'Bloomberg Surveillance Simulcast' Full Show 01/18/2023

This is a rally, no doubt the dangerous we’re falling into the same traps that markets fell into at the start of 22 and at sort of 21 low choppiness near-term in our opinion, both were more constructive by 2023. I think most art maybe we’re seeing, you know, some sort of regime set when we see that the pressure is in place and the pressures and interest rate, financial conditions have been easing. I don’t think you can really make much of a case right now that people are going to just spontaneously increase their rates of savings. This

is Bloomberg Surveillance with Tom Keene, Jonathan Ferro and Lisa Abramowicz. Live from New York City for our audience worldwide. Good morning. Good morning. This is Bloomberg Surveillance on TV and radio alongside Tom Keene. I’m Jonathan Ferro equity features this morning on the S&P 500, up around a tenth of 1 percent. What’s that banking about? Baggage pen. You just bang in a pen around the Bank of Japan. Okay. You wanna start with a B? Those little pieces start. Let’s start with retail sales this morning. It’s retail sales Wednesday here. It’s very important. Market will be by

to dress it up at 70 percent of the American economy. So we start with some of that spending. United Airlines will be in a race after the close yesterday afternoon. The stock’s

up in the premarket. United Airlines here today and want to be very specific year to date, like since the start 2023, like you did two weeks ago. That’s good. Stock’s up thirty five point eight percent Emma Chandra. Well, a move just a couple of weeks. They have a Pacific heritage here. And maybe that has to do with the news from Davos, the coroners from

Davos dovetailing into what to expect from retail sales and a non recession. Is the Chinese driving the message to cover the FTSE this morning? Our time and CAC last night, about 9 p.m., writing up the message from Xie and his associates, is China’s open for business? So we’ve got this big battle right now, this debate over recession or recovery, and we can talk about that. But let’s talk about the context of all of this, which is a central bank decision from the BMJ unchanged, not doing anything. One more meeting to go for Governor Kuroda in

March before he hands over the reins to somebody asked him in April to night, about 7:00 p.m., we’ll get inflation down for Japan. And it looks like it could be both sort of a 4 percent top line nationwide. Inflation among the 45 had loans that were Allergan. This one really caught my attention from a guy leading this experiment. Corona Sun, regrettable. That’s the sustainable inflation not attained yet. If you’re pumping 4 percent inflation in Japan, you’ve got sustainable inflation at least 10 years and ISE pretty much everything. CAC. What more can they do? They basically

on the whole bond market, don’t they? I mean, I know I’m joking. They are close to half the bond market. The JCP market takes pretty wild stuff this year, half with some of those tranches. They own all of it or yen on a hedge basis. I don’t want to go. It’s too early for the math of it. But the answer here is they surprised in December. They shocked this morning by doing nothing. That’s what central banks are really good at. And then what’s the next, what, six weeks out again when the market tests them? And,

you know, I go back to Soros and Bank of England here. Whatever that was then. And this is the markets trying to break Kuroda. And it’s tough to bet against the markets here. Well, he’s pushing back today, 129 on dollar and positive buy by eight tenths of one percent. That currency pair had a two point seven per cent move against the Japanese yen a little bit earlier this morning in the bond market. If you could pull up the screen briefly when we’re through things a bit into the bond market, 10 year Treasury yields lower down

by about 7 basis points to break a 350 on a 10 year, 340 757 equities, just a nut shy by a tenth of 1 percent on the S&P and crude. We’ll keep an eye on this, too. Yeah. Eighty one was the United Airlines deputy at one point nine per cent every time. This is true, folks. Every time I look at the screen, you know, once it once a day, twice a day. Brent crude is up 87. And change wonder we around up to 88. We’re not there yet. One more start to look at. Microsoft reports

from Sky News of all places yesterday in the UK that we could be getting 11000 job cuts at a Microsoft. We had one really interesting call on the south side, some first bearish call on the stock in three years, three years. We finally get a sell on the stock and it comes from Guggenheim and the individual, Guggenheim said this time. Most investors see Microsoft as a large, stable business that can weather any storm. It has vulnerabilities, some of which could be exacerbated by this macro slowdown. When a prolonged macro slowdown, no one is immune. Was

that no in the last 24 hours? That’s the call there on the macro economy and how it falls in the big tech. I would folded into Goldman Sachs and that they’ve got all their labor challenges and I believe they had expenses go up. I mean, you’re still going to run the place, just me and maybe a different mix of people at Microsoft. But the idea that they’re going to diminish their labor, throw us a number of that stock was challenged yesterday, that’s for sure. We’ll talk about the banks a little bit later this morning. Good

morning to you. Well, we can kick off our program with Manus Cranny, global head of G10 Affect Strategy at Bank of America Securities. Can we start with that B.J. non decision? How does that set things up for March? Well, the Michael Barr bond likes to surprise investors. Perhaps they remain on hold because most the people were expecting them to do more. However, they are on an unsustainable path. And what they did during the filing, this just opened Pandora’s box. Inflation now is well above the target. We expect that it will remain actually well above 2

percent this year. And although they are right. Not to stop it, but their normal business cycle. I think they don’t need unconventional policies anymore. So the market believes that is a matter of time when at some point this year later that we can get rid of gene targeting and bring rates back to zero. And the market would keep testing them sooner. So, Major, shout out to Ambrose Evans-Pritchard. The Telegraph have featured this chart yesterday. It was from Bloomberg. Let’s go to it right now. And it’s real simple. There is the yield chart in red. And

for those of you in radio, all you need to know is the so-called yen swap pair has exploded out to a much higher yield. And that is highly unusual in the case of this chart going back five years. Thanos, this is the market is speaking to Mr. Kuroda right now. What is the power of the market to tell the governor of the Bank of Japan what to do? I think if the bomb winds up and keeps defending the target, at some point, you have to start being concerned about unsustainable increase in their balance sheet. After

all, this is what led them to go into not getting in the first place. And particularly if we are right, that flesh all would be speaking, then the market will be nice to keep oxen expecting that the bombs upon would lead to war. So what they’re doing. I don’t think will be sustainable and short that we realize that they cannot defend these targets anymore. Again, I think the bottoms up on its own score. They like to surprise markets. Maybe that would do it when markets least expect it. Right. But I don’t believe that we’d find

the proper window now because the market has a very strong belief that that moving in this direction. And again, what they did in the 40 days has led to this situation. So it’s a 20, 30 headlines, 40 headlines that came out with the Bank of Japan today. The biggest shock for the street was the low bar on inflation where they’re looking, well, sub 2 percent inflation. I’ve got a print tonight, roughly 7 p.m., maybe 8 p.m., where they’re looking at nationwide 4 percent top line CPI. Are they low balling inflation? And then they’re going to

get to a point where they have massive negative real GDP because nominal is not there and the inflation rate is elevated. I mean, you’re right, on the one hand, inflation pressures in Japan are not the strongest in that I. They won. A lot of it is imported deflation, but quite inflation is also increasing. And they have to be very careful on the one hand that we’re trying to inflate the economy, but they don’t want a system inflation well above 2 percent because down the road this could create fiscal problems. That’s why I’m arguing that they

don’t need to tighten anywhere near what other central banks are doing. But if they keep that conviction on a conditional point, which is this would add to inflation risks. So this is that I balance, especially if inflation keeps rising to the upside compared to their forecast. This will allow them actually to walk in the direction. Next step for the IJA is in March, next door for the ECB early February. The day after the Fed Reserve. Tanis, can we finish? There was some speculation yesterday, encouraged by a news report here at Bloomberg that it could be

a step down after the next hike of 50. They go towards 25. Some pushback from an ECB official speaking to Francine Lacqua in Davos this morning. Where are you on the trajectory for ECB rate hikes? Where is the path? Where do you see the terminal? Right over the ECB in Frankfurt. We get that a lot, eight but three and a half percent. So we see 50 beeps in the next two meetings. I was pleasantly surprised with the headlines yesterday, I thought. But in the December meeting, for the first time, they should be gave clear message

that they will do whatever it takes to fight inflation better in Europe. I’m surprising to the upside. Inflation is still high quality. Inflation is not big yet. So I think they have to stay the course and continue hiking. If anything, that is for anyone higher than eight and a half percent. A Mason famous. Thank you, sir. Senator McCain, is there a BFA back story yesterday? Eurodollar a brief break, a former wait. Don’t you want to wait? Is The View? I don’t know, 110, 112. What’s my concerns at the moment on the ECB, to be clear

and not the currency is that there is some division emerging. And that’s indicated by our story yesterday suggesting there could be a conversation about stepping down for 50 to 25. But to finish his point, there was very clear guidance from ECB President Christine Lagarde, who at the same time is tightening us. She’s not doing forward guidance anymore, that they would do 50 for the next few meetings. I’m not too informed guidance either. Have to this week. What I would suggest, John, is you don’t have a glide path in Europe as defined as you do in

the United States. I mean, I’m not saying we’re going to 2 percent here. That’s the official line. But the answer is there’s a real belief and disinflation. The United States, I don’t hear that in 10 percent. United Kingdom, I don’t hear that in maybe it’s 89 percent Netherlands. I don’t get the glide path thickness of that that I get that. He probably didn’t make that two problems. One was that inflation is too high. The second was that growth was too weak and seemingly on the growth front. I wouldn’t say things are good, but they’re certainly

better compared to where they were. Well, you we spoke to Chancellor Schulz yesterday who spoke to John Micklethwait, our editor in chief, Michael Bloomberg TV in Berlin. Sea Shells was pretty clear that we can escape recession here in Germany. He is convinced that that’s a manufacturing dynamo. And, you know, I’d even put the Netherlands in their group. There’s a lot of other places that aren’t like that within Europe. But I’d say the same nominal GDP worry in Europe is the same as in Japan. I walked through that with Thanos through the math, folks, is nominal

GDP, less inflation equals real GDP and financial media just goes to real GDP all the time. And I don’t agree with that. To see the Defoe rate summit who after been negative. Yeah. And to help Santos there say we can get to 350 and maybe they’ll even have to go higher. All this stuff was unthinkable two months ago. The European Central Bank. Yeah, yeah. Yeah. I think the unthinkable is what we’re talking about here in the answers. We’re gonna adjust to it. The elephant in the room to the salvation of Europe, the salvation of Japan

and all the other worries that are out there is a burgeoning China. And that was the single message out of Davos yesterday for the Chinese. Massive change you had from Brammer. Scheme this morning. You know, I called I talked to Barry last night late. Like, you know, it was like 3:00 a.m. their time, 9 p.m. our time. What did you like? I said, Barry has said, this is there singing Sweet Caroline. She was at the bar singing Sweet Caroline. Yeah. You know, after a few drinks, I just turned up somewhere and started very, very didn’t

want to go. He protects against a kind that’s that’s pretty cool. That’s why it’s good for her. And she’s having a good time. You know, we. How you better think. Oh, nice. We have music rights. Can we play some of that, Steve? He got Neil Diamond to sing at Fenway Park. You know, that’s pretty cool. That is pretty cool. Oh, okay. Laurie Hein was coming up in the next hour through State Street Global Advisors. Looking forward to their futures this morning, up about a tenth. This is blowing back. Keeping you up today with news around

the world with the first word. I’m Lisa Matteo. U.S. Treasury Secretary Janet Yellen sat down with her Chinese counterpart today in Zurich. It’s Yellen first face to face meeting with Vice Premier Liu Hook. Now, before the meeting began, Yellen said that misunderstandings must not make the relationship between the two countries worse. Inflation in the UK dipped in December for the second month in a row, according to government figures. Consumer prices rose ten point five percent from a year earlier. Still, inflation is five times higher than the Bank of England’s target. The central bank has raised

interest rates nine times in a row since December 20 21. And another rate hike is likely next month. In Ukraine, the country’s interior minister was among those killed when a helicopter crashed near the capital city of Keith. 18 people died and 29 were injured. No word on what caused that crash. Microsoft is joining the ranks of tech giants that are scaling back. Bloomberg’s learn that the company plans to cut jobs in a number of engineering divisions today. The layoffs are said to be significantly larger than other round of job reductions in the past year. Global

news 24 hours a day on air and on Bloomberg Quicktake, powered by more than twenty seven hundred journalists and analysts and more than 120 countries. I’m Lisa Matteo. This is Bloomberg. Especially with the president’s having discussion, the path that the Democrats are going, they’re gonna go bankrupt. Let’s sit down and find a place that we can protect Medicare and Social Security for the future generations. Let’s put our house in order. How we’re gonna spend it. Let’s make the investments to make America stronger. Oh, the politics of the American debt pile. My favorite, your favorite take

care of fifth cap is not the 80 100. And they’re rattled and it will continue. Equity futures right now on the S&P. Cornwall ISE had even made it back to London, headed live off the scent yields lower by 7 basis points. Retail sales in America a little bit late this morning. Good morning to you. 347 57 on a tenure in the fax market, Eurodollar waterway 44. But a pushback this morning from one ECB official suggesting 50 is the way to go in line with what we heard from ECB president Christine. The cart before year rent,

one of 44 in positive, five tenths of one per cent, one eye on crude throughout the whole of this morning and yesterday up 2 per cent, 81, 82. Brent crude is making a move, eighty seven point three six. Every time I look at the screen as pennies, I have an a look at 90 again. Goldman having a look at triple digit crude by year end. That’s just the moment. China opening and Tom Keene CAC it up about 9 p.m. last night for Bloomberg with work from Goldman Sachs. You know what? This is what you do

when you’re wanted to tell tearin regime your banker up in your gut, you know, in a broad sense, and you got to employ people. So no shock after the party Congress. China’s open. I think Geoff Curry called it a bullish concoction. One thing that’s just taken me aback, Tom, just to see these moves in the allied stocks so far this year, in the last couple of weeks, 35 percent move on. United, United. Yesterday, Tom, B, B and A race and a big race to the guidance that they put out was way, way above where RTS

was. And we got another rally this morning, really talk right now about what you know would do that would be United Van Lines moving people out of high tech states. There are times where it’s not about the zygote in Washington. It’s about one strategist giving pause. Gregory Value does out this morning at EGF with a note devoted Annmarie Horden in Washington to the state legislatures value reporting. And this is The Washington Post that bills will be introduced tomorrow by the left by progressives and California, Connecticut, Hawaii, Illinois, Maryland, New York and Washington state to bring

up the taxes and even to generate a wealth tax. They can’t do that in Washington, can they? No, there’s gonna be no changes to the tax laws in Washington, especially if you have a Republican controlled House. We did have a Democratic controlled House, a Democrat controlled Senate, and obviously the president is a Democrat and still most of the Trump era tax cuts has have lived through. So there’s no way there’s gonna be any changes when the GOP in charge of the House. But you make the point, Tom and Greg Valliere this morning is the fact

of the matter is these progressives cannot get any of this done through Congress. So you’re looking internally, but they are going to do this and act congruent, Lee, with each other across these states. This really comes from the senator, Elizabeth Warren. This comes from her playbook that you don’t just tax income, you go after people’s assets and wealth. And maybe it doesn’t have legs. But this is something that is going to resonate with many members of the public. The demonstrable reality is, as Greg Valliere says, get a get out the moving vans. Here come the

moving vans is what he says verbatim. I mean, this has been proven to Florida and other states as well. Florida, Arizona. There has been. You see an exodus at times of people from these very high taxed cities. Think about those living in New York City. You pay federal, you pay state or really city tax. You haven’t. You have incredibly high rents. And then with Emily Chang on top of that and you compound that with the fact that you can, for most people, start to work more remotely at home. We obviously saw that access to Florida

and potentially there’s a wealth tax. And I’ll continue. I know you’re laughing. I saw both ferals does. The other day. We never talk. I walk by his desk once a year and he’s got a map of Texas out. And I tell his story to everyone. I remember when I was moving over here seven, eight years ago and the accountant said they give me a call. Bloomberg offers great service to relocate. So I take this call with the accountant. I’m thinking I’m only paying lower taxes in America. This will be great. Su Keenan gets on the

phone and says federal income tax will be excellent. Fantastic. That’s down from where I was in the UK. And they said, no, no, no, we’re not done. And then they start going to state. City. I was like, what are you talking? This is this is so important. I’ll let you go back to Annmarie Horden. John, the summation of the many taxes is and then the property taxes on top of that question I keep asking is how on earth do you retire in some of somebody states with the property taxes? So we have an announcement to

make today. We do it in advance of our strategic. You’re not retiring January 2024, Bloomberg Surveillance. What happens in 20 from London? Oh, is that right? Yes. Make an overlay rally was here with Monaco. He wants us to move to Zurich. I could talk about taxes around houses, continued mass ordering Amari. This is an administration even where the majority in Congress over the last couple of years that couldn’t even close the carried interest loophole. What are we talking about? Well, again, this is why these progressives and it’s a great point. They couldn’t close carried interest

loopholes. So obviously the private equity lobby has got on the phone and even they couldn’t get that done because they had such a slim majority. Right. Most Democratic lawmakers want to see that close. But, Jonathan, the fact of the matter is we’ve seen them try to undo a lot of the Trump era tax cuts. They couldn’t do and they had to control because of that slim majority. So now these progressives are doing are saying, OK, forget it. We’re not going to work on this in Washington, D.C. We’ll just take it back to our local politics.

And they’re doing it through state legislatures. Now, remember, this might not end up having legs, but what it does do is it is a fire in the public debate. And this is something that many people agree they don’t think the rich pay. What President Biden would call their fair share. No, I’m not talking about people who, you know, pay their income tax on people who have amassed a man, a mass amount of wealth, especially over the Covid pandemic. And also comes on the heels of his Oxfam report ahead of Davos, talking about the fact that

there has just been this increased number of billionaires. While we’re also seeing more people dealing with higher inflation, hunger around the world and etc.. AMH on the latest down in Washington, D.C., that’s based on garnish weekend inside the Beltway year that you think I still your Brunner ex and etc. and etc. etc. You know, that’s just so beltway. Very RTS. It’s just very RTS Annmarie Horden. Thank you. Can we talk about property taxes? I think we might as well. So in the UK and I’ve talked about this before Aplin DAX radio, so forgive me if

you’ve heard this rant before. We have stamp duty, right? So you sort of pay this tax upfront and it’s not that big compared to what you have to pay yearly annually here in America. Once that’s done, you’re done and then you have council tax, which compared to property taxes, it’s just a nominal sum. Couple hundred pound depending on how big your house, how valuable the house might be and where you live. Some here in America, I don’t think people outside the United States realize how high property taxes actually are, that even after you’ve paid your

mortgage off, you can be paying tens of thousands of dollars a year just to live in the house you supposedly own. And what’s interesting within the urban landscape of the haves, which is the Bloomberg world, with great respect to all of our listeners and viewers, the premium you pay for grass is stunning. The difference in property taxes of real estate like, you know, suburbs and all that versus condos is just insanity. I used to think that people went to Florida when they were older because of the weather. A wetter. That’s not the story. That’s a

boom. So tell me why, sir. Good morning, everyone, down in Florida. And you know, the first person that went down, this is right after St. Augustine was founded. Doug Kass, look under Florida inauguration. I think it was like, you know, he was like, you know, it was a grand success went down there. It was like something 80 years after the pilgrims. And we’re doing the show from Florida. Jason Kelly says, well, we’re going to London in 2024. You know, I can suffer, ma’am. We’ll try and make that happen. Simon French is going to join us

in kind of a rant about this as well. If he wants to join us from Pamela Gordon in just a moment, you’re equity market looks like this sunny S&P positive, a tenth of 1 percent, up by almost two tenths of 1 percent on the S&P 500. Disappointment from the DOJ. I don’t know if I’d use that phrase. Bank of Japan unchanged in setting us up for a really, really interesting final. Be okay meeting with Governor Kuroda in March, yields are lower by 7 basis points on a 10 year 340 757. Tom Laser focused on what’s

happening with crude. The rally continues up more than 2 percent, 81. You can call it 82 on Shiite. And we’re having a little look at 91 percent at 87, 40. Two hours away from retail sales in America, equity futures look like their sunny S&P up almost a tenth of 1 percent on the S&P 500. Likewise on the NASDAQ 100. If you take a trip to the bond market, quick snapshot of treasuries, two stands and thirties look like this year it’s in at the long end by seven basis points on a 10 year, six on 30s,

your 10 year sub, 350, 347, 57. Maybe you can thank the BMJ for doing absolutely nothing and not adjusting its yield curve control. Dollar yen at a 120 934. That’s a one percentage point move on dollar yen. It was as high as close to three per cent against the Japanese yen in the dollar’s favour. Need to look at euro dollar too. Yesterday, a break of one away. Just briefly, just a brief break of one away off the back of a report here at Bloomberg. Maybe we get a downshift in the next couple of meetings from

50 to 25. I can tell you, we bounced back today. Plenty of speculation about whether we get that downshift from 50 to 25. The Governing Council member, Francois Villa Roy, weighed in a little bit earlier on. Let me remind you of the words of President Blackguard at her last press conference in December. We should expect to raise rates at a pace of 50 basis points for a period of time. Well, these words are still valid today. These words are still valid today 50, 50, 50, 50. And it is not going to change any time soon.

Well, yeah, that’s the theme that’s out there. But what’s changing is everything’s changing. And it has in the beginning of this blaming year, I don’t know how to extrapolate United Airlines over the ECB policy, but why should ECB, other than sort of horrific war, be left behind? Maybe it will be better there. And that will give them some cover in the near term. Thanks, IBEX. Yeah. If you listen to Goldman, Eurozone escaped recession to Deutsche Bank only escaped recession. You listen to Chancellor Schultz yesterday in back TV who said himself he is convinced that Germany

can escape recession. Well, I want to try and understand from the Europeans time is whether the situation we went through this summer, last summer, faring this winter, whether we repeat the act this coming summer, approaching next winter. Someone to help us with that, Simon Franz, chief economist Padma Gordon in the British media, particularly writing some really thoughtful essay. Simon, thank you so much for joining today. At the margin, it seems like Europe is being buffeted by good news, including China reopening as Premier Gordon shifted the 2023 euro call. No, we haven’t. We went into the

year thinking the tax you the behavioral response you were looking for across two parameters would play out in terms of a more dynamic behavior. What are those two parameters? First of all, energy usage and I think Jonathan gave a good start up in terms of next winter. What are the dynamics? Well, the strongest argument for why the dynamics might be more favorable than consensus is you’re seeing quite significant behavioral change in terms of energy consumption, which there is no reason with an extra 12 months why that can’t actually be amplified. And the second thing we’re

seeing in corporate results, not just across Europe, but you mention, you know, corporate results in the United States as well, is signs now that households which have paradoxically strengthened their balance sheets over the last two to three years, starting to divest more rapidly, actually, in the US. Them all the way through that cycle. But we’re starting to see the data in Europe suggesting that the backend of Q4, where it was thought of a slamming shut of the European wallets, was not that path. We saw both those behavioral changes coming to pass. I think the data

is on our side. But look, we’re still early days. That could be a New Year hangover. So we were talking earlier about the glide path and interest rates as an idea of disinflation maybe ever so slow in the United Kingdom as well. There is a record to zygotes understanding in the United States. We come down, we don’t know where to 5 percent, 4 percent, dare I say 3 percent, maybe 2 percent. Is there a consensus understanding of a disinflationary vector in Europe? I don’t see it. No, no, there isn’t. And your ECB commentary, which you’ve

been alluding to, if you like, reflects the national interests of the national governments in terms of how their economies may have quite different experience of stubborn core inflation, which really is going to be the the the the headline piece of data, perhaps not on our screens each morning, but in terms of what’s going to affect the ECB response function, each of the ECB Governing Council’s decisions. So the fact that we have amongst investors a very, very different view as to whether actually you mentioned a glide to 5, 4, 3. I mean, there are quite a

number of people who think we’ll see active disinflation over deflation by the sort of middle part of 2024 versus those people. And I think I sit in the latter camp who expect quite a lot of quite stubborn and quite sticky inflation because a lot of corporates are trying to rebuild margins, trying to delay the pass through that they couldn’t do in one go because of the price shocks of 2022. And therefore they’re going to pass them through in 23, 24, 25 as part of rebuilding their corporate margins and a delayed pass through of inflationary pressures.

Sam, can we talk about who’s in the driving seat at the European Central Bank? I got the impression at the last meeting with President Legarde that really felt like the Bundesbank was back in control. It was so punchy, the most hawkish I’ve ever heard her in a news conference. What did you make of that? That it was gonna be data dependent, Yes, it was hawkish. But as always, we must since, you know, this is far too clever an audience to fall in to the idea that these are unconditional statements. For years, both when policy was

left to the zero lower bound, we were talking about when we were going to leave that. And now when we’re talking about the the pathway through to a plateau, through to terminal rate, we have to recognize that statements, even ones punches Decembers was conditional to how the data evolves and the fact that we are now in Davos this week and we’ve got to get in the run up to the next ECB Governing Council. Different takes on that data is that if you like turf war going on, on how you interpret that stickiness of inflation and

the degree to which that commentary in December persists through Q1, there was a phrase that echoed in December. It was sufficiently restrictive, started with the Fed. We heard it at the ECB as well. If you’d asked me, Simon, what was sufficient restrictive for this ECB maybe a year ago. I’d say that struggled to get to one, two, not three, because I thought this market would just completely collapse under the weight of what they were doing, something that hasn’t happened in the way that many people, including myself, anticipated. I guess my question to you is, first

of all, why do you think that is? Is the bond market more resilient than we thought it would be? And secondly, where do you see sufficient restrictive now with that in mind? Well, look, that’s very honest, Jonathan, myself. I would put also put myself in the camp for the year in which I didn’t I didn’t see this. So we have to have a degree of humility, don’t we, when we’re appraising what happens next. But in terms of why we haven’t seen the level of, if you like, market capitulation in the face of a rising risk

free rate, there are two things to note. One, there is a delayed path through monetary policy has famously long and variable lags. Have we seen the full impact of monetary tightening, particularly in private markets, in fixed asset repricing? The revaluation cycle? No, I don’t think we have. So the jury is still out in terms of long term economic impact. But and I’ve written quite a lot about this and I think Thomas alluded to this is very kind intro is potentially a return to a higher risk free rate has a nice side effect in terms of

productivity improvement, the allocation of capital and the type of thing that has undermined economic growth. Joy, you know, Tom, I know you’ve talked a lot about the impacts of financial repression on trend economic growth and productivity, potential investors. And I’ve talked to low investors who see the potential corollary of a high risk free rate of return to more normalized levels of productivity and a welcome return that may be one of the explanatory factors. This is really important, folks, in this Cerner zone. My optimism here on things clear. Corporations change. If there’s a great misjudge, I

would suggest. Simon It’s led by the European, the American, the Pacific Rim consumer is well, it premier. Gordon some together your confidence the consumer can deliver the goods. Well, if you take the data points in terms of the excess savings that took place throughout the pandemic year 2020, 2021 with the U.S. consumer has begun quite a considerable divestment phase. But they still have. While the savings ratio is normalized and possibly undershoot is starting to undershoot, there is still a stock effect that can support consumer spending. Europe and I include the U.K. and this is on

a much more delayed pathway. We’ve only just begun that divestment phase, but it circles round to consumer confidence, to sentiment. The degree to which balance sheet flex from consumers is buttressed by the fact that the labour market remains strong. You think UK you don’t need as much of a rainy day fund for potential redundancy unemployment because you think the labour market remains strong? Those indicators are still very robust and that allows, if you like, a divestment cycle to support the consumer. If the labour market starts turn, then we get a very, very different response function

in terms of consumers. And we’ll see corporate reporting replicate that sentiment. Simon Super smart as always, buddy. Anna ISE been way too long. I said it’s against safe summer French there of Panama. McCord And some on the latest on the European and I guess global economy as well. There certain core economic words that endure across decades and centuries. And he alluded to one there, which is incentives. You can’t have societal incentives if you have financial repression where retirees are flat on their back. Doesn’t matter what country in that. And we’ve identified through the great financial

crises, the financial repression of so many to save the financial system we’re coming out of that is Taleb says the gravity is return and that’s the emotion and the volatility you see here and early. And as we’ve said, the return of discipline is what it does. Yes. Well, it’s too bad there several times. And I talked about it in the last couple of weeks as well. You think about what we had over the last decade, some exceptionally low interest rates, monster bond buying programs, and we had low and stable wage pressure as well, low and

stable labor costs. And I always think about the kind of economy we built off the back of that we invested in what did we invest in? Cheap taxi rights, cheap food delivery. You had fire to a whole industry dedicated to just get us to do this, to just stare at our phones so they could sell commercials and all of the above. And I think we’re suffering the commodity, Mr Musk, of not investing in the in the real world enough. Well, there’s this minister in the last months who frankly had to endure is definitely my Book

of the year in economics and maybe my book of the year I’m in it. So there’s a lot of math in it. But Olivier Blanchard really, really emphasizes this dearth of investment is an outcome of to get to the math. R minus G is a negative number. You have created a firestorm. What I think for in property discussion every time in your life is it comes in and this comes in from John I. John, I don’t resent the seashore in New Jersey. And he says, Ferro, you’ll love New Jersey because that is the land of

the property. John, thank you so much for spending Covid Seaside in New Jersey. Are you suggesting we should not do the show? New Jersey, is that where this is going to? I would suggest John Tucker we say good morning to John Tucker and Sandy to Governor Mafia Charlie CAC Michael Bloomberg Radio John Tucker and knows no Jersey Finance called. I mean, he’s got it down cold. He says you look good in Summit, New Jersey. If I think I’ll take I’ll take a miss. Nothing against Summit New Jersey. I’ve spent a lot of time in New

Jersey over the years. I just can’t do the commute. Trump can’t do the commute. The commute kills me. I can’t make up at this time and do the you know, like there’s got like a 20 only agreed 20 closure exam. No driver’s license. Well, neither do I. Oh, you don’t even IBEX what they say. You don’t drive. He driven. Yeah. Well, R.J. Gallo is coming up. He’s not going to weigh in on any of this from Federated FTSE and its market. Boiler up, boiler up. That’s good. There’s two there’s two teams up north. There’s another

team, not Notre Dame. Cathy never had a man like that. Yeah. Yeah. Boiler up is to the West, I believe. So far west of India from New York, this is blowing back. Keeping you up today with news from around the world with the first word. I’m Lisa Mateo. House Speaker Kevin McCarthy is calling on Democrats to engage in talks over raising the federal debt ceiling. Republicans now in control of the House have been demanding deep spending cuts as a price for increasing the limit. But President Biden wants it raised without conditions at raises. Concerns of

U.S. payments default. The Bank of Japan gave investors a modest jolt. Yes, jolt. Today, the central bank kept its main policy settings unchanged Wednesday, maintaining its negative interest rate and keeping a trading band for 10 year bonds. There had been some speculation that the OJ would change its policy. Amazon set to kick off another round of deep job cuts. The company announced earlier this month that it was laying off more than 18000 employees among its corporate ranks. The latest round is set to begin today. It will affect mostly the retail division and human resources. And

global oil markets face a bigger surplus this quarter than previously expected. Even as China reopens. According to the International Energy Agency, world supplies will exceed consumption by about 1 million barrels a day in the first three months of the year. The agency doesn’t expect to see annual demand growth in China until the second quarter. Global news 24 hours a day on air and on Bloomberg Quicktake powered by more than twenty seven hundred journalists and analysts and more than 120 countries. I’m Lisa Mateo. This is Bloomberg. We are going to see some margin compression. We are

going to see some revisions down. Now, is that the time where you really lowered guidance? Okay. Oh, we’re going to see some sort of down side. We’re going to see some sort of pain. But there’s economic, whether it’s earnings or whether it’s what we think in 2023 is over, you’re going to get what you can pay. Chris Harvey, that the head of equity strategy at Wells Fargo, John Tom Keene just yesterday, causation. He was pretty, mustn’t it? Yes. Yes. He and story wise or I think have really learned over setting. Yes. Chris, right now, positive,

a tenth of 1 percent on the S&P retail sales in America. Coming up a little bit later, Tom, just briefly, crude Bren approach in 1987, 20 WTI having a look at this morning, up one point nine per cent, 81 17. I think it’s valid to say finally we’re approaching 90 on Brent crude. John, this is the first day we can say that because it’s just been relentless in seven, 24, up a dollar 32. And I don’t have a chart in front of me, but. But there it is. It’s just that simple petroleum on a march

and so much of that because of China, which means it is an annual visit in Davos, Switzerland. The meetings of the World Economic Forum Lisa Abramowicz there are just in from the piano bar landing. It makes surveillance. Watch out. Look at the time changes Lisa Abramowicz with one of my favorite people 40 B roll of IBM. Good morning, Lisa. Good morning, Tom. Thank you for that. I am here a 43 year old executive director of the International Agency for Energy. And there is this question here. At a time when you are the busiest ever of

trying to get a handle on an energy market that has defied everyone. I was speaking yesterday with Chevron CEO and he said he could see an argument for oil prices going to 150 or going to 50 dollars. Do you agree? I think he is a businessman. I am sure he knows what he’s talking about because he makes money or loses money. And I hope he has a good view about the markets. But when I look at to markets this year, 2023, there are many, many uncertainties. But if you ask me, which is the big, biggest

uncertainty, I would say it is China. The reason is very simple. Last year, 2022, for the first time since 40 years, Chinese oil and gas demand declined. So it never happened in the last 40 years. And this year, China’s economy is opening. And a week we may see China’s economy growing strongly. And if Chinese demand for oil is strong, it would put upward pressure on the prices. So Chinese for me, the biggest perhaps uncertainty followed by the oil producing countries policies. OK. So we’ll get into the oil producers. The country’s policy is sticking with China

for a moment. You have a sense of how much energy, how much coal, how much crude they’ve already stockpiled to get ahead of reopening. That could potentially dampen how much activity could translate directly into demand for crude. Now to a Chinese oil demand will definitely increase this year. The question is how much? There is no question that I don’t believe that if there is a reopening of China, which goes smoothly, as does China’s leaders here and in China, claim it me, it may mean it. The Chinese oil demand will increase unlike lustily, which decline. So

it means that the it will be the biggest driver of the global oil demand, because when you look at it, India in a normal year, about half of the global oil demand growth comes from China. Other half of the growth comes. Everybody put together. So therefore, China’s oil demand will bring about 8 under 900000 barrels per day. Additional oil demand growth to the market. You just put out a paper that said that we’re actually oversupplied right now, that there is more oil than there is demand in the markets. How much would it take to change

that? Very little, because the discussion is not is because the the consumers of it would like to see is they’re very tiny. But if the Chinese economy phrase surprises us under higher site, if the economy grows instead of 4 percent, 5, 6 percent, that cushion will disappear very quickly. So a definition, relax to see that energy oil markets this year will be comfortable and we have got enough problems. This should be more on the optimistic side. Looking from the consumer’s point of view, are there any lessons take in? And from what we saw in the

summer of last year with respect to demand destruction and at what level the price has to go to include more people to stop buying. And there’s sort of a natural ceiling that is depending on the country. I mean, it is different in the United States, different in Europe, different in India and Peru, the lower income countries. But. ISE did it. If the prices come around seven to seventy five dollars, it is it a good signal for their consumers to vote? But that’s a good instinct that they will continue to buy. But higher than that? Not

so much, especially for the value. Look at the numbers. It is especially for the developing world, which is the most important one, because their financial muscles are much weaker compared to not American or European. Their older Japanese consumers. I think it’s a bookseller to 75. It becomes very difficult for them to absorb that increase in the prices. Do you feel like there needs to be more investment in fossil fuel companies that have been abandoned in the past couple of years for ESG types of priorities? I didn’t have been talking about, for example, United States. I

don’t think that the companies have difficulties to invest in terms of availability of the money. They have a lot of money in their pocket. And I think what they have preferred instead of investing, they have preferred to pay it back to their shareholders. And if you look at last the year, 2022, the oil and gas industry is the windfall. The revenues reach 4 trillion U.S. dollars in a normal year. Normally it’s about Vonnie Quinn trillion. And last year they make 14. So nobody can commissioner there not enough money to invest. To be honest with you,

it means they don’t have the intention. They pay back to their shareholders. We’ve been talking about the potential for an upside surprise with respect to demand if China comes back online. What if there is a fairly deep recession or even a mild recession? How much could oil prices fall from here? Just because of people hunkering down and not being as active, I think depending on how deep the recession is, how vast the recession is. But if it’s a mild recession, I don’t think that we will see a big drop off to the oil prices. As

we have seen during the Covid times. But it will definitely put downward pressure on the prices. If there a bright spot, a recession around the world. But I don’t believe that China, the largest oil importer of the world, will go to recession. Hopefully not just yet. Mark Gurman, do you think that the refueling, the refilling, I should say, of the Strategic Petroleum Reserve in the US this year, potentially starting next month, will affect pricing? Do you think that this is sort of going to be a swing factor in 2023? I don’t believe so. I believe

the U.S. government will make it in a gradual manner, in a careful manner, so that it doesn’t create a major challenge for the oil markets. And we should not forget that when the process shut up about a 100 dollar, the SPRO played a very good ROI for us and for the global oil markets. So you actually thought it was a positive move? Very much so. I believe you are U.S. citizens and entirely you should be very happy to have in the United States and many other countries in the world. Fatih Birol of the IEA, thank

you so much for being with us, John. Setting it back to you, Lisa. Thank you. Fantastic work. As always, you missed over here in New York City. Lisa Abramowicz alongside Fannie Mae that the IAEA with the iconic backdrop in Davos, Switzerland. It’s iconic. I think it’s you know, I said that someone wants to I think that’s Italy. And I think I was turned around and I was like, I may easily I may have been to Austria. RTS do in that, Jonah, pick up on a commodity story that life from Goldman and Jeff to CAC the

week. You cannot come up with a more polished concoction for commodities right now. And he went beyond crude. Let’s be clear about that. You’ve been out front and copper. Eleven thousand five hundred is the number he’s looking for, some 1 3 9 CAC. Last week we heard from Simon French. I mean, why is this bad news? I mean, we’re reopening off of a global medical event. And to me, it’s all plus plus plus is what gets us back to normal incentives, normal interest rates structured, heaven forbid, commodities priced in some general equilibrium. We’re still trying

to figure out some just how many issues come about from the revenge spend we’re expecting for the Chinese consumer. How much power that reopening has and whether we go back to some of the issues we were grappling with last year. I got back to the same same question with a Chinese reopening on a supply side, supply side relief because the factories kept going to full capacity again or supply side dislocations because the market sale in an unfavorable way. I would suggest there is a heritage or cultural heritage in China to work. It’s got nothing to

do with the party and the politics. This goes back centuries and they’ve got a work ethic like no one that you’ve got to be optimistic there that they work all that out, that they work it out in a truly micro battle. Can I bring up something that exiles just published? You don’t need much. You know, just you know, that GDP. I think we’re talking about a lot of way to get rid of me. GDP passes is barely what are called the national borders. They’re like the CFA exam. But for doctors and the flunk rates, about

14, 15, 18 percent. Check GP team passed all three. National. So basically the whole of this country now is doing its homework. You got a social TV take going. They tell you what to do with Chachi Beatty. That works. They CAC. This is a rally, no doubt. The danger is we’re falling into the same traps that markets fell into at the start of 22 and at sort of 21 choppiness near current market in both were more constructive on point twenty three. I think most art maybe we’re seeing, you know, some sort of regime set when

we see that the pressure is in place and the pressures and interest rate, financial conditions have been easing. I don’t think you can really make much of a case right now that people are going to just spontaneously increase their rates of savings. This is Bloomberg Surveillance with Tom Keene, Jonathan Ferro and Lisa Abramowicz. Retail sales data in America coming up in about 90 minutes, time line from New York City this morning. Good morning. Good morning for our audience worldwide. This is Bloomberg Surveillance on TV and radio alongside some keen Jonathan Ferro equity futures right now.

But a couple of tenths of one per cent, T.K., we keep asking the same question, are we running into a recession or rallying into a recovery? Thrown out there, Ben Littler always doing good work in Utah and he just nails it, John, with a nice graphic. This out on Twitter for Layla, I’m sure. Also to his clients, this is the seventh bear market rally and that’s normal. To be clear, he’s calling it a bear market rally, though. Yeah, okay. But that’s what happens. And then all of a sudden it’s not and everybody has an interpretation

of how you get there. So Mark Su Keenan over J.P. Morgan does not want to get on board with this rally here and it’s being published just yesterday. Here’s the top line from him. We remain cautious on risk assets and are reluctant to chase the past week’s rally as recession and over tiny risk remain high. A lot of good news, they went on to say, is already in the price in terms of inflation, moderation or the potential for a soft landing. A lot of the good news, Tom, is already that I’ll go with all of

that and then subject to change to see what will change it. It’s the data. And one of them is coming to us here in 89 minutes. You got the hard data in a soft data. So the labor market data, payrolls pretty decent right now. Top line headline data, great wages, a bit softer, encouraging, soft landing, Goldilocks, all that good stuff. Great. Look at the survey data. And part of it was grim. Dreadful. The ISE dreadful. Both manufacturing and services. But the real gap emerging here. So I would mean the soft data, the survey data and

what’s been happening with markets. I’d go with what Farty Bureau just told Lisa in Davos, this idea that China pushes against all of this, it pushes differently against Europe. I’m with the people that suggest the China effect on Europe is underestimated. It will probably be larger. You heard that with Mr. Micklethwait yesterday, with the leadership of Germany. I mean, it’s percolating right now. The pushback from the airlines, take United Airlines be on a top and bottom line in the last twelve hours or so, Tom raised that guidance. I would say shredded the guidance on the

street stock rallied stock yesterday. Keep saying this up, thirty five point eight, one per cent yesterday in a couple of weeks on one single night. The airlines have performed terrifically. You can look at the luxury names, too. I was looking at the luxury names time this morning with Jamie, my producer, just yesterday. A few minutes, 60 percent. Don’t you have a place producer that were Qantas? Well, they don’t sit near each other. I mess up 15, 16 per cent this year so far. Tom Carrying is up by about the same. That’s huge. You write that?

Yeah. That guy, LVMH is flying as well. That’s Luis Vuitton. Yeah. God, Mr. Arno. Yeah. Well, margins after before the pandemic, 17, 18 percent e but they’re not back there yet. They got 10 or 30 percent, but they’re well on their way back to normal. It’s just going to take longer to heal. Prices are high. Supplies constraint. We’ve all been to the airport. We’ve seen the mess. They’re doing okay, aren’t they? Yeah. That’s the takeaway for the airlines at the moment. You know, I I’m just not surprised by any of this. As we move along

after the pandemic, the war does get in the way, particularly for someone was clearly surprised because the stock is up by a third. Yet today, a few weeks, I think that is the China great equity features right now. Enough about two cents on a S&P 500 equity futures advance in just a little bit on the Nasdaq up by a similar amount. Yields come in by 7 basis points. Tom, just briefly, 347 20 on a 10 year helped out by BMJ non decision. No move from the BMJ. Yeah, I go with that. Janet, there’s a knock

on effect here out of Bank of Japan and it’s a central bank that has an arch rule. This is in all the histories of the central bank, including Mr Bernanke. They love to surprise in if they’ve moved on yield curve control today that was widely anticipated and they would not have a surprise. Then in March, his last meeting at his surprise that when we all ISE banks, what you see is High Flyers in March has been Amman’s roads up and I’ve quoted it three times off the Bloomberg terminal, top line inflation, Japan. Tonight we will

see that in their morning, 4 percent inflation. Never John Adams think I would make that statement a dollar in right now. 129 was as high as 131. A little bit earlier in the session, we had a move really point seven percent. Now only seven tenths of 1 percent on that currency pass stronger dollar, weaker Japanese yen and that currency, apparently. Joining us now is Larry Hino, global chief investment officer at State Street Global Advisors. Larry, fantastic to catch up with us, as always. We start with a question to Tom. And I start this hour with

A, we rally against the recession or rallying against a recovery. Well, it depends. Certainly our core call that were rally into recovery and that we’re going to hit a soft landing. And we hope that the Fed will engineer a soft landing here in the U.S. But the jury is still out there is still a lot of pressure on the Fed to contain inflation until we see this price come down, modest, moderate, more moderately. And they’re going to have impulses. You raise rates and they do risk leading us into a recessionary environment. Could you find value

in active management now or do we still hide out according to theory in index funds? What they see active right now, and it’s somewhat tactical, is actually serving investors quite well. We’ve been managing our overweight in good way to equities pretty considerably over the last couple of months as we’ve watched the data and watch how the Fed is responding to that. We’re currently slightly overweight equities at places like high yield or other avenues where looking where spreads are and thinking about the future trajectory has been a good trading play. So active and in many forms

we think is going to serve investors well for this period. What about the two broad consumer categories of staples and discretionary? However, favoring discretionary right now. We heard you talking earlier about some of the areas are luxury goods. Air travel. Things of that nature. We think that those are more are valuable in terms of reopening trade. We’re seeing in China. The impulse for consumers globally to have still the propensity to spend. Laurie, this Randi was saying in Europe, it’s just been unbelievable. Yet today, so far, U.S. stocks 50 is up more than 10 percent at

a close as of yesterday. Laurie, do you think that can continue if we got some sustainable tailwinds behind that move, or is that just a big relief rally off the back of the fact people are saying no recession, maybe the economy just stagnates, perhaps this ECB will be hiking not into recession, but just into zero percent GDP growth? Well, we’ve been trumpeting Europe for a while and haven’t ever weighed in the equity markets in Europe. All we did it had an underweight in the US throughout much of last year. So we were actually thinking that

the war wasn’t going to weigh on Europe nearly to the degree that many thought we were early to realizing that the energy crisis wasn’t going to be as big a deal in Europe because they were taking steps to mitigate that. And as we heard earlier, the reopening trade for China benefits Europe and an outsized way. So we actually have been favoring Europe throughout the last many months now. Is this true, the luxury place? Is it through the banks? How do you play that story, Laurie? It’s consumer discretionary, but it’s also financials. They are also manufacturing

companies that we think look pretty attractive. We’ve seen autos actually be quite resilient in the face of some impulses to slow down. So there are many things the like and it’s also a bit of a value trade play because we’ve see value stocks be a lot more attractive in this environment. Laurie, what is the distinction of the U.S. juggernaut of, I mean, to say the last 15 years, Virgin versus the burgeoning E.M. trade? How do you study that? What is the thing our listeners and viewers should look for in saying us, domestic or international? Well,

again, there are a couple of different threads there. Certainly from an international developed market standpoint, we think that the short term favors non U.S. equities because, again, that base are were relatively undervalued. Sentiment is very strong there. The makeup of those forces is different than it is in the U.S. and not nearly as dependent on the high flying growth stocks that had driven much of the past rally. When you talk about emerging markets, that’s a very different story. We think that there are still a lot of vulnerabilities there. We actually like the China re-opening trade.

And so that’s part of our basis forever waiting. Have broadly the Asian markets. But there are other places where there still are concerns about Covid. There still are concerns about geopolitics. Is there still are concerns about whether the long term growth prospects remain use of cash. We have the texture to be genuine. Is the tech. Do we start first week of February? So Microsoft, I believe, is next week. I think we’ve got Netflix coming up for swimming. Absolutely. Every second I think it was. Laurie, what’s use of cash here? A year ago, two years ago,

we were talking up of cash is the be all and end of these stocks. Now we’re talking about layoffs. I know by the gloom of the layoff story, it’s there, it’s tangible, it’s heartache. But how does use of cash change for the big American companies? Well, the whole question is, where do you find pockets of growth that you can invest in? And we’ve under invested from a capital standpoint for quite a long time here in the US. We’ve focused more on labor. And now there’s this tension between can you continue to have cost increases? Can

you continue your path as long as the consumer can you continue to carry the labor if you’re not getting the top line growth? And so a lot of companies are really grappling on a kind of a micro level with how do they think about that and continue to grow growth, because ultimately what we’re all pursuing is earnings growth and their lovers are smaller, more limited than some other sectors might have. Laurie, wonderful to hear from you. But a Shery Ahn not alone either. Laurie, I know that of State Street Global Advisors. We said this yesterday.

What a difference. It really makes a difference of running makes all of a sudden the tone totally changes. Yeah, well I’ll go with that. We’ve seen that in the first three months of board. Three weeks here, I should say, of of the is a good blur, to be honest. What was so important there is the idea she alluded to that in this tumult there’s fewer things to choose from. And that was the shock of the Microsoft news today. One of those for everybody is always when in doubt, Microsoft. And with the layoffs anticipated and the

challenges, obviously sudden even mother Microsoft is off, the markets can be painful. We’ll see if this is a head fake or the real deal. Tesco this morning has by three point five percent. We heard that from Laurie about the automakers this week and off yesterday on Tesla and a huge move in the last weights cut prices by 20 percent in some regions. A lot of investor questions about Tesla. Why is the stock up on price cuts? It was up big yesterday, too. This is down after Wedbush. The reason is because the street views this as

much needed strategic poker move to go for the masses aggressively come off the consumer TV demand in a soft macro near-term march in pain for long term share gain volume. So. Small margins are your problem. Some seems to be the takeaway here for the. Technically, it’s a disaster. I get what Mr. ISE is alluding to, but it’s time. It’s a bounce. I mean, anybody would say it’s the mosque bounce and we’ve seen the mosque bounce. And I should point out, this goes very much between a pennant of support and resistance. In late 2020 as well.

They avoided with this announcement moving down to a sub 100 times. Do you think, Lisa, Charlotte will push back against the gloom at Morgan Stanley since she listens only in the next hour? I lean forward. She’s fantastic. Lisa Schlein at the CIO at Morgan Stanley Wealth Management. In the next hour, 8:00 a.m. Eastern Time, a suitor away from you think seconds will have a stent. Right now, New York actually features on a S&P 500 up a couple of tenths of one percent. This is blowing back. Keeping you up today with the news from around the

world with the first word. I’m Lisa Mateo. U.S. Treasury Secretary Janet Yellen called the meeting with her Chinese counterpart today. Candid and constructive in Zurich. Galen sat down with Vice Premier Liu Hook for more than two hours. The Treasury Department said that Yellen looks forward to traveling to China in the near future. Inflation in the UK dipped in December for the second month in a row, according to government figures. Consumer prices rose ten point five percent from a year earlier. Still, inflation is five times higher than the Bank of England target. The central bank has

raised interest rates nine times in a row since December 20 21. And another rate hike is likely next month. In Ukraine, the country’s interior minister was among those killed when a helicopter crashed near the capital city of Kiev. 18 people died. Twenty nine were injured. No word on what caused that crash. Twitter’s daily revenue has reportedly fallen 40 percent in the last year. That’s according to the Web site, the information. It also says a senior Twitter manager told staff that more than 500 of the platform’s top advertisers have paused their spending since Elon Musk took

over. And Microsoft is joining the ranks of tech giants that are scaling back. Bloomberg’s learn that the company plans to cut jobs in a number of engineering divisions today. Layoffs are said to be significantly larger than other round of job reductions in the past year. Global news 24 hours a day on air and on Bloomberg Quicktake, powered by more than twenty seven hundred journalists and analysts and more than 120 countries. I’m Lisa Mateo. This is Bloomberg. Certainly a risk to it. I mean, there is suddenly, given the dynamics that we have in U.S. Congress. There

will certainly be some tensions around it. But I really hope they just get the job done and do the right thing is move the debt ceiling, do what’s needed to make sure that this is not a question, get a cup and answer the first managing director at the IMF from New York City this morning. Good morning to you, Bill. Let’s check out some of the market price action for you. Just quickly, briefly, equity features right now up eight points were up by about two tenths of 1 percent on the S&P retail sales. A little bit

later, a thirty Eastern Time, one hour in about 30 minutes from now. Yields look like their start seven or eight basis points, 347 20 on a U.S. tenure. And some get ready, some Fed speak a little bit later. Bostic of Atlanta comes up at 9 a.m. So that’s 30 minutes after the economic data. Then you’ll hear from Harker, Philadelphia at 2:00 p.m. Eastern Time and then at 5:00 p.m., you’ll hear from the Fitz Larry Duncan a little bit later. Eileen Ford and Harker, I think is a really interesting guy, sort of out of the Wharton

come by. And he’s got a real linkage here into. You mentioned the umpire number yesterday. The dreadful was referee. There’s a heritage of the Philadelphia Fed really having a pulse of business structure and not just big business, but, you know, across all of it’s an important question region. How much weight should they put on the survey data that’s been coming in? Yeah, really read a week over the last couple of weeks. It’ll be important to see a retail sales will go beneath that headline data, important data with our Michael McKee. Marie Horton is in Washington.

And she knows that in Davos there’s discussion with people who are war strategists. I remember Ann Marie in May when I was in Davos, a wonderful spirited conversation with a giant. Lawrence Freedman of King’s College. And he wrote in the FTSE yesterday. And this will be a new and different wards followed up in The Washington Post today by Mr. O’Hanlon. Michael O’Hanlon with us many times on North Korea. Mr. All Hamlin also talks about a new and next war in Ukraine within your reading, and particularly at Pentagon and Murray. How will this war change? Well,

what we really are waiting for in terms of the news on this war is whether or not Germany is going to send these leopard to battle tanks. All of Schultz, the chancellor, would not answer that question yesterday with our editor in chief John Micklethwait when they sat down in Berlin. He will be attending Davos. People are expecting him to potentially announce whether or not Germany is going to send these or allow others to send these battle tanks because they are German made. But all of Schultz said he is consulting with his allies. We know he

spoke to the president yesterday. So that is something that the Ukrainians are really waiting for. They want more of this, more military weaponry. We did get notice from the Netherlands yesterday, Mark Crumpton, the prime minister confirming a Bloomberg Businessweek group that they will also send a Patriot missile. So you do see movement in this direction. And of course, all of this comes as the fighting is getting incredibly intense, especially as Russia is making inroads on back moot. And then also, of course, today really the topic is going to be about the interior minister who fatally

died in this helicopter crash. What’s important here and again, to go back to Professors Friedman and Dr. Handle and the idea of Friedman talking about it is a winter stalemate. And Michael O’Hanlon saying the days of incrementalism, which, Anne-Marie, you’ve reported on from day one, they’re over. Do you buy this? Is this being discussed that we move beyond stalemate and incrementalism? Well, potentially, but I mean, what what I think you will see when everyone talks about is this protracted war that this will just continue. I mean, I think we’ve talked about this a lot. What

we saw in Ukraine before this started and not everyone always paid attention to it was eight years of fighting in eastern Ukraine. Yeah. What is difficult at this moment is it doesn’t seem like the Russians want to negotiate any sort of cease fire and Russia will not leave without that land that they’ve already technically in the Russian doctrine annexed. Right. Like they say that Lohan’s done. GSK is theirs as well as Crimea. And this is a no go for any political leader in Ukraine. Totally. Let’s bring it back to the domestic front. Right now, we’re

mega reigns supreme against the newly minted speaker as well. What is your power to dictate our incrementalism on Ukraine? Well, of course, Kevin McCarthy made that famous, saying when he said it’s not going to be a blank check for Ukraine. Right. He had walked that back, though, at the moment. What you do see is more military support aid going to Ukraine, whether it’s a Patriot missile, whether it’s the Bradleys, the tanks that are going to to Ukraine, which, by the way, these tanks when they were developed were actually a response to the Soviet tanks, the

BNP, which stands for in Russian just infantry fighting vehicle. These tanks are basically one for one for that Soviet era. But the United States obviously cannot do this alone, which is why you see calls from the UK sending tanks from France. And obviously the one we’re waiting to drop is Germany. Anne-Marie, if we could just finish on the latest from the Treasury as well. There was a meeting this morning between Secretary Yellen and top economic official as out of China, the Chinese vice premier. When you hear this this readout and this line, because I’ve heard

this line a lot when you hear this line from the Treasury. So this is the readout, so-called readout from the U.S. side. Yellen had a candid and constructive conversation with the Chinese vice premier. What does that mean? It’s a good question. It feels like there’s a lot of abstract or maybe word salad being used here. But I think, Jonathan, you brought this point up yesterday when we heard from the vice premier lawyer in Davos talking about a China that doesn’t want to see protectionism. I imagine the, quote, candid words Secretary Yellen used with China was

about that also very much so. On her mind is debt relief for Africa, especially in places like Zambia. And that’s going to be a key part of her trip coming up. The last line of the readout, I think, is incredibly important. Secretary Yellen welcomes her trip, upcoming trip to China. So not just as Secretary of State Anthony Blinken, which we know yesterday, will be now going to China in early February. Yellen will be at some point heading to Beijing as well. Am I spending a lot of time in Beijing at 23? I think it’s the

time. I think. Yeah, I do. I feel that very strong road trip. You know, Anne-Marie, thank you. Down in Washington, D.C., I’ll just get you set up for the day ahead. It looks like there’s a thirty Eastern Time retail sales in America after that. And just before actually we’ll catch up with Bob Michael Barr, J.P. Morgan Asset Management. Veronica Clarke of Citi as well. Really looking forward to that conversation as city continues to make the push led by Andrew Holland House, that chief economist. We’re going to get more high. We underestimate underestimate how far this

Fed reserve is going to go. Well, you talk about strategists and there’s the optimists in there and in those less optimistic. What I see pushing against it right now is a VIX, which acts differently today than recent days, nineteen point one five. To get down to an 18 levels are noteworthy. But there it is, 23 down to 18 within Ben leaders seventh bear market rally 19 right now. You want a flavor of what, Bob Microsoft for J.P. Morgan, please. Really interesting print interview here at Bloomberg with him just yesterday. It is possible the Fed will

not initially do enough because the labor market proved more resilient. That’s his takeaway at the moment. This is the one thing that can unravel the market and it’s my biggest concern. He went on to say, inflation does not come down into wages, to wages don’t come down until unemployment rises. Unemployment does not rise unless we are in recession. But Michael Jackson, classic Bob Michael McKee sitting with Diamond, you know, brief and Jamie Diamond and this four diamonds in your letter and everybody else is like bad news is bad news. The good news is bad news

show. When Michael is like. Good news is bad news is good news is bad news. That’s above killer. Well, I think after the payrolls report, we got this sort of idea of this immaculate disinflation that maybe we can get wages come down and unemployment doesn’t need to climb. I wonder if that’s just a quirk in the data right now. The result I say in the coming months. My problem with this is, first of all, it’s by definition non-linear and we don’t know the non linearity of that, but far more, John, it’s a step function. You

come down from the horror of where we were X months ago and you get to a certain level and then you recalibrate. You read hedge your bets there and those levels. I think we have a clearer idea of those levels here versus what Simon French said about Europe. They don’t have a clue. Might be my frustration with this conversation. The moment around recession I talked about this yesterday would trigger Gasquet of FSS Investments and Lines, Bernstein’s cash and distant fact. We keep talking about recession is some kind of binary event. This line in the sand.

You don’t cross it. Everything’s OK. You do cross it. Everything’s terrible. It’s a process. It’s like we’ve got to sort of like throw out that word and and talk about what we should throw out. My amateur interpretation of that word and of the late Martin Feldstein. Precisely. Carlos coming up. Looking forward to that. He joins us from Federated Hermes. Equity futures trying to bounce this morning. Good morning to you. Here’s a flavor, a snapshot of the price action stay site. Equity futures look a little something like this stateside. It’s not my stay site. No, it’s

just, you know, which side of even those who prefer just say the companies. I don’t think that’s going to go for my career in American Revolutionary Hero with a handshake. Keep it up. Give me a. You said that. Not me. NASDAQ a quarter of one percent in the bond market. You’d see 10 year, 30 year shaping up as follows on a two year. Yields come in three or four basis points for 16 45 on a 10 year. We come down seven basis points, 347, 20. And maybe you can blame the VHA this morning and Governor

Kuroda for doing absolutely nothing with a yield curve control setting us up for maybe. And I say maybe a move at his last meeting at the Bank of Japan in March. Dollar yen 128, 94, way off session highs through 130. A little bit earlier. So yen weakness still, but a way off, way off where we were 128, 90. That currency power positive, six tenths of one percent. Euro dollar yesterday, a brief break of 1, a weight off the back of speculation. And a story here at Bloomberg suggesting that maybe we get this step down from

50 to 25 in the next couple of meetings. Some pushback this morning from one ECB official, white 32. Positive there, four tenths of 1 percent. That right there is a stronger euro and a weaker dollar on euro dollar. We aren’t one hour away from retail sales data and factory gate inflation data as well. PPA expected to slow in the month of December. Federated Hermes and R.J. Gallo wank in saying the following inflation will keep trending lower in 2023 from its still elevated levels. Declining goods prices, improving supply chains, lower commodity prices. A strong dollar is

interesting. Benign inflation expectations, slowing growth and moderating job growth. Some should drive down inflation. Certainly the trend that we see right now from the U.S. economy and frankly, on a global basis as well. Giddy open house talking up at Davos just today was Francine Lacqua on an important panel as well. Joining us now is Mr. Gallagher for Stephen Arthur of Federated Amazon. What’s important here, R.J. Gallo, is to know that when you work with Steve ISE, you’ve got a long term perspective. You lead your note by saying, guess what? It was the worst year since

1788 and you are guaranteeing ISE 1789 was better than 17 88. If we go back through the great common feature of 1789, was the Red Sox still needed a shortstop? That was the linkage back there. You can tell that to Steve off R.J. Gallo. What are we going to do here this year? GRIMM Last year’s 60 40 died. Does 60 40 and does your bond market recover? Well, good morning. I think the answer to that is yes. The the the disaster in the bond market last year was profound. You’ve got to go back hundreds of

years, as Tom just mentioned, to find it very when treasuries performed as poorly. We think that this year is shaping up to be much better. As you noted in my piece there, inflation is on its way down. The economy is slowing. Earlier in the broadcast, Jonathan was talking about the soft data, the services ism, for example, flashing signs of yellow, if not red. All of those factors, such as just the high quality bonds, will produce positive returns after the double digit negatives of last year. That is very helpful for diversified investment strategies. A 60 40

has always been built on the idea that bonds and stocks don’t move together. Last year, they moved in lockstep. So now we think diversification will start working once again this year. If that is the case and we’re investing for total return as well, a lot of it’s already been done. What will be the forces that keep this train going into the year? You know, the bond market started off with a very favorable tone. You know, fortunately, our expectations are coming forth on the tape, if you will. I don’t think, however, that’s all we’re gonna get.

You know, one thing about fixed income and this is the boring part of fixed income. It’s the income. It’s the fact that you get a yield that each day accrues as each day to export. That doesn’t happen when yields are close to zero. But now the yield on the 10 year treasuries is three at between 3 and 4. You have corporate bonds that can yield five or six. Munis are much higher in yield. You actually get an accrual of income that supports your total return. You’re no longer just banking on price changes when yields were

extraordinarily low 20, 20, 20, 21. That’s all you had. You had to have prices stay high or else you were going to be decimated. And ultimately, we were. Now bonds are returning to a somewhat more normal state where the income matters for your return profile frame. And here the great debate that we’re having this morning and that we come in with disinflation and there’s going to be a point along the way where maybe we stop dis inflating what happens at that given point where we say, OK, now the really heavy work to get back to

2 or 3 percent begins. Well, how will markets respond at that nexus, that breaking the curve, that kink? Well, I think in the last 20 years we’ve almost become trained to expect that that turns in the economic cycle are dramatic global Xi Jinping, the global financial crisis being Exhibit A and the Covid disaster being exhibit B. In other words, we haven’t had sort of a typical recession in quite a long time. Well, we anticipate that this will be a more typical recession where the Fed’s extraordinary tightening of monetary policy slows the economy, disinflation. As you

mentioned, and they don’t have to respond by driving target rates back to zero. In each of those last two examples I just mentioned, that’s what happened. Target rates went to zero. Turn on the balance sheet expansion. If you go from it’s like almost a binary state, everything’s OK. Everything’s a disaster. We don’t think that’s going to happen this time. We think that there have been recessions in modern history, 1991, 2000, 2001, when it was challenging. But you didn’t have target rates going to zero. You didn’t have double digit rates of unemployment. Something like that is

apt to happen this time. So markets don’t have to crash, don’t have to surge. Bond market returns are going to be moderately positive this year. That’s what we believe. Moderately positive does not assume that the target rates go to zero. So the markets are going to have to behave in a more normal fashion than what we’ve seen in the last two crises. So let’s get back to the tell you a little bit more constructive. And the lead line here, I think, underpins all of this. The foundation for some of this constructive ness is inflation will

keep trending lower at twenty three. Now watch out. You went through a list of things that you think will go in that direction. You said declining goods prices, improving supply chains and lower commodity prices and a strong dollar. How does China’s reopening push back against a few of those things? While the commodity prices is the one you are reading, that is like, well, the commodity prices is the one to really keep your eye on. You know, things move fast these days. Commodities. This inflated declined pretty sharply last year, certainly helping the disinflation story. China’s abandonment

of zero Covid has been a stark reversal from from the multiple years that preceded the markets. And certainly we were surprised to see how quickly the Chinese authorities walked everything back. And there is no doubt that that should boost commodity prices. However, there is a favorable element from China’s reopening with respect to disinflation that is continued unthinking of global supply chains. Getting more Chinese factories up and running more people back to work once you get through this very difficult wave of illness is apt to continue to support the disinflation story, even if commodity prices are

likely not falling and as we’ve seen so far in 2023, actually rising. For example, oil. So I do think that the China Rio re reopening story, it’s not a single variable. It has effects that should boost commodity prices, but also should help with the disinflation process with respect to supply chains and production. What is the goods? Forgive me for jumping in, but what does that mean for goods prices? Because I think a lot of people that do the goods disinflation over the last couple of months and start to get comfortable with the idea that some

of that is becoming entrenched. I just wonder whether the China story dates to say the goods disinflation because factories reopen in a more material way. Whether we get a return of goods inflation off the back of the best in demand, we’re expecting. It’s a great question. I think the uncertainty is high around this. On net, those at Federated Hermes who specialize in watching China. We think that some of the the ebullience about the economic response of the reopening story and what that might do to global growth and what that might do to inflation is a

little overplayed. You know, the ability of getting China back to work to smooth out these supply chains. That’s a key variable. One of the main challenges that prompted the world with the global inflation story had to do with production interruptions and supply chain kinks. China coming back online is obviously going to help them. I think on net. Yes. Inflation is not going to get, you know, sort of the single benefit of the reopening story. But on the other hand, we think that that part of the China reopening is being underplayed. Obviously, this is an uncertain

time. You know, when that went in world history, has an entire economy gone from, you know, Covid zero. Call it, you know, attenuated production to re-entering the global supply chain and global economy as quickly. We don’t have a lot of history here. But I think on net, we’re still optimistic that the disinflation story takes hold and goods prices don’t have to rebound sharply because of Chinese reentry, because they make a lot of the goods and twice till it’s happened twice in the last three years. That’s the issue right now. That’s why the next year is

so uncertain. We’ve had the reopening of the United States and Europe, the two major, major economic regions. And China’s state shut down about all those problems. And I think we sat here a million times and we said, can you imagine if China reopened at the same time as the U.S. and Europe, how much more problematic that might have been with the commodity issues we experienced? I give credit to a lot of not China optimists, but what I would call almost China realists who are politically attuned to the be all and end all. And I give

Richard Haass immense credit on this, that they had to get through the party Congress in the morning after the party Congress banking started to bang. What things changed with the protest as well? Let’s not forget that we had those protests across the country. Yes. Then all of a sudden, that deficit that was off the bank, but the elephant was the party. Congress pretty clear. I just kind of. Thank you, Sanjay. Bringing Federated, am I so much so great there in 1789 just to be ready? I remember I I don’t remember it. It’s like, you know,

that’s when Cornwallis is on his way back to London from the colonies. You sent the latest rate from Citic and Andrew Holland, who US will catch up with John Tucker Clark City just after the retail sales report really in about 50 minutes. Really important note. And this is, of course, something that’s very germane to New York where we’ve had nurses strikes and this is something percolating out there, which is what does the medical industry. The medical section 16 18. Dare I say 20 percent of the American economy. What is it? Disinflation tendency there? You’ve got

to be kidding me. There is none. There’s going to be a payback for Covid. And you saw the nurses in Holland or says beware medical service inflation. The last time I heard from City that was still leaning to what’s 50 from the Fed. Yes, I think that’s right. In the rest of the market, gone in the direction of 25. But we’ll catch up with their own agenda in the next hour. Forty seven minutes. So the next hour looks a little something like this. We get retail sales 830 help a bunch of data in about 50

minutes. We’ll catch up with Bob Michael just before and just after from J.P. Morgan Asset Management. And then we’ll get the view from Citi. Fantastic lineup in the next 60 minutes right here rumbling back. Keeping you up to date with news from around the world with the first word. I’m Lisa Matteo. House Speaker Kevin McCarthy is calling on Democrats to engage in talks over raising the federal debt ceiling. Republicans now in control of the House have been demanding deep spending cuts as the price for increasing the limit. But President Biden wants it raised without conditions.

That raises concerns over U.S. payments default. The Bank of Japan gave investors a modest jolt today. The central bank kept its main policy settings unchanged Wednesday, maintaining its negative interest rate and keeping a trading band for 10 year bonds. There had been some speculation that the DOJ would change its policy. India may have already surpassed China as the most populous country in the world, according to the World Population Review. India’s population was just under one point for two billion at the end of 2022, and that’s a little over 5 million more than China. On Tuesday,

Beijing reported the first population decline since the 1960s. Mortgage rates in the U.S. fell to a four month low last week, according to the Mortgage Bankers Association. The rate of a 30 year fixed loan fell 19 basis points to a little more than six point two percent, and that helped applications soar by almost 28 percent. Although the data can be a little volatile around the holidays, Amazon set to kick off another round of deep job cuts. The company announced earlier this month that it was laying off more than 18000 employees among its corporate ranks. The

latest round is set to begin today. It will affect mostly the retail division and human resources. Global news 24 hours a day on air and on Bloomberg Quicktake, powered by more than twenty seven hundred journalists and analysts and more than 120 countries. I’m Lisa Mateo. This is Bloomberg. Not to be convinced that this will not happen. That we are going into a recession and we hope that we are able to react to the very difficult situation. I think no one really expected that we would survive the situation when there would be a complete stop the

supply of Russian gas to Germany and Europe. But we succeeded. The German chancellor also shelled, speaking with Bloomberg editor in chief John Micklethwait there in Berlin. Can we just sit on that just for a moment? Some. I totally agree. If you’d told me a year ago what would transpire if you tell me that invasion would take place and that ultimately Russian gas would be cut off to Europe? This is not the winter that I expected. It’s not the winter that I don’t think anyone expected. And even two months ago, we were all absolutely convinced that

we’d get that recession for the eurozone as a whole and for Germany in particular. And now we’re dumping those costs to the weather things there. And I’m not going to come in and say what I observed today in the press, which is a long winter. Winter goes out the next winter, too. Yeah, I’m not I’m not there in the all clear weather angle. What I would say in this goes to Michael O’Hanlon in the in The Washington Post today, who’s truly expert on this. There’s no there’s no stalemate. Lawrence Freedman of King’s College talking about

it, too. There is no stalemate. The war continues. I think I went to have a blast. There is one Olympic opinion. Yeah, a lot of this was luck. The weather turned out to be far, far more in the Europeans favor. And I got fed some. I said this yesterday a few times. There is a difference between good and bad and better and worse. This was better than expected. Everyone thinks this is good in Europe right now. I don’t think anyone living in Europe thinks this is good right now. We want to synthesize this right now

and we will do that with someone who should be in Davos soon. Let me tell you, he’d bring the bar at the hotel there, the Belvedere, to a hotel. Damien says, Our briefing CEOs on the reality of emerging markets. He is definitive with Bloomberg intelligence. Is the China recovery for real? At Heinemann says six point one percent GDP, others are all of a sudden percolating. Do you buy it? When you look at broad statistics, just look at the GDP data, right? I mean, everyone is calling for a full year 2020 to GDP in China to

be under 3 percent. They somehow got that extra one tenth of a percent, 12 points in Malaysia. Indonesia Data’s Indonesia data confirm the enthusiasm over China. Todd Endo, it’s going to be Thailand and South Korea first and foremost. But we do see central bank activity tomorrow from Indonesia and they are expected to hike rates by another 25 basis points to Asia, which is a little bit behind the curve. And Malaysia as well is expected to hike by 25 tomorrow. So there’s some activity going on in emerging markets. But if you look at home currencies, it’s

sort of a proxy for what we’ve seen this year. I mean, it’s been nothing short of spectacular Asian dollar index, which we got pretty constructive on at the end of last year, is up almost 3 percent this year. I mean, every E.M. currency, I think with the exception of Peru and Turkey, Jonathan, are up on the year and up big. Thailand and South Korea up almost from a mere mortal and not some fancy guy like Damien, said Suharto. How do I express E M enthusiasm? Which ETF? Which asset class was the proper way to express

E M enthusiasm? A lot of people out there are going to love this FSI, which is the China ETF that everyone’s been buying hand over fist right now. This year I think it’s up 11 percent this year alone after being off something on the move. I mean, look on low liquidity. I mean we’ve got relatively light volumes. Yeah. I mean, it doesn’t take a lot to move the needle. And I guess that’s what that’s been a big macro effect. Say, hey, I’m not calling it look, I’m not a believer in it. I think it’s Guy

Johnson ISE. I go to trade. Well, I think you touched on something to slipped under the radar as she talked about. Why did that 3 handle come from China GDP? I’m not letting it get a lot of people looked at that data and thought, yeah, whatever. They’re going to tell us whatever they want China GDP to be. And guess what I’m willing to look for through whatever that data looks like for the next couple of months, because I expect that data to get better. That’s the view of most investors right now. How much better do

you think that’s going to get? And do you think it last very long? So for me, the real data point you’ve got to look at are the credit markets. You got to look at 82 data out of the China banks, which now you’re seeing them. They’re not going to make the capital their debts threatening to not make the capital call. So basically, there’s all sorts of things going on in the credit complex around the property developers and around all these defaults for an ever grander hollering. By the way, if you look at country garden bonds,

they’re up 30, 40 percent this year alone already. I mean, it’s been an absolute moonshot for all of these high risk, high volatility in late volume. It just just wasn’t. Was it just a pure and simple bail out by a totalitarian regime? I think it’s again, I think it’s light volumes, low liquidity. And so, you know, it doesn’t take a lot to move the needle. What we’ve learned from all of this, Tom, is he just I mean, I don’t know where China fits in your portfolio, but it’s not zero, right? I think that’s the reality

of where we are. I don’t agree with a lot that’s going on. I don’t agree with the numbers at all. But a lot of stock in the Chinese sits at the place where, you know, Royal Dalton. Let’s talk about the event, Grand Prix, Munich’s property tax. Airlines are flying luxury goods, planes are absolutely flying. If we were going to have this conversation a month or so ago, I would have said that the China that was reopening is not the China, the shut down that are consuming more nationalistic. We’re seeing the barriers to entry for the

property markets in Canada go up. Rhonda Santos, the governor of Florida, wants to do the same. I just wonder whether Chinese money’s going to get spent, how this capital is going to be deployed this time around. How sticky is the money and what happens, by the way, if the capital controls go up? I mean, that’s the real concern, right? You’ve got voyeurs coming into the market right now. Speculators effectively. That’s the first money that comes in. And what happens if things go horribly wrong, as you as you say, right. I mean, they’re all going to

head for the door. And what happens then? Does Beijing basically put at the gates again? And that’s the real risk when you’re investing in any emerging market, more or less China, which is not a managed currency. I don’t think that’s going to happen. So, you know, look, if you take a step back, it’s the Chinese New Year. You know, we’re getting a setting up in the Spring Festival. A lot of people, you know, I mean, you’re the tiger. It’s the year of the rabbit. You know who’s the year of the rabbit? A lot of people

mistakenly for Brad Pitt, he’s a rabbit. Albert Einstein is a rabbit. Sting, George Michael. They’re all rabbits. It’s gonna be a pop star. I’ve never heard of the ship. I didn’t know. Yeah. You to save the show when David says. David Papadopoulos is our surveillance bookie on horseback. Horse racing. Other than that, it is sour. There is no other discussion. And it’s not cowboys to the Super Bowl. I’m actually a real football talk. Marge. Action for the Jets and guarded action film Eagle. Danny ISE. And he dimes. I mean, the Barkley. Well, look, I love

it. I’d love to this guy Guy Johnson those lines. It’s gonna be a close game. These at the NFC East has been a very, very tightly fought the billion all year long. Yeah. So and Dallas is still in a two. I mean, I think that San Francisco game is going to be good. But I love the way Danny Times is playing. I mean, Hertz is really not fully back in the mix. But, you know, they’ve got I mean, look, it’s Philly, right? They got AJ Brown, they’ve got the Monte Smith. They’ve got a pretty potent

offense and they’ve got a tough defense. Is gonna be a tough call for Big Blue. Can we talk about personnel in the future? Two individuals and Russia’s Mr. Brady. Yeah. When they go next. Wow. They’re going home, retiring or they’re going to do it again. I’d love to see Arne Rogers in green in New York Jets green. But Tom Brady, this one this one looks ugly for him. I don’t know if he’s recovering. I don’t know if he’s going to come back next year. I don’t know. I think if you ask, you know, most most

people out there, they probably think this is it. He’s gonna hang it up. But, you know, Aaron Rodgers still has some life in him, and I’d like to see him move. I don’t think that the Packers are gonna let me back from Davos a couple days ago and they’re in the promenade was the menu. The Glazers are the man you little shop there next to where you buy the RTX and then the flags. You know, whatever it was, it was, well, is America going to buy it with the Middle East? Are we going to abscond

with Premier League football? Abscond meaning? Are we gonna give me joy and bring it like the US is going to? You know, I think it has happened. Who owns Newcastle? The Saudis, right? Saudis? Yeah. No, I think it’s happening. I think look, I think if you look at some of the I mean, Lisa did a great interview this morning with the chap from Bain. Right. Who are you? Yeah, yeah, yeah. And so and so my point is it’s expensive because U.S. owners want to run the team profitably. Middle Eastern owners. You know, it’s kind of

then they don’t care about profits. Let me you know, somebody is knowledgeable, please. What do the Kansas City Royals of the Premier League do? How do they respond? Five or six, eight teams to the madness Damien’s described. Can I tell you what’s interesting about what’s been happening with Chelsea and Mr. Bowling was American and ISE experience, I believe for the touches. He’s putting plans on seven, eight year contracts, which a lot of people are discussing because traditionally in real football, you have a four to five year contract. And I can go one of two ways

and go in the player’s favor because they get better and they can demand higher wages or they can demand a transfer or it can go in a team’s favor because you can just get rid of them after a couple of years if they’re no good. These baseball contracts are much, much longer saying we’re talking night decade contracts and I’m bringing that’s a real football. Could be pretty interesting. So there is a change emerging. I hear from from from U.S. leadership who are trying to run these clubs a little bit differently, taking young players at 20,

put them on an eight year contract. And over the average of the contract, you end up paying them less than maybe you otherwise would. No, I think that’s smart. I think that’s exactly the Major League Baseball introduced. But the NFL is very different just because of the violence of the game and the activity. So, you know, it’s a health issue, I think. But I I completely agree with you. I see soccer players getting. I’m sorry, football players getting paid. Yeah. Longer and longer. Long duration contracts. Absolutely. Jim Brown, zoom from a foreign exchange. Peyton says

asked John, who’s gonna buy? Man, you don’t know. I don’t know. I not like Dani Burger colluding. I do wonder. I think the Liverpool transaction is more interesting. I wonder if Fenway Sports are looking at this right now and just thinking. It’s time to go and make the money. Get out. Fuel is always early, hasn’t it? Don’t you get the feeling they don’t they don’t think that this is, you know, things are maybe a little bit toppy. Take the Middle East money. I take in the Middle East Matt Miller. But the market gives you. Do

we get we got through this tax free? I don’t know. I thought the whole thing was was a presence at the time was great. The talk didn’t talk about Rafa Nadal either out of the Australian ISE said Bloomberg Surveillance fired a sport sacked. Damian Salazar, thank you so much. Futures up 14. Good morning, Lisa. Charlotte, Morgan Stanley up next. It feels like you’ve got conflicting signals coming at the moment, muddled outlook for many. We start to see a recession and come into the forward. That’s the critical concern. Is it a mild recession or is it

something worse than mild recession? Is the word you’re hearing quite a bit in the last few days here? We think we’re really facing more of an economic malaise than we are, some sort of sharp recession. The composition of growth is improving. Right. So even though inflation is moderating, real economic growth is accelerating. This is Bloomberg Surveillance with Tom Keene Jonathan Ferro and Lisa Abramowicz ISE. Good morning, everyone. Jonathan Ferro Lisa Abramowicz in Davos and Tom Keene, we welcome all of you here. An important report on the American economy, retail sales in 30 minutes. John feel

it’s just flat out an inflation guide, a consumer guide. It matters to the Fed. Just how strong is this economy because right now this market’s running again. So who knows what later this year? Is it recession or global recovery? Tom, you look at the hard data and things are pretty decent. You look at a soft data, the survey data, things look pretty terrible. Empire manufacturing yesterday. Dreadful. The ISE dreadful. America manufacturing and services, not great. And that’s the debate right now for a lot of people. Are we coming into a year dominated by growth, slow

down off the back of monetary policy tightening or a year where we get a global recovery off the back of China, Rio and Bank of Japan earlier. But I’m going to show the elephant in the room here, John, against these important micro data points, including what we see in 28 minutes. And that is the elephant at the World Economic Forum meetings, optimism from China and their leaders that they’re back on the page with the West and back to normal and optimism in some of these stocks as well. Luxury plants in Europe rip in lights in

America. Water ran high yield Maria Tadeo Nissan for Shery Ahn. Let’s just you mentioned credit high yield spreads tightened by, what, 60 basis points so far to date in the last couple of weeks is a high yield. It’s raining as the ISE Sam drops below 50. Something’s got to give. Even a I take two bounces back. Credit spreads need to go agree career that within the hard and soft data. But what’s important and this is where the retail sales price matters. And one of the great mysteries here was an inventory overhang across all sorts of

categories of retail sales in price reacted shock. They move units Matt Miller disinflation that people hope continue and they hope it spreads to services later this year. We’ll see how sticky that is. Is there a challenge emerging to the goods disinflation story now off the back of China reopening as an additional fly in the ointment, right? Well, the important point here is a micro data. Damien CSR, as he left us in the set the last hour notice, John Liverpool swag is on sale. It’s been that bad. It was this that was about Michael Barr Liverpool

that could fold right into retail sales in the United States that he kicked off of Michael Barr. J.P. Morgan, asset manager alongside us. Great to catch up with the above. Great. I always say we save Liverpool for later in the conversation. Do you want to start with markets? You had an interview with Bloomberg News yesterday was really, really interesting about the risk that maybe this Fed does not do enough. Can you talk to us about that risk? Yeah, I can’t get 2006 out of my mind. The Fed had raised rates from 1 percent to 5

and a quarter percent, 425 basis points. Here we are today. They’ve raised rates by 425 basis points and then they stopped. And was it enough or wasn’t enough? It took a while for things to slow down and ultimately it ended in a financial crisis. But they got to five and a quarter. We’re still at four and a quarter. Will they get to 5 percent? I think there’s still a lot going on. The labor markets tight. China’s reopening the housing market, although prices are coming down. The competition for House is still very, very high. So how

conservative are you when it comes to this rally that we’re seeing emerge in the last couple of weeks, the last few months? Well, we we’ve been part of it. We thought at the end of last year the markets were ripe for a rally. I was out meeting lots of clients and a lot of places. And a lot of them were telling me they’re going back into the bond market for the first time in a while. And they didn’t mean a year. A lot of them met for the first time in 70 years, but a lot

of them were saying this is the first time they’ve been in the bond market since the financial crisis. So there was a lot of money desperate to get into bonds, waiting for high really yields. They got it. It’s come in. The Fed’s thrown a lot at this market. They’re probably ripe for a pause. I think the market runs a bit more and then it pauses when the Fed pauses. I want to go back to 2006 and your observation pre GFC and what’s so important to me and this goes to without question the observation of the

year last year, Nassim Taleb saying the gravity has returned to the system. All of a sudden the dynamics harken back to 2006. And what I remember then was the overshoot in real estate. It was hugely advanced. Hugely inflated Dow only came in, overshot through the large regression. Are we going to see that this year with bonds where the yields are price moves so much that we overshoot in certain way, but so will the overshoot and real estate that occurred because the ample supply of pretty much low cost money. Right. Was around everywhere. And that’s happened

over the last couple years. So that costless liquidity has been sloshing around for a few years and we’ve only recently started to remove it from the system. So, yeah, I do can get concerned that there will be an overshoot. We do get concerned that there are bubbles out there that will burst. It’s really hard to identify them. But the one thing we’re pretty sure of is the only way this ends is with the recession. You have to have a recession to really cool things down and then reset. Ambrose Evans-Pritchard of The Telegraph yesterday with Ken

Rogoff, Lisa Abramowicz talking with Ken in Davos. And Ken Rogoff made clear this is a different shadow banks in 2006. But nevertheless, there are shadows within the banking system. How does it devolve into JP Morgan fixed income? Well, by definition, shadow banking is shadowy. So we need to be careful where we can. Yes, we need to be concerned about that. But there’s a lot of shadow banking that’s occurred in the private capital markets that have financed a lot of things that may have made sense two or three years ago. Do they make sense today? Are

there write downs coming there? Where will the Brad Stone? Are there write downs? Is there access easier than private equity? I think if we look at private capital in total and we look at a lot of the private credit transactions for sure, there are going to be restructurings, exchanges. Right. You’re talking about menu. I’m not sure. I don’t think so. Given that’s a public company and we talk about how what’s happening in private markets could introduce a new set of risks into public markets. I’m told repeatedly you are to that high yield is stronger, that

the quality is much higher than it was maybe a few years ago, 5, 10 years ago, especially in the last decade. But do you push back against that, knowing that there is this risk here in private markets that could spill into public markets? So I’ve heard those arguments before. Every single recession, this time high yield will hold. And we have to remember, really, the high yield market got started in the 80s when it became public and investors could get invested in it. So it’s not been around for a long time and there have only been

a handful of recessions every single time headed into a recession. It holds in well because this time is different. And every single time in a recession, credit spreads blow out to a minimum of eight hundred over. And yes, it may look higher quality, but when defaults start to hit, when the economy goes into recession, when corporate profitability comes under a lot of pressure, investors will reprice that market. The one thing that I worry about this time that is genuinely different is the amount of investment in the private credit markets. And if you start to have

problems there, where you start to get restructurings, defaults, exchanges that are in the 20 percent neighborhood. Investors in those spaces may only have the public markets as their relief valve. You sound what you can, not what you won out in the face of what we could see. There’s a question I’ve just been asked on the Bloomberg my terminal subscribe, but I’d like to share with you. Could you ask Bob about how what’s different this time versus 2008 and that we know the Fed has QE and they know how to use it? The risk of severe

credit risk contagion was real back then. Not anymore. Question mark, how would you respond to that? I think what what is different this time is everyone’s on the lookout for a bubble. There is their complacency or not. We’ve all been expecting a recession. It hasn’t come yet. There are a lot of reasons why it may be pushed off until the back half of of this year or maybe in two to next year. And and you do have new tools out there. I think one of the problems is that while we have QE, we’re also running

Kuti now. And that’s an experiment that we haven’t lived through before. I mean, let’s face it, we are living through history and we don’t know how it will be written, but we shut down the world for some period over the last three years and now the last of it is just starting to emerge and return to normal. And we’ve got to adjust for all of that. It just seems very aspirational to me that it’s all going to end in a soft landing. We’ll reset and move on. Nothing about this is normal. That’s for sure. But

Michael Barr, JP Morgan Asset Management going to be sticking with it. Some place to say gone through to retest sounds in about 20 minutes time. I think we could squeeze in some sport, nap up what’s going on, your beloved Liverpool. We can talk about the Eagles in a moment, because that’s a better story. But your beloved Liverpool, I can take it this year, last year with the bond bear market. If Liverpool had gone off the rails, that would have been a disaster. Right now, there is a bond bull market. There has been some reset. Money’s

coming into the market. I can live with some restructuring of Liverpool. I like what Klopp did and the FIA club. He played the younger players hungrier. They were life, you know, on the immature here. Does the World Cup screw this up? I mean, the tots are playing in a cloud. Liverpool’s sub part say the least. I mean, I get Arsenal there in the World Cup, too. But the World Cup, as you say, in the middle of the season has that is disrupted. It’s just it’s disrupted me. I mean, I was just talking about Salah, so

I thought it might disrupt the teams with momentum in the Premier League. That was Arsenal in Italy. That was Napoli. We’ve restarted the season. It doesn’t mean World Cup. No. I just thought I just thought stopping for a month would disrupt the momentum at the High Flyers teams. And that hasn’t happened. That was such a. A port I’m learning every day, you know, you know. You know, it’s funny. They said they pulled it off. It was a great World Cup living world to come back. Yeah. Come on. It’s not a bust. Which one? Liverpool. Chelsea?

No. Think Everton. There’s another blue team up in Merseyside. Some called Albertson what you would call to even Sonali Basak in Liverpool. That’s the Dow. So for here I was on the way into Heathrow. Where’s the losers? Whistler’s Chelsea. Chelsea under. So that would be a West London Derby. Chelsea for him as a world. Chelsea. Got it. Thank you. You see what I have to put up, but Michael’s gonna stick with this. Veronica Clarke coming up from City as well. Just around the numbers that report in about 20 minutes time, we get retail sales and

PPR in America. Live from New York, this is blowing back. Keeping you up today with news from around the world with the first word. I’m potato. Treasury Secretary Janet Yellen and her Chinese counterpart may meet later this year in Beijing and Washington. The Treasury Department hinted at the plans after Yellen and Vice Premier Li Ha held a closed door meeting today in Zurich. U.S. officials said the two exchange views on macroeconomic and financial developments inflation in the UK dipped in December for the second month in a row, according to government figures. Consumer prices rose ten

point five percent from a year earlier. Still, inflation is five times higher than the Bank of England’s target. The central bank has raised interest rates nine times in a row since December 20 21. And another rate hike is likely next month. In Ukraine, the country’s interior minister was killed among those when a helicopter crashed near the capital city of Kiev. 18 people died. Twenty nine were injured. No word on what caused that crash. Global oil markets face a bigger surplus this quarter than previously expected. Even as China reopens. According to the International Energy Agency, world

supplies will exceed consumption by about 1 million barrels a day in the first three months of the year. The agency doesn’t expect to see annual demand growth in China until the second quarter. Microsoft is joining the ranks of tech giants that are scaling back. Bloomberg’s learn that the company plans to cut jobs in a number of engineering divisions today. The layoffs are said to be significantly larger than other rounds of job reductions in the past year. Global news 24 hours a day on air and on Bloomberg Quicktake, powered by more than twenty seven hundred journalists

and analysts and more than 120 countries. I’m Lisa Mateo. This is Bloomberg. Activity is more resilient than expected, and we should avoid recessions this year probably, and second, inflation will very poor and we peak in this semester. First on the headline and then on call. All of a sudden things get very, very constructive for the ECB. Relatively speaking, of course, that was a French central bank governor, turned up the ECB to go another 50, maybe 50 again. And then who knows? Equity futures right now and the S&P up by a third of 1 per cent

on the S&P 500, 13 minutes away from retail sales data. In America, there is a bit in the bond market yield to lower by 8 or 9 basis points on a 10 year, 346, 10. If you’re waking up this morning and wondering where is the BMJ news? The news is there is no news, no change from Governor Kuroda in tennis. Potentially some potentially, I say for a number of maybe be in March, the festivities, 9:00, 10:00 last night, Wall Street time and into the morning as all everyone publishing on it. And I get the calendar

of a Corona retirement here. But I would say far more importantly than the calendar is tomorrow or even tonight. We will see in the Japanese morning CPI nationwide. The Bloomberg survey is a stunning 4 percent unimaginable. And I don’t understand the inflation headlines we saw a day ago versus what we’re gonna see tomorrow. They don’t dovetail when he hands over the reins after the March meeting in April at the base chase that mission complete or mission incomplete. Over the last decade, for him, his experiment was successful, given the cards were dealt to him, that he

reflected the system. Ukraine. All the rest of it. China, Covid. He reflected the system. He can say I did that, but it’s for the wrong reasons. And critically, John, he reflected without belief in a persistency, what he wants is persistency. Sustainability. What’s that? 10 years gone? That feels like literally a couple of years ago where we’d sit there, wait for dollar and go back through 100 to the upside. Shinzo Abe by the late Shinzo Abe running the country sat in the bottom of the Bloomberg building in London. The old one. Okay, so sit. Jim O’Neill,

Finsbury Square. And he and I did a panel and he he Jan was 96, I think at the time. And he said something brilliant is Lord O’Neill would do and he moved. He and I moved the young market in real time. That was your fault in no. Is who was Lord O’Neill? Trust me doing it. But there was a long time ago, you know, in touring 60 percent debt, they have 8 percent of France’s debt. Eight percent Japanese own 8 percent of France’s debt and the VHA owns a significant amount of the GDP market now.

Right now we’ve got to write just to talk about this as well. But Michael is just a massive, massive way for us to shut out here, would you know? But I think this sets it up nicely. The dysfunction here of the flows in the capital, ownership of debt is tangible and you see it with the Japanese and other percentage of debt. Do you have an inherent fear within your strategy when you see ratios like 260 percent or where another nation owns 8 percent of France’s debt? I’ve got so many thoughts on the Bank of Japan.

One, I think they missed an opportunity. I would have done something today and keep the process going. Get to something that looks normal while the rest of the world is doing it. We talk about the top end of the band is half a percent. The targets actually zero. And official rates are actually minus 10 basis points. So there’s a lot of room to get things looking somewhat normal while you’re printing 4 percent inflation and then start the process of transitioning the bond market out of the BMJ, hands into public hands into private investor hands. Get

that process going. Now, as I’m saying that, I also get concerned about what that means for assets in the rest of the world, because many of us in the markets for a long time have known that Japan is the mother of the carry trade, that Japan finances carry trades in the U.S. market. They want a European market that’s deliverable someone from the tax and borrows them. I get that. What that’s jargon. What is a carry trade? A carry trade is to use the very low cost of funding in Japan and then take your capital at

your cost to funding and then send it to somebody like me to invest in the U.S. bond market, in the corporate bond market at yields of 4 or 5 percent or higher. So you are enjoying a much higher yield than you would have by staying in that sector. Do you think these changes that we’re seeing in the last month, potentially again in March will change how you do business and ultimately on the behalf of other people who want to invest abroad from Japan? Well, I think we’re already starting to see some signs of repatriation. We’re

starting to see some clients that have had money in the U.S. market start to take it back in and put it back into the Japan bond market. And when you look at U.S. assets hedged back to yen, you’re actually coming out at a yield that’s significantly lower than where the JCP market is. So a lot of it is the dynamic of the inverted yield curve in the U.S. So. So that’s pretty punitive. I think the Bank of Japan has to be careful how they unwind all these things so they don’t create this frenzy of repatriation.

But as I said, I think they can be consistent without creating this sort of friends. There is a part of me that thinks great price discovery returns. We can start coding these places markets again. Then I look at the size of the balance sheets and I just think, wow, this a real stock effect here. It’s going to exist for a long, long time. But there’s two ways of looking at it isn’t that this is the final anchor around the neck global bond. You know, it’s about to be released by Japan and that should should have

some real consequences. The other way of looking at it is still we have these massive balance sheets, the ECB, the Fed Reserve, the BMJ, they’re gonna be around for a long time. Which one is it? I think it’s both of those. This is the conversation I’m having a lot with our clients because we think we have put in a secular low in bond yields and a sack at the end of this secular free for all in costless capital. And and we’re in a trend that will return the cost of funding to something that looks historically

more, not normal. Central bank rates, bond market rates to something that looks more normal, but it doesn’t happen all at once. You don’t go from zero to the right time continuum. What do you do as relation? Are you in two year, two months variable? You and three month labor will hold its own diamond. We gonna to be in three month labor. It took 27 years to get the fed funds rate from 20 percent, right? 0 percent. How long has that you had a series of lower lows and lower highs. I think we’re seeing the mirror

image of that. We’re going where we’re going to have a series of higher highs and higher lows. But every three to five hundred basis point shift in the cost of funding through central bank rates will have an impact. And then they’ll have to come back and take some of that back and then they’ll start up again about 10 minutes on the clock. I’ve got a fit isn’t you’re not talked about this before. This is a huge thing that I think you’re ready at the forefront of. You’re basically saying that it’s going to take several cycles

to basically unwind what we’ve seen over the last several decades. Can you tell me what’s changed in a secular story of the last 30 years and why you’re projecting that out the next several cycle? What’s changed? What’s that powerful story that’s going to unwind all of this? Well, there’s one certainly in the developed markets. I remember after the financial crisis, we all sitting there going, oh, my God, what do we do with all this housing stock? The baby boomers are rolling over into retirement and the millennials are too young. The 91 births at the time

were were what, they were 17 years old? Well, guess what? 13, 14 years has just passed. The 91 births are now 32 years old, still living with me. But while they’re there, hitting their peak of earning, spending and saving, much like the baby boomers did in the 1980s, and suddenly all the housing we didn’t invest in after the financial crisis, we need it back again. So there are some real capital expenditure plans out there. Sustainable investment, defense, infrastructure, health care, education. Those are things that a new emerging population of millennials, the X, Y, C, whatever

you want to call it, they’re going to be willing to spend and invest in the Michael Barr. This is awesome from Jack. He’s trying to give fantastic tools to Somalia. Couldn’t even go second last June. Maybe next time around rates half s just to disrupt the conversation. I could clock on the other side a sexy way. He’s gonna be joining us. Retail sales data moments away. Reaction from Bob Michael Barr, J.P. Morgan up next. Economic data are just moments away in the United States, America equity futures on the S&P look a little something like this

on the S&P 500 this morning, positive by two tenths of 1 per cent, PPA data, retail sales, an absolute economic data dump coming up in just a moment’s time. Mike McKay is going to break that down for you coming into our yields lower by 9 basis points now on a 10 year, your tenure here at 345 37 with economic data. Here’s my NIKKEI. Well, we’re just getting the numbers and we were expecting a decline in retail sales and we certainly got one down one point one percent. The expectation was for a nine tenths fall. And

the question is, where do we come in with retail sales? Control that number yet to pop up. But here’s the PPA numbers down half a percent on the headline. The expectation was for down a tenth ex X food and energy, it is up just one tenth. That matches expectations. But it’s down from four tenths a month ago. And then the PPA for final demand at six point two percent for the year. And the core for the year, four point six percent. Those pretty much met while the core matches. But the final demand was expected to

be six point eight percent. So another decline in an inflation indicator that is going to look good for the Fed. Now, here’s the rest of the retail sales ex auto and gas down seven tenths and the retail sales control group down seven tenths. That had been expected to be down three tenths. It was down two tenths in November. So it looks like a very poor month for retail sales. John, I’ll let you do the market reaction to all this while we get details on where the wheat is was kind of a mix here. So we’ve

got a downside surprise on retail sales. That is the wrong kind of downside. Surprise. We’ve got the right kind of downside surprise on BPI. She can work that out. What that means, equity futures right now. On behalf of 1 percent on the S&P 500, just off session highs, Tom Keene a front. And we do see a bit in the yield curve. We’re down eight basis points on a two year to four point one, two percent on the 10 year, down another 12. Now on a 10 year note to 3 and 43, Bloomberg Financial Conditions Index

pops out to a point to five stunning accommodation away from what Chairman Powell has been hoping for. Mike, we’ve got to educate the public now, including me, and that is retail sales are inflation adjusted. So with the disinflation out there in the PPA, disinflation out there. Does that make the gloom of retail sales less gloomy? Well, they’re not inflation adjusted, which is why you have to try to do that calculation, what they’re doing for us. Right. The government can do it. What the government does is put the retail sales numbers in the categories that that

they track into the overall GDP and deflate it from there. So you’ve got to look at these numbers and think that they’re going to be lower than we anticipated. And here’s where some of the weakness was. Food down one point one percent. That’s an important number for a lot of people. Food has been coming down. Gasoline goes down four point six percent. Now, gas prices have started to go up again into January. So that’s an interesting one to follow going forward. Food and beverage stores flat with food prices down a little bit. Retail and food

services, clothing down three tenths. That may have been. Tom, you were asking yesterday about clearance sales and maybe it’s time for you to go shopping because those prices are down a little bit. But here’s the interesting one. Non store retailers down one point one percent. This is the it’s a broader category. But where you would find your Amazons and Wal-Mart and online retailers and then food services and drinking places down nine tenths. That’s what the one service industry that is in retail sales. And it is sort of the the most discretionary spending that we have

there. So it does suggest that people pulled back in December all across the board in terms of spending NIKKEI. Thank you, sir. Just to wrap things up for you, I said again, downside surprise on retail sales. The wrong kind. The right kind of downside. Surprise on PPC for a moment, equity futures pop. They face now up just two tenths of 1 percent, basically where they work out into the print yield. Still lower Tom Keene a 10 year by 11 basis points 340 354. And just to give you a fair to think that a front end

of the curve, a rally at the front end again on a two year with down seven or eight basis points to about 413 on a two year. So yeah, it’s just the whole curve. Tom, just put him back weirdly enough to your advantage there. Bob, Michael with us with J.P. Morgan Asset Management. Before we move on to economics. Bob, help us with what the bond dynamics right now signal about the parlor game of 25 beeps or 50 beeps. And even more foolish, something you and I never saw were the streets gaming out rate cuts out

X amount of months. What part of your bond world do you look at to gauge 25 or 50? Beeps So as Mike was going. The data in my mind, I was also replaying a lot of the inflation data, which has stopped printing at point five point six point seven per month. And it’s now in the point two point three point four. And the words that come to mind are long and variable cumulative and lag. The impact of a year of very aggressive central bank tightening and quantitative tightening are starting to bite the economy and they’re

biting hard. So things are slowing down. I think the Fed has good reason to raise rates 25 basis points at the start of February and pause if for whatever reason they want to do another 25 in March as insurance. But it feels like we’re a meeting or two away for a pause. Then let’s wait a quarter or two and see what the impact of all this tightening has done. I think it’s a signal to bond investors who have been trying to buy pack ups. You’re not going to get them, certainly not over the next couple

of months. That applies to credit, say, and not just sufferance. Is that the whole of fixed income? So where we’re seeing money coming into the bond market, it’s going into aggregate bond funds. Investors are making this vision. Get me into bonds. I want a general bond fund or they’re going into a general municipal bond fund. So the investment grade space is going to appreciate the securitized market, the mortgage market, the investment grade, corporate market. The one thing I did get wrong, which you’ve been very polite about, is the high yield market. It’s been rallying like

crazy because recession still looks in the distance, although this data says it’s not quite as far out as as maybe this finish on that thing. With that in mind, how much weight would you put on the recent survey data, which is indicating that things are slowing down pretty quickly? How much weight would you put on that? Well, businesses will respond to that and they’ll start to invest less in their business and start to save. So it’s it becomes self fulfilling. All of these things to me suggests that that hurt that recession is actually on the

horizon. Bob, this has been great equity features right now at two tenths of one percent. If recession is on the horizon, this credit market is not sending golf into it. It’s rallying into it over the last couple of weeks. The 10 year yield this morning down 11 or 12 basis points, home to 343 on a two year, down 7 basis points to 4 13. These are movements. And again, as you said, it’s about the hard data. And I believe this is hard data. I know it gets revised and I don’t have the data here again.

There it is. There’s a revisions. For example, the control group, I don’t have a revision and yet. But, you know, Michael McKee was telling us the revisions were a less of a retail sales than the cautious numbers that we saw in the previous month. And that follows on forward today. Let’s get the economic outlook. And John, I want you to help me out. You’re Veronica Clarke. Can frame for us the Citigroup conundrum. Was John, I believe, as Mr. Holland Hawes discusses, 50 or 25 basis points. Do you want to show Miss Clark in a rough.

So I’d like to decide and make some news. They had a wonderful group call a wonderful 20 22. Let’s talk about twenty three. Veronica, thank you for being with us. You’ve been leaning towards this idea that we get another 50 basis point move from this Fed reserve. How challenged do you think that view is now with the incoming information? Yeah, I mean, it was already a close call, I think even going back a week ago when we got CPI. I that’s certainly what we’ve we’ve heard from that ever since. I do still think, though, that

the market could be under appreciating the chance that the Fed would opt to go 50. I think the market is misinterpreting the Fed’s commitment to getting rates above 5 percent. Secondly, Veronica, we’re all slaves to the data. Every Fed and every textbook and every history book is data dependent. You guys got out front of this and the data has backed up the Citigroup call. What is the data that matters to you less to Feb. 1 and much more to look on to what we see May 3rd or June 14? Yeah, I mean, I think that

the most important data is still inflation data. And I would bump along with that wage data. Maybe we’ve seen some signs of wage growth slowing, but you saw such a tight labor market that I wouldn’t necessarily expect wages slowing back to something consistent with 2 percent inflation. And the most important inflation data, I think should be the Fed’s preferred core P.C. measure. And some of the details of CPI that we got this morning will matter. For that, we are still expecting a stronger core piece even than what the Fed even has. Certainly than what the

markets I think. Are you going to reaffirm right now 50 basis points? Is that what I’m hearing? Yeah, I think that that chance is still under. Appreciate. We do have some some important Fed speakers still to hear from. The chances is lower now, certainly. But we also wouldn’t necessarily adjust how high we think rates will end up going, even if it’s not a 50 in February. We just expect that the Fed’s Haidi Lun for longer. Did she make news or not? Stick to the script. I’m trying not to cause any trouble. Sitting right in front

of you. That is great. Thank you. John Tucker clock there. City Global Markets alongside Andrew Holland House making a coaster ride for a city on a federal S.F. fund of white pickup. But what you make of that? We go another 50 times. The race going to be hard and people think it is. I don’t think there’s anything in the data that we’ve seen over the last month to get the Fed to go 50. And I think they’ve opened the door to continuing to dial down the pace and rate of hikes. So I think 25 is

pretty much in the books for this really important. And this goes back to Boulder and the work at Citi. Good. The fabulous work at Citigroup versus what we see from CAC winning for Rollie Michael for all his call on U.S. potential GDP X number of years ago is how you get to 25. Beeps is there’s just a dampening there that I hear out of JP Morgan that I don’t hear from other shop. You know, you’re going to cause trouble between the investment bank, the asset management. No, no. Guys, I know I’m crossing the Chinese wall

or some Japanese wall. I think I think he knows what a brilliant researcher and economy is. I go to read the book. Tonight is potential GDP call, which was sub 2 percent of time. Is how you get to this to your point of the Great Moderation ending? Yeah, exactly. You okay? You did. Which while. I’m also called cause trouble at City Hall. You think the city’s going to come in and change the code before they’ve paid for it and then get Bob to find out. I also thought it was a lock down the Chinese. Why

did I just come back next year and lock down again in the next start? Jake Pelosi FTSE W Advisory. You’ve been waiting to catch up with Jay. He’s going to join us on 60 Minutes. Yeah, pretty mess right here. You. I’ve got em. Aaron Brown at PIMCO. And I’m gonna track Bob Michael Barr with me as well. Just to wrap things out for the next hour on Bloomberg TV. What a morning already. If you’re just tuning in, we’re going to tell you your blender made it real. Live in is Premier Li on Microsoft. Later, they

play the FIA Cup. Do they play differently in the FIA Cup than Premier Li? If you’ve got a deep squad and they’ve got tons of depth, let’s step than, say, Manchester City, but they’ve got enough. Then you play different players. You play the younger players. The six point play the hungrier youngest. Is it the defense? It’s so good. From Belgium, a virtual VanDyke, Virgil Van Dyke. You try and rest place like that. Although he’s had a great season, he’s not had a great season till World Cup disease. He recommends that the World Cup decease injuries.

World Cup to say. He says that they thought they were the World Cup and they’re all exhausted. Mike and I so understood. I love the way tyres sounds like, you know. My goodness. I guess that’s the whole show, isn’t it? So I’m working overtime. I’ve got a guy from New York. This is playing back. Thank you, Bob. Appreciate it, sir. Thank you, Bob. You get. Keeping you up today with news from around the world with the first word. I’m Lisa Matteo. House Speaker Kevin McCarthy is calling on Democrats to engage in talks over raising the

federal debt ceiling. Republicans now in control of the House have been demanding deep spending cuts as the price for increasing the limit. But President Biden wants it raised without conditions. That raises concerns of the U.S. payments default. In San Francisco, opening arguments are set for today and Elon Musk’s trial over claims he defrauded Tesla investors. The case has to do with Musk’s tweets in 2018 about his plan to take the electric car maker private. A nine person jury was selected on Tuesday. Mortgage rates in the U.S. fell to a four month low last week, according

to the Mortgage Bankers Association. The rate on a 30 year fixed loan fell 19 basis points to a little more than six point two percent, and that help applications soar by almost 28 percent. Although the data can be a little volatile around the holidays, the world’s biggest oil company is confident demand will pick up strongly this year. Saudi Aramco CEO Amin Nasser spoke to Bloomberg at the World Economic Forum in Davos. Nasser says he sees promising signs and demand both from China and the U.S. and the aviation market. Global news 24 hours a day on

air and on Bloomberg Quicktake, powered by more than twenty seven hundred journalists and analysts and more than 120 countries. I’m Lisa Matteo. This is Bloomberg. I think in the United States, we’re obviously fighting higher interest rates, but we’re doing it from the perspective of an economy that’s in quite good shape during the pandemic. People stayed at home, fed two and a half trillion dollars of extra money. Was the banking system and they’ve been spending that money and that’s been keeping the economy performing better than people expected. As Schwartzman at the meetings, the World Economic Forum

in Davos, he is with Blackstone, he is their chief executive officer. And far more than anyone I know, a student of linking an economics into finance. And of course, with his Blackstone Group front and center across America has been their commitment to real estate and huge debate about the future of American real estate wrapped around private equity, private investment and directly with what Blackstone is doing after the retail sales. We’ve got futures up 13 Dow futures with a modest lift. I’m watching the VIX very carefully. It’s a quiescent nineteen point zero eight. That excuse me,

that’s a substantial change from what we saw 10 days ago. And to see an 18 percent would signal the bid to the market in the yield. A 10 year yield comes in a huge 11 basis points off. The shock of tepid retail sales and revisions to your yield comes in seven basis points as well. And we’re watching Brent crude, 87, 23 a barrel. It was most important today to have one of our guests say watch the shadow banking system, something Ambrose Evans Pritchard talked to Ken Rogoff about. She has spoken to Professor Rogoff at Davos

about shadow banking, about overinvestment and private equity. And there’s some real debate about this. Lisa Abramowitz at the meetings in Davos drove this conversation forward this morning on private equity away from the markets of the shadows. Lisa, not the shadows descending across Davos now is the sun. I think the sun falls. I think it falls down to France or Italy. I can’t remember which. But the answer is the answer is the shadows. The shadow banking are front and centre. Yeah, the shadow is if you look at some places, they’re not so shadowy, although I was

just on a panel with the head of the French Central Bank and he said that he is very concerned about the shadow banking, the non banking financial markets. So basically to that point, however, I did speak with the former co-chair of Bain Capital, Steve Paul, UK. She just actually retired yesterday, although he hates the R word stepping down, but is still going to be an advisor. And I asked him whether we think whether he thinks that we’ve already seen peak private equity. Why there? Well, whether we’re in for some sort of significant downturn. Take a

listen to what he had to say. If you look at private equity returns, most firms are shooting for 18, 20 percent. The private equity model works. It puts it puts capital to work with experts that really help drive these companies and certainly Bain Capital. I think we’re only still in the early innings and it has another 20 to 50 years run because it’s a great business model and you could see it being 18 to 20 percent in that period of time. It’s absolutely is consistently done that for 40 years now. What about in China? What

about some of these other areas that a lot of people are pushing into and seeing a lot of value as Bain as well? We’ve had a fantastic Asian presence for a long time now. We one of the first people in Japan, for example. Japan is a fantastic market because they are now embracing capitalism. I met with the prime minister about a month ago. He’s he’s pushing that they’ve got to rejuvenate the economy. They believe it is they got have more free markets, more capitalism. And we’ve been fortunate because the Japanese really respect the company that’s

trying to build value and sticks with his. So we never went in and out. We went to Asia. We stayed there. We built a large presence. They love the value added approach. You do own the Boston sell tax you are interested in. The Chelsea football team didn’t win that bid. Are you looking to push further into the football arena? Our group is looking at many teams. The prices have gone up very high and we tell. We want to buy a great club, but we want to stay disciplined so we can invest in the club over

the future. And so my fear is some of these prices are are now getting so high that that there might be disinvestment. And I want to have a great club and I want the club to be able to win. And you got to be competitive. So you have to budget putting money in to make it the best. That was DFL UCA of Bain Capital in time. I’m sure that you’re interested in the football discussion, but honestly, to answer your question, there is a lot of optimism. Not so shadowy necessarily, right? A lot of private equity

executives who are here. You know what’s really interesting and this goes to your panel, RTS head, Michael, my back on it. The president is the chief executive officer of MasterCard International. They have the thermostat. They have the thermometer of every folks, the name of the panel. By the way, was Brammer does Davos. The answer is there’s a there’s a thermometer to it. There’s a pulse to it. What’s the Davos thermometer? This year? Well, I would say that soft and shallow, shallow and short would be basically the concept of the consensus right now around what people

are thinking about the recession or the lack thereof. My first question on the panel was are we going to get into a recession? And the head of the French central bank said no. Even though they’re going to raise rates further and go above the neutral rate and other people saying the same thing, Michael McKee Bach of MasterCard saying that the actual empirical data doesn’t seem to show any sort of downturn from spending. On the flip side, there is this real tension here between this belief that you can raise rates substantially more and continue with the

dynamism. And I know that the retail sales that we’ve just got suggests that there is a bit of softening that hasn’t been reflected in at least the tone that we’re hearing from certainly central bankers here at this particular this particular event, Happy Valley is removed from reality. Mrs. Zelinsky appeared to bring back reality. How was the leadership of Ukraine and Mrs. Zelinsky greeted today? A lot of people are trying to figure out how long it’s going to take. I mean, very much there is a real question mark here of how long this is going to

drag on and what the implications will be. That is definitely on the forefront. At the same time, very much the focus is on China and the reopening and the question mark around what that’s going to do to inflation and what that’s going to do to growth at a time of increasing tension. And so I think that underpinning every conversation is less sort of the tail risk that people see as as possibly an escalation in the war that Russia’s waged on Ukraine. That’s less the conversation right now than China, the reopening and what that means for

inflation. Yeah, I would say the headlines, Lisa, that we saw back in the West was very much to China reopening the comments of the Chinese leadership, meeting with Secretary Yellen here in the coming hours and days. What’s amazing to me is how it endures across the Pacific Rim. And then you have the Filipino president, Mr. Marcos, attending his well, you’ve got others from the Pacific Rim. What is the feeling of Asia opening up? I think it’s underplayed. I would agree. And I think there’s an incredible amount of optimism and frankly underplayed is the reliance of

the West, in particular Germany on China to reopen in order to get that economy going. And a lot of the optimism that we’re hearing about the European economy. How much of that is hinged on China reopening? So, you know, on one hand, we’re talking about globalization. We’re talking about unhinge in the west from the east. And in reality, it’s not that at all when it comes to conversations or what people are depending on. And so that, I think is a big theme. In full disclosure, folks, I got an e-mail and and no, that was not

Lisa’s Gulf Stream. And there’s a photograph at Zurich of all the fancy peoples planes lined up at our age. Lisa, with that said, what is ESG looked like at this year’s Davos? A lot of people are saying that they’re going to re commit to it and that they’re going to continue to finance it. I mean, it still is a big piece of it. I guess the question that I have is what’s the role of investing in fossil fuel companies at a time when you’re trying to prioritize ESG? And I was speaking with the Norwegian sovereign

wealth fund manager, the head the CEO of the biggest sovereign wealth fund in the world today about that. And they had this mandate to diversify away from fossil fuels. But they’re still investing in diversified oil companies, energy companies and trying to effect change from the board level. So still, there is this feeling that there is a place for an investment in the energy and oil complex while also pushing for ESG types of mandate. Do you get briefed on that by Mike Worth, the Chevron? Did he step in there to talk about future investment of hydrocarbons?

Yeah, I mean, they’re big on this, right? Because this is ultimately their future. Again, you know, I hear your skepticism. There is this feeling of how quick is it going to be and what do you invest the meantime as having you still need the fossil fuel asset to get going. Lisa Ramirez, thank you so much. The meetings, the World Economic Forum in Davos, her coverage will continue along with our team in the coming days as well. Our coverage is about retail sales that came in soft with a soft revision as well. PPA a little bit

quiescent. And I guess you’re going to see in the coming six hours a nudge here towards a disinflation, maybe a nudge towards a a adjustment by the Fed from 50 basis points to under 25. Thank you to Andrew Holland Harrison, Veronica Clarke over at Citigroup. They, I’m sure, will have statements out overnight on their call a 50 basis points. Really appreciate her attendance today as well. I do want to point out and this is important through the Bloomberg day on radio and television. I need to guide you to this evening after you’ve forgotten about economics,

finance and investment. They will remember it in Japan without question. For me, the inflation report of the day will be what we see out of Japan. Will we see a headline inflation and survey of 4 percent? Please stay with us. With futures up 14, the VIX right on the cusp of an 18 print. I’m going to call it better than good markets. Good morning. This is Bloomberg Surveillance.

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