Annmarie hordern. Live from new york city and good morning. For audience worldwide this is bloomberg surveillance. En jonathan ferro, your equity market for the s p 500 negative by 0. 2 taking off q2 hitting a bump in the road when it comes to manufacturing. Manufacturing data entering expansion for the First Time Since september of 2022. Prices paid a little bit firmer. Setting off right across the curve. Lisa the idea they came in at the hottest level since 2022. People are wondering is this a commodities led blip that is temporary or transitory or is this something deeper that has to do with the ends of goods disinflation. Jonathan the commodities board, wti through 85 a barrel. Brent getting closer and closer. We are talking about the highest level since october. Throwing gold alltime highs on gold again. What is happening on the board right now. Annmarie obviously you will see a risk premium because of what happened yesterday which is an israeli strike on a key individual in the Iranian Revolutionary guard as well as the Iranian Embassy in damascus. More potential upside for the market because of the risk we can see. Iran is pledging revenge. On the supply side opec is not willing to add more supply to a market that clearly needs it. Lisa its been sort of a creeping cloud and now the reasons people are giving to it at what point does this become a problem. Its also chocolate, its not just some of the other commodities ahead of easter and after easter, all the different commodity sectors can we just say its an isolated thing having to do with idiosyncratic. Do you think this is a reflection of the extension of the cycle or a recipe to end it. Its out of china as well. A bit of inflection in the last few days. Basically his whole comment when he was talking to you guys saying wake up people its commodities, it supply and demand. This people coming to this view saying this one conviction is be long oil. Is this the real deal. Thats the question we have to ask. For a long time for the best part of a couple of years we had a big spread between services and manufacturing. Weve been asked how that spread will close. I think what we saw yesterday was that first early sign manufacturing is coming up to services. Saying weve gone from rolling recessions to rolling recoveries. Lisa especially with inflation. I would take it a step further and say how much does this support the idea of broadening out in the market rallied. We were talking about how much does this really stymie it at a time when people are hoping yields remain lower and the fed can cut. Equity futures on the s p 500 at least a little bit negative. Down on the s p. Bleeding a little bit harder once again. Your tenure very close to the highs of the year at 43391. Federated hermes on factory data. As the u. S. And israel look to ease tensions looking ahead to payrolls friday. We begin with the top story. Stronger than expected factory data ahead of this weeks jobs data. We are not bias of the spx here. Still expect a rally in stocks will broaden out to include domestic largecap value, smallcap growth in international. Lets get straight to it, the data of yesterday. How much weight would you put on that manufacturing . Thank you again for having me back on. I think yesterdays data was significant. The ism as you pointed out was back above the 50 level, the contraction line of demarcation for the first time in 16 months. As lisa pointed out the number that was stunning was the prices paid component so you have a situation where the economy is strengthening yet inflation is sticky, perhaps even accelerated. Pair that with the le i we saw last week. Leading Economic Indicators went back positive for the first time in 22 months. You sit down and tell bond people they look at these inverted yield curves we were watching for the last two years, three month to tens, they are flattening out, bond guys think those may become positively sloped again. So the risk of recession or lower risk of a lot of soft landing, shift to a stronger period of Economic Growth. The inflation question is the more important one. Look at last weeks pce print, core, 2. 8 percent for february. What caught our attention was the changes in the feds last meeting. During the increase, core pce forecast, 2. 6 from next year and cap that in place for calendar 26 so the fed is telling us that inflation is still a problem. It will be a problem as the economy comes back. What that means is its good to be less rate cuts relative to what the market is expecting. Given everything youve said every item on that list, is that good or bad. Good or bad for stocks. Phil the s p 500 up 10 here the first three months of the year of 28 since october. In our view stocks are headed themselves. We expect a rolling correction, the mag seven in the last 15 months is up. The forgotten for 93 is up 22 . Our view has been this rally will broaden out. We see that in the mag seven and the domestic largecap value stocks and smallcap stocks, the International Stocks which are largely left for dead over the last year or so. We would start to see some improvement in the share prices of those. Lisa how much do higher rates challenge the idea of broadening out particularly to small caps given these companies usually are more leveraged and are more vulnerable to higher rates . Phil remember the u. S. Economy is doing relatively better in a lot of our trading partners. The reality is Smallcap Companies here in the United States right here at home. And from an economic standpoint, we are doing better here. In terms of underlying fundamentals, the sectors in the smallcap of market, biotechnology for example is our favorite is really well positioned to read biotech stocks have very strong pipelines, the value asians have probably never the valuations have never been cheaper. The prospect of m a activity is enhanced today versus where they were a year or so ago. So we do like smallcap. Lisa how much is oil the new mag seven at this point. Theres the reality of supply and demand and the factors rolling over. Phil music to our ears, we are very lonely at the beginning of the year talking about oil in the mid 60s. Thinking we could see 80 to 90 a barrel by the end of the year. We are sitting in the mid 80s three months of the year. This is happened a lot quicker than we thought. The accommodation of increased geopolitical risk in combination with the fact we do not have a lot of levers here. In the pastor might have utilize Strategic Petroleum reserve to perhaps adjust the price of oil. We took the spr down 350 Million Barrels a couple years ago and did not replace it. At this point we are at the mercy of the vicissitudes of whats going on globally. Crude oil last september was at 95 a barrel. We could see the crude oil market retest that. Gasoline prices up could be at four dollars over the course of the next couple of quarters. So this move in energy is real. Energy is one of her favorite categories on the domestic largecap value side. Annmarie with brent already in your range, what do you see for year end . Phil high year. We could see it trade up another 10. Brent maintaining that spread could probably approach 100 a barrel. Jonathan you were talking about doubledigit rallies on the s p 500 did you ever expect things to go as far as they have in the stock market . Phil not as quickly as it has. We got a 6000 target on the s p fully discounted calendar 2025 earnings, of the market seems to be focusing on that number. We didnt think we would get up to the 52, 53 hundred level in the First Quarter this year so the rally over the last five months has been much faster than we have expected last fall. Jonathan great to catch up, sir. This came from jim at deutsche bank, up more than 10 in q1. Marking the first time in over a decade its been backtoback quarterly gains in double digits. First time in more than a decade because the because they werent convinced. Thinking about how they came out of that. Having seen backtoback doubledigit quarterly gains in more than a decade. Lisa we get numb to this idea. Whats new. That was the pandemic era. A lot of disruptions but you talk about another era and we saw that with the japanese stock market pointing out the fact the japanese nikkei is the most going back to 2009. We are talking about post great financial crisis recovery types of level. Jonathan this morning just a little bit softer down on the s p 500. Here is your bloomberg brief. Iran vowing revenge against israel blaming the country for a deadly airstrike on its embassy in syria, the strike killing at least seven iranian personnel including military commanders. Theyve yet to confirm the attack but the countrys forces have struck iran linked this be the first time its directly hit an iranian facility. Ubs says it plans to buy back up to 2 billion of its shares with up to one billion of that total expected to take place this year. The swiss bank confirming the repurchase plan after having suspended its previous plan a year ago amid its governmentbacked takeover of its former rival credit suisse. They expect to complete the merger by the Second Quarter. Homer President Trump has posted a 175 milk one hut at 75 million bond. The move preventing new york state from seizing his assets at least for now. It halts the collection of the more than 450 million he owes after a judge ruled he inflated the values of his assets for years to get better longterm loan terms. Plus millions in interest if his appeals fail. Bet your bloomberg brief. Up next, the u. S. And israel easing tensions. We are very concerned about a military operation into roff up. There are more than one million palestinians in rafah right now and we want to make sure if there is going to be a military operation we have to understand how they will move forward. Jonathan live from new york city this morning, good morning. Do you want to close out . Should i . Normally id hold. But. Taking the gains is smart here, right . Feel more confident with stock ratings from j. P. Morgan analysts in the chase app. When youve got a decision to make. The answer is j. P. Morgan Wealth Management. Is personalized based on your goals, whatever they may be. All that planning has paid off. Looks like you can make this work. We can make this work. And the feeling of confidence that comes from our advice. I can make this work. That seems to be universal. I can make this work. I can make this work. No wonder more than 9 out of 10 clients are likely to recommend us. Because advice worth listening to is advice worth talking about. Ameriprise financial. Godaddy airo. Creates a logo, website, even social posts. In minutes how . A. I. impressed ay i like it who wants to come see the future . get your Business Online in minutes with godaddy airo jonathan when i said we were hitting the ground running, i said manufacturing shaking things up big time in the bond market. We had a number of basis points, the equity market down just a little bit again negative by zero. 2 on the s p 500. The u. S. And israel easing tensions. We have obviously been clear about our concerns on a military operation into roff up. There are more than one million palestinians in roff are right now, if there is good to be a military operation we also know there are hamas operators in roff as well. If they are going to move forward with military operations we have to have this conversation, moving forward. Jonathan israeli officials agreed to take concerns from the u. S. Into account. The white house and both sides share the objective to see hamas defeated in rafah and plan to hold followup discussions as soon as next week. If that is easing tensions, tensions were in easing between israel and iran. Lets talk about the strike in syria, can you talk about the test how great the risk is. Irans behavior today is not suggested they are looking the israelis killed another commander in syria. This is probably the most important since sue lamont he was killed. Thats probably the first order of response is how iranians can go after this against the u. S. A bit of a pause in these types of strikes since early in the year, the other factor thats more worrisome would be one of iranian proxies like hezbollah to attack israel from the north. So far iran has not wanted them to escalate in that matter and for now it looks like the u. S. Annmarie given that he is basely the highest ranking individual thats been assassinated since cost him soleimani is there a potential for a more direct confrontation between iran and israel not through proxies . That would be an unprecedented escalation especially given the iranians have so many proxy forces in the region. Its always possible that has not been there, over a while now. They are heavily armed, welltrained. It seems to be the iranian preference even the iranians havent tried stoking direct confrontation because they dont seem to want to. That could change, every thing thats happening is unprecedented but the pattern here has been pretty clear. The iranians dont seem to want that type of conflict. Annmarie it does seem like the temperature was taken down between washington and jerusalem , this relationship is been very acrimonious especially in public between netanyahu and biden. How important is it for these two countries to show a united front at this time when we see this escalation in the region. It is certainly important for israel. For washington its more dangerous particularly for the Biden Administration given this remains one of the political vulnerabilities they face. You seen the administration shift their views on their support for israel including by abstaining at the u. N. Security council vote last week. For washington their relationship with the is raleys for the israelis, it is one they are willing to take on because the support went so deep in washington. Public opinion is starting to shift with more americans questioning u. S. Support given the images out of gaza. But that has not deterred the Biden Administration. They have been effective so far. The roff operation couldve started weeks ago when israel was looking at troops down there. You have to think the only reason it hasnt happened yet was the strong u. S. Pushback and concerns. Lisa you did mention something that was important, the idea of a potential x escalation. And some sort of direct attack from hezbollah on israel. How much power does the u. S. Have to prevent israel from going on the offensive which is what a lot of people has suspected is the next step and this strike shows a willingness to do. The u. S. Has not been particularly effective in slowing israel down other than this roff operation. Israel is intent on rooting out hamas and they are intent on reestablishing dominance and deterrence in the regions. And what the u. S. Is nothing from the u. S. Saying right now is shifting that. In order to arm israel. I dont get the sense, we do not get the sense israel is looking to stoke conflict at the northern border. It seems its focused in gaza. But that could be depending on the perceived threat that could easily be another front that opens up. Lisa she pointed to this as being the biggest potential escalatory risk. The reason why she says this is a considerable escalation when it comes to domestic politics how much power does this administration have two counter gasoline prices will continue rising inevitably on the heels of any further escalation. The American Administration . Lisa yes. Rising prices are obviously a huge vulnerability for biden. Its one of the reasons everyone so worried about bringing the iranians into this is they dont want that to get off of the market. And neither do the americans. They need prices to remain low during an election season. It does not seem to have a lot of implications for conflict purely with an israeli territory. I think the americans are desperate to keep the iranians out, but the is raleys have a singular focus on their own security and thats whats driving them now and that will continue to drive them. One side of that is not worried about the oil market. John of eurasia group. Wti through 85 for the First Time Since october. Brent crude getting closer and closer to 89. What we are seeing pair that with what we are seeing, new highs for the year on the u. S. 10 year just months ago very close to 435. 30 year yield spiking on the heels of some of these concerns. The ongoing pressure and this inability to see how you deescalate it. Youve one actor in the space. Iran is trying to not to escalate but there is a question of how this remains contained if the u. S. Doesnt have more influence. Jonathan it might be a stretch to call this a haven trade. Yields rose, gold rallied. I find inflation component of this story to be quite interesting. Started going into the Federal Reserve meeting. I wonder we keep hearing that same question out of a News Conference just how committed are they to that 2 inflation target. The language around it has changed. August of 2022 it will require pain. The Inflation Numbers of developed. The story is it will require time. The emphasis on time and not on pain. Subtly under the hood. Its not a wholesale rejection sing the fed is a necessarily can have its target there. But look at the five year forward breakeven rates. You get a sense especially with the oil market people started to realize something is percolating here. Its really reflected still down 11 since the end of 2020. Jonathan abigail joining us to weigh in on the Federal Reserve. What this means for the fed going through this year as traders pushback once again the perspective rate cuts. Cutting the probability in half. A 50 chance now. Weaker yesterday, a week again this morning. Down by 0. 2 on the s p. New highs for the year. That new high for the year just moments ago. Up next, an ev surprise in china and tesla deliveries coming out a little bit later this morning. From new york city, this is bloomberg green this is bloomberg. Hello, mia. Are you ready to meet your demise . Man, we really need to upgrade your trash talk. Nice shot. Shot. Taker. Who programmed you . ill see you tomorrow. The future isnt scary, not investing in it is. 100 innovative companies, one etf. Before investing, carefully read and consider Fund Investment objectives, risks, charges expenses and more in prospectus at invesco. Com. Starting a business is never easy, but starting it 8 months pregnant. Thats a different story. I couldnt slow down. W