'Bloomberg Surveillance' Full Show (06/01/2021)

everything is in place for inflation to rise and i think it's going to rise significantly enough to make the fed uncomfortable if people expect inflation then they're more willing to accept it the risk-free rate right now is manipulated by central bankers all over the world what the fed's objective right now is managing expectations and they're doing a great job with that we step back and we look at the fed's goal of reacting so they kind of want to wait it out but market prices don't weight things out this is bloomberg surveillance with tom keane jonathan farrell and lisa abramowitz kicking off the month of june from new york city for our audience worldwide good morning good morning this is bloomberg surveillance alongside tom keane and lisa brownwoods i'm jonathan ferro equity future's up 17 on the s p we advanced four tenths of one percent what a month we've got coming up for you the ecb coming up in about a week the fed after that before we get there tom keane friday payrolls yeah well friday payrolls will be very very big john but i really sent her on the fed meeting june 16th and the basic idea this morning that the markets are doing what the fed wants they're doing the heavy lifting for the fed george ceravelos with a very sharp noise note from deutsche bank in the last few hours really talking john about it's just like a rate cut to see the dollar dynamics in the short rate market with a flood of money the wall of money the fed has given us and we've got some stability in the bond market too tom we need to talk about right now a 10-year 162 your average since 10-year yields topped out at the end of march 161 was 62. i'd argue that's probably good news for them isn't it over the last couple of months yeah the stability there is great but in the short where the pros are in the short short rate market there's a lot to watch for overnight reserves i don't know if i have a good reading on that yet john it hasn't really ballooned out to new highs over the long memorial day weekend but it's just the wall of cash that's out there as we end the pandemic in america's really moving markets are you calling the end of the pandemic tom i'm not quite no no let me be careful in the united states i'm calling it but i'll tell you it's shocking in other nations that are behind on vaccination lisa 650 000. that is your estimate this friday and transitory is really the key word as tom was talking about and i'm wondering how much we're going to get any nuance to what could be transitory from federal reserve officials before their blackout period given the fact that there is this wall of cash that's going to continue pushing asset prices higher regardless of the fundamentals whatever that means anymore john jim bullard in the ft tom keane jim bullard sounding very very hawkish the senator was fed lisa bringing up the fed speakers i think you've got to look out for that he's not alone that list of people is starting to build quite quickly well it sets up for a june that's going to be interesting i mean were the commodities busting out all over is one thing mr bullard's looking at but you're right and there's going to be different nuances here and you know you know i'm not a big fan of the parlor game of the feds speak but the idea here john of look at the markets as they try to price a global recovery from this natural disaster well let's look at the markets right now tom tuesday morning good morning equity futures up 18 points on the s p 500 40 220 through 4 200 on the s p we advise how many times have you said that tk exactly you're gonna hear it again and again and again in the fx market euro dollar unchanged 122 28. lisa yields just sat there 162 on a 10 year this morning just creeping higher by a couple of basis points yes the name of the game though as you said earlier is stability we continue to see that stability in bond markets and i really am trying to understand what the marginal deciders could be for the federal reserve as to when to start talking about talking about tapering and really talking about transitory which may be a bigger deal all right here's what i'm looking at today starting at 9 45 a.m we get a slew of manufacturing data 10 am we get u.s april construction spending and may isn manufacturing data followed a half an hour later by the dallas fed manufacturing index key question in my mind how much have input costs increased in other words the inflationary impulse into the producer how much has that forced them to consider pricing and force prices higher for the end consumer we have seen this again and again how much does this crimp what they actually produce these are questions that people are looking at to try to determine decipher how long lasting how transitory this inflation really could be 2 pm lael brainard of the federal reserve fed governor going to be speaking at the new york economic club again the key question i have is what are they looking at to determine when they should move away from this temporary blip what are they going to potentially reconsider and she going to follow in the footsteps of jim bullard and with respect to taking a little bit more of a hawkish tone and then today and this really is probably the key market story of the day opec plus is meeting to discuss july output expecting to ratify output increases we see prices on brent prices on wti rising to the highest levels in about two years because people are actually driving places and actually flying places john and this has led to something of more of a tightening in supply uh demand dynamics the key question really is iran and what happens if the agreement comes to a pass and they're able to start shipping oil alisa that's the commodity market your take on foreign exchange dollar china 638 your take on the latest move out of china this is a huge huge deal and basically china for a long time allowed the u.n to strengthen strengthen strengthen versus the dollar and then yesterday took a pretty big measure starting to actually came out with a peg that was weaker than the expected reference mark for the un and then today for the first time since the financial crisis required banks to hold higher reserves of foreign currencies basically trying to weaken to offset some of the rise in the u.n i really wonder how far they will go what triggered this and what this means for a dynamic that a lot of people thought they would actually allow to continue to climb it's a 10 move in china's favor over the last 12 months tom hit your headline nobody wants a stronger currency this one's going to get a little bit more interesting if we have to see some dollar weakness in the months ahead the old line race to the bottom i would note moments ago euro yen which is a major major pro pair just went out to strong euro weaker yen and one of the overlays here as we go to john uh one of the overlays john farrow is uh the um stronger euro it's irrefutable well let's go to john right now john stelforth oppenheimer asset management chief investment strategist john let's start right here just a massive month ahead of us the ecp the federal reserve payrolls this friday after the big downside surprise on payrolls last month what are the lessons learned going into this friday well i i gotta think that investors are gonna have somewhat uh trepidation trepiditions we get closer uh to that friday uh date uh for the non-farm payroll number i mean they're looking for one 600 and 650 000 k versus 266k which is what we got the last time and ahead of that as i recall there were some uh predictions that was going to come in at 2 million so we'll just have to see how it goes our understanding of the markets from uh from the period that we've been in the markets the last 38 years is this is not uncharacteristic the uncertainties that we're dealing with when you're coming out of a major crisis you just have to right-size your expectations john sophis i want to congratulate you on being a persistent and courageous bull in the heat of the pandemic you were right right right right what is the thing you're studying or the thing that would trigger you to a more cautious outlook tom it would really be an indication that the the federal reserve was indeed asleep at the wheel that it had become uh locked into this idea of just leaving the faucets running irregardless of inflation ticking up uh should it become not uh no longer a transitioning or uh or transitory kind of uh occurrence uh that's what would worry us we we look at the economic data uh uh on our on a daily basis and so far it's so good it's not it's not great but it's not poor progress being made and the inflation that is occurring is still linked to some of the disruptions in the supply chain in a wide variety of areas from food to technology well that's uh the economy and the economy and the stock market are not necessarily on the same trajectory there are signs of cooling in certain pockets of the froth whether it's the spa market whether it's the ipo market where you're not seeing the same kind of pop as you used to whether it's the junk bond market a feeling that things are actually hitting at their peak do you think that this is a blip a pause in an incredible rally or do you see this as a sign of what's to come for the rest of the year lisa our particular focus is really on on the core of equities so you know what we're looking at is a combination of growthier value and garfier growth uh uh stocks that are doing uh quite well actually in in this period we think when it comes to this fact when it comes to the ipos that's where you saw the frog and uh they are essentially uh they're not the set center of the circus so to speak they are other rings on the outside or what you might call the uh the the side rooms in las vegas you know the lounge acts too many fancy terms john way too many fancy terms can we keep this simple are we stinking sticking with the banks the big banks on wall street we want to stick with the banks we want to stick with the industrials and and our our contrarian picks for the for this for the third and fourth quarter we think you want to be now accumulating uh big tech and you also want to be accumulating consumer discretionary which is likely to benefit from a successful reopening of the us economy john stolfes we've got to leave it there fantastic work as always uh oppenheimer asset management chief investment strategist on the equity mark in the path forward after delivering another tiny month of gains for the month of may for the s p 500 banks here's the quote from jim bullard the st louis fed president speaking to the financial times in an interview this morning guys i'm evolving towards a judgment where labour markets should be interpreted as fairly tight he goes on to say quote even though it's a booming economy and gdp is growing leaps and bounds i'm not sure employment is going to follow tom you sent me that interview this morning what's your take on that my take is there's three americas out there and dr bullard is exceptionally prescient on this his work out of indiana over the years in the research heritage of saint louis there's a fully employed america john across all the different deciles there's another part of america coming back from the pandemic so it'll be like february last before the pandemic and then there's a part of america that's undertrained jeff sacks has been brilliant on this at columbia there's a whole piece of america that just is not in the game dr bullard's adjusting our labor dynamics for that group that's not in the game lisa president bullard adding that he did not expect monthly job gains as high as 1 million in the coming period i wonder what the pressure is though on him that's causing him to take a different tack is it worries about financial stability and this to me is a key question as tom was talking about all that cash sloshing around it's got to go somewhere so if we don't see the inflation in the core economy if we don't see more employment you get asset price inflation and that's got to be scary to certain federal officials federal uh federal reserve officials yeah and you wonder how much that's what's underpinning some of his concerns i'll avoid taking a guess on what he's thinking and i'll just take a look at what he's actually saying he's worried about persistently above target inflation i think at least again into next year pretty much what he says in this interview and if the labor market is tighter than they all think then that really really raises the prospect of being behind the curve in the years to come but it also means that he doesn't have faith that the fed has the tools to address that inflation in a calm way with respect to the markets in that circumstance which is actually counter to what a lot of people including janet yellen have been saying how lonely do you think he is on the f1c right now pretty lonely i think less lonely than he was six months ago john we slotted in the pendulum of stability stability here at 612. i think that sounded a little bit more doomy than stability to be honest with you thank you kate winslet i have been told by 42 family members stop everything and watch kate winslet on hbo and it's fantastic yeah she goes jack mary houston i think oh i thought it was fake so 7am yeah danny research president he's thinking of titanic hbo i know tom's just distracted i have no doubt tom's going to watch kate winslet whilst this program is off new york mrs bloomberg with the first word news i'm ruska gupta china has taken its most substantial move yet to reign in the surging u.n beijing is forcing banks to hold more foreign currencies in reserve for the first time in more than a decade that effectively reduces the supply of dollars and other currencies on shore and that puts pressure on the yuan to weaken president biden will unveil plans aimed at reducing the black white wealth gap that will happen today in tulsa where the president will mark the 100th anniversary of a massacre that took place in a prosperous black neighborhood president biden is expected to offer proposals aimed at boosting home ownership and helping minority small businesses in tennis women's star naomi osaka has dropped out of the french open because of a dispute over mandatory press conferences osaka said in a social media post that she has suffered from depression and social anxiety disorder she says that taking part in press conferences makes matters worse osaka is ranked second in the world global news 24 hours a day on air and on bloomberg quick take powered by more than 2 700 journalists and analysts in more than 120 countries i'm rick gupta this is bloomberg [Music] but the president keeps saying inaction is not an option and time is not unlimited here we the american people expect us to do something they expect us to deliver and it's my hope that these continued conversations really over these next few days will be productive and will lead to that clear direction the secretary butchered there doing the rounds at a sunday talk show stateside over the weekend from new york city this morning good morning alongside tom keane lisa bradford i'm jonathan ferro tuesday morning price action set up as follows equity futures up 19 advancing four five tenths of one percent in a bond market yields just south of 162 at 160 198 on a session up by a couple of basis points and kicking off the month of june in the fx market euro dollar in at around 122. 122.28 and totally unchanged on a session brief mention of crude a tighter commodity market a tighter oil market later this year opec plus looking for some of that 68.12 on wti up by about 2.7 on the session tom crude advancing this morning yeah really nuanced today for june 1 as we start the summer there's a lot going on in the markets again john stolfes there on the equity lift and his optimism as well right now to stagger through the weekend and to survive into a four-day work week and all of june martin schenker joins us bloomberg editor-in-large in charge of voting rights here at bloomberg it is sort of an arcane topic but there it is and over the weekend the texas democrats lost out of the legislature the republicans were stymied i guess they'll get something through it's a battle brewing to 2022. how does washington affect states decisions on voting rights well obviously the issue of who is eligible to vote is a states rights issue if washington wants to inject itself into the debate it's going to be rancorous to say the least if the washington establishment tries to enforce voting rights on the states does greg store just understand this will end up in the courts it will probably end up in the courts indeed and then it will just be a basic states rights issue who decides who gets to vote in national elections is it the states or is it the federal government marty as we talk about voting rights as we talk about what's going on in washington d.c we also continue talking about what happened in china and i do wonder what the international implications are of president biden kind of doubling down a little bit on investigating the theory that this could have initiated from the wuhan lab that i'm talking about the kovid 19 crisis yeah it's an extraordinarily sensitive issue for the chinese and you know even though there is no specific evidence the fact that joe biden sent this issue back to his national security team for analysis has got to be really concerning to the chinese and you know joe biden has basically taken an approach that his predecessor predecessor has taken which is ironic to say the least well people are saying that this is actually potentially dangerous because china has tried to avoid this theory for a long time what is the big international potential consequence here because it's not just the u.s australia also raising questions here tensions rising between china and a number of other allies of the u.s in addition to the united states well if it has ever proven that the chinese somehow hid the fact that this escaped from a lab the international consequences would be severe you know my own feeling is that it's probably never going to be proven someone out there probably knows the answer but if we ever hear it you know i'll be surprised does anything get done in washington in june it's the oddest month it's like it's not 100 degrees yet and now we all have air conditioning and all that but the heritage of the city am i right nothing gets done it's very little it gets done and i think the framers of the constitution sort of decided to place the capitol in washington so that it's so warm there congress doesn't meet so they don't do anything in the summer months in all your experience i mean it's basically 1920 or 1820 for that matter isn't it it is but you know i will say that it looks like this whole infrastructure issue is going to come to a head pretty soon you think it's going to come down it's interesting yeah well and that's actually an interesting exactly where i wanted to go this idea that people are already pricing in some sort of infrastructure spending plan what's the contour of this particular plan given the bipartisan effort that's taking shape well i mean i think this meeting with senator caputo and joe biden this wednesday is going to be critical the the issue obviously jonathan has talked about this all the time they can't even define what infrastructure is if they're able to come together with a definition that works for both sides then the big issue is how to pay for it and that's where there is a deep fundamental fundamental philosophical divide what's the latest headline number that you keep getting from sources i i keep getting somewhere south of 1 trillion you know you know if they can agree on a number like that and agree to how to how to pay for it then i think you're going to get a deal money got to leave it there congress getting back to work in the next week marty schenker there bloomberg editor at large some breaking news for you a share sale from amc entertainment 8.5 million shares for 230.5 million dollars looking to use the proceeds from this lisa to maybe purchase some theater assets and leases and maybe looking at de-leveraging opportunities as well yeah that's a key issue as you were talking about before that they need to reduce some of this debt to give themselves more flexibility going forward my question is what is their business model going forward is it just going to be movie theaters and if so does that look the same post-pandemic as it did pre-pandemic i mean do people want to go back to sit in movie theaters no idea but one thing they're looking to do in the near term is take advantage of a massive equity cushion and a big rally that's been taking place tom keane in the pre-market amc up by six percentage points up by 6.32 it's a bull market and odd things happen i can remember a few years ago where you were attracted to head to uh prime brokers if they could offer you krispy kreme to short and then krispy kreme was put out of its misery and now we have krispy kreme thinking ipo they've fouled publicly for an iphone i don't think about it tomorrow i think it's happening all things krispy kreme come through you don't sound bullish about this i've got to be honest with you no i actually sound hungry about it tom's way of breaking really gold dunkin donuts to come out with headlines well t.k i think your word choice was interesting there the phrase you used bull market you weren't talking about bubbles you were talking about a bull market just a consequence of a bull market i'm just i'm removed from it i'm in triple leveraged all cash and i'm happy i mean are you happy my part of the story this morning then up six percent in the pre-market krispy kreme filing publicly for an ipo and look at the weightings just quickly tk the waitings of the russell right now the number three waiting on the russell gamestop the number eight waiting on a russell right now lisa amc entertainment yeah and the idea here that amc entertainment also has been a meme stock right so how much are people gonna end up benefiting from this but you do think about some of these key players being such big weightings of these indexes what that does i'm not ignoring you tom just the punchline should come at the end just inching towards the end of the segment to give it a punchline go ahead there was so much rain this weekend kennel fee started quacking like a duck okay is that really what you wanted to say yeah that's really good to let you say that 60 seconds ago do you think that would have helped the flow who would have helped you know smarten up the program here you didn't think i was gonna have a punchline no lisa i thought you'd add some value which you did coming out sterling the prime minister got married advances management director you and i weren't invited how is mayor viewstown dumb 42-21 on the s p lisa you know he's watching that i know up four tenths of one percent on the s p equity is doing okay to kick off the month of june this is bloomberg 6 30 in new york this morning good morning kicking off the month of june your equity market looks like this on the s p advancing four tenths of one percent on the nasdaq up four tenths of one percent on a russell up six tenths of one percent after a slim month of gains for the month of may on the s p 500 the banks and that rally continued up by more than five percent on the s p 500 bank sector through last month if you switch at the board and get to the bond market payroll's coming up on friday 650 000 is your median estimate yields going into that higher by a couple of basis points on a 10-year so 161.98 up by two or three basis points on the day over the last couple of months though we've talked about this continuously the amount of stability you've seen in the nominal yield since we topped out at 174 on a closing basis at the end of march it's been pretty phenomenal hasn't it when you think about it your average has been about 161 162 and that is where we are again this morning let's finish on this the news that the opec plus team are looking for a tighter oil market in the second half of this year at a rally going into an opec plus meeting a little bit later up by 2.65 on crude wti with a 68 handle brent with a 70 handle your year end estimate still 63 64 on wti and about 68 on brent south of that of where we are right now tom brent 70 wti 68 when you're looking at the forecast some people still doubting this could continue you know it's gonna have to see and you know frankly it's a more active market than i expected on a post-memorial day tuesday morning john and there's a real correlated lift here again with that commodity lift dovetailing right into an equity lift we start strong this first of june and we do so with the right guy at the right time because we didn't know over the weekend that china would profoundly change a birth policy from one child to two child to three children three bouncing babies robert ormatz uh joins us with titanman advisors and their managing director and what is so important here bob is the arc of your service to the nation goes back to nixon and truly the opening of china in the 70s explain the baby policy long ago and far away well it's a very interesting change because uh as you correctly point out tom traditionally they've had a one-child policy to avoid a very large continued increase in population now their population is turning downwards they they want to keep an active vigorous workforce so they're now permitting people to have three babies the um and and a lot of chinese families would like to do that that's part of their uh tradition of having large families one of whom takes care of the parents stays in the village um so it's not this is this is culturally sort of going back to china um maybe okay that's right where i wanted to go bob this is really important you mentioned the culture of china is america in its bipartisan policy to china blind on the culture of china well i think we need to understand it better a senior chinese once told me your your understanding of history in the united states the way it's taught really starts at athens and moves west it's athens rome and all the things that go on in europe whereas a whole portion of the world the middle east and east asia had their own cultures in their own histories and china's is 5 000 years old we have to understand that that culture is not going to change and there and and they've changed their government um since the revolution in 1949 but they've uh but the but the culture of china is a very deep one and and one of the things we have to remember is education is a critical part of that it has been for centuries and centuries and it will continue to be and we're dealing with a a country that is very formidable in its emphasis on education and now and particularly in technology education bob do you think the perspective on history is what led us to believe that we could get them to become more like us the western governments could get china to actually adapt the system that has driven the growth of the last 50 years that is right and i i got to know deng xiaoping quite well during the period that he was in power and he said we can learn that one of the major things i've done is to open china up the universities were closed for several years during the cultural revolution and chinese were not permitted to study many chinese were not permitted to study abroad including the united states he said now we'll be able to open the universities and america and chinese will be able to study in america but he said one thing to remember we we will learn from you uh technology and a whole lot of things you have a lot to teach us but it doesn't mean we're going to change our system um and he said you have to make the distinction between learning from you and uh and that causing us to change the fundamental system of china which has been based on 5 000 years of culture so we have to we have to understand a lot of americans were naively of the view that once they became a more market-oriented economy which they have um they're also going to move toward a democracy and that um the chinese even early on said that we have our own way of doing things and and because we move and one direction economically doesn't move we'll move doesn't mean we'll move in a uh in a democratic direction bob that word you use though naive when you look at the approach from this administration do you sense continued naivety no i think the uh the people in this administration jake sullivan tony blinken kurt campbell have a very good understanding of china they've worked with china i've worked with them very closely jake and i uh went to china several times with hillary clinton when we were in the state department together tony blinken has been there with with biden when he was working for biden um kurt campbell knows china as well as as anyone there these these people are not naive uh they're very they're very knowledgeable about china and i think the chinese respect the fact that they understand china quite well so then distinguish what their approach is to president trump's in other words what they want to accomplish with their chinese u.s policy that perhaps trump did not well i think they the tone has changed uh uh uh uh quite a bit and i think they want to do two things one they do want to have a a good dialogue with the chinese i mean they they've uh they've said that i mean the the first meeting didn't get off to such a great start but it was certainly a meeting the second thing they want to do is work with their allies to a greater degree and they have a view that they will be more effective in influencing china on certain issues not all issues but certain issues with with the quad um and with other allies the trump administration picked fights with all of our allies and the chinese said well how are the americans going to do anything vis-a-vis us if they can't even really get along with their allies and they don't have a unified uh view among their allies on what they want bob if they want a better relationship with china how does this investigation into the origins of kovid 19 fit into that this idea that president biden is doubling down on the theory that originated from the wuhan lab and people are basically saying that which could potentially really throw a kink in the relationship between the two nations even though they're not necessarily significant health consequences in the near term that would stem from that well the answer is i don't know i don't know what they know and what they don't know and and what their objectives are in this so i i really can't comment on that i i will look beyond that though and say that over a period of time um there is in the health area in the climate area and many others these are the two most powerful countries in the world with also a substantial amount of scientific expertise and over a period of time we're going to have to work with the chinese and get through this period to deal with the the pandemics of the future and and deal with flu we get a lot of information early stage information on asian flus from the chinese which helps us to develop our vaccines here because the flu tends to move from asia to to the u.s so um whatever whatever happens now whatever the reasons behind it and i just don't know what they are over the medium term we're going to have to work with the chinese on on on health issues and and numerous other issues climate issues financial issues don't forget we were able to deal with the 2008 financial crisis in part by working very closely with the chinese so we have to sort of divide these things into short and medium term elements bob where does trade come into this because there's been a real tensioning in the relationship there with tariffs and certain agreements that china came to that they have not necessarily fulfilled when it comes to buying u.s goods what does the biden administration want to see with trade between the u.s and china i think what they're they're certainly the as you recall there were a few issues in face what was called phase one mostly china buying more stuff from the united states agricultural products natural gas things of that nature now we're gonna have to move to uh phase two which is agreement on intellectual property trade secrets a whole range of things and we have a very competent trade negotiator um and and i think there's an understanding that at some point we have to move not to some brand new phase to deal but identify two or three or four areas where we need to to reach some level if not total convergence at least a framework for for dealing with these issues the the what we're doing now is we're sort of moving apart we're becoming more self-sufficient china's becoming more self-sufficient uh in certain areas like that that have to deal with very high highly advanced uh 21st century technologies but over a period of time we need some degree of understanding of rules um to deal you know the the the the framework for dealing with some of these newer technologies safety issues for instance ethical issues a whole range of things when we deal with things like ai or quantum computing and we and someone has to set international standards for these things yeah and the two most important countries are are china and the us if you look at the um at the legislation that's being produced now a part of it is to set internet to have the usb a leader in setting international standards china wants to be we should also be a leader and we have to work with them on international standards for the newer technologies a fragmentation of the world and and each country will have its own national standards and that's not healthy and it doesn't improve efficiency we're against the clock but you know i love catching up with you bob hormats tiedemann advisors managing director from new york city this morning good morning equity futures up four tenths of one percent on the s p through 4 200 alongside tom keane lisa brown with some jonathan farrow up 18 on the s p we are positive four tenths of one percent your yield higher by a couple of basis points to 161.81 for our audience worldwide this is bloomberg's surveillance with the first one news i'm ricky gupta u.s oil futures climb to their highest in more than two and a half years today west texas intermediate rose as much as three percent opec and its allies are forecasting that the global market will tighten up but cartel says the oil glup built up during the pandemic has almost gone france's president emmanuel macron demands to know if the u.s is still spying on eu leaders macron was reacting to reports that american intelligence monitored germany's chancellor angela merkel and other european politicians with the help of denmark the danish are amongst the us's closest allies in europe there's a report that japan will allow some spectators at next month's summer olympics according to tv asahi organizers will let domestic fans attend the game spectators would be required to have a negative virus test or a vaccination certificate fans from overseas would not be allowed to see the olympics in person and the world's biggest meat supplier has become the latest casualty of a cyber security attack jbs says it shut its north american and australian computer networks after an organized assault on some of its servers the jbs attack took place three weeks after the operator of the biggest us gasoline pipeline was targeted instacart has a plan to replace its army of gig shoppers with robots it's part of a long-term strategy to cut costs and put its relationship with supermarket chains on a sustainable footing bloomberg's review documents that detail the plan it involves building automated fulfillment centers around the u.s where hundreds of robots would fetch boxes of cereal and cans of soup global news 24 hours today on air and bloomberg quick take powered by more than 2 700 journalists and analysts in more than 120 countries i'm rich gupta this is bloomberg [Music] [Music] it's vaccination vaccination vaccination that is defined the the how robust the recovery is we need a very important effort to be able to get vaccines into the arms of people in developing and emerging economies and without that we won't be able to to say that that we've overcome the crisis and guru there the oecd secretary general from new york city this morning good morning alongside tom keane lisa brown with some jonathan farrow can we get down to the opening bow stateside in new york equities up 18 points on the s p 500 we advance four tenths of one percent after a slim month of gains for the month of may on the s p 500 coming into june your yield is higher by two basis points a little bit more than that this morning at 161 81 on tens fx market euro dollar unchanged at 122.25 and crewed a 68 handle now on wci up 2.5 percent tom to 68 and about one cent a little misleading on the way up i look at brennan the way down i look at uh west texas intermediate on the way up here 70 dollars 64 cents on brent crude more the global price we've got lots going on in commodities we'll discuss that here in a moment right now let us wander out to 2025 or maybe out to 2030 we do that with amish adalgia of johns hopkins center for health security and what is so important here is people like dr adalja wander out into the rural parts of china looking at bat research and how it links into people research and what it means for the future of covid dr adelgia out four years out five years do you just assume there will be more covids you definitely have to assume that there's going to be more coverts we know that the coronavirus family has many different viruses that are circulating in bats some of which are going to have the capacity to infect humans so we have to be prepared for the next code we have to understand how this coronavirus found its way from bats into humans in order to make us more resilient to the next coronavirus emergency and there are whole other viral families as well that we have to continue to be vigilant about there will be another pandemic there will be more infectious disease emergencies we have to be ready and we can't have the same mistakes occur again is that the warfare of university against university in terms of funding it or do you look to larger government and ngo institutions to drive forward the research it's really all of the above you have to remember that infectious disease when it gets to the point of a pandemic that really becomes a national security emergency and it is incumbent upon governments to think about public health infrastructure as part of national security infrastructure and fund it that way so right now we have a chance to get this right in the with the u.s government in terms of pandemic funding in terms of prioritization as well as uh as well as globally with ngos that are engaged as well as universities thinking of new research that they're getting involved in and it even goes down to the local and state level we have to improve public health infrastructure at that lowest level if we're going to be resilient because that's where a lot of the failures happened was the fact that local health departments didn't have the ability to test they didn't have the ability to contact trace and that really put the united states in a bad position now everybody sees what people have been talking about for decade after decade than neglect of public health i'm really kind of shocked that tom didn't start with greek the idea that alpha beta gamma delta alpha being the variant that we saw coming out of the united kingdom and delta is the variant coming out of india the new names because the old names were too confusing b1117 or b167 the question is going forward are we going to get a beta are we going to get a gamma that's going to potentially be more virulence that's going to puncture through some of the vaccination protections and lead to another cycle in the covada pandemic dr adulja we might have lost him lisa dr emma should doubt you there johns hopkins center for house security senior scholar or you just put him to sleepless speaking greek asking about the greeks well this is actually really interesting they've actually come up with names for variants at this point these sort of giving them greek letters to sort of designate them because they are expecting further iterations you're dead on lisa and what i find john so so important here i agree with lisa for the record i just found that pretty funny it was funny you know i'm not an expert on this but john i get more questions from people about the effect of these variants than any other thing that we do let me rephrase uh dr adelge lisa's important question is the variants are front and center what should we actually study from alpha to delta on the variance well i think that the the it's confusing now because we've got three different names we've got uk variant 117 alpha that's hard to remember but i think i think people are going to use all the names i do think what's important about the variants is to try and understand are they more transmissible what mutations make them more transmissible do they have the ability to evade immunity that you might have from natural infection meaning can you get reinfected with the variant and then lastly are they able to evade vaccines and what we've seen so far is none of the variants have the ability to evade vaccines especially when it comes to what matters preventing serious disease hospitalization and death so it's important to track the variants and to keep a database of all of them but i think that the solution to the variant remains all of our vaccines that are out there modernizer johnson and johnson all work tremendously well when it comes to what matters with the variant so that's the way that we get out of the variant problem is to get more and more of the world's population vaccinated dr adelga in the meantime this weekend it seemed almost normal people were walking around without masks people were interacting going inside is this appropriate is this the new normal where we actually go back to the old normal i do think we are at that point now in the united states where the trajectory of the pandemic is such that we will be back to normal probably well below before fourth of july i think memorial day was a good market we've got over 40 of the u.s population fully vaccinated and that's kind of that inflection point that we saw in israel when cases fell and we've clearly tamed the virus basically removed its ability to threaten hospitals and that's the most important thing so i think people are are understandably and and justifiably feeling that this is getting back to normal we're still going to have cases we're not going to get to covet zero we still want more people to be vaccinated we want that number to be as high as possible but i think we are on on the way back to normal uh imminently doctor we've got to leave it there thank you sir dr amisha down to there of johns hopkins the center for house security senior scholar going back to normal lisa i wonder if we've forgotten how to socialize have you seen some of these videos coming from the likes of south west the rowdiness i mean it's unbelievable well i've actually seen uh that people are struggling with small talk but more than that people don't have patience they're fighting flight attendants lisa never mind struggling with small talk hitting flight attendants is just people being they're gonna better alcohol now in coach i think southwestern american airlines following tom the good news for you sir i think they continue to serve alcohol in business in a business cabin you're going to be okay yeah i don't know what to make of this really i mean we've never been here john it's people have been pushed for 12 months and they're exploding that's not why they're punching inventory i think people have forgotten how to socialize you know so they've forgotten how to interact with people there is an element also of desperation i mean the idea of 14 months of not being able to engage with the world in ways that were familiar i think led to substance abuse led to depression you see that spiking all over you wonder if that's going to percolate out we've seen increased crime in a number of different cities how much is that going to continue and how much will that come down as people relearn social norms interesting to see what's happening in florida governor ron desantis basically threatening to find anybody any company that asks people to prove whether they've been vaccinated the washington post this morning in an article one florida concert promoter thinks he has a workaround offer 18 tickets to anyone who's vaccinated and charged 999.99 for everyone else still trying to work this out in this country coming up next edgy antennae research president from new york city this morning good morning tom keane yeah we're trying lisa i'm trying to do it as well as some british we're just trying to keep the nine seats the british everything is in place for inflation to rise and i think it's going to rise significantly enough to make the fed uncomfortable if people expect inflation then they're more willing to accept it the risk-free rate right now is manipulated by central bankers all over the world what the fed's objective right now is managing expectations and they're doing a great job with that we step back and we look at the fed's goal of reacting so they kind of want to wait it out but market prices don't weight things out this is bloomberg surveillance with tom keane jonathan farrell and lisa abramowitz final month of q2 from new york city for our audience worldwide good morning good morning this is bloomberg surveillance live on tv and radio alongside tom keane and lisa brabhas i'm jonathan farrow tuesday morning up 19 on the s p 500 advancing four tenths of one percent what a couple of weeks we've got coming up for you payroll's on friday the ecb next week and the federal reserve decides the week after that yeah john there's no question about it to get out to june 16th in the fed it'll be a really key part of the month but what's fascinating for me is it starts right now right today with the markets we'll get to the markets in a moment john but commodities and equities speak volumes crude higher tom rallying looking for a tighter market later on this year that's opec plus do you think they have to respond to that in today's meeting in the meetings we expect them to have over the next several months as well they got to be enjoying it they need it i mean all sorts of countries within opec are loving 71 brent crude as well i don't really look too much at it other than demand's a lot hard to gauge and supply we spend more of our time time on countable supply analysis rather than the emotion of demand and john what this comes down to is gdp 10 and we're going to fall off a cliff and we're all going to slow down in late 2021 six months away you know what that's drifted away that conversation tk nowadays we spend way too much time talking about demand and not enough time talking about supply that's true of the commodity market lisa true of the labor market as well going into friday and there's a question here of how much of the disappointment that we saw in the previous jobs report really stemmed from people not going back into the workforce voluntarily basically these frictions that we continue to see i'm really curious to see how much those frictions ease how long lasting that will be because that will determine one of the key factors in longer lasting inflation which is wage growth and that a lot of people are looking at as their primary director what is actually causing the demand supply mismatch at the moment it depends who you ask if you ask the businesses they'll tell you the majority of them lisa will tell you it's the additional unemployment insurance if you ask the people the potential employees their signal is everything but well part of it is child care right the idea that people are not back in school that children are not in fact their normal schedules how much is that how much are the jobs that people are not going back to less desirable because they're dealing with big crowds of people and they are still concerned about doing so because the pandemic has not yet gone away fully john these issues are going to be pursed out for a long time tom do you think friday's a political report or an economic one uh both always as frankly it always is but john after what occurred 29 days ago i'm still not over just the you know any granted there's a pandemic in i think we've all rationalized how we went from a million on down in jobs i don't have a clue what we're going to see friday i have no wisdom on it whatsoever 266 a monster downside surprise when we were looking for a million tuesday morning equities up 19 on the s p 500 we advanced by about a half of one percent on the s p 500 just a nice little lift on the s p the nasdaq up a third the russell doing okay as well in the bottom market yields a higher by a couple of basis points to 161.81 and euro dollar unchanged here lisa 122 21. all right we're going to get a slew of economic data today having to do with manufacturing 10 am the key number is u.s may isn manufacturing data coming out i am curious about supply chains i am curious about the input costs of the raw materials we'll also be getting some data on the housing market which has been red-hot the spending on new construction how much is that being also hammered because of the increases that we've seen in some of the costs of things like lumber and also like labor 2pm the fed's lael brainard is going to be speaking at the new york economic club very interesting to see how much she starts shifting her view does she start reiterating jim bullard's points that he made in the financial times as you john and tom were talking about earlier today how much will she start to say that there are specific metrics there are specific time frames that they're looking at to determine if this is a transitory surge in inflation that we are seeing and today opec plus is meeting to discuss output for the month of july they are expected to reiterate that they will see output increases but the reason why oil is surging today is because they did say that they do see a tightening in the market heading into year end because of how quickly some of the reserves have been drawn down any details on that could possibly be the most interesting aspect coming out of these meetings all this demand coming back online at the same time lisa thank you front page of barons over the weekend the everything shortage tom the everything shortage from chips to war toes to your favorite table at 8 p.m on a saturday evening to people in the labor report every single friday that seems to be the story of the moment the story of the moment is what we observed this weekend i observed my the sikorsky was down because of the rain this weekend john i had to take a lift in and it was nine dollars more than it's ever been that's the reality people face right now danny joining us now yeah danny research president i'd love to do this with you you coined the term bond vigilante decade ago and many people have been asking the question where are the bond vigilantes with the yields still at 160 on tens where are they ed well i think they're actually back you recall back in august the bond yield was uh 0.52 as an all-time record low and now we're uh somewhere around 1.6 so uh and much of that uh backup and bond yields occurred uh late last year and earlier this year and then they went on a siesta uh it's been really uh surprising to me that uh the bond yield has kind of gone nowhere fast over the past couple of months but then again i keep looking at the fed data and the fed keeps buying notes and bonds so i think that's the answer is the fed has been doing his best to keep the bond yield from going up uh but i do think they're coming back i think the cst is over i think we're going to see some bad inflation numbers up ahead here uh just a continuation of the recent bad trend ed you own the high ground on this we are honored to have you here on a june 1st it comes down to george akerloff writing late in the 60s mrs akerloff presently the secretary of treasury picking it up in the middle 80s olivier blenchard with a definitive article on the wage price spiral way in here is that what's coming for 2022 well i think anecdotally there's just so much out there suggesting that the labor market's tight and you know what matters for for wages is the extent to which employers view it as a as a chronic problem and i think it is a chronic problem it's you folks mentioned all the possibilities of why the labor market's tight right now uh but i think the most important one is demographics we forgot to have kids along the way here and there isn't just uh yes we did john speak for yourself and there is a question though here going forward that uh there has been these frictions yes it's one thing that we haven't had enough kids uh generally collectively and our fertility rate collectively has gone down on the other hand there is this idea that we had all these people in the labor market a year ago and now we don't right and that is something distinct what is blocking them from coming back online what's your answer to this mystery well i've been looking at the labor force data and it definitely shows that seniors are retiring a lot of baby boomers uh who worked past 65 and some of them are now in their 70s and they've just decided you know what it's time to just retire you know meaning of life and all that uh and then i think you've made a very good point on child care we do have a child care problem in the united states we've had it for a long time it was exacerbated by the pandemic and that i think that schools opened up as child care facilities opened up but we are going to find people going back into the labor market but nevertheless there really is a shortage of workers particularly skilled workers and um as you know we've got uh almost as many we've got more almost as many job openings as we have unemployed people there's job on that i want to jump in just forgive me tom please come in with this it came from jim bullard the center was fed president in the ft and he was talking about maybe looking at a different metric and maybe this is exactly where you want it to go tom berlin is starting to advocate for the fed to look at other measures of job market tightness the unemployment to job opening ratio danny is that useful i think it's very useful but but it right now is indicating a lot of frictional unemployment either a mismatch in skills or a geographic mismatch uh whatever it is there's plenty of jobs out there employers are just i mean anecdotally we see help wanted ads everywhere but look i i think i think the good news here is employers if they can are going to use technology to increase productivity and that should be an important offset in the next few years ed what is the level of inflation just regular cpi where you begin to see whispers of a time of a younger yardeni what's the jump point where we get out to a new inflation well i keep writing about the roaring 2020s as a possible scenario here where productivity would be a tremendous offset to labor costs uh on the other hand i also write about the 1970s and that's when i was a bit younger and i am concerned about that scenario we're starting to see some a lot of similarities food prices going up energy prices going up wages going up however in the 70s productivity 8 growth absolutely collapsed and i think that's the big difference but in the short term here we clearly have not just only a base effect but we have a demand shock effect which has created a supply shock effect and i think we are going to be shocked at some of the inflation used over the next few months both on the cpi deflator and wage basis and i think i speak for all of us it has been way too long yeah come back soon absolutely we're thinking thursday president got into payroll friday talking about the dynamics in this economy yields are up two basis points on tens to 161. call it 162. ed talking about the bond vigilantes making a return well they're not back in japan the 10-year japanese government bombed today did not trade it did not trade no trade this is a serious issue in a year and tom it wasn't because the market was shut yeah there just wasn't any trading there's no trading and it has to do with just a bankrupt policy i've heard a lot of people talk about this it's just not good you need price discovery within a system and a grant of the u.s system cameron christ has been brilliant on this the u.s system right now john is original to say the least but at least there's movement and price discovery every day it is not in the jtp market right now lisa well how do you do price discovery when you've got a whale in the market at all times it's getting bigger how do you deal with price discovery when central banks are discovering the price for you john i mean this is the conundrum they are the price and sensitive buyer and they are the whale and i agree with you i think lisa it makes it very very difficult what's happened in the jgb market though volume just just not there just trading how big is the ism today i mean help me here i don't watch it just in terms of the direction of travel and the concept of peak growth which seems to have got everybody's attention it's like a big deal growth yeah i think it plays into that for sure i think it also gives some sort of sense with respect to supply chain disruptions and that i think is a key concern with respect to the frictions of getting the economy prices paid finally the right labor market the hiring story all beneath the surface in the isms we've seen over the last several months the pmis as well your yield 161 81 on a 10 year up around about a couple of basis points your equity market advancing i'm ready to go on tv this is bloomberg [Music] with the first world news i'm rick gupta president biden will unveil plans aimed at reducing the black white wealth gap that will happen today in tulsa where the president will mark the 100th anniversary of a massacre that took place in a prosperous black neighborhood president biden is expected to offer proposals aimed at boosting home ownership and helping minority small businesses china has taken its most substantial move yet to reign in the surging u.n beijing is forcing banks to hold more foreign currencies in reserve for the first time in more than a decade that effectively reduces the supply of dollars and other currencies on shore and that puts pressure on the un to weaken tension over iran is set to rise after two confidential reports from the international atomic energy agency one says that iran has continued to stonewall diplomats investigating decades-old traces of uranium found at undeclared sites another says that iran is blocking iaea monitors from doing their jobs the reports were circulated as iran and global powers negotiate reviving the 2015 nuclear agreement two big private equity firms are taking cloud company cloudera private affiliates of kkr and clayton devilier and rice will value cloudera at about 5.3 billion dollars in the all cash transaction that would represent a 24 premium to the company's previous close cloudera's largest shareholder is activist investor carl icahn mobile news 24 hours a day on air and bloomberg quick take powered by more than 2 700 journalists and analysts in more than 120 countries i'm richie gupta this is bloomberg [Music] he has expressed to me and to our group numerous times his desire to work with us and to negotiate a package and i think that's what you see in in fact that we're inching towards one another i understand there's a deadline here i understand at some point if we don't get there but it won't be for trying it won't because we didn't try it won't be because we didn't try senator shelley more capital speaking on fox news over the weekend from new york this is bloomberg alongside tom keane lisa bradford i'm jonathan farrow 7 30 eastern just around the corner before we get there 7 18. that's just how time works do you like that making no sense this morning at all it sounds like tom king i've got 22 points on the s p 500 weird advance a half percent i've been away from them a couple of days lisa this is what happened yield time by a couple of days at 161 30. we had a cast of thousands replace you on friday how did that work out it was just you know they auditions to replace me i don't know i'm not going to go there did you line that up let me get to amc entertainment as if this isn't entertaining enough amc up by 10.9 of the pre-market 28.97 so doing a capital raise guys to moderate capital but issuing that equity premium to the close on friday and the company the ceo saying it's time for the company to go on the offense again they're talking about buying up theaters real estate they're discussing maybe exploring deleveraging opportunities as well the stock is positive after a share after a capital raise a share sale tom yeah and paul sweeney who's really expert on this said this is a great great mystery for hollywood they really don't know how theaters are going to work how will they work and lisa you raised this question as soon as that capital race dropped on the bloomberg yeah what does this company look like well i mean are they gonna buy more theaters are people gonna be rushing back to movie theaters when they have 14 streaming services at this point do they want that collective experience honestly i wonder how much john you raised this point this idea of will mudric use this as a way to buy up distressed assets like for example uh movie theater companies and the in the actual infrastructure potentially sell it at a higher price amc a distressed asset vehicle tk what do you make of that i i i make of it is it's kids on couches with laptops moving around prices and amc's being opportunistic about it as they should right now let's be opportunistic about washington the talk shows including the senator from west virginia well entertaining our jet fix patrick as bloomberg infrastructure reporter and joins us this morning to me jack it's really simple it's the get it done of the republicans versus some of the emotional infrastructure of the democrats maybe it's about bridges roads tunnels and the democrats say don't take out the lead pipe funding um as well emotionally how far apart are these two parties emotionally they're not too far apart when republicans are talking to president biden the issue the republicans have cited over the last month or so is that they get closer and closer together and are in a very good mood on both sides in terms of finding common ground and just focusing on what they agree on and then afterwards the the rest of the biden administration will push for something a little more partisan that democrats want so if there is a meeting this week as there is expected to be between republicans and the president at some point the the emotions are pretty positive and the mood is good the question is can they actually follow through on that and actually turn this into legislative language that both sides agree on but the mood tends to be good when there is a meeting between republicans and president biden what is the number one roadblock to split the difference let's go how much of this gets paid for with money that biden doesn't want to use does it rely very very heavily on using unspent money from the stimulus is this really new money is it a trillion or so in new money or is it a trillion in overall spending plus or minus 700 billion that's taken away from something else there could there's a pretty big delta between the two sides in terms of the amount of money they want to use but how much of it is pulled out of something else that republicans want to take from like the unspent stimulus funds jack how much momentum is there behind this right now it seems to be slowing a little because of the impatience from democrats the the mood can be good but if there are enough democrats saying these proposals from republicans aren't serious enough and we're running out of time uh then you start to lose momentum and we could really see the momentum stop as soon as later this week if we don't see them really push through this so i would say it's slowing down as of right now meanwhile uh internationally there's quite a bit of momentum around a number of different relationships the u.s has we've been talking about china for the bulk of the morning there's also a question about reinstating the iranian nuclear accord uh there was a sense that perhaps we were getting close to doing that where are we on that front yeah that's uh that's something that you're correct to say there's a sense we were getting closer to that that's an area with a lot of partisan disagreement right now in washington and i i'm not sure i necessarily have a concrete update on what comes next but it is something that that seemed to be uh an issue that the biden administration was at least inching forward on but i don't know if we're gonna see news on that in the very very near future jed fitzpatrick does west virginia get an airport that'll rival dubai uh you know depending on how they work out the earmark system this has been a joke i know a lot of people have told that west virginia is going to look like the city of the future by the time they're they're done with joe manchin's ear marks they're going to be some limits on exactly how much they can do for one or two members but west virginia is really in a key position here with shelly moore capital leading the talks and joe manchin backing her up and insisting on bipartisan talks so it's probably going to look pretty good for west virginia jeff fitzpatrick of bloomberg government down in d.c tom keane you're on form this morning kids on laptops moving around stokes dubai airport international in west virginia which one do you want to start with i don't know i survived the weekend you got through it yeah i got through the weekend let's talk about the kids moving around stocks on laptops you're making more okay but is it still what you just alluded to is it something much more than that now no i would argue with like some moderate capital getting given the way they are it's like yes look the kids wake up and they're looking at bitcoin and then they're trying to get a doge quote and they they're upset they can't get it off the bloomberg we don't have it because it's not real 36 000 on bit dawg wait hold on a second tom you actually have a point though and i will say this john that the idea that mudrick wants to get involved when the shares are valued as highly as they are gives them the ability to raise more money to sell them at potentially a higher price and then use the cash to do other things there is a lot of ways for them to play a company that is in the popular eye because of kids moving around stocks on their laptops and we're talking about the equity we're not talking about the credit have you seen the trip the credit market's been on yeah amc debt i mean some of the debt that was issued back in 2017 dropped to as low as i think below 10 and now it's back to 75 and some of those maturities are higher than that for various reasons of course and i won't get into the dynamics of the credit market the overall the cheat guide to this lisa is we collapsed we were talking about bankruptcy yeah and then we ripped back yeah and there's a question of whether they are proven yet to be a comeback story because people are not really going back to the movie theaters yet in force and what is that business you both have been talking about so they're going to go back but our the mass is going to go back in the same kind of way frozen sing-along john farrow wants to do that this weekend kids are captivated by that aren't they can you imagine you can't get away from it just stares at it hypnotized have what he said that movie chartered a significant any sort no no no time would go tom's had enough kids for me so i'm just going to average it out no like john my highest recommendation [Music] from new york city for our audience worldwide good morning tuesday morning price action like this up 23 on the s p advancing five six tenths of one percent on the nasdaq up four tenths of one percent on the russell you're at performance on a small caps this morning up nine tenths of one percent all-time highs in europe on this side of the atlantic not too far behind switch up the board get to the bond market remarkable stability in the bond market we have not traded in japan on the 10-year in today's session for the first time in about a year i guess the real headline is it's not the first time we've seen that happen we've seen it a few times over in the jgb market the 10-year nominal yield has also been a snooze when we topped out at the end of march on a closing basis at 174 we've talked about this repeatedly on this program we're back to 160 130 and that is basically your average over the last couple of months many people believe though that because of the amount of debt the treasury's got to issue that one or two things has got to happen either yields are going to go higher or the dollar's got to get weaker well right now your nominal yield's not doing much so does the dollar have to get weaker and against what finish on this dollar china over the last year with a big move lower into the chinese currency's favor a move of more than 10 percent and then the chinese come out with more than just a verbal pushback some real policy asking the banks to hold more in foreign exchange reserves looking to put the brakes on this one tk with dollar china down to about 638 but if you need to see a weaker dollar to fund that deficit who's going to absorb the stronger currency the chinese don't want it they've taken it so far will the europeans take it will japan well the answer is no and the answer is there's always a race to the bottom a race to weakness on the currency markets it's out there it's a fact but i would suggest john what we've seen in the ending weeks of may is a pacific rim strength that has been uh really noted led by led by renminbi but really other currencies x japan um as well you know john it does rebound back over to the equity markets yep and equity futures this morning a positive even with this story just playing out in the background i think it's the one to watch 638 on dollar china let's get you some movers and second money to remain morning hey good morning guys yeah uh the s p is moving a little bit higher here volume though is still relatively light here when you look at the top of the leaderboard not only in terms of what's moving but also in terms of the actual volume and value it's a lot of energy stocks at the top of the board like devon energy occidental as well devon energy up about three percent here uh you've got this day here where you've got crude oil here at wti crude well back above that 68 level and of course over there in london you got brent crude camped out above 70. these are back at those 2018 2019 levels here of course waiting on word out of that opec plus meeting that could be another potential catalyst here up or down for some of these names a big deal here for cloudera not a huge deal five billion dollars here as far as the actual valuation kkr taking this company private remember cloudera was supposed to be the big open source challenger to a lot of these cloud companies like microsoft amazon's google's et cetera except they just really weren't able to sort of trade punches with them so they're going private those shares up 24 here pre-market and amc getting another bid here had a private uh equity offering here uh that priced about a dollar above where it closed on friday those shares higher by about 11 companies say it's going to use those proceeds for acquisitions and to deleverage you flip up the board take a look at a few other quick names a downgrade here for lamentum some concerns here about his relationship uh with apple an upgrade here for a firm holdings uh the company's saying that it's the analyst saying that its partnership with shopify as well as with peloton that's actually going to be a big beneficiary here and keep an eye on the ev stocks he got some data out of neo and x paying over the weekend uh this is the chinese uh automaker's neos uh sales we're up about 100 here year over year over the weekend some buzz there on a firm and klein and the rest of it as well romain bostic thank you so much greatly appreciate it how do we on a june morning synthesize what we're seeing the dynamics of newtonian plumbing if you will of the financial system well it always rebounds back to the dollar let's take the conversation that we just had with the giant edward yardeni about inflation and maybe it's cost push maybe it's demand pull zachary griffith has to synthesize this for wells fargo zachary griffiths how do you get from inflation guesstimates to yield guesstimates over to the dollar hey tom thanks for having me yeah so that's really the big question and for us we see inflation rising and that should push yields higher and that's you know part of a story that really comes down to the global reopening we have a very tolerant fed with with higher yields and very heavy supply as you outlined earlier as far as the dollar goes we think that dollar weakness is what we're going to see for the next month or two and again that comes down to a fed that's really been the most resolutely dovish of the major central banks and at the same time you have this u.s exceptionalism story fading where other major economies are picking up from both a public health and economic perspective so that's kind of how we see things unfolding over the next month or two is a race guy what dollar pair or dollar index do you use is your litmus paper for the american system we really keep an eye on the dxy and certainly seen that come off quite a bit and we've been in the camp that we should see dollar weakness for about a month now we think that that could last another month or two as the factors that i just outlined really play out over that time frame and then just with respect to our target for the 10-year treasury yield we think that that's going to continue rising again toward the middle of the year and could hit 1.85 percent by the end of this month so that's the target that we took down a bit uh we were a little bit more aggressive but it seems like this recent range has been pretty sticky so we kind of had to reset our expectations and that's where we see things going over the next month zach offered a very basic framework outline that many people are pushing to think about the treasury market at the moment to fund this deficit we either need higher yields or a weaker dollar is it as simple as that zach from the higher yield perspective we think so and that really just comes down to the supply demand dynamics and you really saw some of that play out in the first quarter specifically in february you had a couple auctions the seven year auction had some of the worst stats we've seen in a while so we think that you've seen some episodes of duration indigestion and that's sort of faded a bit i'd say the auctions last week went fairly well but this supply story is kind of a longer term one that we expect to play out gradually and that's what's really going to push yields higher is you need to get paid more to take down all this stuff just how tight is the relationship between the deficit and treasury yields historically zach how tight is it it's been a strong one recently and i guess it's been stronger from the analysis that we've done with respect to the shape of the curve you really see the back end steepen when definite deficits are rising and we've certainly seen a huge increase in deficits over the past year the issuance patterns have been a bit different with bills really doing most of the heavy lifting last year and we're shifting that out to coupon debt as we really term out the debt that was used to finance the cares act and other bills initially so we think that that turning out all of this duration again it's going to come down to yields need to rise for for market participants to be willing to take all of it down zach we've gotten a lot less certain about the likelihood of an infrastructure package getting passed and the size of that infrastructure package has come down as time has gone on has that already been priced into market i mean could there be for example surprising dollar strength if there isn't some massive infrastructure plan that is passed that increases the deficit to the degree that people expected that's a great question i think that expectations have come down quite a bit and you know you've had those the two packages out there totaling nearly 4 trillion and we've been in the camp that we could get another deal by call it september of this year maybe a bit later but it's going to be much smaller than the two that were originally outlined i think expectations have come down and are more in line with what we had been originally thinking and again it it's going to come down to you know congress has had a tough time getting around this another package when you have economic growth coming up so much you've had you have deficits so high already but when it comes down to the economic impact of these different packages it's going to be much longer term than the cobit relief we've seen so as far as the market reaction we think it's going to be much less severe than what we saw when we were throwing around covered relief deals that were very deficit financed and the spending was very immediate in most cases how high can u.s yields actually go at this point based on the foreign flows that we've been seeing into the united states from countries like japan which we've been talking about and europe which have incredibly low indeed negative yields yeah that's a great point and we think that's a big reason why yields will rise but not tremendously so when you look at u.s trade yields on an fx adjusted basis they're extremely attractive for both japanese and european buyers that hedge at least some of the currency risks so we think that's definitely a factor that puts a ceiling on how high yields can go but with a very tolerant fed and that was something that we did not expect to see when rates began to rise in the first quarter the rhetoric around that out of fed policymakers was very receptive and i think my favorite quote was from chairman paul calling it a vote of confidence in the u.s economic recovery so i think that with the fed more comfortable you it takes the ceiling a bit higher but again the foreign dynamics and the buying that we've seen definitely puts something of a soft ceiling on how high we can go zach got to leave it there thank you sir zachary griffiths there wells fargo senior macro strategist not just the tolerance but it was almost an endorsement from some fed officials earlier on this year when yields started to rise and they said it was consistent with the brighter outlook what surprised me tom was to hear that from an ecb official executive board member isabel schnabel i believe speaking to reuters recently and this was the quote most importantly recent yield developments were more clearly related to an improvement in the eurozone growth outlook rather to foreign rather than foreign spillovers this is precisely what we would expect and what we want to see i for one were surprised to hear it from an ecp executive board member well you're going to see it through euro 123 and we're not there yet you can get there very quickly we can go there in one or two days as well john i would do the correlation here of june is busting out all over and maybe my headline for today is commodities are busting out all over affecting europe as well the bloomberg commodity index up 20 year-to-date from the bottoms it's up 56 roughly from the pandemic lows and even from where we were before the pandemic john commodities are up a robust 16 there's something going on here more than pandemic analysis and the threat of a weaker chinese currency is doing nothing to dent the appetite of this rally this morning lisa yeah and there is also a question about how much of the increase in prices has been transitory due to some of the supply chain kinks to the fact that we've had cargo ships that have been stranded on the seas due to the pandemic and how much is due to a new regime where we're building more stuff we're buying more stuff we are having bigger footprints and that's the price of stuff and it's the u.s driving this cycle and now china it's a real change from what we saw coming out of the last crisis tom you still playing that drinking game i've got you on the corner of my heart drink yeah well you know we went to more of a summer thing with tang mimosas and it's working mimosas yeah it's working out great i mean you know it sounds really good enjoy do you force your kids to eat tang actually well it's not champagne it's cold cold duck but that's it's what's it called called john coming up john janine white pulled duck barkley's sick beverages you can tell me more about it in a minute it's back i'm 22. crosby stills nation young deja vu one percent to 42 22 70. i hope you all enjoyed cold dog would you like to listen to this welcome back from new york this is bloomberg with the first world news i'm richard gupta u.s oil futures climbed to their highest in more than two and a half years today west texas intermediate rose as much as three percent opec and its allies are forecasting that the global market will tighten up the cartel cartel says the oil glut built up during the pandemic has almost gone and higher energy prices are one of the reasons inflation in the euro area climbed to the highest level in more than two years consumer prices rose an annual two percent in may more than economists had predicted a separate report said that factories lifted their prices by the most in more than 18 years there's a report that japan will allow some spectators at next month's summer olympics according to tv asahi organizers will let domestic fans attend the game spectators will be required to provide a negative virus test or a vaccination certificate fans from overseas would not be allowed to see the olympics in person in tennis women's star naomi osaka has dropped out of the french open because of a dispute over mandatory press conferences osaka said in a social media post that she suffered from depression and social anxiety disorder she says that taking part in press conferences makes matters worse osaka is ranked second in the world and krisky cream is set to become a public company for the second time the american donut shop chain publicly filed for an ipo on the nasdaq g-j-a-b bought krispy kreme for more than 1.3 billion dollars in 2016. global news 24 hours a day on air and on bloomberg quick take powered by more than 2 700 journalists and analysts in more than 120 countries i'm risky gupta this is bloomberg boeing has delayed the deliveries until 2023 and we are fine if they can deliver it to us in 2022 we will accept them the only problem we have is there is a stress in the supply chain for the entire aviation industry and i hope that that will be resolved pick a sector we've heard that last line on repeat that was the qatar airways group ceo speaking of bloomberg from new york city this morning good morning alongside tom keane lisa brown i'm jonathan ferro here's the equity market as we kick off the month of june up 22 on the s p we advance a half of one percent 161 64. yields a higher by a couple of basis points you could clip and repeat that line too you're a dollar 122 19. we're down a tenth of one percent just a slightly weaker euro here tom crude 68 handle wti 68-25 john very quickly here at 4-2-2-4 standard on poor's 500. remember how absurd not that long ago 4 200 or 4 500 felt ridiculous and so when people were putting together those year-round forecasts on the s p 500 back end of october early november developing the year ahead outlook then the headline dropped around some of the efficacy for madonna for pfizer changed the game what surprised people i think it's not the cyclical rally it's just how well tech actually held up the tech didn't collapse and fall away which was really away on the index in a massive way the tech held up and everything else had a rip and john stolfes very strong on the idea of tech having a better uh back end of 2021 dow up 36 percent spx up 38 nasdaq composite up 45 year 12 months trailing dave wilson has these numbers tattooed on his left arm he also knows it's about the fundamentals of of earnings i should say rather and you've got an earnings update here is 400 and 512 with the s p 500 reported well actually our number as it turns out is 489 we don't necessarily get 500 it seems every quarter so we have about 10 left to report but what's really striking is you're looking at a third straight quarter where companies way ahead of analysts estimates when you look at earnings and yet getting no reward for it in this particular case if you look at the first quarter numbers on average shares moving the day after reporting when companies were beating estimates for the first quarter they rose less than a tenth of a percent but we're up 38 12 months trailing and once again the market gets out front with the expectation oh yeah i mean that's definitely part of the mix here and it's also the anticipation perhaps that what we see looking forward is not as promising perhaps as what we see looking back at these quarterly results comparing them with estimates one thing you can say though is that really quarterly results have become a one-way street for companies in the sense that you know if you come up short of projections your shares still fall on average you look at the s p 500 uh down 2.2 percent the day after reporting results when the earnings came up short and that's in keeping with what we've seen now for several quarters so you know that's consistent but you know in terms of beating projections the last three quarters companies haven't gotten any benefit in fact for the fourth quarter results last year they actually fell on average in response to results so it just shows you how things have gotten arguably out of whack you know you're talking about how much stocks are up in the last 12 months that's part of it uh clearly the effect of the pandemic on earnings and on estimates is part of it so when you put it all together it's clear that you know there's not a whole lot companies can gain at this point by coming out ahead of projections it really is an issue of what happens when they come up short is out of whack really the takeaway here or is it that it is priced in that people have already priced in such an optimistic future and brought forward the future to now when it comes to the pricing that it requires some massive massive shift in the business model to a more optimistic trajectory in order to get stock investors excited you're on to something lisa no question and it's about the forecast in a lot of cases you know companies talking about how numbers may come up short for their current quarter their year you know or finding some issue in terms of you know their profitability uh you know especially when you look at the you know higher costs of the labor of transportation those sort of issues so it really is a matter of kind of looking ahead and perhaps not seeing quite the optimism that's already built into share prices no question but it's also built into these quarterly results when you compare them with estimates david wilson thank you so much greatly appreciate it uh this morning you know the deutsche bank story john that just came out here on work from home i mean it really talks to where we are in june and you know to be honest to me it's a mystery to get to labor day and certainly into 2022 every company has a different formula they're going to inform staff on work from hole rules tom in due course due course i've had 12 months to work out there unveiling this hybrid model for post-pandemic work i'm thinking haven't we been doing that didn't we get due course it was an email single sentence somewhere coursing back to november of last year maybe april may of last year lisa you identified the difference as well the transatlantic difference between how the european banks are playing this and how they're playing it on wall street yeah in europe they're basically saying great work from home we'll cut our footprints we'll reduce costs and the us are saying get back to the office there's an office culture there is more productivity in the office what i find interesting is from an investment standpoint offices have come back much more when it comes to valuations than say brick and mortar retail and this to me is a real question why should that be in other words if offices are going to be subject to the same dynamic as malls why shouldn't they be as devalued as you're seeing uh mall real estate what does this hybrid model actually look like do you skip mondays and fridays tom is this how this plays out does everyone want the monday off the friday off does everyone work the same days in the office back to marissa meyer at yahoo over 10 years ago they did a study study study she said let's actually learn about this and she was heated work from home doesn't matter heated lisa i think that there is a bias though in terms of who chooses to work from home i mean there are number of studies that show that people who work from home don't get promoted as frequently but often people stay home because they have children to take care of or they're in a situation where they need to take care of things at home so they can't work as much there's also the question of office culture people want to be with one another especially if they're younger and they don't have families and other obligations i don't agree with that at all if you have family and kids you want to be in the office more sure it's the question of whether you can do you want to talk about your weekend tom i think tom wants to talk about a range of things the other thing is hitting the road and making a sale making a sale yeah we've been discussing that a million times haven't we if you're willing to get out and see a client face to face lisa surely that gives you the edge and you're seeing business travel pick up again my question is is there going to be internal company travel that won't necessarily happen right i mean is that the marginal business travel that's not going to come back and the rest of it we're going to see it come back because you're already seeing that happen i'm not going to go to the local restaurants and come back our team meeting that nobody really wants to be a part of team hunting you know what i've seen from all my friends none of them have patience for the small talk or the relationships on the periphery that they didn't necessarily want to begin with that doesn't surprise me that your friend group doesn't have patience for small talk a little bit later from northwest and the mutual chief investment strategist we're looking forward to that conversation before we get there i've always said the commercial breaks of this program would be a million times better than the show itself yields up a couple of aces points on a 10-year to 161.47 euro dollar unchanged at one and all the twos 122 22 run change there on crude 68 32 on wti up a little more than 3 on radio on tv this is bloomberg surveillance everything is in place for inflation to rise and i think it's going to rise significantly enough to make the fed uncomfortable if people expect inflation then they're more willing to accept it the risk-free rate right now is manipulated by central bankers all over the world what the fed's objective right now is managing expectations and they're doing a great job with that we step back and we look at the fed's goal of reacting so they kind of want to wait it out but market prices don't weight things out this is bloomberg surveillance with tom keane jonathan farrell and lisa abramowitz good morning everyone jonathan farrell lisa bramwell it's in time keen on radio and television the simulcast on the most interesting start to june and i'm going to go to broadway john commodities they are busting out all over thanks for that tom we're up more than two percent on brent on wti up by about three percent 68 handle on wti crew tom brent with a 70 handle approaching 71 opec plus talking up a tight market tight labour market maybe the words of the lewis fed president jim bullard and that seems to be the theme pick a sector pick a commodity pick an asset class pick a dynamic tom it will speak to the same thing well the dynamics here are real they're really correlated we'll get to the data here in a moment john but a 71 print near 5 a.m this morning on brent crude speaks volumes and i know there's an opec story to it john my only question is talking to our guests when do we blink and when do yields a 10-year yield actually move and catch up with the other dynamics we see so far over the last couple of months they have not 161 162 is the average that is exactly precisely where we are again this morning in the face of a conversation about budget deficits north of 1 trillion forever in america yields 161 162 on a 10-year maturity suits and ties lisa can rationalize inflation for the people of america it's tangible isn't it well university university of michigan sentiment survey that came out on friday was one of the most underplayed surveys out there it showed that people have the expectation for five to ten years of three percent inflation not necessarily runaway dynamics that we saw in the 1970s but still justify a 1.61 1.62 10-year yield with the expectation of three percent inflation over the next five to ten years tom and john the dynamic here on real yields i mean let's be honest folks most of our guests are focused on the real yield you could see that in a four-day work week friday we're looking for that friday afternoon but seriously john we just simply haven't seen the real yield coming in without inflation pushing down where are we negative 85 negative 86 on tens i agree with you tom we haven't had the lift that many people expected we haven't seen that in real yields we had inflation expectations reprice but even that story started to stall a little bit more recently tom even that's come in just a little bit more as well so what's the catalyst to really change this when is the transitory debate get addressed get solved get reconciled you could be talking about the end of the year well the other time the other parts of the market are getting out in front of that let's go through the data john and sit on it for a while i'm going to do foreign exchange right now weaker dollar but dxy the blended broad index not breaking through to new weakness renminbi with some yuan strength and then over the memorial day weekend sets of action by the chinese including that stunning three children policy a weaker yuan john what i would notice is just one proxy his mexican peso nicely comes in stronger peso off oil down to 19.88 wicked dollar theme in spots in spots in the fx market euro dollar 120 26 unchanged in the bond market there it is for you up a couple of basis points back through 160 161 81 equities on a nominal yield totally stable your equity market with a lift up six tenths of one percent on the s p yeah but it's a way it's up john i mean look at the russell up nine tenths of a percent leading the way uh this morning the vix i'm finally getting the vix to come in i'm not to a 16 handle can you imagine a 15 handle yes i can imagine a 15 handle if this continues i can envision what 15 would look like can i throw another data point out there and this really does have to do with the incredible environment for borrowing borrowing costs for investment-grade companies are now the lowest they have been post-crisis they continue to grind tighter now just 84 basis points and it raises a question of what kind of risk we're building up here the idea of what kind of buffer do you have if there is finally a move in treasury yields or do people not care because frankly they need income they want income we're getting older we need that retirement and that i think is really going to be a key dynamic you two sit on this for a minute because it's really important am i right john that what she just said is lesser quality bonds are less than one percent difference in yields lisa was talking about investment grade i think lisa was talking about investments well for a guy like me that's lesser quality but compared to high yield no i just wanted to be really clear that we weren't talking about high yield we were talking about ig we've had a ton of supply to match some of this as well particularly in high yield i think junk was a record for the previous month before that at least a month before that well and the reason why is because energy companies were actually the main ones that were driving the most recent borrowings there because bargain costs have gotten so cheap and energy costs have gone up the question is again what are we building up we have companies that are leveraging themselves up to the old economy in a regime of low rates that may not stick around yes this is the big debate with that word sorry to interrupt forgive me just careful with that word leverage because a lot of this issuance this year has been refinancing not additional leverage well refinancing though from 2020 right refinancing from the amount of cushions that people that companies tried to get to survive the pandemic the question now is are they going to grow into this debt that they incurred to survive a public health crisis right and so yes they are more leveraged than they were pre-pandemic although perhaps they're not increasing leverage at the same pace this year it's a very good point i'm confused uh we're joining us now brent shooty northwestern mutual uh wealth manager and what's so important here folks is you have to recalibrate not mid-year but maybe june 1st will be a good point to do that brian i want to go into the depth of your note where one of the great opportunities here from milwaukee to the pacific rim is to buy up emerging markets so much of our radio and tv audience is behind is em the place to catch up well i think international in general is a place to catch up and so if you think about it we've had this broadening recovery in the u.s in the back of vaccinations stimulus and reopening and now you're seeing that push into places like the eurozone where they're now having increased vaccinations their manufacturing segment is doing very well and soon their services segment will be doing very well and so you're going to have reopenings occur in the eurozone and i guess more in general i think as we continue to think about the next part of the recovery it is more based in the international part of the world where they're just a bit behind the us we're about sprint because europe right now is trading at all-time highs on a stock 600. what's been lagging what hasn't participated well i mean i think if you look uh past the last year or so i think europe in general has lagged and that's because their economy has lagged and they're now starting to do stimulus they weren't doing that before certainly they're sharing debt more so and so i think you're going to see a european economy that pushes forward at a rapid pace and i think that's going to draw more investors in because if you think about the past 13 years and you guys mentioned this with the treasury trade and everything else investors have learned not to invest overseas and they're still extremely reluctant to move anywhere outside the u.s especially growth and now you're going to see that narrative change a bit and every economic expansion is different which means every market expansion is different and i think this one's going to incredibly push more towards those international economies in the coming quarters what's the main factor brent that you look at to determine which economy is further along in the cycle is it vaccinations is it the central bank and the tightening cycle there are a lot of different competing factors here i think all the above but even just take you back recently i mean the us in the first quarter posted what 6.4 growth i believe uh the eurozone posted negative and so if you look at their output gap for example which i think is a summation of all those their output gap is bigger than the us leading economic indicators in the eurozone are actually down not up like they are in the u.s and that will actually occur and i think this cycle has been a little bit easier because it is more along the line of coveted cases and shutdowns now you're going to see that starting to reopen i suppose i could add one more for you for those uh uh people who want to do so look at the oxford stringency indexes that show how much uh government regulation or tightening there is based upon uh coveted closures uh and those will actually start coming off the boil a bit in the eurozone and that should actually have the same impact it did in q1 in the u.s brent do we need to make bet here i mean in speaking with northwestern mutual and a more conservative idea do we need to make bets here and strategic guesstimates out two years or five years or do we risk an over diversified portfolio where we've got too many ideas at play at once well certainly we look at the next 12 to 18 months heavily and how we make our tilts and our shifts of our money i think all the things that you guys mentioned in the opening commentary between you lisa and jonathan are all out there i think they're out there two plus years and so you do have this period of time i think right now where the markets are probably going to slow down i don't think that's a big comment based upon the pace that they're at but certainly i think this could be a very quick cycle and we'll see what that actually causes and some of that debt that's building up uh the question of inflation is going to be incredibly huge i think it's temporary right now um so i'm more consensus i think it pulls back but then i think it's more of a 2022 issue and i think that is actually an issue of this expansion because monetary and fiscal policy have adjusted all those demographic headwinds that everyone talks about and you're actually having societal shifts towards actually inflation preferences and so i think that's more of the the next you know two to five years that you mentioned where those concerns are gonna be much more prevalent i think right now you still have some time left brent just quickly when you say a quick cycle quicker than what we saw before in the previous cycle which is probably easier to say relatively speaking quick what does that mean um so we're we're still probably early cycle we could be mid-cycle the late cycle in the next year so think about the jobs market recovery we're likely to have there um you're going to see big job gains and you could be at full employment in the next year that is incredibly quick brent sherry northwest of mutual wealth management chief investment strategist really important point tom and that's the theme that morgan stanley has been getting his hands around what for the last couple of weeks couple of months this idea that it's early cycle timing late cycle valuations that's a difficult tension to resolve the timing here is simple there's a lot of people that have rationalized not participating and the fact is the people who are winning winning there were some zeitgeist done this over the weekend if you're not in this market you've missed a boat and you see it again this morning i mean john the character of the equity bid here it's a solid bid on this first day of june small caps out performing on the russell the s p up by a half of one percent at least at the nasdaq of four tenths how do you have conviction when we have the incredible swings that we've seen in the surprise index the idea that it's been so hard to pinpoint the reasons behind the frictions that we're seeing how do we determine where we are in the cycle the disagreement there it just is such a hard time to have any conviction with respect to any of these calls because this is a unique moment in economic history that was the conditioning of the last 12 months have conviction about nothing just try to stay humble about the moment we're in kathy jones a charge swap suggesting and i'll catch up with kathy a little bit later this morning oh you will it might be until august september when you see the big jobs gains yeah i've got to wait for the back to school tom well yeah the back to school i mean you can see it in the trees you can smell it in the breeze june it's this is [Music] with the first one news i'm riskier gupta president biden will unveil plans aimed at reducing the black white wealth gap that will happen today in tulsa where the president will mark the 100th anniversary of a massacre that took place in a prosperous black neighborhood president biden is expected to offer proposals aimed at boosting home ownership and helping minority small businesses china has taken its most substantial move yet to arrange rein in the surging yuan beijing is forcing banks to hold more foreign currencies in reserve for the first time in more than a decade that effectively reduces the supply of dollars and other currencies on shore and that puts pressure on the one to weaken two confidential reports from the iaea raised questions about whether iran is being transparent about its nuclear activities next week those reports could lead to a formal sensor from the agency's board of governors at the same time iran says it hopes the 2015 nuclear deal can be revived by august when president hassan rouhani's administration ends rouhani is expected to be succeeded by a hardliner who will be more hostile to the deal and the u.s two big private equity firms are taking a cloud company cloud era private affiliates of kkr and clayton de billier and rice will value claudia at about 5.3 billion dollars in the all cash transaction that would represent a 24 premium to the company's previous close cloudera's largest shareholder is activist investor carl icahn global news 24 hours today on air and on bloomberg quick take powered by more than 2 700 journalists and analysts in more than 120 countries i'm rich kagupta this is bloomberg [Music] there is a strong recovery of oil demand united states china europe and elsewhere and if the oil producers of a class stick to their current uh policies we may see a widening gap between supply and demand it's the theme at the moment isn't it that was fanny b-roll there the iea executive director talking about the crude market from new york city this morning good morning alongside tom keane lisa brambids i'm jonathan farrow i'm 22 on the smp we advanced five tenths of one percent and there's the move on crude 68 on wti and just for you tom perfect timing 71 handle on rent 71 and four cents up two and a half percent moving up off the 5 a.m number uh this morning let's get right to it this conversation is too important janine weighs chemical engineering out of berkeley and has put together a storied uh career in the sell side of integrated oil actually looking at the american oil companies gene they've got a whole bunch of ways to go here including the climate change uproar at exxon but i do have to focus at 70 dollars a barrel on the responsiveness and dynamics of oil price to say exxon mobil's free cash flow is exxon a real oil company now are they a bank that happens to run oil which is it and what are they going to do at 70 a barrel thanks for having me on tom that that's a very interesting question we do think they are a real company at seventy dollars a barrel there are a lot of options but i think that the main drivers of major stock performance recently has been twofold dividend sanctity and timing of cash returns cash returns to shareholders and so at 70 dollars we think that it's a matter of when and not if that exxon starts returning incremental cash to shareholders and we think that could probably happen in 2022 because that's when they get that's when they get within the range of their debt reduction targets their 10-year per-year return is a travesty their 20-year 10-year return is how ceos get fired what's the new religion at exxon mobil well the new religion is that there's been a paradigm shift in energy broadly i would say there's a focus on go forward cash returns and there's a height a significant high grading at exxon for the projects going forward which should exactly change the track record of the poor roce going forward so there's a paradigm change in energy focus on free cash flow focus on capital discipline and the current management team is very um focused on reducing capex to the lower end of the range this year and they've dramatically lowered the medium-term capex to uh 20 to 25 billion which is about 10 billion lower than it was before so we think that the go forward exxon is a much different company than the prior 10 years that you just mentioned how hygiene do prices have to go before u.s shale producers before marginal u.s oil drillers actually get back into the market and produce more that's a good question i think that's everybody's fear is that with higher oil prices comes more u.s supply but what we've noticed in our companies not just on the us major side but also with the large cap us emp's is that the supply response has been very muted to higher oil prices and we don't see that changing in the next couple of years and that goes back to the paradigm shift that we talked about investors know that it's a now or never for these companies to prove that they're real companies that they can return cash to shareholders and so we think that the supply response will be very needed going forward generally speaking our companies now are much more vocal and aware of the macro conditions around them indicating that right now the world doesn't need their oil but they're looking for a global inventory to stabilize they're looking for curtailments to come back and they're looking for oil demand to come back to 2019 levels before they even consider growth so the one caveat there is we're keeping our eye on private production given that it's become a much bigger part of the u.s supply picture so janine how much of what you're seeing with respect of discipline has to do with what you're talking about which is that it might take some time for things to get back to the levels of demand in 2019 and how much has to do with the push by shareholders for climate change activism and some sort of response from the fossil fuel producers i think it's both i think that the capital discipline is alive and well and we keep seeing more and more data points for that and i think the push for climate change really is making companies more aware that they've got to look at the overall macro picture it's not just every company out for itself and with investors demanding climate change the energy transition is only going in one direction so um that kind of biases production lower and let's not forget that investors are really demanding returns and cash returns on and of capital going forward which historically this group has not done a very good job janine what does engine number one want from the exxon board exxon leadership and do you disagree with them well um we don't necessarily disagree with the nominees that engine one has proposed i think certainly they all have merits and broadly speaking i think that the market really wants to have change in the exxon board so i think engine one is really looking for transparency and for more energy experience where we kind of differ from other maybe opinions is that we don't necessarily think that a major change in the board or the strategy of exxon would necessarily benefit shareholders and this kind of goes back to your first question in that we think the current management team has done a really good job changing the complexion of the company going forward so between one maintaining the dividend last year when oil prices were crashing to reducing capex to historically low levels from what you would expect them to do and three most recently executing on quarters we think that the management team is actually doing a pretty good job right now so a major shake shake-up we don't think would be the watershed moment that maybe others do but we do think that the company would benefit from lowering capex further in the near-term and lowering capex to at or below the low end of their medium-term budget could you put some numbers on that for us janine and is this upstream capex and how big would that cut be right so this is upstream capex that we're talking about um so for example if they go to about 19 and a half 20 billion of capex we think that they can get all of their plans done in the medium term and produce a decent amount of free cash flow so free cash flow is really the key for the sector because that's how you get cash return to shareholders that's how companies prove that they're real companies and so for exxon if they do that what we're saying is lowering capex at or below the midpoint of the medium-term guide we see free cash flow averaging about 3.6 billion per year on average through 2026 or sorry 2025 and that would allow them to both pay down gross debt and increase the dividend janine great to catch up timely conversation too janine way there berkeley senior analyst unaccrued players the likes of exxon and more brent crude this morning 71 dollars and 17 cents we approached 69 on wti at 68 and about 70 cents now tom up by 3.6 on wti as we were speaking whether christopher owned publishes at strategus and he says he has quote his eye on eighty dollars a barrel what are the dyna is anybody framing eighty dollars i don't think so john the rally continues this morning crude higher equities push up by 23 on the s p by 0.55 and yields up now by three basis points to 162 67 the small caps outperforming that reflationary thing back just a little bit as we kick off the month of june from new york on radio on tv this is [Music] bloomberg from new york city for our audience worldwide live on tv and radio this is bloomberg surveillance alongside tom keane and lisa ramitz i'm jonathan farrow one hour away from the opening bow small caps out performing on the russell on the s p 500 up five six tenths of one percent we advanced 23 points your headline at the moment though levels we have not seen since 2018 in the commodity market on crude a 68 handle on wti at 68.55 and tom brent brent crude training at 71 and almost 10 cents in some commodities we mentioned that earlier it's not a broad bloomberg commodity index rise but john there's enough going on there with copper and the rest they're not out to record highs but they're right up there in elevated where you really wonder this 56 moving commodities off the bottom of the pandemic will it keep going copper's still through 10k bit of softer on the session the last time we saw that trade now tom look china's not participating in this in the way it did maybe 10 years or so ago and i think it's interesting this morning that china's basically come out engineering maybe tapping the brakes on its currency appreciation which you would expect to actually make a dent take a dent in the commodity market this morning it hasn't in a big way at all no and it's just a little bit of a reversal from a 637 yuan to a 6.38 yuan but nevertheless there it is as china is active and you really think folks we've got to see more people active just as an aside i'll point out the idiosyncratic turkish lira out to 8.52 a continued difficult tuesday there as well he writes brilliant notes for pictay of switzerland pictay wealth management we're thrilled that thomas costners could join us on the american economy this morning thomas my mathematics is a buoyant 6.5 all in this year and are still buoyant 3.2 percent we average out at 4.8 4.9 economy for two years running that's pretty good isn't it that's basically double the run rate right right and that's what would you you would expect after you know strong fiscal spending several rounds of checks so fiscal support has been really huge and to some degree i think actually the economy could do even better than what it is doing now the economy is strong but again if consumers were really going out and spending all that money that they saved last year we could go up ten percent so uh yeah we are up six point five percent this year uh it could be better could be worse though as well there can be leakages or surprises within the calculus of what we do the blunt instrument is we're all going to go out and spend it no one believes that what's the leakage within the calculus that you're focused on what could be the surprise to a more moderate consumption right and the equation is you know we look at the pile of savings we're speaking here at a pile of around 2.2 trillion dollars right around you know 1 trillion that consumers have not spent and 1 trillion that's the excess income that they they got last year because the federal government was so generous so two 2.2 trillion dollars and the question is are they going to spend it now are they going to wait to spend it are they going just to save it or repay the credit card yet and so far the indicators we have suggest that there is a a degree of caution out there you know people are saving they are still not unsure about the recovery uh there also the so-called haircut effect which means that if you don't go to the hairdresser once you usually you don't go twice the following week right so you know what has not been spent will not be spent um but bottom line is that you know um the savings pile is there but it will probably be spent gradually uh which is good news because also it means the us economy will avoid overheating thomas is that just a guess what are the inputs that go into that how do you know how do you come up with the forecast for what happens with savings right so we have data we have consumer surveys and so far they are not that great actually in europe consumer surveys are back to their pre-crisis levels in the us they're not if you look at conference board consumer survey the michigan survey and even in some details i'm i'm a bit cautious if you look at housing attentions in the us they're actually going down which is a bit of a worry uh because you know people should be feeling more confident they should spend you know they should buy houses cars and so on and so forth so we have data from consumer surveys which suggest some caution we have also data about april spending so right i mean they received the checks in march so we already know what they did in april and in april people were quite cautious in their spending so if we extrapolate that we have the the outcome that i just described which is strong growth in the second quarter but after that we're likely to see growth normalizing back down towards say around four percent in the second half of the year thomas what's the implication if we've basically had helicopter money in the u.s and even in parts of europe and that doesn't lead to sustained inflation right i think one key conclusion for the next recession is that we may have fiscal policy which may put a time stamp on spending you may be forced in the next recession when you receive a check to spending to spend it within the next three months or six months but not like i mean the problem with that uh fiscal spending in the u.s was that i mean you there was no you know people didn't tell you that you had to to put it back in the economy and i think that was maybe a fragility or a weakness that could be addressed in the next recession now in terms of inflation outlook you know you don't see wage growth or you know excessive wage growth you do not see credit growth i mean credit growth in the u.s remains still uh subdued and third uh inflation expectations remain uh very much uh uh low okay there is an exception in the michigan survey but i think that's an exception overall if you look at inflation expectations they remain very much anchored so i do not see an inflation phenomenon kicking in i see inflation in commodities i see inflation in some supply chains and some you know goods and so on and so forth but there's no generalized uh uh increasing inflation so just to put together this idea of the conservative way that people have been using their spending which is b or their savings excuse me uh which is what you're signaling with this friction in the labor market with people not going back into the labor force could this be that people are using their cushion to stay home for longer and that they will they'll only go back once that cushion is used up i mean is this sort of part of the mystery in your view that we're seeing in the labor market yeah and and so far i mean we we had a bad employment report last time uh i think i think we really need to to show firmer conclusion we need to really wait for this one on on on friday i mean this one will really be key uh to seeing whether there is a genuine impact from the the generosity of the federal government with regards to unemployment benefits i think it does hamper the return to work on however it's true there are other issues uh one also is that you know you know firms have have gotten more efficient uh in these uh in this during the crisis and during the recovery you know you you the skills have changed as well you know the economy has changed and so you don't need the same workers that you did uh you know the same ones that you you used before the crisis uh you know think about the green economy you need a new range of skills for the green economy and you know those workers the skills are not there um so that that's i think another issue thomas your inflation view maybe it tilts to john hatzius at goldman sachs but i'd really make note that it tilts to david rosenberg up in toronto rosenberg looks for a disinflation and he really under uh he really estimates rather a go east tone if the if you're going to buy growth you've got to go to the pacific rim does pictay agree right i mean in terms of the the recovery um you know definitely asia has been you know i i i has definitely rebounded much more quickly and also um you know you know a few months ago it was already rebounding so definitely asia is the place to go for for growth however you know right now uh the good spot is actually europe you know europe is recovering um the vaccination is is also accelerating i think you know this summer could be a good good good good growth uh for for europe now in in the longer run we see we're still more optimistic about the us uh than than europe including for demographic reasons but also the the technological leadership than we really see in the u.s thomas thank you sir gotta catch up thomas costas wealth management senior economist just to give you some of the numbers put some muscle on those bones that thomas was talking about the growth for this year decelerating to next year 6.5 percent the median estimate for 2021 growth in america in our survey four point zero percent for 2022 so it's that deceleration from six five this year the estimate tom to four next year then 2.4 for whatever a 23 forecast is worth right now here it is 2.4 is you'll meet an estimate there i just emailed up to toronto and canada john with the same undershooting of the survey you had 19 economists with a good statistic and the number came in first quarter number came in below deceleration you know that it it there's a lot of moving parts here but what i don't see john on the bloomberg screen this morning is the world coming to an end no obviously not with futures up 22 4200 on the s p 500 but tommy kicked there i was looking at a doge but okay well lisa the key variable has got to be the savings rate how much more will that come down how much money will be spent and when you really dig into it with economists these are some big guesses well yeah and who has the savings right i mean is it the wealthier individuals who have less of a propensity to spend and really more likely to put this in the wealth bucket versus lower income individuals that are more likely to spend it i think that the implications here have to be emphasized the idea that if we do not get sustained inflation from helicopter money from printing trillions of dollars of cash what is the what are the longer term implications about fiscal policy i mean to me john this is a massive massive question that we're going to be talking about for years to come coming out of this year it's about time how much you let this play out to see a tighter labor market which is what the fed wants to do they want to wait a long long time for this kathy jones swap's going to be joining me a little bit later on bloomberg tv we'll do that in about 20 minutes time we're going to be talking about when you can expect the big jobs number is it this week kathy thinks august september when this is go back that's when you'll start to see the big numbers and you're not going to see them this friday tom i i don't have an opinion on that but it's important the way she takes the timeline out so few people john are looking at q3 or q4 pushing it back to the end of summer lisa yeah well things haven't gone back to normal fully and yet there still are so many job openings how do you square that with all of these people still out of work i mean the thing that tom was talking about that possibly some of the skills may have changed i find that really interesting to see in 20 plus republican states haven't we yeah we're about to see over the next couple of months what that looks like with those 20-plus republican states removing that additional unemployment insurance from new york this morning good morning up 22 on the s p we advanced by five tenths of one percent on the s p 500 to 42-25 in the commodity market a 68 handle on wti 71 on brent 68 broadway's routine 50 cents on tokyo you're gonna sing again more than three percent if you bought tickets you no this is why it's been such a please with the first word news i'm rich kagupta u.s oil futures climbed to their highest in more than two and a half years today wti rose as much as three percent opec and its allies are forecasting that the global market will tighten up the cartel says the oil built up during the pandemic has almost gone and higher energy prices are one of the reasons inflation in the euro area climbed to the highest level in more than two years consumer prices rose an annual 2 in may that's more than economists had predicted a separate report that factories lifted their prices by the most in more than 18 years and there's a report that japan will allow some spectators at next month's summer olympics according to tv asahi organizers will let domestic fans attend the game spectators will be required to provide a negative virus test or a vaccination certificate fans from overseas would not be allowed to see the olympics in person crisky krispy kreme is set to become a public company for the second time the american donut shop chain publicly filed for an ipo on the nasdaq it says that sales rose 23 in the first quarter jab bought krispy kreme for more than 1.3 billion dollars back in 2016. the company is an investment vehicle for the rymans one of germany's wealthiest families global news 24 hours today on aaron on bloomberg quick take powered by more than 2 700 journalists and analysts in more than 120 countries i'm richard gupta this is bloomberg [Music] one of the cheap concerns i have is that as you start to see people doubt the fed's credibility with respect to its supposed mission on inflation some of those inflation expectations are rising in a way that's uh not good dean kernet very important there with the vix coming in as we get closer to the market futures up 20 now futures up 250 currents vix comes in to 16.69 that's a really important statistic we'll have to see how that unfolds through the trading day as well lisa brambleton tom king john farrell preparing for an opus at 9 00 a.m and what we know for certain is every once in a while every columnist writes a jewel and one b ritaholtz has done that for bloomberg opinion barry i loved love loved your column on the great reset and you go to robert frank in one of the greatest essays of all time over 20 years ago led forward by michael mobison which is the winner takes all technology economy that's great how do i do winner take all investing well one way to do it is to look at who the big winners have been and what the trend is like and up until 2020 that was pretty obviously uh own everything passively and go with vanguard and blackrock i can't tell i don't think anyone can tell just yet was 2020 a lockdown boredom aberration or have we just flipped the script and suddenly we see the return of active investing and stock picking i i can't help but feel like last year was a one-off that it's not a sustainable sort of thing and the big tell for that is going to just be look at robin hood uh volume is that going to continue on its incredibly hot path or is it going to plateau in reverse well within that barry is a battle i've had this conversation a couple times recently and it goes back to you know academics like to shashande and others which is sector or individual stock diversification to use a phrase from the great peter lynch i mean do you when it's winter take all do you do sector focus or stock focus so you know all the academic data seems to suggest that a tiny tiny handful of winners drives most of the market performance and depending on the study you look at it could be as low as one per percent it could be as high as four percent but but we know that the vast majority of stocks are essentially flat a handful of small winners a handful of small losers and a couple of zeros and they all sort of offset themselves so there's only a handful of ways to make sure you own everything that's gonna be in that four percent or one percent uh you can give your money to the best stock pickers in the world uh folks like bill miller the the problem with that is we don't know they're the best stock pickers in the world until after they've put up you know decade-long track records or you can try and pick stocks yourself and i think the average investor has had very mixed results with that or you could just own everything and that seems to be the trend at least in etfs and mutual funds okay in in endowments foundations large large funds large investing pools they seem to still be in the stock picking uh modality all right well barry it's one thing to not pick stocks but it's another thing to not pick a cycle and not pick the great reset that you've been talking about how life has changed post pandemic and what it means for investments we've seen a lot of themes thrown out there of what may happen what's sticking in terms of new trends that you can bank on in the post-pandemic reality sure so i went over six broad topics in the column yesterday and you know my cheat is a lot of the things that everybody are all up in arms about and all excited about were really trends that predated the pandemic and that we were just accelerated hey welcome to 2024 uh essentially we're three or four years ahead of where we were so so what trends are we seeing obviously technology is just dominant and it's not even a sector now it's oxygen if you are not tech enabled and you are not taking full advantage of technology you're going to be left behind so it's not just the tech companies themselves it's the companies that are deploying technology very effectively so so that's number one number two look my office has been virtual since we launched in 2013 we have you know clients and and employees all over the country so the idea that suddenly zoom is a new thing or screen share is a new thing is really outdated what last year did was reveal a proof of of concept to large corporations who haven't gotten this message okay and so while well people like jamie dimon want everybody back in the office i think you're still going to see a lot more flexibility at least amongst white-collar workers technology workers more sophisticated companies that understand that to attract the best and brightest employees especially the younger generation they have to offer that sort of flexibility barry redhill thank you so much for bringing me up with the younger generation mr riddles with an important essay there on winner take all uh theory in investing in economics as well lisa what do you see well i just was thinking about this idea of how cities have changed and whether the office really is going to come back and frankly you're not necessarily seeing the fear priced into markets people are still thinking of building office towers macy's is thinking of building an office tower on top of their flagship store and i'm wondering who's right you know are we going to see a return to offices in a massive way or is this a new paradigm shift that we're not seeing accurately priced into markets i i find this fascinating you bring it up and i make a joke about it lisa but it's important i think we've heard the word paradigm like seven times this morning which is seven times too many i'm not very big on paradigmatic shifts i go back to what barry said as you go back to february before the pandemic in some ways we'll get back to that in other ways we won't get back to that i i i think the uncertainties here it's enough to keep you me and john in business well that's terrific i just i personally find it interesting to think about the donut theory of cities that basically the internal city center that used to be filled with offices is getting hollowed out and this was a trend before uh the pandemic and it's getting accelerated and i think that that's interesting in the markets really oil is the main story today the idea that the uh that opec plus is seeing a tightening labor market what you're hearing you mentioned the donut theory the key news today is the crispy cake here we go have you ever even had krispy kreme yes i have they have a emporium at penn station an emporium an emporium okay so that's you're going to be buying into the ipo ritica for those of you on radio ritica goop that just nailed the news slow on television i mean the crispy we call it vo we pros you just you're still stuck on the on the pictures of of uh of donuts yeah i didn't even read the notes for the guest after that i'm sure the other interesting krispy kreme report the other interesting story was the amc share sale the idea that it didn't even dent there we go you don't care you just want to look at it on radio i'm sorry folks it is vision just watch i i mean see sugar and dough fried for those of you on radio you can envision the creme de crisp yeah i can't i i don't see you at a christmas no oh

Channel: Bloomberg Television

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Length: 137min 25sec (8245 seconds)

Published: Tue Jun 01 2021