Transcripts For BLOOMBERG Bloomberg 20240703 : vimarsana.com

Things have changed, we have different numbers. New highs for 2024. The two youre getting closer to 5 two year. The quote of the last 24 hours around this desk, jp morgans david kelley, the sound of their slingshot on a june cut. Lisa stephen of standard charting, rbc, we are changing our fed call from 45 basis points to one of a duty five basis point move. Yesterday we saw the biggest self, the biggest yields since 2022 and it seems there might be more. Annmarie everyone is trying to revise. Starting to revise. This really seals the fate for the june fomc to push this further back. If we came into this year expecting when will the fed cut, and that is a matter of some people asking if the fed will have a cut in 2022 in 2024. Jonathan two big headlines crossing bloomberg earlier, triggers parenting rate cutlets to less than 25 basis points. Look at for exchange, the euro, 1. 07. The dollar having its biggest oneday since the banking stress of last spring. Dollar, 152. Never mind, it is 153. Lisa how much does the hot cpi cause the hand of the likes of the ecb and the bank of japan . How different is inflation in the u. S. Different than elsewhere . Is the upas still exceptional is the u. S. Still exceptional . Cutting because their currency is weakening. Jonathan have to talk about the ecb and 8 15, 15 minutes after that we would get jobless claims and ppi. 15 minutes after that, new york fed president John Williams, how is he going to respond to the data . Lisa we did hear from two fed president s yesterday, Austan Goolsbee who had Something Interesting to say. Both of them did not seem ready to wholesale reset their expectations for a reach cut for a rate cut. Austan goolsbee saying they are worse when it comes to conversion reads. We are getting to the point when there will be more tradeoffs than last year. Not ready to take a rate cut of the table but allowing inflation is going to have to run harder to cater to the pockets of we in other parts of the economy. Annmarie the other fed official said you have to stay humble with this environment and the statement. Palmetto arian with a piece solidifying something he talked about which is the the fed in order to remain needs to accept 2 to 3 inflation. If they dont, they have the potential of bernanke gains in the economy. Jonathan equity futures on the s p 500, bottom to the koran. Equity futures negative. So much for the great rotation grand rotation. Within the equity market on the s p 500, equal weight versus market cap weight. Outperforming any the face of much higher yields. The next seven, nvidia positive yesterday. This was brutal. Lisa remember when this was the rate sensitive trade and now it is the rate insensitive trade . People are confused. How do you play any inflation story that seems stickier than yesterday . At the same time when you have companies that feel weakness and curly people are saying it is just nvidia. Jonathan coming up, George Goncalves following the market selloff. Steven cook on rising tensions between israel and iran. David cole explaining why the ecb may deliver a surprise cut. Global bonds selling off as investors expectations investors slash expectations for a rate cut. Cpi is not cp. The Inflation Trajectory at the current pace is any issue for the fed. George is with us now. The data yesterday, do you believe or not to bed the idea that we are going to get a rate cut anytime soon . George i think it does push it off and that is what were seeing across all forecasters. This is the challenge. Once you get to a point where the market is underpricing what the fed has, it does call into question the timing. Timing is critical. If the data has pushed off, the election shouldnt play a role. I think they should cut in july. Im not going to change that part of the view. They think yesterday was any overreaction i think yesterday was an overreaction. We have this unsynchronized easing and the fed is delayed. Other Central Banks will be worried. This does add to volatility is in the 10 year more than the two. Jonathan the word overreaction, want to get into that. Do you think any upside surprise of six basis points was worth a 20 basis point move at the front end of the curve . George that goes to show how like of conviction that is in the marketplace and outflows can change quickly. When you are on hold and data dependent, both consent the fed, it is going to cause these sorts of reactions. Lisa jeanmarie did put it well from butchered bank, this calls into question if the bond with is a bond. At what point does it become a trend . From all of the nodes, it seems people are saying this is sticky and if you discount that, that is going to be at your peril. Why are you discounting that . George sticky versus critical inflation is. We have a long ahead of us with a lot of things that can change on both the growth side versus the inflation side. To only focus on efficient fear could call into question the oped from Mohamed Elerian is a good one. We could be trading 2 to 3 on inflation and to jeopardize growth until the fed will see the improvement or weakness in the economy, at that point it is too late. We talked about the dramatic moves in the treasury market. In the currency market, we saw the biggest oneday rally in the dollar going back to the height of the making crisis in march 2023. How much producing this is the difficulty and challenge to synchronize rate cutting cycle globally . George it comes down to the fx markets. We look what is going on with dollaryen, this gets into a vicious cycle. That is why the 10 year, the dollar, and will are critical. That trio is what is going to dictate what was forward. We had a financially using accommodative environment. If those burials start using, you will get tightening there. All of this stuff is in play. Jonathan the euro, 1. 07. That move in yields and in rates stateside, who does that upset more . Bank of england, doj boj, or ecb . George boj first come ecb second, boe third. We have looked at the ecb as making policy mistakes. I think they are trying to do proactive. I think they will have to ease before the fed. That is a challenge for them. To sit here and do nothing is not the right course of action. Jonathan do think there is any ability to go further beyond the june rate cut . George at a minimum what could have been his, you want to backpedal, this could enter into an environment where Central Banks ease and skip meetings and try to calibrate in between. Slow down the process and not changing her to every other inflation report. Jonathan 152 was the line in the sand of intervention and here we are at 153. Steve said a hot print would mean fighting market fundamentals, that is a difficult intervention proposition. Given where the fundamentals are and how strong the tide is against the boj, do you think they can intervene in the fx market anymore . George the challenge is for the better part of 18 months as the fed was hiking and all of these eases were present in, in many ways the bank of japan was banking on global Central Banks using and that would take pressure off of the currency. This does call into question that and therefore you start raising rates faster and you get into the yen trade. The japan story is critical. It is important to us. It does at a minimum need to have some sort of intervention. I dont think a movie on five will be tolerated. We dont know with clarity what is going to happen. They could raise rates even more than 10 business points at a clip. Lisa does yesterdays print challenge this that there is more value elsewhere . Whether it is risk assets or currency, it seems the u. S. Is overpriced. Does that gets challenged fundamentally based on the fact that the u. S. Is the one printing hot inflation . George if you look at your verbal bond stream, the u. S. Is the highest yielding for developed markets. New zealand and a few others. That is why it is hard for fixed income to go unhinged. This 450 level is critical. We could go to 475. None the less, capital will come to the u. S. Because of higher yields. That will benefit more fixed income than equities. Jonathan George Goncalves, thank you. The two year, 496. The 10 year, 455. We have to sit on this longer. There is a reason people have been so constructive risk assets this year. One was this leaf the fed had this space to respond to trucks. The emphasis was going to shift towards potential weakness and away from being worried about strength. I wonder how much that inflation print changes their story. Lisa it seems like the market is saying quite a bit. If you look at the price and the signals, the beginning of a narrative shift. A pretty massive nerd to shift where the bumps in the road is something retractable and people are not just questioning when the fed is good to cut rates but there increasing the rate for their stop at this is a longerterm diversionary story people are starting to grapple with. Jonathan of the people leaning towards neutering. Here is your leaning towards a new trend. Dani the 14 billion deal will likely be delayed. Both companies hoped they would see approval and it is second or Third Quarter this year. This has become a hot button issue. President biden for his part city with u. S. Steel remained mystically owned but did not stop short of trying to kill the deal. Tommy trumps that he was on the takeover. Difonzo has touched you which laphonza has tried to reach a deal with cabin employees. This would give them a 16. 5 wage increase and an inflation compensation bonus. The agreement will be valid and protect lufthansa until 2026. New york city and miamis return to office rates are almost 80 and the highest among major u. S. Markets. The data comes from and shows wall street is driving the rebound in manhattan with big banks encouraging employees to return to office. We can thank j. P. Morgan and Goldman Sachs. Those have been helping to drive the numbers up. Jonathan i am sure look of politicians are driving up to thank them. Lisa aggressively encouraged. What does that look like . I encourage you to come back to the office or we will aggressively enter your desk. Jonathan or adjust your bonus. Lisa i guess there are next feelings about it but this is the new norm. Jonathan up next on the program, growing tensions between israel and iran. Pres. Biden our commitment to israels security against these threats from iran and its proxies are ironclad. Jonathan that conversation up next. From new york this morning, good morning. [alarm beeping] amelia, turn off alarm. Amelia, weather. 70 degrees and sunny today. Amelia, unlock the door. Im afraid i cant do that, jen. Why not . Did you forget something . My protein shake. The future isnt scary, not investing in it is. Youre so dramatic amelia. Bye jen. 100 innovative companies, one etf. Before investing, carefully read and consider Fund Investment objectives, risks, charges expenses and more in prospectus at invesco. Com. Inthe future is notes, rjust going to happen. U hav. And if you want a successful business, all it takes is an idea, and now becomes the future where you grew a dream into a reality. The all new godaddy airo. Put your Business Online in minutes with the power of ai. Pres. Biden we want to also address the iranian threat. They are threatening to launch a significant attack on israel. As a told Prime Minister netanyahu, our commitment to israels security against iran and its proxies is ironclad. We are going to we can to protect israels security. Jonathan the u. S. And allies warning of a limited attack by iran and its proxies. It could happen in coming days. Steven cook writing this. It has been messaging against iran of the consequences of escalation. I dont think biden can work off the iranians. The iranians would look weak if they do not respond. Steve is with us stephen is with us. We have talking about a minute for some time now. Retaliation, what do you think it would look like . Steven there is speculation iran would attack israel. I think that is unlikely since it would spot inkind on iranian territory. I think is really diplomatic installations around the world are definitely in the line of fire. Not to twitter something not to torture something people say all the time in the middle east, but it is an i for any i. An eye for an eye. Israel attacked at a diplomatic installation. Annmarie if theyre going to attack a consulate or any official in a foreign country, what countries would be acceptable to iran to not start a fight with a foreign country . Steven i am certain they wont choose the u. S. As the place for retaliation. Europe is a likely target. South america is not unprecedented. Iranian agencies attacked a center in one assad wasin buenos aires. Patient is a place where iran has significant capabilities through its axis of resistance. Those areas would not even acceptable to host governments but taking a step of trying to attack israelis into the United States or certain western countries would be a step too far for the iranians. Annmarie i hope you can help me understand what happened when the iranians came out and said they were closing traffic over tehran. Their news agency removed the report above closing that airspace. Was this supposed to signal that they were potentially going to have an almost immediate strike . Steven there is a fair psychological affair underwear psychological warfare underway. This is the second time we have been warned of an imminent attack that has not come. Indeed, the iranians are trained to keep everybody on their toes and surprise them. I would put that in the category of psychological warfare. Lisa you are speaking from delphi, greece at the Delphi Economic Forum where you have been speaking with different leaders not only of countries, but leaders economically. I am sure they are asking you how bad is this . Is this going to percolate out . What chance of escalation do you see . What are you trying to tell them when they try to understand what we are looking at . Steven two questions people are asking, one is will the conflict widened . My answer is the conflict has already widened. If you look at the red sea, sued, in lebanon as well. Then they want to know about the states. There is a lower probability about iran and the United States then israel. If the iranians choose to attack against israel, the escalation spiral is significant. Lisa do you think is being priced in by these investors and people who have pushed into the side for now . Steven you would know better than i if they pressed it in, but there is grave concern about the conflict in the middle east intensifying and becoming beyond this red sea theater to a middle eastern theater. That is with the top of mind for people here and i imagine elsewhere. Jonathan can we finish on iran . I think iran has been misunderstood. They are very calculating, everything is precise. Can you talk to me about how misunderstood iranian policy might be . That is no way an endorsement of iranian policy. I just think they are increasingly understood. What are your thoughts . Steven i think that is right and it is misunderstood in washington. Policymakers and analysts in washington have believed there could be a different kind of relationship with the iranians come in more constructive one. Recent events have made it clear the iranians do not necessarily seek a better relationship with the u. S. They preferred to push the u. S. Out of the middle east. When it comes to this question of a response, i think you are right. The iranians are more calculating, they will take their time to determine where and when would be the most effective to respond to israels strike on the islamic revolution. Jonathan thank you for making time with us. Crude was positive. It is now negative by. 5 . Pulling on to 90 on brent. Annmarie you have to watch the heightened what the heightened geophysical risks could mean geopolitical risks could mean. The iranians take their time. They have a lethal way of going through this. They talked everyone on their Security Council before they decide where to go. I am looking for when the u. S. Department comes out and says do not travel to this country, when is really airspace closes, when airlines say im not going to fly over this airspace. That is when you know something, is on the way. Jonathan the last thing this mortgage needs is another big rally in crude. That is sure. Softer on the morning. Coming next, virginie maisonneuve. As s p 500 attempts and fails to recover from yesterday. Equity futures a little bit softer. From new york, this is bloomberg. Jonathan a delayed start to therapy, and by therapy im in the augustine international. I am going to talk to myself the next couple of days. Lisa i was going to say the same thing. Jonathan no one is interested what is going to happen at augusta international. Equity futures august be 500 down. Down on the nasdaq. On the russell, we are negative. The underperformance yesterday in the rotation trade was absolutely brutal. Large versus small, smoke gets hammered. People of age versus market cap wait, people way to get hammered. You saw the mag7, what is it doing outperforming on a day when art of 20 basis points . That was yesterday. Lisa it points to confusion. There was this idea of strength supporting cyclical areas, those sin companies and credibly challenged by the idea that Interest Rates arent going to go down because those tend to be more leveraged to where rates are at the moment. He these stories together, i cannot think of any other explanation then its confusion. Jonathan cpi, bond market big off, double digit moves. The two year yield we have talking about 470 and 4. 80 and overnight we are talking about 5 . Yields pulling back a touch by a single basis point. The 10 year. If you are sticking with june, youre clinging to ppi. Jobless claims, too. Lisa the question isnt are you cutting your rate call for this year, it is why arent you cutting a recall for this year . Why is this not indicative of something stickier . That is the reason why i am curious to speak with citigroup economists later because they are the ones clinging to june and what gives them that since that there is any opening . Jonathan mike of bank of america had this to say, still sticking with june. We think the unfavorable base affects on inflation mean the fed could be forced to delay the start of an easing cycle to the symbol of this year or march of next year. The longer you wait, the harder it gets to start. Lisa which is the political question. The reason this is a fight moment. This is a fed that wants to be politically independent. Anything they do will be perceived as political, especially if they cut rates into inflation that looks sticky , and economy printing jobs north of a month and talking about a close election. This is a difficult moment for a Federal Reserve that wants to stay out of the fray. Jonathan lets get to on exchange at other banks. The ecb, 1. 0732. The ecb decision coming at 8 15 with president lagarde speaking at 8 45. To cut in june is the base case but no longer fully pressed. The conversation we started the hour with was how yesterdays news would impact tomorrows moves. Annmarie it is causing headaches in frankfurt and tokyo because you see this wing on the currency pairs. When it comes to june and the ecb, should the ecb already be cutting . Christine lagarde said in december it is likely going to be june. When you see the cpi print happening in the u. S. , how difficult does it make that decision . Jonathan in the News Conference today, one challenge and i imagine someone is going to ask it, how important is the fx channel to present stability . Fx channel to press stability price stability. Lisa i am checking the euro weakens more, plane tickets to europe. How much could this be positive for the nation besides just importing goods at higher prices . To me, you have to think it is going to be a boost for people who want to fly. Is this not where your money goes . Jonathan my flights are already booked. Annmarie this is what youre has done so good after covid, the influx of americans that wants to go to spain or greece. Jonathan your flights are booked, too. There is a g7 if you are interested in a work trip. Try and make that happen. Annmarie i am close to making that happen. Jonathan more yuba state ahead, ppi and jobless claims at 8 30. Waiting to see if ppi will confirm cpi print. Commentary coming bitter from the Federal Reserve. 8 45. No offense to president lagarde, i will be speaking to John Williams of the new york fed. Lisa does this changes framework . Does this call into question how sticky disinflation is . People listen to three people on the fed, the vice chair, the fed chair, and the new york fed president. The new york fed president when he comes out to speak they see it as a proxy of jay powell. If he says this has changed the narrative we cannot have the justification to cut rates, that will solidify this narrative shift. Jonathan everyone has got any opinion on yesterdays cpi, including the president of the u. S. Pres. Biden i stand my prediction by my production that before the end of the year there will be rate cut. We dont know what the fed is going to do for certain. We have dramatically reduced inflation close to 3 . We are in a situation where we are better situated than we were to take office. Annmarie you think this is a heading for the fed, a massive problem the Biden Administration. Not only doesnt mean they might not get a cut going into the election, it is april. This means it is going to be top of mind for voters going into the summer when we are expecting higher gasoline prices. If you look at the items pushing up core inflation, housing, car insurance, clothing, education, medical care, this is hitting the american consumer. That is a massive problem. Jonathan i dont think he was out of line with those comments. It is always best to not go there. Dont talk about the fed and fed rates. Lisa this is the reason why they dont want to be cutting rates heading into inflation. They dont want politicians talking about them. They dont want to joe biden and for dont want donald trump. If they start cutting rates, who is going to talk about them . Everybody. Jonathan hot inflation prints to start the year shaping the financial markets. Virginie maisonneuve of allianz global markets, she sees a more stable inflation picture in europe and inflation destabilizing in china. She is with us now. Can we talk about what happened yesterday, why the mag7 outperformed on a day went bond yields were up double digits around the curve . Virginie it might be positioning of people taking advantage of uncertainty if they dont have enough tech in their portfolio. I think the mag7 is not particularly where you want to be. You have to look at tech overall and bet on quality trump strong Balance Sheets. Cybersecurity and the impact. I think on any retreat he to restart your portfolio you dont have enough. Yesterdays move is an aberration. Jonathan people have been hungry for the rotation, looking toward small caps, away from the mag7, more cyclical themes. Looking abroad as well to europe and japan and even china will recently. Do you think what happened yesterday, the repricing of a bond yields this from step trade at all disrupts that trade at all . Virginie we are at a crossroad of inflation in the u. S. Is more sticky. We have had meeting indication of this happening. It is very resident. You have this industrial manufacturing cycle picking up. Pmi in sweden, exports from korea to taiwan, i expect chinese exports to be wealthy. You have a pickup in the cycle. If that continues, earning inflation in the u. S. Aims to keep that. Europe is wellplaced on the inflation front. If growth falters and you stick inflation, this is an environment not as paul not as positive for the market. We have to see what happens with oil prices and geopolitics. Lisa you talk about china and investing in china which is a fascinating trade and a lot of people are getting on board. It comes after the hot cpi print, chinese inflation stalled out and it is moving in the opposite direction. How much is the increasing bet on china the diversification, the complete opposite story to Everything Else . Virginie this is what we have been talking about. They market is very cheap and the cycle is very different. We believe the deflationary trend in china is appeasing. It is not intensifying. At the same time we are about two thirds through the weight in terms of property issues and consumption is stabilizing. I believe experts will be picking up. An environment where it has a lot of sense. Annmarie we see Goldman Sachs and Morgan Stanley raising their outlook for chinas Economic Growth. Do you think it will be higher . Virginie for the First Quarter we could have positive surprise from exports. As long as we have quality growth, i am happy with it. What were looking at in china is the power of innovation. We have all the China Company china, the power of innovation, etc. It is really fascinating and i think a lot of people have not looked at it. There are Interesting Companies there. Jonathan can refinish on the u. S. At the prospect of difficult times ahead . There was a believe that ultimately what we are set up for is a hard landing down the road. Do you think there are chronic risks accumulating in the system . There is a phrase in credit which is survived until 2025 survived until 2025. Maybe we take bricks out of the security wall but do think that could be a problem . Where would you be focused on the economy . Virginie last two people expected six rate cuts, we were never in that can that camp. I think clearly june rate cut is out of the table. The question is expectations versus reality. If you believe we are on that first path where growth is more resilient, inflation is sticky. Movements, we have had a lot of talking restocking. That will continue to support growth. I think youre okay and you will have some rate cuts but it will probably not be what people expected. If you have no rate cut, i think the market is not there to take that scenario in place. We could have an air pocket that provides a buying opportunity. Jonathan thank you for being with us. Virginie maisonneuve of allianz global. The s p down a quarter of a percent. Dani mckinsey has begun is rezoned drop cuts. They have begun a slowdown in demand of Services Even after a record revenue last year. They hit about 380 staffers, 3 of their workforce classified as specialists. Mckinseys traditional staff would be affected and this is after they offered u. K. Staffers nine months pay to go away. Bad weather looks to disrupt the golf masters in augusta, georgia. The first round will not begin before 9 a. M. Scottie sheffler is favored to win. No favor has gone on to win the tournament since tiger woods. Tiger woods says he is still capable of winning a sixth green jacket if everything comes together. Kkr is weighing a sale of ipo or ipo of bmc Software Worth about 15 billion. Other firms have shown interest in acquiring houstonbased company. No final decisions have been made. Kkr still favors an ipo of bmc which piled confidently last year. At 10 30 this morning, kkr leasable have in exclusive with the officials. Jonathan coming up later, sitting down with lisa. What is the big focus for you . Lisa they want to grow to 1 trillion over five years but they dont want to increase their headcount and i want to talk about why. Is this a feature or a bug . An a high improvement story or Something Else . That is an interstate focus. Jonathan that is a theme. 10 30 eastern time. Do not miss that conversation. The ecb Rate Decision on deck. We may see the ecb cut as often if not more than the fed which was unimaginable. I think they are going to signal quite strongly that june is when theyre going to cut. Something the fed will not do. Jonathan that conversation up next. What about africa . Safari . Hot air balloon ride . Swim with elephants . Wait, can we afford a safari . Great question. Like everything, it takes a little planning. Or, put the money towards a downpayment. On a ranch. In montana. With horses lets take a look at those scenarios. J. P. Morgan Wealth Management has advisors in chase branches and tools, like wealth plan to keep you on track. When youre planning for it all. The answer is j. P. Morgan Wealth Management. Jonathan live from new york city following yesterdays glove about the cpi report, upside surprise, sparking the biggest selloff worldwide. Equity futures. 3 on the s p. Yields unchanged. Bramo has thoughts. Lisa yes, but it was broadbased. It was the super, it was everything. Having four consecutive months of 0. 4 month over month inflation is not great. Jonathan pumps are no longer bumps. The euro, 1. 27. The ecb decision on deck. We may see the ecb cut more often than the fed. Which was unimaginable months ago. Is having a huge impact on ability of pricing. Is it that in the bond market and the currency market. They are going to signal quite strong that june is when theyre going to cut. Jonathan an hour and a half away from the ecb decision, expected to hold rates steady put markets expecting a price cut in june. We see a chance the ecb will price a rate cut at this meeting heard the feds levy to cut rates but with less urgency than the ecb did david is with us on an interesting call. Does this today change anything about the way you see this ecb . David not the ecb but the fed pressure here. It might help some councilmembers and some decisionmakers to not see a big urgency of rate cuts. Wife . Some of the ecb mentioned they dont want to be too much ahead of the fed would we think this is a weak argument. The arguments for rate cuts are more on the fundamental side. Jonathan why do think it is a weak argument . Why is that so weak . David the argument against any really rate cut would come by the Exchange Rate with the ecb would every would be afraid of a weaker Exchange Rate. We see in opportunity to revive European Economic zone both because prices are rising faster than in the u. S. And switzerland and in china. A because change rate would help offset that the more you surprise markets with a rate cut , the more you have these effects which might help to rebalance a bit by its competitiveness which is pretty weak. Jonathan is this a call you think the ecb should cut rates today or you think they will cut rates today . David we think they have good reasons to cut rates. It is more in the camp of they should consider that. All the indications we have is that they want to be foreseeable. When you want to be foreseeable and guide financial markets, you wont cuts today. We think it is misplaced. We think Central Banks can live up to the traditional role of not being perceivable for financial markets. They can achieve the best effects for the economy and the Inflation Trajectory. Lisa are you saying the euro economy needs a weaker euro to fight the fact that prices have been going up . They are dealing with near shoring, chinas competition and trying to revive their Manufacturing Sector . David it would be more helpful than doing harm. When youre a central bank and you look at the Exchange Rate, you two effects. One is reviving economic activity. He received a tick. This is the case and in the euro zone and then you might be afraid he weaker Exchange Rate increases your inflationary potential, imported inflation. Right now when we look at the income on its the components and keeping inflation moving away from 2 , it is not reported inflation. We dont have supply chain issues. That is what we think on balance it is quite a good idea to rely on exchange and revive Economic Growth without negative effects on the Inflation Trajectory. Lisa john asked you about yesterdays cpa print and you said i believe the ecb has a meeting today. You are separating the two is the divergence from Central Bank Activity a feature and not a bug based on the backdrop . David it is definitely a future and not only Central Bank Activity, demand back drop. The u. S. Is still having Strong Demand of Economic Growth. Euro growth is stagnating. There is a huge difference in the fundamental backdrop which shows up also in inflation and Inflation Expectations. We think Central Banks should acknowledge this development and act accordingly. Annmarie you have some people calling for parity. Where do you see this paragon given the latest see this going given the latest data we have seen when it comes to cpi . David regarding fundamentals, divergent fundamentals will not be enough to drive the euro significantly lower. Unity acknowledgment of Central Banks and central bank policy. We think when the ecb indeed listens to the fundamental data and surprised fundamental markets, we can see the euro drops out of this trading rate. It had been stable in the last year. It drops out and goes below the 105 and in the direction of parity. Jonathan thank you. David call there with a stuff on the ecb, why they should be cutting Interest Rates. We will get the rate cut call at 8 15. The consensus view is no bridge cuts today. This from socgen this morning, if it looks like a duck and swims like a duck and , it is probably a duck. In this case, a problem for dollar barriers, bond bowls, and the ecb. Lisa or is it of future for pcv is into the future of the ecb . They want a weaker euro to stimulate the manufacturing industry. It has been stimulating the tourism industry. This is one of the key questions, how far can that are . Jonathan 1. 0729. Coming up next, we will catch up with katy kaminski, and, Maryland Governor wes moore. Katy kaminski coming up in five minutes. Short treasuries before and more reasons to be sure. Lisa she tried to go along for a hot second and said this is difficult. Key question here, what is the next step . We heard people talking about 5 10 year yields. Is this people getting overdramatic because it seems like something everyone is doing . Jonathan dont you like, was people in fixed income appeared to be traders . Where all of the headlines, the notes that people screaming buy with a tenure buyback of 450 . Lisa what conviction can you have when people cannot agree on what the terminal rate is . Jonathan 450. Lisa are you trying to sell something. Jonathan where were you . Where were do you at yesterdays option . Lisa i thought you were doing it. Jonathan i do the options. That is why i do not take calls, im busy in the afternoon doing bond auctions for treasury. Lisa i thought you would care more about it than. Her uncles unhappy. Im sensing an underlying issue. Its tmobile. It started when we tried to get him under a new plan. But they they unexpectedly unraveled their price lock guarantee. Which has made him, a bit. Unruly. You called yourself the uncarrier. You sing about price lock on those commercials. the price lock, the price lock. so, if you could change the price, change the name its not a lock, i know a lock. So how can we undo the damage . We could all unsubscribe and switch to xfinity. Their connection is unreal. And we could all unexperience this whole session. Okay, thats uncalled for. When people come, they say theyve tried lots of diets, nothings worked or theyve lost the same 10, 20, 50 pounds over and over again. They need a real solution. Ive always fought with 510 pounds all the time. Eating all these Different Things and nothings ever working. Ive done the diets, all the diets. Before golo, i was barely eating but the weight wasnt going anywhere. The secret to losing weight and keeping it off is managing insulin and glucose. Golo takes a systematic approach to eating that focuses on optimizing insulin levels. We tackle the cause of weight gain, not just the symptom. When you have good metabolic health, weight loss is easy. I always thought it would be so difficult to lose weight, but with golo, it wasnt. The weight just fell off. I have people come up to me all the time and ask me, does it really work . And all i have to say is, here i am. It works. My advice for everyone is to go with golo. It will release your fat and it will release you. This lack of stability will be with us for a while and i dont think they have a Clear Strategy to manage it. Even if they cut this year, it will not be as relevant. The door slip shut. Goldman sachs shift their call to july. They go from four to two. Everyone has had to make changes, including everyone in fixed income. Check out this board. On the 10 year, 4. 5 . Lisa in the yield space, speaks to revisions not only on the front end, but how far the fed can cut. Stephen englander not only revised his fed forecast in the near term but said we expect the trough to be three. 5 now. This is a feeling that inflation will run hotter for longer. Annmarie we have to wait for the ppi report to be the final nail in the coffin for individuals betting when the fed will cut. Morgan stanley saying it is in jeopardy and dependent on the ppi data, it could tell the fed toward a later start in the cutting cycle. Everyone is expecting we are all in towards the end of the year. Jon the estimate for jobless claims, 215,000 the previous week. New york fed president John Williams in december, he poured cold water on the december cut conversation, which was engineered by chairman powell by his boss. Taking a step back. Some people say this is the feds fall. They are always going to blame the fed no matter what but people saying the change in communication lucinda financial conditions at a time when inflation had not died. How do they have a different message . How do they give communication that counters the narrative in the market without undermining any credibility they have . Jon those words are part of does words reminded me of those words reminded me of someone. He said the change in super court inflation now 8 . Six month annualized inflation. We are sticking to our view that the fed will not cut rates in 2024. Is he finding more company as we get more data . Lisa the market confirms that. We are seeing two rate cuts being priced in and tepidly. Theres a question of what we could be missing. Someone came out and said just quit. We are seeing disinflation. Check out wages. You do see people point to quits, Small Business optimism falling. There are reasons to see this. How much can the fed really justify making a shift given the hot inflation reads, the strong labor market prints, and the political backdrop . Annmarie paul donna paul donovan is saying they are seeing disinflation in every Consumer Price prospect but in certain states. Its difficult to argue that structural inflation stickiness exist when every key sector has deflation. This is what makes it so complicated. Jon ppi jobless claims coming up. Equity futures on the s p. 25 , softer after yesterdays selloff. Bond yields unchanged. 4. 5457 on the u. S. 10 year. The dollar stronger against the euro. Coming up, kelly on the risk of higher inflation. Maryland governor wes moore on rebuild efforts in baltimore. And ian lyngan. Investors closing in closing the door on a june cut. Someone writing the real concern is future cpi prints giving current commodity trends. Should the inflation data start to pick up further, we could see even higher rates. Katie is with us for more. I want to understand what things look like looked like for you yesterday. Short signals had been consistent this year. They had not come to fruition because they have been anchored on a dovish fed but whats happening now is the breakout we have been looking for in fixed income, which is basically identifying that there is more inflation than people would like and inflation will be harder to get lower. The biggest thing i have been watching before yesterday was Commodity Prices. Take a look at precious metals. Industrial metals and energy. They have started to move substantially before this event, which is going to be a tailwind for a better inflation number in the future, which means we are here for longer. Jon why should you stick with the bonds trade for longer . Can you build on the signal coming out of the commodity market . Crude 90. What gives you the impression that the lifting commodities is sustainable . Katy if you look at where some of the Commodity Prices have moved, its been substantial. Take a look at copper. Take a look at gold prices. Its a little different. Also energy. When you see how much those prices have increased over the last six weeks, we have also seen some of this inflationary pressures we saw in agricultural sectors dissipating and bottoming out in february. This means a lot of these disinflation trends and now uptrends are starting to be visible in rock commodities, which tend to be the leading indicator. This is exactly what we saw in 2022 when we saw such a high inflation print later. So there is some concern that this will be a tailwind for the narrative of the future cpi later this year as these prices put pressure through the system. We have been talking about where the bond market moves have been coming. Its been interesting on the short end. Directly correlates to fed policy. The long end is the confusing part because we see people reset longerterm Inflation Expectations. Where are you most short . Are you seeing these shifts in momentum in the long end with people questioning whether the fed has the conviction and will to bring inflation lower . Katy signals across the bond curve technically are still short across the curve. A little shorter stronger on the short end, but there is still a lot of concern for longterm bonds. The concept of this is straightforward. If inflation remains sticky, theres a chance that owning longterm bonds could have a deterioration in value. Should we stay sticky in inflation or should we cut and not need to and thus those bond prices in relative terms with inflation sticky become vulnerable . A lot of people are not thinking about how longterm cash flows are vulnerable to sticky in longerterm Inflation Expectations, which means there is still downward pressure. Lisa you have people who say look to recent history. Every time yields go to a certain point, it brings buyers in. What are you seeing on the technical level about whether people are lining up to buy at certain levels or whether that bid has evaporated along with the narrative . Katy this is not a conversation im seeing now because i think people need more clarity on how long its going to take to cut. If they really do believe the cuts are coming sooner rather than later, then you would definitely expect people want to get in and lock in those higher rates today, but given all the commentary about inflation stickiness and the longterm battle we have ahead, it is unclear at what point we will get that signal. I know we got it in october when we saw a 5 10 year, but we are still far from that. So maybe 5 is the point when people start to say theres no way we are going higher. But it still could be a case like i said that we had a big steep in her where people are concerned big steepener where people are concerned. Annmarie you name checked gold as being different in the commodities space. What do you give this gold resilience to . What does it come down to . Katy for us, i think its about real rates. Thats been something thats interesting to me for the past month. Gold prices have gone way up. If you take this simple analogy. If you were going to buy your s p with gold. In some sense, it has not gone up in real terms. That something when did is they get out in an inflationary environment. Inflation is good for equity nominal prices but the fact that gold prices have increased so much suggests that real rates are not as attractive, so people want to have gold as a store of value, so ingold terms, they have gone down. If you kept your goal at home, you could buy your s p. Jon i will have to go back to those comments and listen to them. Can you explain what on earth is going on with gold and its relationship to bond yields . For most of this year, gold has rallied, yields have climbed. It has been developing. Then yesterday happened. Yields ripped, gold dropped on a hot inflation report. What is that about . Katy that is trickier because its a oneday move. The most recent move to us has looked like decreasing real yields. With inflation increasing, you want to hold gold as a store of value. On the other hand, when you have the situation like yesterday, it may be the case that people see it as an opportunity to take profit in gold. Im not sure because yesterday was an idiosyncratic day. But in general, gold has been increasing as a safe haven asset where people are thinking about inflation going up as something where you want to store value. Thats why its interesting that the s p relative to gold has not increased. Jon it was a oneyear year move in the bond market. Katy, thank you. Short fix that fixed income, short bonds short fixed income, short bonds. Lisa bitcoin was up, i want to point out. I oneday move will not do anything but i wonder if the new trend that is developing is short barnes, lauren gold short bonds, long gold. This question of whether it is the new ballast, the new haven on the margins Given Central Bank buying and other concerns. Jon its hard to keep up. More to talk about. Data, ppi and jobless claims. 8 15, an ecb Rate Decision. You will hear from president would guard and John Williams of the new york fed, some comments hopefully on yesterdays data. Equity futures negative by one third of a percent. Bloomberg brief with danny berger. The ecb is now and what he calls a pickle says the allianz ceo. A100 basis points difference. Markets could be spooked. He spoke to me earlier on the bloomberg brief, which you can cash at 5 a. M. Every weekday. A whos who of business and tech leaders gathered at the white house last night. Jamie dimon, larry fink, tim cook, jeff bezos were all among the attendees. Also some celebrities were in attendance. U. S. Credit card delinquency rates were the highest on record in the Fourth Quarter according to a report from the fed bank of philadelphia. Almost 3. 5 of credit card balances were at least 30 days past due at the end of december. The number of debts that were 60 and 90 days late also climbed. Jon next, antitrust action heating up over u. S. Steel. I stand by my commitment to American Workers. I will keep my word. I stand by our commitment to our alliance. Jon we will follow that story next on the program. Live from new york city this morning, good morning. Jon equity futures on the s p negative by one third of 1 . Yields up again, nothing like yesterday. Doubledigit moves yesterday through the curve. 4. 5559 on the 10 year. Antitrust action heating up over u. S. Steel. I stand by my commitment to American Workers. Im a man of my word. Im going to keep it. I stand by our commitment to our alliance. This is exactly what we are doing. Jon pledging his support for American Workers as an antitrust probe is opened for nippons bid for u. S. Steel. Could she do saying japan believes the u. S. Kishida saying japan believes the u. S. Will do this appropriately. Can you walk us through this for the u. S. President on these issues . I would encourage people to think of how long the rope is. I would imagine it go through the november elections. Ever since this deal was announced, there was immediately an understanding that this will take a long time. Theres no reason this has to be approved before the election. I think to acknowledge your point about how tricky a tight rope this is, they need this to be thoroughly vetted, dot all the is and cross all the ts, but likely it will take into the Fourth Quarter of this year and i suspect after the election. Theres no reason to risk any tensions from either side. Nippon steel can be patient and i think the doj will do a thorough accounting of the entire situation. Jon they are lucky this is japan because they have been very respectful, very aware. They know what is going on. Is it working. When you make moves like this or suggest you will too attractive vote to attract the vote in places like pennsylvania, are there signs this is beginning to work . Henrietta the way i think about the election in this stage is you are trying to see an absence of unforced errors. President trump came out aggressively against the deal and President Biden will not give him an inch. This administration has been very conscientious of where the Trump Administration in 2017 took us on trade. All the existing tariffs on china are still on. The steel and aluminum tariffs have been suspended but are still in existence. So theres this weird nexus of the world where democrats and republicans under former President Trump have sort of overlapped a lot on trade and i think they are both may be similar points and its one the democrats feel comfortable making. And former President Trump is trying to outflank. Lisa your base case is annmarie annmarie your base case. Its still one of the top concerns. When we go out and take these surveys. How do you see the president shifting how he talks about the economy . Because it is not working. Henrietta it has not worked all year despite the fact that the economy has improved and cpi has come down substantially since the midterms. I would encourage people to look historically at what voters say they care about. Its consistently the economy. The economy, inflation and your polling is 31 of the populations number one issue. The issues are tremendously important, especially at the Household Level and amongst female voters in the United States. They have a 10 more negative view of the state of the economy than male voters, perhaps because they are more exposed to making household purchases. Gas prices continue to be an issue. Look what happened in 2022 and 2023. Even when inflation was 9 in the runup to the election, democrats won acrosstheboard. And that was in the senate, where they picked up a seat, despite having majorities in the house, senate and white house. President bidens Approval Rating was underwater and they still gave the Republican Party the worst showing of a marne a Minority Party since the 1930s. So when people say the economy and inflation are the number one issues, how do you justify them going into the ballot box and pulling the lever for democrats, which they have done consistently just as recently as five months ago . While immigration and now crime and terrorism are top issues amongst republican voters, what we see time and again, specifically just five months ago in ohio and kentucky as well as virginia, is that abortion is in fact driving people to the polls. When they go to vote on anything, they pulled the lever on democrats. I suspect its largely abortion. So the rulings on ivf in alabama, the new ban in arizona, which was just unveiled last night by republicans in the house and senate there, are a real problem and a real factor in the election, more so than economy. Because its sort of nebulous to say im voting on the economy. You go in and say what do i actually change. Its all is like a protest poll. You going to the new polling booth and you are like, what matters is abortion. In that sense, what is going on in arizona, does that shore up that the democrats can control that senate seat . Because when it comes to the senate, the republicans have an advantage. Henrietta republicans are in a position of extreme strength geographically and statistically. All eight seats are democratic seats republicans are putting up fights for in mostly purple and red states. Democrats have no business winning four election cycles in the senate in georgia the last couple years, let alone arizona. I would say there is one reason for that and its ever since 2016, its donald trump and abortion. Jon and you see how its becoming a bigger problem for them, how President Trump and even kari lake have responded to that decision. How are they responding . How are they messaging to the electorate . Henrietta arizona is a perfect encapsulation because the candidate is more progressive than joe biden and kari lake is an avatar for donald trump and kirsten cinema for nikki haley. You are seeing trends in that state consistently perform biden and trump at the top of the ticket. Kari lake is trying to distance herself from her historical statements on abortion. Now they are sort of trying to backtrack. To get back to the original point about unforced errors, if the former president will say i support states rights, then the state asked the next day, this is exactly what he said he supported so its hard to distance yourself from it. Jon we are seeing a lot of it. Thank you. Henrietta treyz. Arizona is fascinating. Annmarie they had a potential incumbent when it comes to kirsten cinema. She decided to become an independent is not running. This law was on the books before arizona became the became a state. This could potentially give democrats not just a seat but by the presidency. Jon we support states rights but not decisions like those seems to be the theme. Annmarie how do they communicate . We know donald trump and republicans struggle with women, suburban women. A ruling like this is unnerving. Even if they are annoyed with grocery prices. Jon jon big focal point going into november. Equity futures on the s p softer, down one third of 1 . Next, baltimore hoping to have its port fully restored by the end of me. Marilyn governor wes moore joins us next. From new york city, this is bloomberg. Her uncles unhappy. Im sensing an underlying issue. Its tmobile. It started when we tried to get him under a new plan. But they they unexpectedly unraveled their price lock guarantee. Which has made him, a bit. Unruly. You called yourself the uncarrier. You sing about price lock on those commercials. the price lock, the price lock. so, if you could change the price, change the name its not a lock, i know a lock. So how can we undo the damage . We could all unsubscribe and switch to xfinity. Their connection is unreal. And we could all unexperience this whole session. Okay, thats uncalled for. Jonathan on pause. Yesterday was a week or years worth the price action in the bond market. Softer again on the s p. Negative one third of 1 . Down 7 10 of 1 on the small caps. The small caps yesterday getting absolutely hammered. If you are away from the market yesterday this is a big reset for you. The twoyear with the move of about 20 basis points. Yields are a little bit lower by a single basis point grade the 10 year with a big adjustment talking about double digit moves with the 10 year, 30 year. 450 five on the 10 year. Lisa has talked about auctions. Yesterday was a really sloppy one. The 30 year bond 22 billion worth this afternoon. At a time when people cant put a finger on what inflation will be over the longer term. It was a reset about how sticky this inflation is and what it means longer term which is why you had dealers taking up the greatest amount of the 10 year Auction Going back to late 2022. Do you see a repeat of that as people pushback and say wait a second we have to rethink what levels are we looking at in return. Jonathan lets get to affects and start with the euro. The euro breaking down to about 107. Later on this morning about 45 minutes from now. We get the ecb Rate Decision. Stronger dollar in the last 24 hours. For the japanese, for the bank of japan weve been talking about 152 as the line in the sand. We cleaned out 153 in the last 24 hours. Its not something officials can easily fight against because it is just a fundamental shift. The dollar ripping of the greatest pace since the banking crisis in march of 2023 so at what point to Central Banks welcome us and did what point do they accept it and how much do they try to fight it. Under surveillance this morning fresh read on the u. S. Economy in just under an hour with jobless claims at 8 30 eastern time followed by fed speak. We are from williams, collins, a lot more going into the weekend as well. Its got to be the focus. Of the big three on the fomc. The new york fed president his thoughts on what happened yesterday morning. Annmarie and what is that mean for the path of the fed when they start to say its good to be two or me eating less. I he said we are making a lot of progress we need to be humble about how easy it is to get there so the fed wants to be more humble and steve yesterday called that a hot landing and whether or not the fed and potentially will hear from the fed president whether or not they will have to accept a two to 3 inflation landing to cut rates and continue the economy. Humility that we all need a dose of. Unsure whats happening in the economy and markets. The last couple of weeks talking about big rotations and markets to small caps away from mega cap tax. Mega cap tech they do ok. Amazon andy jassy publishings annual letter to shareholders its betting the infrastructure to become an essential part of the generative ai boom saying much of the world changing ai will be built on top of guesswork. I guess the shareholder letter this morning was a pitch to investors because this is where it will be for ai. Stop telling us we are losing the race with microsoft this is absolutely in the repertoire and we are doing just great. Whether people buy it, it is in terms of consolidation cloud ownership in terms of the ai space and dominating it in a way google is having a lot of trouble with. He talked about how they want amazon to fuel the Artificial Intelligence boost efforts to build amazon franchises, groceries, etc. Its basically the same thing but revamped and a lot more flow of that fire. A little bit softer in the premarket. The ntsb says its investigation into the bridge collapse is only on the electrical system. President biden saying the federal government will pay for the recovery and rebuild. The governor saying he hopes to restore full service in baltimore. Police joining us is the governor wes moore. I know its been a difficult month for you and the people of your state. Very difficult. The president of the United States has committed to funding the cost of the rebuild. How confident are you you can get that financing through congress. Im confident that it is imperative that we can get it. If you look at the Economic Impact the port of baltimore is worthy and contributes about 70 billion to the American Economy. The port of baltimore is the largest port in this country for new cars, for heavy trucks, for agricultural equipment. For coal the huge chunk of the American Economy relies on the port of baltimore and so i am thankful the president has led and rightfully acknowledge what happened last week was not just a human catastrophe. We lost six marylanders during this catastrophe and it was not just economic its astra fee for maryland but for the region. This was a catastrophe for the country so our ability to rally and a bipartisan fashion and be able to get that and reopen the port and get the bridge rebuilt is going to be a national priority. Jonathan reopen the port and reopen the bridge can we deal with the first one first. Reopen the port, how straightforward is that going to be . Gov. Moore weve never had a maritime disaster like this where you have not only a vessel its the size of the eiffel tower and the weight of the Washington Monument that is now stuck in the middle of the Patapsco River and part of it is because it has a bridge, an iconic bridge sitting on top of it. 3000 4000 tons sitting on top of the bridge. So this is still remarkably perilous operation where we have divers in their every day and they cannot see anywhere between a foot or two in front of them. Because of the amount of wreckage in the water. The ability to open up channels that can now have 14 foot depths. We have had 59 commercial trends transfers that have already taken place. And hopefully by the end of the may we will fully operational functions of the port. Annmarie what about the rebuild of the bridge . What is this timeline look like . Gov. Moore the rebuild will be a longer timeline. That over 36,000 people went over that bridge every single day. That was the bridge that got people from where they lived to where they worked, to where they went to school. It was also a key and crucial part of Port Operations because for the port of baltimore its not just Maritime Operations its also truck operations. In order to truly get the port of baltimore up and going in the same kind of fashion it was before getting that bridge rebuilt is going to be imperative and we know that will be a longer timeline we are committed to making sure we get the key bridge rebuilt. I know thats why you will be in washington today speaking to lawmakers about rebuilding this. I was struck by what was said yesterday, he says he wants to get this rebuilt as soon as possible but says it is bureaucratic governing and lengthy environmental reviews blaming on democrats for this bureaucracy that could potentially make this a longterm process and not as quick as you and residents of maryland want to see. Do you agree this should be fast tracked . Gov. Moore im thankful senator cruz is a yes on making sure we can get 100 funding. We get the port reopened and also the bridge rebuilt. I also know the white house. I have i had my first call from the white house at 3 00 in the morning on the day of this tragedy. The secretary of transportation was literally down there with boots on the ground for noon to be able to assess the damage and what they can do to help. I have yet to receive a phone call from senator cruz, a visit from senator cruz. I would welcome him to come to baltimore to see the circumstances and the situation we are dealing with and im sure if he came he would see there are members of the Biden Administration who have been there the whole time. I know this needs to move quickly. It needs to move fast. We need to focus on safety and we have to get this rebuilt and im glad we are building a bipartisan support structure around what its can it take. Lisa you talk about how quickly its been a rebuild the brit important it is to rebuild the bridge. From every facet of the region how much you exploring other types of financing if it doesnt come from the government weather is issuing bonds or getting publicprivate partnerships. I think that all options should be on the table and all options are on the table. I dont come from a political background. I spent i was a perry paratrooper with the 82nd airborne division. I started a business when i left the army so i understand the moment of Public Sector and private sector, that they will play in this. Weve used every level lever in our disposal to address this issue. I issued an executive order that really 60 million of state funding for port workers. We signed legislation that focused on things like providing scholarships to children of transportation workers and also providing additional supports for businesses. We also helped launch something called the Maryland Tough Baltimore Strong Alliance which is over 80 organizations private sector, businesses and philanthropy we raise 50 million going towards port workers and also for businesses to do things like not letting off their workers. They have to move operations in the port of baltimore theyve committed to bringing them back to the port of baltimore. So we know its important to use every single lever at our disposal and every sector, private sector, Public Sector, philanthropy have to be involved and at the table for us to get to our longterm conclusions. Lisa you fully understand the importance of infrastructure and the ramifications could be the longer this goes on. Is there a dropdead time where it takes two years and thats the maximum it could take to rebuild this bridge and get operations to reopen the port to get things back up and running where it maryland and baltimore can withstand that versus after that word becomes a real financial weight that has much more punitive consequences . Annmarie gov. Moore its a financial weight now and its the reason we are moving as fast as humanly possible. The reason it when he 47 operations and that cadence, that speed is not going to stop. Im committed to making sure we are, moving with speed on this. There are tens of thousands of port workers the right now are being impacted by this. There are entire communities that have watch their way of life completely up ended. There are industries the country relies on that are now at either a stop or a stall because of whats happened with this tragedy. So how imperative it is we move fast with this sits with me every day. And i know we are going to an ondemand 20 47 operations until we accomplish those goals, ring closure to these families, reopen these channels, make sure we are taking care of our people impacted by this and getting the bridge rebuilt. Jonathan how much money do you need . Gov. Moore we dont have an official price tag on that right now, we know this is going to be a long journey. We know this will be something that is expensive. We also know whats taken place thus far. If you would ask me two weeks ago and see what i saw and said two weeks later we would have two commercial channels open but by the end of this month we should have up to a 35 foot depth of draft that should be able to get the new cars and rollon rolloff the port of baltimore relies on and by the end of may we should have the port fully functioning i wouldve said when you look at the damage and devastation we saw i would say that seems very ambitious but thats where we are. So we know this is going to be a longterm, we know this will not be inexpensive. Its a journey we have to be committed to because this needs everything means every thing to not just our region but longterm growth of Maritime Operations. I know this is going to be a long road ahead for you and your state and an ongoing conversation hopefully we can talk to you again in the future. Thank you. The governor of maryland, difficult conversation after that baltimore bridge collapsed. Its important to ask im not expecting a precise figure. If youre going to congress they want to know what the price tag is. Lisa and to understand how its going to be deployed. How challenging it is to move something equal to the monument statue of liberty or eiffel tower over it. At what point to some of the dock work move away from the region. At what point does the traffic push people away from living in that region for all these longerterm implications that go on the longer it takes to rebuild. Annmarie to your point jonathan how much will it cost. When professor the university of chicago is looking at what happened when the mario cuomo bridge, he said its going to be at least 4 billion. And potentially that number can get higher. A big number and may be definite commitment as well. Stories elsewhere heres your bloomberg brief with dani burger. Dani the u. S. And its allies warning of a strike by iran or its allies. The attack may happen in the coming days. A significant widening of the conflict. The Justice Department has opened an extended antitrust investigation into the takeover bid for u. S. Steel. The companies had hoped for approval in the second or Third Quarter but this will likely delay at. The takeover has become a hot button issue for the selection. Residents by and says he wants u. S. Steel to remain domestically owned but stop short of making an explicit push to kill the deal. Donald trump said he would try to quash the takeover. Bad weather looks set to disrupt the first day of golfs u. S. Masters. Officials announced the first round wont begin before 9 00 a. M. Eastern. The favorite to win his second green jacket. Since tiger woods did in 2005. As for woods he is still capable of winning his sixth green jacket and six major if everything comes together. Thats your brief. Nothing else matters this weekend. Nothing. Scotty, rory mcelroy. Ive got no idea when. When does it end . Jonathan sunday. Why . Annmarie we have a few days left. Lisa i get to watch him just talk to himself or the screen. Jonathan everyone at home knows this is the most therapeutic Golf Tournament on the planet. Its just quiet and beautiful. There you go. You can join jim this weekend. Slamming the door on june. The sound you heard was slamming on june. He can convince the committee of something the committee does not on average want to believe. Live from new york this is bloomberg. 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. Jonathan session lows on the s p 500 negative by 0. 5 . Softer yesterday, yields off a single basis point. Adding to that 10 year yield. After a double digit move yesterday. Slamming the door on june. The sound you heard was the door slamming on the june rate cut. Jay powell wants to achieve consensus. It can convince the committee of something he doesnt do on average that they dont on average want to believe. Id be happy enough if they started to cut rates in june but i think this means they will. Bond yields soaring on the heels of another health cpi print with investors excepting the first rate cut to come in september. If the fed needs more convincing, running up against the optics of cutting rates and meet me after the president ial election. We are not willing to take a september 1 cut off the table but it would require a sharp rush to justify the pondering is september departure point. Good morning to you. Starting at 8 30 yesterday lets pretend this just dropped. If we were a few basis points around. 4 prayed how different would our conversation be this morning. If we had seen a. 3 print is that of a. 4 we would be looking at the data and might be parsing through some of the details but we would be thinking the fed headed right to assume january was just a bump on the road to normalization and we would still be talking about rate cuttings with the fact we are here, no one is expecting june. Everyone think september will be hard to pull off. I think it is a fascinating moment. Jonathan how many decimal points is it looking to . The fed is looking at the translation of cpi and ppi to core pce and we dont actually have a solid estimate of what pce is going to be yet we will get that after ppi today. Lisa i wonder about how much people are looking at the potential for a Federal Reserve to make a policy era based on the political calendar. Essentially they have the same conviction they had earlier about the economic backdrop and its highly inconvenient to cut rates at a time when inflation is hotter than expected. And you have north 300,000 jobs claim. I would argue the negative impact from Monetary Policy already occurred and that was in the form of the december rate. Powell wanted to get ahead of the president ial cycle, socialize the idea of cutting rates and thats why we rallied into the end of the year and the fed has been walking that back. We are talking about how that how much do you think that has been fueling what we saw yesterday versus the side story to the whole thing. I think its the resilience of the labor market thats really driving the super court measure inflation. We had three relatively strong average hourly earning prince during the First Quarter and yes the lofty valuations in the equity market mattered, the comparative stability in the Housing Market matters as well because it can to be so the wealth effect but at the end of the day if we have a 3. 8 Unemployment Rate its difficult not to see some degree of inflation on an arguably sustainable basis. Annmarie given the potential we see more sustainable inflation on this basis, when you look at the job market i cant get over more people working more than one job to keep up with paying their bills. If that kind of deterioration worries the fed. Ian we tend to see that dynamic develop at the end of a cycle. Its similar to the way we often see a divergence between the and establishment surveys when things are about to turn. I would be very surprised we havent seen a more significant correction towards a higher employment rate and a weaker jobs overall. Jonathan is this a screaming buy now. Ian its getting to the point of being a screaming buy. We did the Client Survey last week. This was ahead of the payrolls number and the average response said it would be interesting people would be interested in having treasuries at roughly 465 if we did that survey now i imagine that would be higher. Jonathan people say theres a point where they want to buy and the treasury market start selling off they run amok. Ian i think people have a spread from where we currently stand where they would get really excited. It always seems to roll a bit higher. If the fed does not cut rates in june does that make you more bearish or bullish on the market . Ian it makes me more bullish on the long end because the reality is as long as the feds holding that 2 inflation target they might find themselves in a situation where they have to cause a recession or more material slowdown to get inflation back to 2 so its a bit counterintuitive because everyone is now in the no landing or hot landing camp. This complicates things for the fed. Jonathan lets finish on language if we can. Theyve repeatedly said its too early to know if its more than just bumps. I think this is a meaningful change in the broader inflationary. It is more than a bump but it is does not mean the fed has lost control of inflation. Good to see you as always. From this bond market an extra 15 basis points, an extra 20 basis points in fixed income. You want another 20. 4. 56 on the 10year. Very close to 5 . Coming up in the next hour the third hour of bloomberg surveillance we catch up with jason thomas of carlisle, looking for the euro to drop back we will speak to robert in city the ecb Rate Decision about 20 minutes away and then 15 minutes after that on deck ppi and jobless claims which will be the final read in terms of understanding the components for core pce which is what the fed looks at. What we just heard is this was a clear pivot point. This was a shift in terms of what the fed can do and have the markets perceiving that. Thats what i want to hear from the fed president. The highlight might be John Williams. If we get some comments on that inflation data from yesterday. If you are just joining us welcome to the program we are lower again. 0. 5 . From new york this is bloomberg. What the fed has done is put up or pressure on main street usa. May be bump is the new transitory. No ones talking about a reacceleration of growth or reacceleration in inflation. I think its a fundamentally disinflationary economy. We heard from many years. This is a problem. This is bloomberg surveillance with Jonathan Ferro , Lisa Abramowicz and annmarie hordern. Were a few weeks into q2. First trading day of the year. Were getting it six to seven rate cuts in 2021. Here are three months later. Bond yields are higher by more than 70 basis points. Yesterday we got an extra 20. Doubledigit move throughout the curve and here we are pricing in plus seven not seven, not six, but maybe two or nothing. Lisa people flirted with transitory early this year. Thats essentially what we are looking at with the fed theyve never talked about this. The market talking about immaculate disinflation. Bumps in the road repeatedly. I think with quote of the year so far, bumps in the road for the new transitory. Maybe shes got a point. Annmarie i was struck by what ian said. How uncomfortable politics might be of this because you see the market pushing back in september, what he had to say was with the fed did in december and there fed pivot and the rally weve seen in the equity market that was the election hype that powell set the table for not this potential cut a month or two before the election. Monetary policy having an effect. That word, uncomfortable. 30 minutes from now we get jobless claims and ppi. 15 minutes before that you get an ecb Rate Decision. You hear from president Christine Lagarde at the European Central bank and we talk about what uncomfortable looks like in foreign exchange. Its dollaryen taking up 153 and maybe boj can intervene because it goes against the fundamentals of the u. S. Economy and the fundamentals of fed reserve policy. How uncomfortable will some of the Central Banks be . Lisa you know its uncomfortable the next 45 minutes sitting here. Looking at this about the fx. Jonathan how do you feel . Annmarie what if he misses his tee time at the masters. Jonathan delayed from the weather. Good news. Carry on. Lisa im thinking to myself how much does it actually benefit for some of the Central Banks. Going back to the ecb and the euro. On the margins not too much. They can diverge but just not for very long. I wonder how much Christine Lagarde annmarie the top currency diplomat saying recent yen moves are rapid, disorderly quit moves. Wont comment weather overnight are excessive. Excessive moves could affect the economy. Continuous almost obsessiveness where is that in the sand. Im not sure if we will get that kind of uncomfortableness from Christine Lagarde. Jonathan basically saying this is more uncomfortable for the boj than it is for the ecb. Essentially maybe this is what they want to your point. They want a weaker euro because the growth compared to the United States is a very different story. Lisa the fact that germany is the sick dog of europe right now and was the strongest dog. Does a lot of china competition especially with inflation which does lead to the currency channel. Jonathan equity futures on the s p negative by 0. 5 . The euro a little bit softer. Yields up again by two basis points. Coming up we will catch up with jason thomas. Jane foley reacting to the ecb decision. We begin with top story. Dimming rate cut hopes. Its more than likely rates would move up and down. With their guidance toward rate cuts. That isnt the case for cuts. Jason joins us now for more. Wonderful to give you give your thoughts on the program. I think the discourse needs a change. Since the fomc meeting weve reserved a massive easing of financial conditions. Stocks up by 25 on average in that rally. 10 year yields fell by only over 100 basis points. And also credit markets. If you look at the spreads and highyield bonds just over 300 basis points within 50 to 60 basis points for that time series dating back since 1996. This response in financial conditions since november is reminiscent of what we saw when the fed launched rounds of qe in the past decade. Its not the base rate which has remained unchanged that is so central to inflation determination but these broader financial conditions. I think today the fed has to look at this data, a look at the Services Sector the looks to be bursting at the seams it experiences Entertainment Services continues to grow. And really just change this discourse. Looking forward we dont see any rate cuts. And they allow for tightening of financial conditions that may put you in a situation we are feeling more comfortable on the inflation front. Jonathan the fed chair says we are sufficiently restrictive. I think as of november the fed said they didnt need to hike further this financial conditions a titans significantly prayed they did the feds work for it. That was right at the time. When you look at whatever metric one wants to look at or collection of metrics to try and ascertain where they stand, its hard to say for the three months of the year its not the base rate that matters. The fed funds rate is overnight Interest Rate thats applied to about 85 billion of transactions. Its meaningless, its only the extent the instruments, the Balance Sheet debate base rate influence financial conditions. On that score you would have to conclude policy has been too easy to hit a 2 inflation target. That gets into questions about is the fed effectively implicitly moving to a higher target if the discourse doesnt change i think thats going to be the takeaway among many Market Participants. Lisa as people look to it two to 3 range for the potential for inflation. As an investor though you look at how easy financial conditions have been do you push against that, do you sell credit and avoid those areas and say this is a fed that wants to remain accommodative. Jason i think running the economy hot may turn out just fine. The economy is performing very well. I think the risk in the situation however is the federal budget deficit and what i mean by that is some Market Participants may include desk conclude their moving to a higher inflation target its actually succumbing to fiscal dominance. Based on the funding needs of the treasury. Setting policy on the net interest expense which has been growing exclusively. If that happens if thats a broadly shared sentiment, a watch out for longterm bond yields because of a central bank is setting policy on the basis of what the fiscal needs to fund itself, it loses control of the price level. These are tail risks, this is not anyones central forecast but as these perceptions gain hold you could be looking at much higher longterm bond yields and much steeper curve. For me in this environment i like formulate loans, clos in a way you are profiting from riding out these base rates. This idea of needing to buy bonds because they go to 4. 5 or 6 at some investment grades. Thats proven to be a bad trade and i think theres a lot of embedded Duration Risk that people need to be cognizant of. Lisa whats your understanding of what benchmark rate becomes restrictive for these companies . At what point these higher yields really do pose essential risks to their Business Models . Jason i do not see existential risk but what i would say is over the past several months certainly much of 2023 the expectations of rate cuts and the expectation that the terminal rate is still much lower than current levels of the fed funds rate allow a lot of businesses to swap twoyear, three year to fiveyear and lower their borrowing counts. Its not the overnight rate that matters. If you have a flat curve of 5. 3 or an upwards looking curve from 5. 3 that would be more than sufficient. In my view to bring inflation down to target. Its not the base rate that matters here. Secondly i would say one of the effects of higher Interest Rates thats been interesting is increasing finance costs so its different for businesses and consumers to buy homes but also durable goods and renovations. The spending has actually moved to experiences, to services. This is where the inflation is. If you look at household Balance Sheets about 85 of the debt is fixed rate. Of course thats a mortgages. The effective Interest Rate being paid on that stock of mortgages is still only 3. 8 . So you have the rate hikes have done nothing to indent household cash flow so households on average are able to spend with a degree of compensation. Because of higher finance cost its meant thats been redirected into experiences. Jonathan appreciate your time and hopefully we do this again soon. Jason thomas they on this market. Not being sufficiently restrictive but insufficiently restrictive. Equities on the s p 0. 5 . The ecb Rate Decision. upbeat music theres more to business than the business youre in. If you use data, thats the privacy business. Manufacturing on demand . Youre talking cloud business. Got a few million hyperconnected customers . Digital experience business. That was fast. Thats where deloitte comes in. With the right combination of talent and technology to help advance and connect all that it takes to excel in business. To the business im in. Deloitte. So, what are you thinking . Im thinking. speaking to self about our honeymoon. What about africa . Safari . Hot air balloon ride . Swim with elephants . Wait, can we afford a safari . Great question. Like everything, it takes a little planning. Or, put the money towards a downpayment. On a ranch. In montana. With horses lets take a look at those scenarios. J. P. Morgan Wealth Management has advisors in chase branches and tools, like wealth plan to keep you on track. When youre planning for it all. The answer is j. P. Morgan Wealth Management. Jonathan the decision from the European Central bank just seconds away. Beginning with equities and we work away through the bond and finish on the euro. Equity futures negative by 0. 5 down another one third of 1 on the nasdaq 100. This course following, 4. 5 620. Hit damaged, hit hard the euro negative. Interest rates on the refinancing rate. The facility is expected, the deposit facility Interest Rate coming in at 4 against a median estimate of 4 and the previous number as well. Great expectations the ecb will make a move sometime soon. That could come in june. The question of the last 24 hours is whether the cpi data stateside would change the story given the strength of the u. S. Dollar and the weakness in the single currency. A bunch of headlines to work through. Lisa looking at the idea they plan to focus on the idea of reducing inflation in a timely manner which is interesting given that there seem to be more flexibility in the time we heard from fed chair powell also talking about how they do see substantial progress when it comes to the disinflation in the region and they are going to continue applying flexibility on the investment. To me the idea of sufficiently restrictive being a key term they keep using and they want to have a timely reduction in inflation pushes against this idea of being more dovish in the face of what some people were talking about might be an opening for them. Jonathan this quote here from the ecb in their statement financing conditions remain restrictive and the past Interest Rate increases remain on demand but domestic price pressures are strong and the key Services Price inflation is high. Catching up with lizzy burden in frankfurt. A lot of attention on this ecb News Conference later on this morning at about 30 minutes time given there is expectations that they will cut Interest Rates in june when maybe the Federal Reserve cannot. What do you see in communication this morning . Just looking at this decision it is exactly what we expected in the sense they stood here when theyve told us why they said inflation continues to fall most of the measures of underlying inflation are easing. The rate levels making substantial contributions to reaching that 2 level but youve seen Services Inflation sticky but Growth Prospects in the euro area in proving. It gives them room to wait a little bit longer. They have said they wanted to wait for that rage data in june. We are listening to Christine Lagarde on her tone as to the path for rates beyond june because economists were expecting quarter rate cuts each quarter off the back of this. Youve seen traders change their Pricing Holding ecb rate thats steady. So thats the reaction in markets. This line from the European Central bank not precommitting to a particular rate path. Different is a commune casing from the ecb or how similar is it to the coverage you do over the bank of england how similar are those two stories of the moment. Nobody wants to be the unreliable boyfriend. From the ecb theres nothing explicit here and thats kind of what we expected that they are not going to want to make commitments before seeing that crucial wage data and its the same picture in the u. K. From the bank of england because there is so much uncertainty in the Economic Outlook at the moment. But the big question for the ecb is when the divergence from the fed looks inevitable what about euro weakness. Warning about eurodollar parity will Christine Lagarde in this press conference mentioned that volatility in the Exchange Rate and the potential to feed back into eurozone inflation. Its interesting you mention foreign exchange. We see the euro soften a bit versus the dollar after this release which was surprising given the risk of them having a cut at this particular meeting has been taken off the table. Is there anything you can be viewed as particularly hawkish in this release. We did not expect to see a cut today. Only one of 62 economists that bloomberg surveyed expected to see a cut today so that in itself is not dovish. Just looking at it given traders are not changing their pricing off the back of it that is it it doesnt seem especially hawkish yet but this is why Christine Lagarde will have to mind her tone especially carefully in this press conference today. Great to see you over in frankfurt, germany. Breaking down the ecb Rate Decision. This morning a lot of people going over if the governing council updating assessment on inflation outlook the dynamics of underlying inflation and the strength of Monetary Policy to further increase confidence that inflation is converging on a target in a sustained manner. That quote if youre sick of hearing it you will be youll hear that on repeat from president lagarde. You hear from president lagarde and 25 minutes time. Those three conditions of the ecb to think were pretty close to meeting them to cut rates in june. We are close to meeting them but had you asked yesterday morning before the cpi data i wouldve said yes we are even more close to reaching them. What impact will the Exchange Rate have on the timing not just the june move or if there is a june move but further at the end of this year. There is one caveat which we need to throw in in this context i think the weaker euro is probably only of significant relevance to ecb policy decisions if we are simultaneously getting a hike in the oil price. Weve seen brent today trading at the 90 a barrel level. The market concerned about an escalation in the middle east. If oil trades higher than the weakness of the currency becomes a bigger issue. Other than that of oil prices were lower they would be i would be a lot more comfortable about the ecb cutting Interest Rates despite a softer euro and thats because the very fact the Central Banks are turning towards Interest Rate cuts means they are in the transition away from inflation inserts towards growth concerns and that means its good to be less of a problem but that oil price could certainly be an issue. Jonathan lets go through those conditions again. The governing councils updated assessment of the inflation outlook. The dynamics of underlying inflation and the strength of Monetary Policy on transmission. Does that weaken if the euro is too weak and crew start running away. Does that make those mean those conditions cannot be met. Quite possibly if the euro is weak and oil prices are strong you will get more imported inflation and you have less confidence if your ecb that inflation can be brought down to target sustainably and theres been a lot of emphasis on the word sustainably from different Central Banks in the last couple of years so that is a significant risk. That said if we look at the eurozone economy particularly the German Economy and reference it back to the u. S. We see a lot of weakness. Stagnation that been going on for some time. Theres a lot of German Companies with the Energy Crisis in europe that really benefit from a softer euro because it would top their exports prayed that could only happen if the ecb is confident that inflation can remain at these lower levels. Lisa what price of crude has to look like for the ecb to get confidence to cut rates and frankly with the idea of a weaker euro . Its the price plus the volatility we are seeing and i think that really does depend on the news ahead of the coming weekend the market will probably take the oil price higher just in case we get an escalation in iran or may be coming back down on monday like it did in the last week just gone. Its difficult to predict what can happen but i can say if we saw oil prices pushing out to 100 and if that happened quickly then we are perhaps looking at a different scenario. That may not mean theres a change in june expectations but it may mean theres a change in expectations about how many Interest Rate cuts we could get from the ecb or from other g10 Central Banks for that matter during the course of the rest of the year. Oil prices really have to be brought into the equation over the next few weeks and months. Lisa im wondering how much more there is to the Dollar Strength weve seen given that that does continue to be the haven trade in light of the recent inflation data. Jane there is the inflationary impact. If we look ahead and weve been talking about this for a while. Looking add to the u. S. Election if we were to get a Trump Presidency hes talked about significant tariffs. That means a crisis prices on some u. S. Goods could go up substantially. That the fed season could be quite short. To Interest Rate cuts this year. And then thats the end. Or at least into the middle of the year. The cpi could get another push up because of that. Theres a lot of variables here. Generally speaking most of them are speaking to a stronger for longer u. S. Dollar prayed jane foley there unchanged in the ecb still expecting a change from this European Central bank perhaps in the month of june youll hear from the president in 20 minutes time. Some data for you. Jobless claims just around the corner. Robert is going to be with a student react to all of that. Will this really slammed the door shut on june. For those of you still clinging to a june rate cut ppi data is the last piece of the puzzle. That data is up next. Negative 0. 5 on the s p 500. Yields are higher again. From new york, up next. The data up next. Her uncles unhappy. Im sensing an underlying issue. Its tmobile. It started when we tried to get him under a new plan. But they they unexpectedly unraveled their price lock guarantee. Which has made him, a bit. Unruly. You called yourself the uncarrier. You sing about price lock on those commercials. the price lock, the price lock. so, if you could change the price, change the name its not a lock, i know a lock. So how can we undo the damage . We could all unsubscribe and switch to xfinity. Their connection is unreal. And we could all unexperience this whole session. Okay, thats uncalled for. Hi, im janice, and i lost 172 pounds on golo. When i was a teenager i had some severe trauma in my life and i turned to food for comfort. I had a doctor tell me that if i didnt change my life, i wasnt gonna live much longer. Once i saw golo was working, i felt this rush, i just had to keep going. A lot of people think no pain no gain, but with golo it is so easy. My life is so much different now that ive lost all this weight. When i look in the mirror i dont even recognize myself. No matter what youre up against, we have your back. We are united way. We are neighbors helping neighbors in communities around the when disaster strikes we get you back on your feet. We help children build brighter. Weve been here for over 135 s but now our work is more. Join us. Join your neighbors. Join united way. Jonathan next up for this market, ppi data and going into it the scores look like this, session lows on the s p 500. Pain in the small caps yesterday and the russell is down by one full percentage point today. The twoyear will reap set close to 5 . The 10 year up to basis points. Economic data, here is michael mckee. Mike good morning, we are watching ppi to see what it means for pce. Once we put all those acronyms aside, ppi up 0. 2 percent, lower than anticipated and lower than last month. Though core is at 0. 2 which was forecast. The super corp x food and energy and trade at 0. 2 also. Ppi on a yearoveryear basis is up 2. 1 . It was 1. 6 and there is some base of x coming into play there. The core is 2. 4 , up from 2 . Super court with trade included 2. 8 , no change there. On a month over month races, good news basically from ppi. We see some increases on a yearoveryear basis. Jobless claims after last weeks jump up to a revised 222,000, we fall back to 211,000. We are still in that range. We are still seeing a relatively tight labor market. Continuing claims, over 1 million and that is up. You would suggest people would say thats a harder time to get work but this has been a volatile number. I dont think we can draw any conclusion from continuing claims. Jonathan look at the recovery in the equity market. Positive on the nasdaq and a raise in most all the losses this morning. Relative to yesterday, and fantastic news, jobless claims lower and yields lower by two basis points at the front end. At the longer and come still higher by half a basis point. Not exactly undoing the moves of yesterday but a rare piece of good news relative to the news at 8 30 a. M. Yesterday. Lisa the fact that the market moves at all on 10. 1 highlights how Little People understand this. If you get input prices to the smaller businesses that are rising as quickly as Consumer Prices, thats because of the margin question. Can they pass along more of this than they are absorbing on the bottom line. People are toggling between is sticky inflation longterm or is it a bump thats problematic . Jonathan you can push it through the data, good news or bad . Mike probably good news. Its relative good news these days. Pce has always running been running below cpi and this confirms we will see a lower pce number which will factor into the feds thinking but i dont know that it changes it but it doesnt factor into the market so much and its your fault. According to thebls a major factor in the march increase in prices for final demand services was up 0. 3 . It was Securities Brokerage dealing in that. We cut prices on wall street and we have no problem. Jonathan im sure this will go down well on wall street. Lisa we are looking at the idea of a little bit more of a rally into the front end. I wonder how much the feds hands are tied. Ppi doesnt matter as much as Consumer Prices and the jobs market is robust given the fact that initial jobless claims confirm week after week we do not have a layoff problem. How can they justify cutting rates in june . Or anytime soon with these kind of numbers even if ppi came in light . Mike as of today, they cant justify because the numbers dont show us. We will get to more cpis before the june meeting and another pce before the june meeting. They will have some additional members to work with and we will see what happens with inflation in these various measures. You go back to the old saying that one data point is a fluke into is a coincidence and three is a trend. We seem to have a trend in inflation here and we will have to see if that gets broken. We will see what translates into cpi which is not a direct translation for most things. It sort of follows the same path. Annmarie given ppi was better, we could potentially get better pce but cpi is what Everyday Americans about as far as inflation. Have concerning is the expectation of Inflation Expectations . Mike it would be something you would be concerned about and its possible it can happen but we have seen very high inflation over the past couple of years that has now come down. We didnt see consumer Inflation Expectations rise significantly nor did we see Business Expectations for inflation rise significantly. The fed is relatively sanguine about that situation. It will be interesting to see because its a Political Year and there will be many commercials talking about how inflation is terrible. We will see how that gets into peoples heads . Jonathan it depends on the party. About five minutes ago, we got economic data, ppi coming in at 0. 2 so a downside surprise. Strip out food and energy and you get 0. 2 . Talking about jobless claims, that came in at211. Thats the right kind of downside surprise. The russell was down hard this morning after big losses yesterday. The s p 500 just about unchanged. Yields are lower in the bond market by three basis points on the front end. It got closer and closer to 5 over the last 24 hours. The 10 year yield about 4. 54. Joining us is citigroup. Youve got that call for june for a rate cut. Is it just about holding on after the ppi prints . Thank you for having me. We are Still Holding onto the june call. I think its a close call at this point. As michael said, once you have three months of data, you start. To think there might be a trend weve seen fairly hawkish inflation data throughout the First Quarter. We had to see how it shakes out with ppi. If core pce is coming in around. 3 or just below that would be ok. We think chair powell would feel comfortable at that rate starting to ease in june. If it comes in something like. 3, thats probably the borderline of where he would feel comfortable. The Inflation Numbers are going against the call and the probability is less but we will see how the ppi shakes out with pce but overall, thats pretty good news. This is a fed that seems to really want to get the easing cycle started at some point this year. On balance, we are holding onto it but it depends on the next few inflation prints and the labor market. Jonathan you have seen dez you have said that the Federal Reserve has shifted emphasis. I think the perceived reaction function from the market of the Federal Reserve has shifted as well maybe until yesterday. There was the belief the Federal Reserve could respond to adverse shocks or maybe pronounced weakness in the labor market because it would be disinflationary. Has that story been damaged by the print of yesterday or not . This is the tough question. That has been part of the impetus for our call as we think there is enough science to solve this in the labor market but not so much and the overall aggregate numbers. Hiring is still strong and jobless numbers are low but you are seeing hiring tensions falls significantly from Small Businesses. We see things like the hiring rate drop. We think there was an of softness that the fed was getting worried the labor market was weakening too much and that you could be heading into a recession. I think thats a big backbone of the call but it has to be weighed against the stronger inflation prints. If we see more signs of weakening, the fed would need more and that element and start this cutting cycle. It complicates the map because before, we were getting inflation that was good enough and some signs of softening for the last few months have been much stronger inflation than we were expecting. Lisa its been said this is a fed that wants to cut and many are wondering why. There are questions around the weakness and where its coming from. We heard from jason thomas of carlisle this morning. One of the reasons why is the deficit. As it balloons, borrowing costs are getting more punitive. How much is that factoring into the decision to cut rates at a time when a lot of the deficit is financed tbills . Is a great question. On the one hand, those deficit numbers are looking large. Interest costs have been growing significantly as a share of the overall deficit. I dont think thats the primary concern of the fed. In the feds mind, they feel theyve done enough and they feel like their restrictive and they feel they are seeing enough progress on inflation and enough signs of loosening in the labor market and softening of the economy that they are willing to start easing especially if they are starting to get a concern about downside activity. I think that concern is primary in their mind. More broadly, i think thats an issue that deficits are getting big and policy makers Pay Attention to. Primarily, the fed is focused on getting inflation back down to target and maintaining activity in the economy. Lisa have you changed your longterm inflation forecast for the United States . Do you believe the fed will still cut . We havent changed the longerterm outlook in terms of inflation will gradually go back down to target over the next few years. Somewhat of a sticky path down we think because Service Inflation will take longer than many think to come back down to more stable levels. As mentioned, it will still have the fed cutting in june. I think the risks around that forecasted change. The risks are looking more tilted toward inflation staying higher for longer and the risks are looking at the fed starting the easing cycle later. We are holding at the similar views but i think the risks had tilted in different directions. Jonathan its fantastic to hear from you. The question this morning is how much the ppi print this morning is a downside surprise on the margin. I will allow the market to give you the answer. Lets get you in up date on stories elsewhere. Dani the ecb has kept rates on hold for a fixedrate meeting and signal they are not for of from cutting as well. Officials said the easing concert if they are updated assessment of the inflation outlook boost confidence that prices are heading back to target. Ecb president Christine Lagarde should hold a News Conference in a few minutes at 8 45 a. M. Eastern. The Justice Department has opened an extended antitrust investigation into the nippon still takeover bid for u. S. Steel. It likely delays the 14 billion deal of companies hoping it would be approved in the second or Third Quarter of this year. The potential takeover has become a hot button issue for the president ial election. President biden has said he wants u. S. Steel to remain domestically owned and he stopped short of making an explicit bid to kill the deal and donald trump said he would block the deal. A sweeping Russian Missile attack on ukraine has destroyed the largest powerplant in the capital of kyiv. Russian forces have ramped up attacks on energy shortages. Volodymyr zelenskyy called the air defense the biggest challenge to date while making a visit to lithuania. Thats your bloomberg brief. Jonathan top next, a News Conference at the ecb would president Christine Lagarde. So, what are you thinking . Im thinking. speaking to self about our honeymoon. What about africa . Safari . Hot air balloon ride . Swim with elephants . Wait, can we afford a safari . Great question. Like everything, it takes a little planning. Or, put the money towards a downpayment. On a ranch. In montana. With horses lets take a look at those scenarios. J. P. Morgan Wealth Management has advisors in chase branches and tools, like wealth plan to keep you on track. When youre planning for it all. The answer is j. P. Morgan Wealth Management. Jonathan in just a moment, we will go to frankfurt, germany and hear from president Christine Lagarde of the ecb all in a rate call earlier, unchanged but expecting a june rate cut. Comments from the new york fed president John Williams in focus after the big upside surprise yesterday on cpi. Lisa we are not there yet and he says we made a lot of progress toward the goal of inflation but we have not seen the total alignment of our dual mandate yet. He anticipated bumps along the way so here comes that word again which somehow has entered the transitory lexicon of some but he is talking about how there is normalization and the labor market, expecting a peak on up limit rate of 4 for them remainder of this year. Jonathan shouldnt there be some pushback to this conversation . Lisa the market is pushing back big time and that will be the key question as to how he responds if he indicates the market reacts. They will not say this will change your view but they are raising caution and saying we are not there yet. Is that enough to have a couple of months data that they will be convinced by june . Jonathan more fed speak today but lets turn to the price action. The s p 500 just about unchanged. Recovering after ppi comes in softer than expected. The two year and 10 year and 30 year, the yields have been lowe. Foreign exchange is getting introductory remarks in frankfurt, germany. The euro is that 107. 31. Here is the ecb president , Christine Lagarde. President lagarde the governing council decided today to keep the three key ecb Interest Rates unchanged. The incoming information has broadly confirmed our previous assessment of the mediumterm inflation outlook. Inflation has continued to fall led by lower food and goods Price Inflation. Most measures of underlying inflation are easing, wage growth is gradually moderating, and firms are absorbing part of the Rising Labor Costs in their profits. Financing conditions remained restrictive and our past Interest Rate increases continue to weigh on demand which is helping to push down inflation. Domestic price pressures are strong and are keeping Services Price inflation high. We are determined to ensure that inflation returns to our 2 mediumterm target in a timely manner. We consider that the key ecb Interest Rates are at levels that are making a substantial contribution to the ongoing disinflation process. Our future decisions will ensure that our policy rates will stay sufficiently restrictive for as long as necessary. If our updated assessment of the inflation outlook, the dynamics of underlying inflation and the strength of Monetary Policy transmission work to further increase our confidence that inflation is converging to our target in a sustained manner, it would be appropriate to reduce the current level of Monetary Policy restriction. In any event, we will continue to follow a data dependent and meeting by meeting approach to determining the appropriate level and duration of restriction and we are not precommitting to a particular rate path. The decisions taken today are set out in a press release available on our website. I will now outline in more detail how we see the economy and inflation developing and will explain how assessment of financial and monetary conditions. The economy remained weak in the First Quarter. Spending on services is resilient but manufacturing firms are facing weak demand and production is still subdued especially in Energy Intensive sectors. Surveys point to a gradual recovery over the course of this year led by services. This recovery is expected to be supported by rising real incomes resulting from lower inflation, increased wages and improved terms of trade. In addition, the growth of euro area exports should pick up the coming quarters as the Global Economy recovers and spending shifts further towards tradable. Finally, Monetary Policy should exert less of a drag on demand over time. The Unemployment Rate is at its lowest level since the start of the euro. At the same time, the tightness in the labor market continues to gradually decline with employers posting fewer job vacancies. Governments should continue to roll back Energy Related support measures so that disinflation can proceed sustainably. Implementing the eus revised Governance Framework fully without delay will help governments bring down budget deficits and debt ratios on a sustained basis. National fiscal and structural policies should be aimed at making the economy more productive and competitive which would help to reduce price pressures in the mediumterm. At the european level, and speedy implementation of nextgeneration eu program and a strengthening of the Single Market would help foster innovation and increase investment in the green energy transition. More determined in concrete efforts to complete the Banking Union and the Capital Market union would help mobilize the massive private investment necessary to achieve this as the governing council stressed in its statement of march 7, 2024. Inflation has continued to decline from an annual rate of 2. 6 in february to 2. 4 in march according to. Euro stats. Food Price Inflation dropped to 2. 7 in march from 3. 9 in february well energy Price Inflation stood at minus 1. 8 in march after minus 3. 7 in the previous month. Goods Price Inflation fell again in march two 1. 1 from 1. 6 in february. However, Services Price inflation remained high in march at 4 . Most measures of underlying inflation fell further in february confirming the picture of gradually diminishing rise pressures. Well domestic inflation remains high, wages and unit profits grew less strongly than anticipated in the last quarter of 2023. Unit labor costs remained high in part reflecting productivity growth. More recent indicators point to further moderation and wage growth. Inflation is expected to fluctuate around current levels in the coming months and to then decline to our target year owing to weaker growth in labor costs, the unfolding effects of our restrictive Monetary Policy and the fading impact of the Energy Crisis and the pandemic. Measures of longerterm Inflation Expectations remain broadly stable with most standing around 2 . The risks to Economic Growth may be tilted to the downside. Growth could be lower if the effect of Monetary Policy turn out stronger than expected, weaker World Economy were further slow down a global trade with also way on euro area growth. Russias unjustified war against ukraine and the tragic conflict in the middle east are major sources of geopolitical risk. This may result in firms and households becoming less confident about the future and global trade being disrupted. Growth could be higher if inflation comes down more quickly than expected and rising real incomes mean that spending increases by more than anticipated or if the World Economy grows more strongly than expected. Upside risks to inflation include the heightened geopolitical tensions especially in the middle east which could push Energy Prices and freight cost higher in the near term and disrupt global trade. Inflation could also turn higher than anticipated if wages increase by more than expected or Profit Margins prove more resilient. By contrast, inflation may surprise on the downside if Monetary Policy dampens demand more than expected or if the economy in the rest of the world worsens more than expected. Market Interest Rates have been broadly stable since our march meeting and wider financing conditions remained restrictive. The average Interest Rate on Business Loans edged down to 5. 1 in january, sorry edged down in february 2 5. 1 coming from 5. 2 in january. Mortgage rates were 3. 8 in february, down from 3. 9 in january. Still elevated boring rates and associated cutbacks in investment, plants led firms to reduce their demand for loans in the First Quarter of 2024 as reported in our latest bank lending survey. Credit standards for loans remained tight with a further slight tightening for lending to firms in the moderate easing for mortgages. Against this background, credit dynamics remained weak. Bank lending to firms group marginally faster in february at an annual rate of 0. 4 up from 0. 2 in january. Growth and loans to households remained unchanged in february at 0. 3 on an annual basis. Broad money is measured group at 0. 4 in february. In conclusion, the governing council today decided to keep the three key ecb Interest Rates unchanged. We are determined to ensure that inflation returns to our 2 mediumterm target in a timely manner. We consider the key ecb Interest Rates are at levels that are making a substantial contribution to the ongoing disinflation process. Our future decisions will ensure that her policy rates will stay sufficiently restrictive for as long as necessary. If our updated assessment of the inflation outlook, the dynamics of underlying inflation and the strength of Monetary Policy transmission work to further increase our confidence that inflation is converging to our target in a sustained manner, it would be appropriate to reduce the current level of Monetary Policy restriction. In any event, we will continue to follow a data dependent and by meeting approach to determining the appropriate level of and duration of restriction level and we are not precommitting to a particular rate path. In any case, we stand ready to adjust all of our instruments within our mandate to ensure that inflation returns to her mediumterm target and to preserve the smooth functioning of Monetary Policy transmission. We are now ready to take your questions. Thank you, president lagarde. The first question goes to bloomberg. Good afternoon and thank you for taking my question. I heard you loud and clear on the confidence needing to increase for restriction to be removed and i