tv Bloomberg Surveillance Bloomberg July 11, 2022 6:00am-7:00am EDT
>> the pressure is on the fed. you have an overheating economy. >> perhaps the economy is not slowing as fast as anticipated. >> will all be watching the fed. >> we are still in the camp of 75 basis points in the july meeting. >> they need to move now. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. jonathan: good morning, good morning. this is bloomberg surveillance on tv and radio. alongside tom keene, i'm jonathan ferro. back in the seat is lisa abramowicz.
welcome back. the nasdaq 100 down .8%. euro-dollar about that close from breaking 101 all over again. tom: the dollar is the story today. the lead for global wall street is continued dollar strength. it bears watching. i would suggest between the earnings later in the week and the cpi gas we get on the 13th, maybe that trumps dollar study. what are you focused on? cpi wednesday, earnings thursday. michael: i think the bigger -- tom: the bigger issue is guidance from corporations. robert scheffler writing for bloomberg intelligence makes it clear he thinks big tech has a quality stream. we need to get nuanced guidance. it helps corporations to be clearer this time around than normal. jonathan: lisa, you've been missed. let's put the two stories
together. the work of mike wilson and the team at morgan stanley. big numbers in that report. lisa: basically saying the move we have seen in the dollar, the strengthening of north of 10% or 11% is commensurate with a much bigger decline in earnings-per-share than people are pricing in. we hear companies worry about the strong dollar and what the follow-through effects will be. how much do we see that they can to estimates in a way that surprises to the downside? jonathan: to conclude sing the recent rally is likely to fizzle out. enjoy your sunday. earnings is the great divide between the bulls and the bears. it comes down to that. lisa: it is not just the bulls in the bears on the macro side, but the bulls in the corporate specific analyst side versus the macro strategist. how much do we get a reckoning that sends markets one way or the other? this week or than the cpi
earnings will be the big picture to watch. jonathan: can i squeeze in commodity. crew breaking down again. copper breaking down since march. tom: a couple of shops over the weekend. jp morgan fight on hydrocarbons. copper. i never liked the phrase dr. copper. chicago copper is down 27%. lme copper is not where it was july 6. nevertheless there is a wait there. that is a pond. -- that is a pun. jonathan: i got it. on the nasdaq 100 we are down about .9%. euro-dollar very close to breaking 101. as tk pointed out, dollar strength through g10. tom: last week in washington the yen did not break. this is about the elections.
weaker yen. jonathan: lisa, welcome back. lisa: a lot happened last week. i was tracking it and the excellent job you guys did. i want to pick up on the euro, the 101 level and key that on the nord stream pipeline which is shutting today. the fear is russia does not bring these gas supplies back online. what does that do? sends germany into recession. if the biggest economy in the euro region goes into recession that is negative for the euro regardless. how does the ecb respond to this? how they deal with the potential for financial instability? this is similar to what we see in the united kingdom. andrew bailey speaking on financial stability. how much does each key the weakening and the pound? one commenter talks about at
least the pound was not the euro today and that is the best they can say with the pound below 1.2119. coming into the end of the day we are looking for an option for three year treasuries. $33 billion of notes will be sold and i know you watched this carefully. i see the yield curve conversion continue. we are looking for a fourth consecutive day of yield curve inversion at a time people are getting pessimistic. jonathan: this is top of the list in when it comes to what tom missed while you were away. twitter is what to watch and the premarket. getting slammed in a way you might have anticipated. truest put out research. if twitter fails to put the acquisition to completion, we would see shares trading in the high 20's, reflecting 25% to 30%
further downside. tom: twitter higher. who knows who mr. musk will higher. this will be absolutely fascinating. in delaware, in the most british court we have, there is no jury, just very competent people. i tell you, is it going to be original law? i'm not qualified to say that, but it will be an interesting thing to see elon musk as we know him before the guys in delaware. jonathan: let's pick things up with chris verrone. something you are focused on. you put together what has happened with commodities, you looked equities, staples versus discretionary, can you run through that research? what have you learned? chris: number one, the action is in the currency market.
when you look at fx volatility and bond volatility, it does not seem to jive with equity vix in the mid-20's. there is something off there that will be resolved with greater equity volatility in our future. as far as the leadership backdrop of this market, i think discretionary versus staples and high beta versus low beta gives us helpful crews as to the market perception of risk. we have taken commodities down sharply, we've taken oil down $25 or $30, discretionary has given us nothing. the idea that weakness in crude would suddenly re-catalyze the consumer, i think the market -- tom: you have a beautiful slide on short interest. where is the bloom on amazon, on apple? give us a clinic on short interest or the lack thereof. chris: this is -- this has
really surprised us. the s&p is down 20, the nasdaq is down 30. when you look at the stocks that are viewed as most vulnerable, these make cap growth names, the short interest is nowhere to be found. let's take something like amazon. the short interest on amazon is 1% of the public flow. the stock has gone nowhere for two years. at the 2009 lowe's you're talking about short interest of 13% or 14% on amazon. tesla, the short interest is 3%, that is down from 30% in 2019. where is the short interest in the names i think people will be most bearish on? that speaks to an overall level of complacency i would argue still exists. lisa: going back to the pressure being felt in the currency market, the euro did break the 1.01 level, it is below that
now. at what point does this mean something is breaking that creates something significant and the rest of markets? chris: this is one of the reasons we have been reluctant to make the capitulation call. i get the market is oversold. have we seen a true capitulation when the forces driving this market are very macro oriented? this is a currency and bond driven market. when i see dollar-yen at 137, when i see the euro at parity, i think we are headed toward some collision where bodies float to the surface. our call has been it is the boj that will blank. the yen will weaken until the boj does. tom: with chris verrone, your cta moment of the month. once you get out of the bottom, let's go 1946, how do you establish a bull trend, is it
off moving averages? is it off a jump condition when the gap does not fill? how do you know up? chris: is a great question. this is something we read about often? how do you distinguish between a bounce and the start of the real thing. a trend is preceded or accompanied with the start of momentum. one of the ways we look at that on any given day, the percentage of issues giving you a two standard deviation advance. we have not seen it yet. it does not mean we cannot see it. we continue to remain prudent. this is without a lot of momentum behind it. jonathan: great to catch up to get your views. down .5% on the s&p. interesting levels in the fx
market. euro-dollar very briefly a break of 1.01. dollar-yen 137. if you look across asset, the yen has not participated this year. the fact we have yen weakness not yen strength in this environment speaks to the moment we are in. tom: the advantage we have is on the fancy bloomberg launchpad i can look at 20 currency pairs and you get a cadence. the headline today is yen weakness. right now 137. what i learned from chris verrone is simple. he is in search of bramo bloom. he has not found it. jonathan: futures -.5%. from new york city, for our
audience worldwide, heard on radio, seen on tv, this is bloomberg. ritika: keeping you up-to-date with news from around the world with the first word, i am ritika gupta. shares of twitter following. the company to go to court to force elon musk to follow through with its commitment to buy it. a filing could happen as soon as today. the court has really sided with parties like elon musk were attempting to bail and acquisition commitments. in the u.k., foreign secretary liz truss is the latest enter the race. she is making tax cuts the heart of her campaign. she wrote in the daily telegraph she would start cutting taxes day well -- day one. france's finance minister is warning europe must prepare for
russian gas deliveries to be shut off entirely in retaliation for sanctions. he called it the most likely scenario and said the french government is trying its best to avoid energy shortages. president biden says the administration is still discussing possible action regarding tariffs on chinese imports. the u.s. is considering easing some of the trump era duties and the u.s. and xi jinping are scheduled to speak again in the coming weeks. antony blinken spoke with china's foreign minister over the weekend to lay the groundwork for a call. the president of sri lanka has agreed to resign hours after his official residence was stormed. he had stayed in office over months of protests. sri lanka is in talks with the imf on a loan program to help pay for imports of food and fuel. global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. i am ritika gupta. this is bloomberg.
>> this fed will do 75 basis points and it needs to catch up. they are not just reacting. they are catching up. that is why they cannot wait. jonathan: mohamed el-erian. from new york city with tom keene and lisa abramowicz, i'm jonathan ferro. futures recovering just a little bit on the s&p 500, on the
nasdaq down .6%. where do you want to start? euro-dollar very close to breaking and staying below 101. it broke that level. right now 1.0106. yields in about one basis points. in the commodity market, down about 2% on crude. a lot of questions about more restrictions on the world's second-largest economy. very soon. jonathan: we have seen -- tom: we have seen that. i would note honestly be monday that is not sleepy, dxy is reaching out on a week euro. can i note that mohamed el-erian had my tweet of the weekend. he wrote a blistering short tweet that said with all of the fancy people like mohamed el-erian, it is the bro some out of inflation that is crushing
society -- it is the gross amount of inflation that is crushing society. jonathan: he is worried about the stickiness of this. tom: i agree with that. jonathan: to settle at five? four? how much longer do you have to deal with that. tom: when i talk about the x axis and when you move along the x-axis, that is something the media does not talk about. they are interested in the ups and downs. emily wilkins is not at 9% inflation with bloomberg government. she knows the x-axis of the biden administration. what an interesting weekend for this president of the united states. he has a to do list, but he is distracted by the issue of his age, his health, the energy to get to the midterm elections. emily: this is something that has plagued president biden from the time he was campaigning for the presidency.
the fact of the matter is the presidency will age anyone. take a picture of anyone at the start of their presidency and the end you can see the aging. biden has that now and there is no amount the white house can do in terms of messaging or other things that would change that. they're also been concerns about how much biden has been able to interact with the press one on one, the amount of time csf down for interviews, the amount of times he has held briefings, all of those has given republicans an advantage in pushing the narrative biden should only be a single term president. tom: riyadh is not bavaria, it is not madrid. how this be different from what we observed? emily: biden does not necessarily have the support of his whole party behind him for these meetings. there is definitely concerns about what biden is doing,
debate about whether he should be engaging at all. you see that in the op-ed biden wrote in the washington post, defending his goals. that does not mean there is still not strong criticism for him taking this trip and questions about what will come out of this one and what the future of the u.s. relationship with the middle east will be. lisa: i want to pick up on that point, the futility. what can you get from this other than making promises in return for something that is ambiguous considering the fact they do not have that much capacity to pump more? is there a cohesive narrative and we get the sense there is a tacit admission of policy failure when it comes to trying to isolate russia and the damage it has done in terms of the gas and oil supplies on the u.s. and oil -- on the u.s. and european economies.
emily: i think you hit the nail on the head there. there are a lot of issues that could be discussed. a good question about what if any outcomes there will be. gas prices are on the top of everyone's mind. as you note there is not a sense we will see gas prices dropped back to three dollars after this trip. biden has also talked about the importance of having relationship with the middle east and with middle east leaders. he is meeting with a number of different leaders on this trip and he is talked about the move forward and that relationship and a constructive relationship with various countries in the middle east. lisa: i want to tie this to the idea of tariffs on chinese goods. this is something this administration is thinking of doing. is there a sense any of the policy measures being proposed by this administration could have an effect on an inflation rate with headline inflation heading towards 9%?
emily: even commerce secretary gina raimondo said even if they did have a reduction of tariffs on china, something she is pushing for, it will not have a dramatic impact on inflation. you might see the price lower for some goods, but you will not have that be the overall massive impact on inflation. this is where the biden administration is trying to figure out what to do with inflation. it is not something they control , it has a lot of factors going on. at the same point biden is the one in the white house. needs to figure out ways to move forward. that is partly what we are seeing with this trip, with this tariff discussion. the administration really trying to figure out a path forward when there is not a clear answer of what the white house can do to lower inflation. that is a big issue for a lot of americans right now and going to
be a big issue this november. jonathan: emily wilkins in d.c.. it is beyond awkward. there is real tension between the criticism from this administration towards the chinese communist party and the potential to remove some of the tariffs on chinese goods. lisa: especially because there is not a clear benefit in terms of how much that could reduce headline inflation. what are you sacrificing on one side and what are you getting on the other? there have to be real discussions. jonathan: looking ahead to cpi on wednesday. 8.9% is the estimate from bnp. hsbc at 8.9%. getting close to 9%. the headline median estimate 8.8%. looking for core to come in a little bit. headline inflation could be a big number. tom: i agree core is where the analysis should be. there is a lot of fancy math
bloomberg goes through. 8.8 is the median number. when you look at the probability distribution of the survey, it is a riddle -- it is a little lower. it is down. i think that hysteria is towards 8.7% and not 9%. jonathan: the low estimate is 8.1%, the high estimate is a .9%. yields in a single basis point on the u.s. 10 year and look out euro-dollar. very briefly a break of 1.01. a real dollar strength and a brand-new trading week. from new york city, this is bloomberg. ♪
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-- 20 base points. on friday, yields higher off the back of an upside risk -- upside prize euro-dollar is close to breaking it is sticking to 101 this morning. negative .8%, but i wonder what you made of the price action on friday. told you a lot about positioning. i wonder how much downside we have. tom: it was written up in the guardian, will, as well. she was exceptionally negative.
not in the business, but it had an approved level. jonathan: if you ask him, this move has more ups died. -- upside. tom: let me drag out a book from a summer ago. a brief introduction. the world. it is an absolute tour de force to provide stability and thinking forward. richard, i'm going to look at the last chapter. i'm going to say, what is the liberal biting order?
he seems to be walking on eggshells here. richard: i think it is taking a backseat. what they have decided to do is put its preferences on the back burner and on the front you have a real interest and greater collaboration and ordination against an emerging nonnuclear threat in the middle east, but there is a longer-term that they will join a diplomatic process and normalize relations with israel. tom: there is also adding some form of state recovery from what the people a is the chaos of the trump years. what is the scorecard on getting the state back to normal?
>> the state department is not back to normal. it still looks pretty weak to me as an agent. the national security council will has a large operational role and it is more than 10 times the size of the security council that i served on years ago. i think that is simply the changed reality of how the u.s. conducts reform policy. lisa: how much of a detriment is it to see a lack of cohesion and people pushing back, saying that this is useless trip? richard: it is probably as old
as the public. it might be consistent with a little bit of exhaustion. the pools are suggesting that things are not going well. there is debate about the -- what ought to be the centrality of human right and democracy. i think the biden administration makes a big miss eight and promoting it. take the ukraine's situation. the biden administration has cast it as almost a force of light against darkness, but most of the world is not democratic. the only real issue that the rest of the world is repaired to sign on to is that countries should not get invaded by other countries. all of this pressure on the trip , but will it deliver? that is really.
you have this crown prince running this country for another 50 years and oil -- oil will remain important. the u.s. to establish a relationship. what matters is not what comes out of the trip as far as a decay. what matters is that they are seriously talking again. lisa: this is what he was emphasizing. the fact that there is so much discussion around possible oil production. they indicate this futility of trying to fight inflationary wave coming from so many places. richard: increasing saudi out but will have an impact.
but the critical item is not will output is gas. figuring out a way to wean off of russian gas. whatever happened in the way of oil rises will be negligible. the fed a lot of work to do on quantitative easing on me. there are questions about fiscal stimulus. whatever happened there will be on the margin. tom: we always look to our guest to see what they read and what they talk about. you have one of the great books on woodrow wilson and his speech, too proud to fight. you do not need to go into that right now.
what is our special example right now post trump? richard: let's go with woodrow wilson. he represents one of the basic beams or school of foreign policy, and some ways it is the perfect this trip. he had a very positive almost angelical -- evangelical coach and over -- he got overwhelmed by domestic politics and internationally. what you are seeing with the biden administration, they have all these aggressive, idealistic people. that is the lesson of woodrow wilson. lisa: tie that what he said moments ago, that you think it is very to get rid of chinese
goods. do you think from a diplomatic reason, this is beneficial? richard: it would have a moderate impact on both. the impact on inflation, a few decimal point never hurts. that would be one of the ways he would do it. they put in place for them for the chinese economy. what they are doing is mainly penalizing american. the trump administration did not get through and slapped on tariffs. they do not want to be looking weak on china. do smart stuff and politics will take care of themselves. jonathan: that famous line on several fronts. tom: it is a changed man ape.
down from 124, but take price from a year ago or two years ago. jonathan: on china, they have come out to say that they need to get rid of tariffs on china. the president still has not made a decision on. not clear what the outcome of that meeting actually was. lisa: instead it penalize consumers. how do they position this argument? it is a hard sell. it is kind of like, what level are we talking about here?
tom: i would defer to dan, the expert on this, but they penalize your domestic layers, not the party at hand. that is the issue with russia and the cap as well. jonathan: do you think it since the right message? tom: it ends messaging. we were all shocked at how stations actually work. it is not that i am critical of them, but we have to understand how it works through. the answer is that they affect apple way more than they do china. lisa: i think it is an interesting recalibration and that goes also to some of these action on oil and gas. jonathan: we are kicking off a brand-new trading week. talk of more restriction in
china as the infection rate creep higher. from new york city, this is bloomberg. ♪ >> with the first word, i am rick -- shares of twitter found today after elon musk walked away from his deal to buy the company. he alleges that mr. presented user data. the latest covid outbreak in shanghai hitting larger. 69 action, the most since late may, leading to more testing. it is proving a constant challenge to the zero-tolerance approach. they have asked ended their majority. the vote was held two days
after. results could strength the grip of the liberal democratic party. former trump advisor steve bannon has agreed to testify, investigating the riots. banning press -- steve bannon -- tied to lobby politicians and flouted laws. we are reporting on the uber files. they say it is a different company today. global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg.
>> they made it clear. soft landing, soft issue landing, fighting inflation -- they made it pretty clear that it will take a lot for them to pause. jonathan: 75 is that rate hike might by the end of the month. futures this morning, good morning. down six or 7/10 of 1%. twitter is down and down hard. twitter is down.
tom: this is not judge judy. there is no jury and there are judges there. all business, and they move things forward. maybe it is somebody else, but this is a very different legal process than what we are to. jonathan: are you saying that judge judy is not serious? many people take this seriously. lisa: are you serious right now? tom: i know. but let's move on. talking about something that john is way better at, this
natural gas issue in europe. sandra is a tv economist with encyclopedic knowledge of the netherlands. the netherlands out -- are out front on this. what can germany learn about the year shut off of mark and netherlands? >> there is not much to learn for germany. it is very high. it is the highest in europe and it energy provision are pretty high. germany is in a very vulnerable place. the netherlands have contractual obligation for an energy emergent e.
there are actually many countries that are somewhat likely there. tom: who speaks to mr. putin about this? is it the leadership of germany? the netherlands? is it utility companies? who drives the discussion forward with these russian threat that appears to reality? wesley should be that we are not anymore in this situation where your is one with sanctions on the russian side. we have landed in economic warfare. the pipeline of voicestream shut down. that is for me reason that happen every year, but there is
a question of whether the pipeline will reopen after two weeks of maintenance. the idea within europe is that nobody is looking to russia. we are trying to prepare for a situation where the gas is not flowing after a few weeks. lisa: let's find that out. how deep of a recession but it be? >> it is too early to an exact number on this, but first a it will be a search for an immediate replacement opportunity. we already see that. trying to get natural gas from every place that we can get it from. there are initiatives going on
for additional energy-saving. we are looking at strategic reserves, even if that using things to provide electricity, so we can use the gas that is still coming in, to fill those strategic reserves. we have to be aware that they are basically meant to cover the different. it is not really intended to cover a complete shut off of gas. what would happen is that would be two channels impacted. it would be an immediate pricing increase. it puts pressure on businesses. the second channel is through
government intervention because the government will consider industry stoppages to get necessary gas flowing for crucial activities. jonathan: we had to leave it there. this just out citigroup. we estimate that the euro-dollar could slide below 95 if the supply of gas is shut off. that is if nord stream goes off for maintenance. the big question they are trying to answer is what happened euro-dollar if it does not turn back on? tom: you have some serious relations, but i would look at the double digit inflation, as you mentioned earlier. the persistent come into
september. i do not think we are looking out to august. jonathan: most people will down to 50 by the time you get to september and potentially coming back down. there is april -- there is a belief out there that it might be the last basis point height, but things have changed and changed quickly over the last few months. lisa: we will get the inflation expectations with sentiment survey. the report was confusing to me because you had that stronger than expected headline number, but they came in disappointing. how do you parse out how much strength there is when there is a lagging indicator and a different reality than those
prior? jonathan: isn't this a pledge to be late? lisa: this is when we talk about are they going to tighten to a recession regardless? because that is the only thing that can pull it up. we are going to see when the tightening of the facts really go into place. jonathan: we have revisions coming our way in the next three to six months. this is bloomberg. ♪
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>> the pressure is on the adhere , that you have an overheating economy. >> perhaps it is not slowing at which is anticipated. >> watching the fed and whether they will link. what they need to know consequences will come with this is bloomberg surveillance. jonathan: live from new york city, this is bloomberg