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 pri