspired by a little down side surprise on a payroll report that got us going into the weekend and we build on it coming out the other side we're up by 0.4% on the S&P up by Third on the N 100 on the Russell up by 0.9 and we are earnings light until we get Nvidia I guess May 22nd just in terms of the mega cap Tech names is only still one to come basically next week we get CPI and we get Nvidia and that's going to really I guess kick things off in a way that maybe this week not so much although Disney should be interesting what they do with their things and you know do with their things is the tease for Disney and the conversation with the CFO tomorrow morning live on Bloom come on that was mean no I look it's I we could do it again coming up tomorrow what they do with their things yeah switch out the board and get to the bond market you can't even pretend to be excited about anything else apart from Bond Supply so let's talk about it 47866 on a 2-year on a 10-year 44711 tell us why it matters it matters because we've seen some softer than expected auctions there has this has been a time where the treasury Department's been managing uh quite effectively people say selling on the short end of the yield curve basically shorter dur duration notes so you haven't seen the same kind of increases in size in the long end that's going to change so I'm curious about how well these are being absorbed how much people are diving in to get that income and whether that can be sort of a sense of when they can increase later on Ys down for four straight sessions going into all of that how I do pretty well foreign exchange looks like this euro dollar dollar Yen you don't need my endorsement dollen 15351 we're positive there by third of 1% looking at the Euro little stronger 10784 data is getting a little bit better I know it's not great but it's getting better in Europe and we had a conversation earlier this morning about how we're going to close this graap if we are going to close this gap between the US and the rest of the world will we be talking about convergence or Divergence and if it's convergence is it something getting better or something getting worse you've been great on this basically relative to what right and basically the data in the US has been actually surprising to the downside more frequently whereas what we saw uh earlier this morning was surprising to the upside when it came to uh services in the composite pmis over in in Europe so this raises a question okay have people underpriced the strength of Europe and overpriced the exceptionalism of the United States well said more than exceptionalism with pet Cher a little bit later let's talk about some things under surveillance this morning Chinese president G Jinping looking to strengthen ties with Europe you're never going to let me live sh Shing beginning his week long trip to France and elsewhere focusing on China's trade relationship with the EU as Leaders align with Washington opposing Chinese over capacity and over production this came from macron in Politico following a trip to China last year the worst thing would be to think that we Europeans must become followers on this topic and adapt to the American Rhythm or a Chinese overreaction he was talking about a whole host of things a year ago but do you think that she sens is an opening there to have a different kind of relationship with the Europeans than the one with the United States some people have put it more bluntly how much is xiin Ping going to exploit the divisions the increasing fissures in the Allies relationships to try to get a leg up and not just with respect to the US and European countries but within Europe as well because he's not going to all of the countries he's not going to Germany so how much is he going to appeal to countries that more aggressively would like to see the disinflation from Chinese goods and are more open to their products being sold I just wonder how Americans will tolerate this position and by Americans I mean the US government of course so if you think about President Biden focus is multilateralism to make sure that allies are good allies and we remain good friends to those allies got all of that how much will the former president Donald Trump hit the campaign Trail and say hang on a minute if you want security guarantees from us don't expect to have an increased economic relationship with China you can't have it both ways and this has been the approach from Europe for a long time sit on the fence try and get the best of both worlds from each side I still wonder how sustainable that would be under a trump presidency even before we get there the lack of dependability and what the US position is going to be has to leave a lot of countries saying we have to go it alone and we have to do what's best for us in absolute terms not necessarily what's going to be best for us with respect to our relationship with this country or that country because it's not a stable backdrop and we're hearing that a lot from a number of officials key topic going into November outwhere Israel telling citizens in the gazan city of Rafa to evacuate a likely precursor to an attack the move comes as ceas far talk stall Hammet insisting that any agreed upon truce should be permanent ham over the weekend la ing one of the worst missile attacks in weeks killing three Israeli soldiers Lisa at a border crossing and it's not just any border crossing it was one of I believe the two places where humanitarian Aid could be transported from Israel into Gaza so really severing one of the ways that people could get food and uh and other resources in Gaza everyone wants this to end or anyone in the Western World wants this to end of course and globally people watch this and it's horrific question is how do you get there time where the where Israel is more and more isolated and where Hamas seems to be holding on to survival as their preeminent concern it becomes a very difficult thing I don't have a sense of who has influence where I'm not sure anyone does at least it's a tremendously difficult situation let's turn outwhere to Fed speak picking up again this week presidents barin and Williams speaking later on today ahead of a parade of fed officials the rest of this week Traders looking for clues about the FC's path forward after a soft April payroll print and a weak ISM as well cities Veronica Clark joins us around a table here in New York City Veronica I mentioned the city quot a little bit earlier summer doing happened so fast I think we should say up front that was Andrew Hollen horse that was not Veronica it was not me it was not it was good you do not want to take responsibility for that let's talk about how quickly this conversation can switch to rate Cuts this summer which has been the base case for you and the team for quite a while yeah yeah I mean I think we saw the the early signs of that last week we we heard from pal of course on on Wednesday and I think it was important to us that you know he he really didn't endorse this you hawkish repricing that you know the had Market had experienced over the last couple weeks and I think this is a Fed that is still just waiting for a little bit more confidence on the inflation data just a couple more months of a a softer you know pace of inflation um after that very strong key1 um and then of course on Friday we had softer employment data and that is something that certainly could get the FED to get more D let's talk about Friday so you were below consensus going into the number you were talking about downside risk as well we got that downside risk it materialized why do you not see that as a oneoff why you see that as a sign of more to come through this sum yeah yeah I mean also you know 175,000 jobs is by no means a weak pace of of job growth on the surface this could still be a pretty strong employment report I think the issue for us though is that you know for for some time you know four five six months now we we have seen a lot of other labor market data that have been deteriorating the the hiring rate in the jolts numbers last week that's been coming down um we saw that in the employment subcomponents of these isms pmis um a lot of signs that that point to hiring really slowing um and this is the time of year when you would normally be hiring a lot of people um and I think this is finally we're we're starting to see you know the the very consistently strong payrolls which is almost an outlier that's starting to crack now you sent out a note as we introduced you while we're on air and you talk about how fed president uh New York fed President John Williams is likely to affirm Powell's concern about the labor market uh an increaseed focused on the employment mandum he's going to speak today at 1: p.m. why do you think he's going to lean into that at a time where a lot of people take J Powell as uniquely dovish and frankly pointing to a rate cut a lot sooner than previously yeah yeah I mean I think Williams is is generally one of the more doish officials that we we hear from um and I think you know pal does speak for for a lot of the the center of that committee and and Williams is part of that um it is important to hear that confirmed in in the other speakers um but it was a pretty interesting shift that we heard from pal I think on Wednesday you know back in in March he was saying that there are no cracks you know in in the labor market data um and on Wednesday you know the first question one of the first questions about you know how do we know that rates are restrictive he he answered that with you know we'll look at all the signs that we see that the labor markets coming into better balance he pointed out that falling hiring rate um some of the surveys that are weaker um so I do think this is a you know Powell and and the center of the committee that are getting worried about the employment side John's been really good on this and just saying how much has the balance uh of risks or balance of weightings changed since Fed chair J Powell spoke in other words how bad does the next print the next two prints have to be how weak does the CPI report that we get next week have to be to reintroduce the idea of a July rate cut yeah I think the the more slowing in the labor market data that we see um maybe the the bar gets higher for what is bad inflation data for the FED um so I I don't think you know they're going to be too reactive to to the data that we saw on on Friday again 175,000 jobs a low unemployment rate 3.9 that's still a pretty healthy print um but I think as you're getting to 4% unemployment a bit above that that would definitely get more more worrying um and on the inflation side of things I think you just need you know a couple months where core PC inflation is running you know 0.20 0.25 softer than you know February March that we saw but not dramatically softer I think that's enough to do it JP laughed at the idea of stagflation or just basically dismissed it and said it doesn't doesn't believe in the Stag or the inflation brings up uh the 1970s do you think that there is something that rhymes uncomfortably with that and the services read we got Friday um I I wouldn't say yet I mean I do kind of agree with pal I don't think we we are in that environment now um we could see some sticking to inflation absolutely um but something that's more you know stuck at around 2 and a half to 3% inflation not not a big re acceleration um and typically you would expect to see you know activity data weakening first and then with some lag you would see that show up in softer inflation um so we might have a period that even looks more stagflationary where activity data is weak and inflation hasn't slowed yet um but I think a Fed officials would think that it that inflation slowing is we're trying to work out Veronica whe these whether these are the early signs of companies worried about inflation But ultimately losing pricing power protecting margin by Lang off workers are we starting to see that develop I think we are we are seeing you know signs that businesses are looking to cut labor costs that's why we see the hiring rate falling you know we we had some anecdotes in the isms last week about not replacing workers if they happen to leave um we've seen hours worked coming down you know more part-time employment all those early signs that business are looking to cut labor costs and and layoffs haven't really happened yet but that would be the last step would you just imagine the FED will see that as inflation comes next is that the leading indicator for inflation because I think a big feature of your research and if our audience at home aren't too familiar with it you believe this fed can cut with inflation closer to three than two I think yeah it's a it's a matter of priorities they're going to be more focused on that employment side of the Mandate and they will be thinking that you know if you start to see the weakening in the labor market weakening demand you that should mean that wages are slowing and that should mean that inflation is also slowing eventually can we get the economist perspective on an argument we've had all morning not an argument a debate we don't argue here different Channel debate intellectual stuff you know anyway unless it's I'm going off on one bro whether this is a feature or a bug a Fed communication the wild swings and understand you haven't changed your base case at all more recently anyway but we've seen massive swings in market pricing to go from Seven cuts to one to one to some yeah in just a couple of data points it's amazing that feature a bug of communication I don't know if it I mean so certainly we haven't gotten the clearest communication from from the fed you know we we know that they want more confidence but what is more confidence what does that look like um so it is a bit of a communication issue but I think it's also just a data issue there's not a good clear signal in the data right now and and markets are very sensitive to every little data point then another argument we were having and it was an argument was about the long and variable lags in the mortgage Market in particular in the housing market do you buy into this argument that if the FED Cuts rates that'll unleash a lot of sales that will then drive prices down it's yeah I mean that's tricky we we actually have seen in the last you know six months or so that new listings of homes have have been coming up some um and we have seen some softness in in prices um maybe that is related to you know earlier this year we had mortgage rates much lower than they are now um so maybe there is there is some of that um but I think in a in an environment where the FED is is cutting and it's because of a economic backdrop like we see a weakening labor market that is weaker demand even for for housing I mean it links to this question of is it a feature or a bug does all the volatility matter if it doesn't have an effect yeah yeah good question I mean maybe at some point it is going to have an effect um and I think we are we are in that hard part now you know we we went from the soft Landing narrative um to the no Landing narrative in the you know q1 of this year um and that stickiness of inflation is where you get then to the hard Landing Veronica enjoyed this as always Veronica Clark there of City breaking things down on the Federal Reserve with tons of fed speak coming up a little bit later we'll get John Williams of the New York fed yeah honestly to me this is a key question does he lean into what we heard from J Powell or does he end up uh really kind of going his own way and saying we have to see to me it's going to be the key threshold for how much do you end up uh with a new balance of what it would take to cut rates let's get you some breaking news breaking just moments ago we can get that with shali bask hey shanan John we're learning now through an secc filing that Robin Hood has received a Wells notice from the SEC you are seeing Robin ha Robin Hood shares react significantly to the news here you are watching this Wells notice in relation by the way to the cryptocurrency listings on the robin hunt exchange remember increasingly in recent years Robin Hood has catered to a customer that has not only been interested in stocks but from cryptocurrencies as well uh the Well's notice was on May 4th and the preliminary determination here was to recommend enforcement action against Robin Hood crypto alleging violations of section 15a and 17A of the Securities Exchange act and this is all according to a regulatory filing before Market opened today shares fell as much as 5.5% you see it moderating some now we know this is all in vain John of the SEC looking further at exchanges listing different cryptocurrencies and the matter in which they do so of course the traditional crypto exchanges such as coin base have also been battling the SEC when it comes to the cryptocurrency world as well shal thank you that stock is lowered by something like 1% no drama yet at least in the pre-market up next on the program just how exceptional is US exceptionalism us is going to remain exceptional it is the only major economy in the west that is seriously investing in tomorrow's engines of growth we have that debate next with Peter of Academy from New York this is Bloomberg [Music] for four days yields pulling back continues today we're down three or four basis points on a 10 year let's call it four 47 in the equity market up by 0.4% going into the opening bound about 43 minutes away under surveillance this morning just how exceptional is US exceptionalism us is going to remain exceptional its growth performance may not outpace others as much as it has but it is the only major economy in the west that is seriously investing in tomorrow's engines of growth and because of the role of the dollar it can run a an irresponsible fiscal policy for much longer than others can the privilege of Behaving recklessly we've talked about that a lot in this program here's the latest investors taking stock of a week April pain rolls report the data fueling chatter of Goldilocks and US exceptionalism but Peter chair of economy securities wonders if the Happy Talk is overblown writing this I like my exceptionalism to be exceptional and I also like my data not to be dwarfed by plugged numbers I cannot help but wonder if even on the jobs front which has been close to exceptional we are exposed to some sort of Gap in perception and we might wind up finding out the Goldilocks met the wrong group of bears the story doesn't end so well Pete joins us now for more Pete thank you for jumping on in front of the camera we were very excited about talking about this topic with you can we talk about just how exceptional things truly are and whether you see this narrative gapping from being too hot to being too cold and happening very quickly you know I've generally been bearish on the US Stock Market NASDAQ in particular for a little while people look at you with this level of sympathy and if you look at it since mid January it's heavily underperformed Europe it's underperformed China massively right China's up 25 30% since it's January lows so this whole perception that there's this exceptionalism and it's showing through the markets I think is an old story that we're Clinging On to and then you start looking at the data right Chicago PMI and I understand Chicago is not what it once was in terms of the center of economic Hub but we are at a level that has previously only been associated with being in a crisis so I think the data is there your previous guess moronica you I like the city economic surprise index that's turned negative again right so I think there's all these things that are going on behind the scenes and maybe we've just been so fixated on inflation and the FED that we're missing this real turn and I think that's why we could see this Gap to back to hard Landing talk Pete now D we've been very focused on the Central Bank Divergence the prospect of the ECB cutting interest rates in June and the Federal Reserve maybe not doing the same thing until much later this year and to your point we've missed the fact that the economic data has turned that that surprise index is now negative that the price action the performance has been elsewhere so Pete the question to you is does it continue do you see more people getting on board and how would you play this theme now would be through equities through foreign exchange what would you do you know for me I like rates right now I started liking yields once they got above 460 I thought we'd be in a 10-year range 440 460 I think we might pull back to 430 425 if the economic data continues weak and to be honest I think there's already been enough weak economic data that we've ignored so I think we can see yields do better so I think that's going to be the first way to play it then the question is how do equities respond right Friday we clearly had a Goldilocks type situation where bonds do well and stocks do well I think that could fade and I think that could fade rather quickly as people start saying hey this has only been a subset of the economy that's been exceptional and there has been a subset that's been exceptional if the rest of the economy starts fading these cannot do that well so I think you get a bit of a retrenchment I think in the near term I kind of like Banks I like some of those other sectors maybe to benefit from this Goldilocks type thing but I'm now very worried that we're not going to see a smooth transition from no Landing to maybe softish Landing to hard Landing I think we might Gap because the data already supports some of that fear there's a question about time Horizon here and whether this is a tactical St a trade or a tactical view or whether it's something that's strategic over the long term where you start to see a greater s chance of some sort of downturn that could more fundamentally challenge certain equity valuations which is it is it just tactical or is it something that has longer legs for me I think this is more fundamental and we've been talking off and on for the past six months to a year that I view China Resurgence as China trying to sell their own Brands and compete more directly with us which I think is going to put margin pressure on us companies and what I don't like and my theory has always been China will work domestically first then sell into Emerging Markets which they're doing but I've always viewed kind of Europe as a potential weak link right we have the ability to confront China to draw lines in the sand and fight with China and our brands are super successful Europe to me always strikes me as they're a little bit more dependent on China than we are G's over there meeting with um the French leader I I think you could see more go to that and unlike in the past 20 years where when China does well we get a Big Slice of that here I think we are going to get less and less of a slice of that and more and more competition and so I think this is strategic about valuations not just a technical or tactical trade and you've had this idea and it's been a brilliant one really that we've discussed at length why do you think now is the time the Market's going to kind of come to it given the fact that earnings have been coming in pretty well uh we've seen them retain their earnings power even if it's not pricing power uh and there are a lot of things including the jobs report that weren't exactly terrible Pete well you on the jobs report too it's uh I think we mentioned in the first part um the birth death model which why they can't come up with a better name for that plug where they're trying to estimate how much jobs are created in new businesses right that was 393,000 out of 190,000 so we would have had job losses had that plugged number not been so high maybe it's valid I question that because that's kind of the last outlier in the whole thing and then I think in terms of why people notice this China story much more you're starting to see reaction to Teemu you're starting to see parts of Europe react to shine and for the first time right as Chinese stocks are doing better there signs the Chinese economy is you know bottomed I think people be watching very closely for a few names to see how their sales into China go and if their sales disappoint while Chinese brand sales you know surge this whole view that oh where sales there are only weak because China's weak disappears and that's when I think we really confront these valuation isues and multiple issues confusion around that with apple last week Pete was save that for another day I want to talk about the geopolitics with you this from axios just moment ago Biden Netanyahu to speak about Rafa later on today they're reporting Pete if we get the same thing here at Bloomberg we'll be sure to share it Pete your view the conversations with the generals you have in at Academy what does it look like you know I think we're still dubious that we will get any form of ceasefire until Israel is done you know eliminating Hamas as a fighting force as much as they can so they are likely to go into Rafa um you know I think when you look at the data as awful as it is they have been very conservative they've taken some losses it's a very tricky situation we would like probably as you know entire Community to see some sort of ceasefire it seems unlikely and there is concern about what state the hostages would be in after being there for so long so that's another kind of worrisome thing so we don't see an immediate ceasefire unfortun and we see Israel really wanting to progress into Rafa to eliminate more of Hamas as a threat if that is the case is there still upside risk for crude because we're not in the 0s we're not in the 80s on WCI we're in the 70s Pete on Brent we're 8357 is there still that upside risk off the back of this or do you think this Market is inated from it yeah and we took off some of this a few weeks ago we were saying we were less bullish crew we're now getting back to fully bullish and I think as we head towards the election I would not see be surprised to see spots of you know activity in around Russ and Ukraine other things that kind of push crude prices higher right you know one Theory would certainly be that if Putin wants Trump to be elected higher crude prices would suit Putin very well so I'd be watch out on that front so right now back at these levels I think you kind of get crude as a hedge almost for free because we do have demand growing for data centers Etc right they're going to need energy that energy is G be you know powered by something so I I like energy a lot again so I put that high on my list of things I want to own both as a geopolitical hedge and outright got Pete this was awesome it's good to hear from you Peter chair there of Academy Securities with a focus on the Middle East as well this on the United States and the disruptions caused by protests on college campuses Columbia cancelling university-wide commencement ceremony according to NBC just moments ago and it came after a lot of pressure due to some of the encampments on the campus question about how much they could ensure peace and a sense of a lack of disruption to have this ceremony celebrating uh graduates talking about whether this fizzled over the summer is a big question Henry Tre saying yes let's see let's see coming up tomorrow the conversation continues Sharon Bell of Goldman Sachs we'll catch up with the Disney CFO Hugh Johnston Steve eisan of Newberg of verman looking forward to that Mark xandy of moodies as well fantastic lineup for you through the week live from New York City this morning good morning this was Bloomberg surveillance [Music]

Channel: Bloomberg Television

Views: 17,803

Keywords: Annmarie Hordern, Jon Ferro, Lisa Abramowicz

Id: eQ8H89LDYbo

Length: 147min 57sec (8877 seconds)

Published: Mon May 06 2024