>> right now we are witnessing a fundamental repricing. >> the market is desensitized to the daily gyrations in the numbers. the markets have been tolerant to a lack of concrete terror progress. >> tariffs are overstated. the fear is more important than the fact. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: live from new york city this morning, good morning. bloomberg surveillance starts right now. coming into tuesday, nothing good comes easy. >> we are doing well with china. china is not easy.

china has been ripping off the united states for years. no president had the courage to charge china. jonathan: trade talks between united states and china enter a second day in london as the u.s. signals a willingness to remove restrictions on some tech exports. we are gearing up for another day of tops in the british capital. dani: it is important to emphasize that this is just rare earth metals and technology. it is a reminder that the process of getting through all of the trade issues is going to take some time. here we are on day two and you are only hearing from the u.s. side saying we are making progress. the chinese side is staying -- jonathan: that feels like we're escalating just for the sake of de-escalating, taking one step back and one step forward. in the president's first term it took 18 months to make a phase one deal. how much more of this can we take? dani: and at that point we were

just dealing with china. we also have been july the 90 day pause for reciprocal tariffs coming up. it begs the question of who has the upper hand. we heard from the huawei founder's a u.s. tech is not that important. for the u.s. rare earth minerals are so critical for things like the auto industry. jonathan: it is all relative but it feels like a summer monday into a summer tuesday. titrating ranges, narrow stop. dani: they go to the beach kind of day but you cannot relax with the trade talks going on. you have u.s. cpi, he of the 10 and 30 year. there is a lot that can upend these markets. jonathan: cpi. into thursday ppi. tenure supply coming tomorrow. equity futures unchanged on the s&p 500. coming up we will catch up with

sidara of jp morgan and a former trump white house trade official and michael ng of goldman sachs. white house officials strike in -- striking optimistic tone. annmarie hordern joins us from lancaster house. just moments ago u.s. officials entered that room. what can we expect from day two? annmarie: moments ago they entered the room. the chinese delegation in the u.s. delegation were about 20 minutes into date two of the talks. i caught up with commerce sec. howard lutnick. he was not present in geneva. he said the talks are going well and he expected the talks to happen all day long. we were outside lancaster house until about 8:30 local time yesterday evening. they had food brought in. the talks went all day. they still left without an agreement. there is a timeline they need to

wrap up these talks because secretary bessent is due on capitol hill tomorrow in washington, d.c. to testify before the house ways and means committee in congress. he has a clock he needs to hit today. we are still looking for the parameters of the deal. the president is speaking to our very own tyler kendall at the white house, basically leaving it open ended. unclear how far he will go easing export controls. our understanding is some of the restrictions are more the new restrictions. things like chip denied -- chip design software, jet engine parts, not going to the redline for the united states of the h20 nvidia chips that beijing are still trying to get their hands on. jonathan: are we making progress relative to where we were last week or making progress to where we were a few weekends ago when we had talks in geneva? annmarie: it is a great

question. we need to put context around that. we are making progress on where we were a few weeks ago when secretary bessent said talks stalled. then there was that phone call between president xi and president trump that opened up the pathway to have these toxic lancaster house in london between the two trading teams. we are not progressing from those talks in geneva. when they come out with an agreement today it is because both sides said they were each reneging on the deal and the terms they understood that they set in switzerland. you brought something up the start of the show that we need to continuously remind our audience, especially as they see whiplash when it comes to trade headlines. trump's first administration, the trade war started in 2018. we did not get a purchasing agreement until 2020. this will take a lot of time. jonathan: q4 2026.

can you wait until 2026 to wrap this up? dani: i cannot wait, these markets i do not think and wait. maybe we get more days like monday and tuesday and we can all relax and pull away from our terminals. jonathan: i will take a few of them. more later on. "we believe u.s. equities are poised to make new highs over next 12 months driven by strong corporate earnings. " sitara joins us. can those strong corporate earnings show up in the face of this immense policy volatility? sitara: the latest earnings season has been resilient. we have seen strong earnest growth. tech leading the earnings higher but we have seen breath and we have seen strong earnings growth. but we are dealing with is this

push in full and tug-of-war between the bulls and the bears. it feels like a tale of two cities if i can take us back to english lit in high school. economic growth has been resilient and earnings growth has been resilient. we believe the more these negotiations take place and the longer the implementation starts to get shifted further out it gives companies a lot more time to adjust their supply chains. we need to remember a lot has happened in post-covid a lot of companies have already started to reorganize their supply chains so that resilience is there. the biggest thing we try to tell our clients is at the end of the day equity markets ride on earnings growth over the long run. we are leaning into pockets of the market across public and private markets on portfolio

resilience, which is a term used ad nausea him and i will admit that. we also impress upon appliance that portfolio resilience means more than just downside protection and leading into less correlated return streams. that means things like infrastructure or things within the relative value and macro hedge fund space. in the public equity markets we are talking about global diversification that will not just give you downside protection given the volatility we are seeing this year, but it will also give you the potential for upside given the incremental news and positive earnings growth we are seeing within europe and japan as well. jonathan: let's take another beat on the earnings season. the bear case is the data and earnings have been flattered by a pull forward. this summer we get the bill. you push back? sitara: i do. there's something to say about a lot of inventory and orders being pulled forward but when we

think about earnings growth over the next 12 months we are still expecting mid-single digit earnings growth. when you look at the s&p, one of the things we need to remember is the market and the economy will not always be the same thing. when we look at the underlying earnings growth, about half of the s&p 500 is related to check and tech oriented areas and the capital we are seeing within artificial intelligence, no one is stopping. we are seeing all of these hyperscalers putting in investment within capex. we think that will shore up earnings on that front. on the opposite side those more value oriented sectors, areas like financials and banks we are seeing incremental progress and trade policy and policy in general from this administration , there are two sides to that point. there is the trade policy uncertainty we are seeing so far this year. the pro-business deregulation agenda is something we still expect to see in the second half of the year.

we expect to see those green shoots which shore up earnings as well. dani: what is the bar that allows the market to keep rallying? is it a very low bar or is a high one given only 2.3% away from all-time highs? sitara: sitara: i think the bar is always high for us when we are thinking about where to put our clients dollar to work. what we are trying to do is separate what is happening at the index level and focus on the bottoms up opportunities. what we are seeing is we are close to all-time highs but a lot of that has still been driven by a handful of names. if you look at opportunities under the hood, let's take a step back. forget what has happened so far this year. over the next couple of years a majority of the returns in the s&p 500 and even global equity markets has still been concentrated in the mega cap tech players and we expect to see breadth now. the rising tide is not going to lift all boats.

we need to focus on those quality earnings compounder's against public and private markets because when we think about the next cycle in the next decade, higher rates likely going to be higher inflation, even if it comes down a little bit. what that means is we need to be able to find those companies with solid balance sheets that are able to weather the storm of a higher rate and higher inflationary environment. dani: this earnings season it was only a handful of companies the talked and earnest about raising prices. it was hermes. ford talked about it. walmart tried but was shot down. are you surprised you did not hear more discussion about prices going up for corporate america? sitara: it is a delicate balance of forward-looking guidance and i was not surprised to see not as many companies were trying to paint the roadmap over the next 12 months, not because of inflation but there's a lot of uncertainty in the environment right now.

when we think about where to put the next dollar to work we think there will be passed through, that companies are going to be able to pass through a lot of the price increases down to the consumer. what that means from our perspective is how resilient is the consumer and how resilient is the economy? we are still seeing consumer spending level strong. it is something we are monitoring closely. two, this idea of what will end up happening on the inflationary front, we believe there will be volatility within inflation. what does that mean when we think about client portfolios? we are looking for areas on the portfolio resilience where you can generate income that is inflation protected. that is the biggest point i can make. core fixed income has a place within client portfolios. it provides that durability and downside protection. we have also been talking to clients about infrastructure where you are supported when you think about these long-term returns.

long-term contracts, contractual cash flows, but cash flows that have inflation escalators embedded within them where the yield income you get an sub keeping up with inflation so you have that durability. jonathan: a lot of people having the same conversation. if things go wrong will bonds bring comfort? sitara: we are pushing people to areas of the market that will complement the exposure you have. fixed income will always have a place but when we think about the market environment moving or were the 60/40 will likely not be enough. you will need other areas of the market to shore up that portfolio resilience. infrastructure is one of those places. jonathan: thank you for being here. sitara sundar of jp morgan. equity futures unchanged on the s&p 500. date two of trade talks in london. annmarie hordern standing by the

british capital. for an update on stories elsewhere, here is your bloomberg brief. yahaira: the trump administration has deployed 700 marines to los angeles to respond to anti-deportation protest. the state of california is suing to try to stop the deployments. president trump back comments from border czar tom homan that borders -- that gavin newsom could be arrested if he interferes with response. trade negotiations between the u.s. and china are continuing for a second day in london. the u.s. signals a willingness to remove restrictions on some tech exports in exchange for assurances china will ease limits on rare earth shipments. treasury secretary scott bessent said they had a good meeting yesterday and commerce secretary howard lutnick called the talks fruitful. apple shares ended lower yesterday as ai took a backseat at its worldwide developers conference.

instead it focused on a new software redesign called liquid glass. apple did introduce some ai powered features, including an relationship with openai that will help it match features already offered by samsung in google. jonathan: thank you. up next, nothing good comes easy. >> we are doing well with china. china is not easy. china has been ripping off the united states for many years. nobody charged them $.10, no president had the courage to charge china for whatever reason. jonathan: in just a moment we will catch up with former trump official kate kalukiewicz and later we will catch up with tyler kendall who was in the room with the president. ♪

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jonathan: back to back gains on the s&p 500. positive .1% on the s&p. on the nasdaq up .15. nothing good comes easy. pres. trump: we are doing well with china. china is not easy. >> did you give your negotiators any limitations? pres. trump: china has been ripping off the united states for many years. nobody charged them $.10. no president has a purge to charge china. jonathan: trade talks between u.s. and china back on. howard lutnick telling in re return he expect talks -- telling annmarie horden he

expects talks all day today. tyler kendall was in the room with the president yesterday. what was your take away? tyler: it is clear the white house is trying to thread the needle. one of the preconditions for the talks to happen is the u.s. was going to temper its rhetoric to be more respectful when it comes to china. it is clear president does not want to give up his leverage they are trying to pressure china when it does come to these discussions even as officials on the ground express optimism moving forward. president trump told me directly china is "not easy to negotiate with." and when i pressed him if he gave his negotiators any pressure on export controls which is what the talks are centered around he was noncommittal but he did not rule anything out. our reporting does indicate the u.s. has signaled a willingness to remove restrictions on some tech exports in exchange for

assurances china will speed up its export licenses for rare earth materials. people familiar telus the trump administration is prepared to remove measures targeting chip design software, jet engine parts, nuclear materials. these are where we saw a new restrictions going to place in recent weeks when it comes to the trump administration. at the moment there is a lot of focus on the commerce secretary being on the ground in london but we should also point out that last week we had quite the split screen in washington. the same day president trump held his phone call with chinese president xi jinping you also have howard lutnick on capitol hill testifying to lawmakers that he thinks there needs to be stronger enforcement when it comes to export controls against china. still a lot of issues that need to be worked out. jonathan: tyler kendall with the latest in washington. the national economic council director kevin hassett made this endpoint simple yesterday. this will be short. on our side we will drop tech

restrictions, on their side they will lead shipments of rare earth. dani: it might be a different question what is happening in the room. given these restrictions were put on recently it seems like the trump administration has come in with extra pressure they want to put on. how easily will they be willing to relinquish that control when china holds a really big chip when it comes to rare earth metals. jonathan: joining us now is former trump trade official kate kalutkiewicz. welcome back to the program. want to lean on your experience and how yof tops. kate: progress would be an outcome as opposed to officials not in london commenting on how things are going. dani: what outcome might we hope for? what might we get out of this? kate: this is the question around which outcome both sides are hoping to achieve. if we are just trying to get a reaffirmation of what was already agreed to in geneva they should be short meetings.

the fact that they are dragging on longer than anticipated indicates to me that one side is perhaps dragging its feet thinking it can get something more than just the geneva deal. dani: we are also in a moment where china has been tightening its rare earth exports, not just for america but for all countries to reach some type of deal. does china need to walk away with something the u.s. can offer that it desperately needs? how much does the u.s. i need to move? kate: the u.s. desperately needs the rare earth's. that is the outcome president trump has sent his negotiators to get. china has restricted these minerals to other nations but they are negotiating in parallel with europeans and others alongside the united states. this is not the only game in town. united states is under the impression that as an outcome of the geneva talks china agreed to release the rare ernst. this is a bit of a he said, she

said discussion. what the united states has to do to get china to release these minerals remains unclear. the americans place these new restrictions on chinese students in the united states as a way to get the attention of the chinese who perhaps feel an easing of visa restrictions will be sufficient. china has signaled it once more than just the visas, it once restrictions lifted on certain ai export controls as well. jonathan: last time around it took 18 months to achieve a phase one deal. at the epicenter of that deal were purchase agreements. i wonder from your vantage point whether you think it is different this time? the ultimate end goal has changed and maybe it will be harder. kate: it is a terrific question. we remain unclear about what the end goal is. you remember in the first trump administration we had a fairly lengthy investigation and public report articulating a myriad of

concerns related to china's unfair trade practices, relating to forced technology transfer, ip theft, unfair subsidies. in this case we hear from the president issues he would like to address in china. it is not nearly as clear. an outcome could take as long as 18 months or longer, particularly if the brown keeps shifting. jonathan: i am confused now. when they were making the argument they wanted to rebalance global trade and push china to drop its walls, that made perfect sense. i remember larry kudlow used to talk about reciprocity. since the biden administration the focused appeared to be more on national security and strategic decoupling. you think it is more of the latter and no longer the former driving things in washington? kate: i think that is true. the shift in tone has frankly encompassed all of washington,

democrats and republicans have acknowledged this notion of strategic and economic competition with china and the need to confront the growth and critical sector -- in critical sectors. some of it will still be about access. president trump has spoken clearly that he wants american companies to have access to the chinese market. we will see a focus on certain purchase commitments, certain access restrictions being lifted , but this is a much broader competition. in some ways president trump has brought the fight home where we see new measures impacting domestic manufacturing in the very critical sectors china dominates now. as opposed to a tariff heavy war we saw the first time around, i think both sides will try the supply chain restrictions to stop the other from advancing in this long-term economic competition. jonathan: appreciate your take as always. kate kalutkiewicz, former trump

trade official. we are looking for an outcome this afternoon. dani: hopefully it is an outcome that sticks. we had progress in geneva but here we are having these conversations. progress is fluid. jonathan: equity futures positive following black to back gains -- back to back gains on the s&p 500. looking forward to the inflation data. cpi tomorrow. ppi the day after. good morning. but godaddy airo does, with its magical ai powers. it not only creates it, it slaps that sweet thing everywhere. mmm. ♪♪

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jonathan: it gets busier tomorrow. cpi, ppi, auctions. equity futures just about unchanged. nasdaq 100 positive by 1/10 of 1%. let's get some morning movers with yahaira. yahaira: we start with novo nordisk up 3% in the premarket. activist hedge fund is building as stake in the company. parvis wants a say in who will the next ceo be. not booming has been the stock which has been cut in half in the last year. we have taiwan semiconductor shares up 1.6%.

it posted a 40% jump in revenue as companies rush to stockpile its chips before the u.s. tariff relief expires in july. the top supplier to apple and nvidia bought over $10 billion last month. tsmc says ai demand remains hot and outstrips supply. mcdonald's here shares falling nearly 1.5% after another analyst downturn. yesterday it was morgan stanley saying there were more headwinds coming. and flagship capital. they say the crispy chicken doesn't have as much breading so they downgraded the stock. happy to do market research. jonathan: there's a couple of words that scare me. food innovation. i don't want innovation on my food. dani: i don't want new

chemicals. i just leave the science out of it. give me real chicken and i'm happy. jonathan: you were talking about mcdonald's. katsu wrap at mcdonald's? dani: would you trust linda mcdonald's to give you a chicken katsu -- london mcdonald's to give you a katsu wrap? jonathan: the u.s. signaled a willingness to remove restrictions on some tech exports. officials pushing china to ease limits on shipments of rare earths. dani: it's important to know who has the upper hand and what china is doing with their rare earth. this is a global effort they are doing. china realizes how crucial rare earths are and are trying to give it long-lasting leverage by controlling the shipments of who gets it, when they get it. for the u.s., you have an auto industry that is so dependent on

it. it's a rare bit of leverage china has that it can flex. how much does the west need to cave in these talks to really accommodate that? jonathan: yesterday, the nec director was straightforward. the fact that it's going into a second day speaks to maybe this is more difficult to get done. dani: the commerce secretary howard lutnick told emery --annmarie he expected to go all day. it is not even this that they have to figure out. they have to figure out all of china tariffs. all the reciprocal tariffs. if this one issue is taking this much time, it shows what a long road ahead they have. jonathan: the president is focused on other things coming putting 700 marines sent to los angeles in response to the anti-deportation protests. gavin newsom suing the administration for its response. the president saying newsom may

be arrested if he interferes. dani: i think this is likely the fight that trump is more happy to take on then and elon musk fight. his approval ratings are strong in immigration. 54% going into this weekend saw a more favorable on his deportation efforts. this is something his voter base likes to see. it is telling this happened in a deep blue state, place that is concerned about immigration, where you can get images. trump knows the power of these images and with that likely does to get his base excited about the immigration actions. jonathan: i could not agree more. the president is more comfortable with this topic then trade. did takes heat out of officials on the following. mike johnson pressuring senate republicans to preserve a deal raising the salt captive $40,000 -- cap to $40,000.

it's not the headline. the focus is on los angeles. dani: this underscores dysfunction. all of this looks to an international audience as something of instability, especially in los angeles, dysfunction in d.c. what if you have the senate push back? it has to go back to the house where you have such a thin majority. in the house you have people who care about salt. in the senate, you don't have that much constituency. it underscores how difficult reconciliation is even before the midterms when you make it changes to the makeup of the house and senate. jonathan: do we still have a july 4 deadline? dani: the clock is ticking down quickly. jonathan: they call it aspirational. some economic data this week. cpi tomorrow, ppi the day after. isabelle mateos y lago bracing for tariffs to make the mark. "the price impact of tariffs is

still ahead of us and likely to come in full force this summer." welcome to the program. when do you see it hitting hardest? isabelle: well, we have seen some sectoral tariffs. steel being a key example. automobiles. these are the 25%, 50%. it's a small part of the total imports. the rest is 10%. this is more likely to see corporate's trying to be patient and figuring out how much they want to try to absorb through cost reductions or absorbing the hit on their earnings versus passing it on to their consumers. it will be -- we will see the impact first in small parts of the cpi. it will grow over time. that is why the numbers have not shown anything massive. it will creep through fairly gradually. jonathan: in the aftermath of

the pandemic, if we had this trade war then, we saw balance sheets were strong. the labor market was incredibly tight. a lot of people would have been more worried about inflation getting out of control. how different are things now? isabelle: it is quite different. the consumer demand is not endlessly elastic. the labor market is still strong but clearly moderating, cooling down. this is what you are hearing and corporate communications when they talk about their strategy to deal with the tariffs. they are careful. they don't want to lose market share. some are aggressively pursuing market share as part of this environment. that's why we will see gradual pass-through and more emphasis on cost control. maybe additional automation to control the cost pressures. it will be interesting to see how it pans out. that doesn't mean we are off the

hook in terms of risk of second round effects. that is part of the picture. it is less prevalent than perhaps right after the pandemic. it is something we need to keep in mind. this brings us back to the rare earth conversation, where you can really see a very sharp price impact is if you get supply chain breakdowns. you have an essential component that is missing and production stops and you can see big spikes. that's why we have seen focus on this in the u.s.-china talks. not so much on the tariff but making sure rare earths keep flowing so you don't have supply chains breaking down. dani: another thing that is different from covid is rates were taken down to zero. rates are higher this time and the fed is unwilling to suggest we have cuts because of the unknowingness.

how much pressure is there on corporate balance sheets right now? could that change? isabelle: for sure. the primary concern for the fed now is keeping inflation expectations as anchored as they can be. you can debate if they are fully unanchored but they look wobbly. it ounces run based on headline news. right now this is a concern for the fed, not the health of corporate balance sheets. they don't want to overdo it. i'm sure they want to cut as soon as they are reassured we are not going to see second round effects. they have a tight path to walk. dani: i'm assuming you are referring to what we had yesterday from the new york fed. they come down to undo, tick up higher in april. isabelle: you notice the

volatility of the inflation expectations. they are not anchored . they might just bounce back up if we see tariffs going back up or the talks in london do not go the right way. that is not a healthy situation. the central bank has to be really putting a premium on the credibility of its commitment to keeping inflation back to target. jonathan: the federal reserve will have to take the summer off. maybe they start cutting rates in september but for the rest of summer, goodbye. isabelle: at least. september looks very early. i'm very doubtful we will have greater clarity in september. they don't have any reason to take a chance. we need to see how quickly the tariffs are getting passed through or not. we need to see where tariff rates land. if we are at 10%, it's a different story then back at

between 20% and 40% depending on countries. it is difficult to see the fed moving before the end of the year. jonathan: if unemployment gets to 4.7% and we have not result the true story -- trade story? isabelle: it gets very hairy. i would not want to be in their shoes. remember, the labor market is having a dynamic of its own because of -- we saw in the last numbers the participation rate coming down, immigration falling. you have a shrinking workforce. they workforce that is not growing as fast as it used two. you have a more tepid -- used to. you have a more tepid rate of growth and inflation staying where it is. for the fed it means that it cannot -- it means the labor market doesn't give it the

weakness in esa cut. -- it needs to cut. dani: there's probably an acknowledgment this is not the fed's battle. it is not under the control of monetary policy. it is a political economy driven by fiscal policy. maybe for that reason there's a bias for the fed to say, let's not moving here. if we get a recession, it is not our fault. jonathan: thanks for dropping by. isabelle mateos y lago of bnp paribas. just as much a focus on the cpi data on wednesday as the trade talks in london. let's get stories elsewhere with yahaira. yahaira: the yuan nuclear walk dog -- u.n. nuclear watchdog says -- the board of governors meets this week in vienna. they reported iran's inventory of close to weapons grade

uranium is at record levels, growing by 50% in the last three months. u.s. health secretary robert f. kennedy, jr. dismissed all 17 members of a key federal vaccine advisory panel, accusing them of conflict of interest. before joining the trump administration, he was known as a vocal critic of the committee which advises the director of the cdc and help shapes national public health guidelines. mark zuckerberg is creating a new ai super intelligence team. sources telling us that zuckerberg aims to higher around 50 people for the new group. he believes meta can beat other companies achieving artificial general intelligence, agi, the idea that machines can perform as well as humans at many tasks. that is your bloomberg green. jonathan: thank you. up next, apple is not at the party. >> the main thing everybody cares about is apple devices are

done. apple is not at the party. we want to see apple taking aggressive chefs to redo their operating system around ai. jonathan: did we get any of those aggressive steps yesterday? we catch up with michael ng of goldman sachs in just a moment. this is bloomberg. ♪

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jonathan: live from new york city, welcome back. a snapshot of the price action this morning. futures positive by 1/10 of 1% on the s&p. the nasdaq 100 up by .7%. no drama there whatsoever. apple is not at the party. >> there are no real big changes

announced in this event. the main thing everybody cares about is our devices are dumb. apple is not at the party. what we want to see is apple taking aggressive steps to redo their entire operating system around ai versus these incremental attempts at making siri better. jonathan: apple failing to impress with ai taking a backseat to a software redesign. michael ng has a buy rating on shares of apple. good morning. michael: thank you for having me. jonathan: how disappointed were you yesterday? michael: i was not very disappointed. i think investor expectations for wwdc 25 were low and apple meant that lobar. -- low bar. they conceded the personal features coming to siri would be

delayed to the coming year. that was as expected. we got several quality-of-life improvements. there was a new design interface called liquid glass. there were some apple intelligence features that led to several new features across the operating system like live translation, workout buddy, things of that nature. they delivered some anchor mental improvements. in line expectations, albeit low ones. jonathan: people would agree based on what i read. this is not sufficient to drive massive demand and iphones. do you see anything happening outside of apple that would erode demand for iphones? michael: you hit the nail on the head. investors care about apple intelligence. it helps drive iphone demand and demand for other products in the apple suite of products.

there are other things as well that maybe are underappreciated. i'm excited about the upcoming formfactor changes. apple's last iphone change was back in 2017 with iphone x when they got rid of the home screen button. over the next several years we will see some meaningful ones. with a slim version of the iphone. next year, the vulnerable. 2027, the 20th anniversary phone when you get the full glass enclosure and new design of exterior. dani: is that enough or new demand cycles? michael: i think they are. formfactor changes are the most meaningful driver for consumers today. outside of that i think there are other things that should be helpful in helping to shortening the replacement cycle and driving demand. in the u.s., just over a third of apple's revenue, the

rising competition among carriers is helping. i just upgraded my iphone in the last week. i got it for free, lowered my monthly bill. i think you are seeing more promotional activity coming out from verizon, at&t and t-mobile after the carriers enjoy a long period of benign competition. dani: is there a point where that changes? when you look at android making far advances where i can take a photo and can redesign it with ai, is there a point where that becomes attractive enough? if apple has not caught up, user start switching? michael: absolutely. it is a real threat. at some point some new software features, the ai features could be a point of differentiation for android and other devices. at this stage we have not really seen that market share loss yet. the iphone base continues to

grow every single quarter, year after year. that is the most underappreciated asset apple has, the 1.2 billion iphone installed base users and over 2.4 billion across all devices. jonathan: what it help of the stop talking about genmojis? michael: i'm probably not in the age demographic. jonathan: it seems frustrating. it feels like amateur hour when they talk about combining emojis and making genmojis. we are looking for the serious incremental improvement in the software and what we can do, the usability, and they talk about combining emojis, they lose me quickly. michael: i don't think there is a killer app that is the same for everybody. everybody wants to use ai in their own way. i thought the live translation

tools announced yesterday were going to be really attractive to the vast majority of the user base. i personally am excited about improvements to thing like writing tools to help draft responses to emails and text messages beyond what is available today. jonathan: i wish they had live translation when my italian grandparents were still around. dani: they would not have loved you transforming into a unicorn talking to them? jonathan: the live translation is interesting because other people are already doing it. is there anything apple has not met just yet and needs to do? michael: we have seen interesting demos of a more personal high-powered virtual assistant coming out from other developers and applications. i think siri has not delivered against that promise yet. with that said, siri with

better on-screen awareness will come out in the coming year. i think those new software features will be rolled out in tandem with those formfactor changes coming out in the next couple of years. you have got apple rolling out those that ai features along with new formfactor changes for the iphone that will result in a good shortening of the replacement cycle. dani: what about the hardware? when the vr headset come out there was so much hype around it. it feels like it has fallen by the wayside. are we looking back at that and saying it was a boondoggle? too soon to release something like that to the market? michael: the numbers for the vision pro have been fairly low and immaterial in the grand scheme of things. that said, it's a recognition that we have all this new technology in vr and ai.

perhaps there can be a new consumer product developed to fully utilize and embrace that new technology. vision pro is an excellent example of that, as is what is potentially coming out of openai and io. it is to be determined. adoption of a consumer product like that at scale will certainly take some time. i applaud apple for being on the bleeding edge of innovation on the vr ai side with recognition that commercially it has not been as successful as investors would have liked. jonathan: the focus of the moment for markets is on the trade talks in london. what is your base case assumption about how it shakes out between tim cook and donald trump when it comes to tariffs on iphones? michael: i don't have a magic eight ball. jonathan: neither do we. michael: what i would recognizes that apple has contemplated a

level of tariffs in its current financial guidance for the june quarter. really assuming the current state of things, the 20%, so-called fentanyl tariffs and upcoming reciprocal tariffs, and apple has done a good job of managing the supply chain and managing that tariff exposure for iphone and the other devices within the apple suite. that includes diversifying into india where the majority of u.s. iphone sales coming in the upcoming quarter will have in india product of origin. jonathan: something the president seems unhappy about. appreciate your time. michael ng goldman sachs. the second hour of "bloomberg surveillance" is up next. ♪

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>> there's nothing simple about the u.s.-china relationship. we have a number of challenges. >> both countries have identified the other as they are long-term strategic challenge. that is why they are at the table. >> the president has many goals when it comes to economic relationships. >> tariffs are here to stay. we are debating the magnitude and what form is it unleashed on the markets. >> neither side will get everything they want. they will have to give in on something. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz and annmarie hordern. jonathan: live from new york

city, good morning. the second hour of "bloomberg surveillance" starts now and the scores look like this. equity futures just about positive following back-to-back gains on the s&p. positive by not even 1/10 of 1%. on the nasdaq 100, a quiet start to the week. it gets busier as the week grows older. cpi tomorrow, ppi after that and two important debt auctions coming up later in the week. dani: it underscore sentiment has improved so much but there are so many catalysts that could change that. the new york fed consumer inflation expectations survey. expectations are back down. they see the expectation -- we are in london, day two, and no agreement reached on rare earth and tack. -- tech. jonathan: this is a rally

looking for a credible narrative. she does not think there is one. we had a rally of more than 20% off the april low. what is the narrative the drive is higher through the summer? dani: the latest on the market seems to have wrapped his hands around is tech. it's basically all going into tech. if you're unsure if capex will continue and things like ic, the one place -- looks icy, the one place is technology, the hyperscalers. the market keeps coalescing around big tech. jonathan: it is the twin pain trade. narrower leadership coming out of tech. equity futures barely positive. in a moment we catch up with matt miskin of john hancock investments. henrietta treyz with the u.s.-china trade talks continue in, and david tinsley on the

state of consumer spending. we begin with the top story. a second day of trade talks in london. president trump: we are doing well with china. china is not easy. we went to open up china. if we don't, maybe we won't do anything. we want to open up china. it will be a great thing for the rest of the world. jonathan: bloomberg's annmarie out of london. day one. we were told it was fruitful. talks are going well. what we looking for from day two? annmarie: for day two tech come out with an agreement or acknowledgment that each side potentially is going to get back to what they agreed upon four weeks ago in geneva. washington-beijing accusing each other every nagging with the agreed-upon on those talks -- of

reneging with the agreed-upon talks. i should note i don't know if it is a barometer but food delivery was just broaden once again from the famous british chef. potentially, they are eating now and having these discussions. we have to remember that this can only be the second and final day at least of the london talks. treasury secretary scott bessent is on capitol hill tomorrow and will not miss his hearing before the house ways and means committee. they are at the crunch time now. what we are expecting is potentially easing of export controls. the more recent ones when it comes to the u.s. side. what they want to see out of beijing is an advanced pace of getting their hands on the rare earths and magnets that beijing basically has a complete control over with 70% of the market that china has control over. dani: if we get some sort of

agreement coming through from here, do we understand what happens next? this is just on rare earth metals and tech imports and exports. what's after this? annmarie: great question. these are the real chokepoints and redlines for the united states. if they are willing to give in on some export controls, maybe the more recent parts, nuclear material, some chemical materials, jet engine parts, what happens when china says we need more? we want access once again back to those nvidia chips that were made to be export compliant under the biden administration. now you can see the complications of this dance. it is two steps forward, one step back. yes, we are still talking about two provisions of this deal. two policies of the deal. we are not even talking about the purchase agreement that trump handled in his first

administration, which we should've might the audience that took 18 months. the trade war began in 2018. we did not get an agreement until 2020. jonathan: working hard just to stand still at the moment. annmarie with the latest. i like the food. it is fantastic. palm not sure who's driving that order out of the u.s. delegation. dani: you would think they would try to get something american. maybe mcdonald's. they were using very british-israeli name to bring them food. jonathan: we will try to find out. let's get the view of wall street this morning with matt miskin of jan hancock investments. we won't talk about food. we will talk about markets. this is a market looking for a credible narrative. do you think there is one? matt: earnings growth is the last bastion, the most important fundamental driver of stocks. u.s. earnings growth is there. we are seeing 14% earnings

growth but no one cares. u.s. quality stocks are the worst performers in the u.s. equity market and for the global market. quality is on sale. the u.s. is on sale. the cell america trade we have seen this year has made u.s. assets -- sell america trade we have seen this year is made u.s. assets the best pound for pound. earnings are down on a year-to-year basis about 4%. mid-caps are about flat. u.s. large-cap quality stocks are the best earnings. markets don't seem to be paying attention to it. dani: how was that possible when we are just 2.3% away from all-time highs and trading at multiples that look like something 22 times the s&p 500? where is the bargain here? matt: it is more that the rally has been sentiment driven. we are in the type of cycle where we are now seeing companies issue debt and preferred stocks to buy

bitcoin. it's a global multiple expansion story. the earnings growth companies are the ones that have not done as well this year. they are up about 1% in terms of the quality factor this year. we think the risk reward looks the best with equities. frankly, we are looking at the bond market and seeing a lot of income. the old narrative it's a low interest rate world does apply to the rest of the world except the united states. we are gearing for providing income for clients and using the multi-asset portfolio to get as much return potential that we can. dani: are we looking at something like 4.9% on the 30-year yield and saying that is the buy of a lifetime despite the volatility? matt: the last couple of years have created a ton of value. we had a bond bear market that

was similar to that of 2008 for stocks. we see the 30-year took it on the chin the most. around 5% for the next 30 years is not the worst decision you can make but there's a lot of volatility. we are geared toward the intermediate part of the curve. a 5% to 5.5% yield. higher-quality parts of the bond market. quality and bonds on a relative basis -- in bonds on a relative basis because high-yield spreads. we see the longer end of the curve is not the worst decision. we are more in the intermediate. be patient, get paid income and watch these narratives play out on the merry-go-round of global markets. jonathan: it feels like we have been on that merry-go-round for a number of years. typically when everyone talks about bond options,

usually we have reached an extreme. things start to turn the other way. are we at that point going into the supply later this week? matt: we had about 4.6% on the 10-year and then back down. it's around that level we are looking at opportunities. it has moved quickly. the whole narrative now is focused on tariffs. no one is paying attention to the housing market, the biggest driver of inflation. 35% of the index. we are seeing housing slowed dramatically in the u.s. supplies hitting the market in a significant way in california, florida, texas. this is likely to weigh on housing. if housing comes down, inflation comes down, and we think they are waiting to see what happens with the tariffs, which means they are not data dependent. they will have to probably cut more than the market things in

the back half because they were waiting and waiting when they should've been looking at the data. jonathan: how much more? what kind of number of cuts are you looking for? matt: it could be similar to last year. it is backend loaded, which is hawkish to expectations but dovish in magnitude. there could be four cuts on the back half. right now there are about two pricing. dani: matt miskin, thank you. another 100 basis point of cuts later this year according to matt. dani: that is far from where the market is. the market is underwear the fed's dot plot is. 70% odds we will get two. the data has been better. even the sentiment figures have started to be better in the market has taken notice of that. jonathan: looking for cpi tomorrow morning. ppi after that. we are down three basis points on the 10-year maturity. with an update on stories

elsewhere, let's crossover to yahaira. yahaira: the trump administration employee -- deployed 700 marines to los angeles to handle the protest. california is suing to stop the deployments. president back comments from tom loman that gavin newsom could be arrested if he interferes with their response. shares of tsmc rose in taiwan trading. the main chipmaker for nvidia and apple showed a 40% jump in revenue for may as the company stockpiled chips in response to mounting trade uncertainty. while sales be estimates, they did fall more than 8% from april. apple unveiled the most sweeping redesign and its history at its worldwide developers conference. liquid glass what you define -- will unify user experiences across all devices. as part of its rebranding efforts, the company confirmed it would use --not version

numbers to identify software. -- would use years, not version numbers to identify software. president trump: we are doing well with china. china is not easy. china has been ripping off the united states for many years. nobody charged them $.10. no president had the courage the charge china for whatever reason. jonathan: up next, henrietta treyz. live from new york city, good morning. ♪ ♪

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jonathan: quiet start to the

week so far. this morning just about unchanged on the s&p 500 and the nasdaq 100. under surveillance, the u.s. and china working out a deal. pres. trump: we are doing well with china. china is not easy. >> did you give negotiators any limitations? pres. trump: china has been ripping off the united states for many years. nobody charged them $.10. no president had the courage to charge china for whatever reason. they did not want to do it. jonathan: a second day of trade talks continuing in london. commerce secretary howard lutnick telling annmarie he expects that talks to going all day after saying they were threefold yesterday. tyler kendall joining us from washington, d.c. do we know what happened yesterday and why this has gone into day two? tyler: i was pretty struck by what the former trump trade official said on this program

earlier. if the goal is ultimately to get to restoring the agreement reached in geneva, that should have happened relatively quickly. perhaps this talks -- the talks extended to a second day. one of the sites might be dragging its feet. we have not really gotten any details on exactly which side or which of those issues could be that hang up. we know at the negotiations is both countries -- at the heart of the negotiations is both countries have put restrictions on products both rely on. as you heard, i tried to press president trump at the white house. he gave his negotiators any sort of limitations when it came to export controls? he did not rule out. our reporting indicates the u.s. has signaled a willingness to live some of the recent restrictions put in place. that would come in exchange for china pledging to give some sort of reassurances when it comes to speeding up the export licenses

related to critical and rare earth minerals. the u.s. has signaled they would focus on those recent restrictions that have gone into place such as on jet engines for the software used in chips. it probably goes without saying that the talks are incredibly high-stakes. it doesn't really seem like we would get some sort of lowering of tariffs at the end of the conversations in london. it's probably a good reminder that the levees that are currently in place could cut u.s. imports from china by 70% over the medium-term. dani: you mentioned language out of u.s. officials. what have or we not heard from china on how liquid they are to accommodate some demands from america? tyler: there seems to be a more tempered tone. they have been pretty firm they want to see the u.s. lift its restrictions. that is the line we repeatedly hear from beijing when it comes to the talks.

there's been focus on the fact that commerce sec. howard lutnick is included in the talks. that does signal a willingness to put export controls on the table. we have to keep in mind howard lutnick has indicated he has a hawkish stance when it comes to china, telling lawmakers he wants to see a tighter enforcement when it comes to those export controls. there's a lot of other extra things on the table here that china has raised concerns about, including u.s. plans to revoke chinese student visas. as we heard president trump last week say that chinese students would be welcome here in the u.s., there remains to be seen if they will rollback that policy and whether or not that's enough for china to get on board with the broader deal. jonathan: tyler kendall with the latest, thank you. joining us now is henrietta treyz. welcome to the program. we were told the u.s. would push to drop some restrictions on their side to ease the limits on rare earth shipments from china.

i guess we have two options. either that is more difficult to do as we go into day two or they are shooting for something much bigger than just that. is there reason to believe it is one and not the other? henrietta: i would like to offer a third alternative. i don't think we are talking about tariffs anymore. that is something the street is coming to understand now. china has already grasped. when we got his cbo score suggesting these tariffs in place today are generating $2.8 trillion in revenue and the white house starts putting up memos incorporating that threshold into their public presentations on the state of the tax bill and reconciliation package, we are not negotiating for tariffs to come down. the tariffs are likely to continue across all nations, not just china but japan, south korea, the eu. they will see sectoral tariffs on pharmaceuticals,

semiconductors, trucking, aircraft in the month ahead. what is being negotiated are the extraneous issues. since the geneva meeting both have ratcheted up, whether it is on looming -- limiting student access to chinese students or the wall way chips or -- huawei chips or ai. they are no longer negotiating just the tariff rates. they are looking for an excuse to get past liberation day in august and come up with a reason to keep tariff rates where they are. dani: can they use tariffs as a crutch? are you suggesting they are just completely to one side and that will not be touched for the foreseeable future? henrietta: i think they can go up. i don't think they will come much further down. 30% is way lower than the president initially wanted. he gave bessent the go-ahead to drop rates down from 80%.

30%. cargo is just now starting to get back to where it was before april 2. i don't think they will go much lower than 30%. $2.8 trillion is just too attractive. i believe tariffs will rise on a sector basis. i spoke with a former ustr and he suggested one or two nations could be made example of. nicaragua, for example. the tariffs are here to stay and we have to find another fronts. dani: what does that say when the 90-day pause comes due in july? do we get a resumption of higher levels of tariffs like we saw on liberation day? henrietta: i don't think so for most nations. the administration is looking for an excuse to extend the july 9 audit to the future. i don't have a good sense of how long they want to extend

to. one thing i cannot square is the liberation day 2.0, july 9, is before i anticipate the tax bill passing. republican lawmakers are trying to pass this law and the july for rally -- july 4 the president is hoping to have and the expiration date. the dates are fuzzy and they don't really quite have a streamlined narrative. the tariffs and tax bill have not blended perfectly. i wonder if that might come into the conversation. jonathan: the white house increasingly distracted by was happening on the west coast in los angeles. do you take the point or the argument they are more come double with that story developing in los angeles and maybe that takes heat off the passage of the bill in washington? henrietta: they have got to love it and the timing is perfect. thursday the judiciary committee is putting out there $175

billion package that will spend money on immigration. one thing that's been lost in the last week with elon musk and donald trump feuding is that the whole package, the reason we are doing one big beautiful bill is because there's a tremendous amount of dessert in the bill. $350 billion in funding for the military and immigration. that will carry the bill over the finish line. i have only seen one senator come up against those spending levels, rand paul. even he wants some level of spending. he just doesn't think we need the full $175 billion. i expect for this immigration conversation, the riots in l.a. advances the odds it will becoming law. $400 billion more deficits. the salt cap will not be as generous. ira tax credits cannot be cut back is much as they had

been. it's in key states that need it including alaska and north carolina where there are at risk republican numbers. jonathan: henrietta treyz, thank you. something to think about going into the debt options tomorrow. 10-year the day after. dani: the bears keep looking to the debt options saying it will be bad. we have not seen that. the auctions since liberation day have been fine. maybe not the same for japan. jonathan: except for the 20. dani: i don't think we can take much signal from that. there are plenty of reasons to be worried. the one big beautiful bill is adding passed. paul donovan says the images in l.a. are worse than they sound. jonathan: i asked lisa if we should kill the 20-year maturity. she said put a stake through it. dani: lisa wants one less

auction? very surprising. that's the signal of how about the 20-year option is. jonathan: of next, david tinsley on the state of consumer spending. we saw a lot of frontloading. are we getting the bill for that this summer? that conversation is of next. you are watching bloomberg tv. ♪ ♪ ryder presents "stories from the supply chain" as a beverage distributor, real-time visibility is what uncorks your true potential. so southern glazer's teamed with ryder to modernize their fleet and logistics improving productivity and performance. our partnership is well balanced

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jonathan: two days of gains on the s&p 500. unchanged so far this morning. off the low of april. higher by 20.5%. now just 2.25% away from all-time highs on the s&p. this morning unchanged. let's get to the bond market. the looming gauntlet of duration. 10-year yields are lower. tomorrow, $39 billion of 10-year note. -- notes. two hours away from the cash open. let's get some morning movers with yahaira. yahaira: it is a pretty muted morning. i happened to find some movers. tesla's years up 2% after

rising 4% yesterday. defying two downgrades from analysts. this comes as the ev maker tensions are easing between elon musk and president trump. and, as buzz builds around the robotaxi lodge anticipated this thursday -- launch anticipated this thursday. shares of novo nordisk up 3.2% on a report that active hedge fund harvest asset management is building a stake in the ozempic maker. they report that they want to say who will run the company next as it faces rising pressures in the booming weight loss drug market. not moving as the stock, which has been cut in half in the last year. we end with meta rising .7%. this is as we hear a report that mark zuckerberg is frustrated

with his latest chatbot. he is personally building a secret super intelligence team, even holding recruiting dinners at his homes as he tries to assemble the best of the best to achieve artificial general intelligence. investors hoping that might lead to real progress. jonathan: more from yahaira in a moment. some news. planning to invest $500 billion in europe over the next decade. that is punchy stuff. blackstone has lots of money to put to work. a few takes on tariffs . not seeing a great impact on inflation. dani: on the short end, it could happen in six much which is optimistic considering last time arata took 18 months. that is what moves investors like blackstone to europe. we heard from apollo last week at the conference i was at.

they said they would invest $100 billion in germany. as tariffs take hold, executives are shifting resources to europe. jonathan: that is the latest from blackstone. we will try to bring you the conversation later this h our. both delegations looking to ease tensions over rare exports and technology shipments. president trump saying, "we are doing well with china. china is not easy." dani: he says they doing well. howard lutnick told annmarie they were doing well this morning. bessent called it a good meeting yesterday. we are not hearing the chinese delegation giving comments. not much from them saying things are going well. you are hearing they strategically and very well-timed placement from the hallway founder, saying -- huawei founder, saying we have workarounds from things we get restricted from the u.s. it seems like the narrative china is trying to build his we have the upper hand, we can wait

this out and you can't. jonathan: henrietta treyz said something else we are not hearing. we are not hearing about removing tariffs. not hearing about taking down tariffs. it does not feel like that is part of the conversation today. dani: it's really not. her assumption is that tariffs stay at the higher level. what you are getting from negotiations is the administration able to move beyond liberation day, that can talk about something besides that. what does that mean for business? you get an agreement on rare earth metals. what if we still have tariffs at 30% and it doesn't budge? dani: -- jonathan: annmarie will be joining us in the next hour. mark zuckerberg prioritizing a so-called ai super intelligence team. he is frustrated with ai shortfalls and thinks meta should be outstripping competitors on artificial general intelligence. dani: i love he's holding

dinners and trying to recruit people. i'm not an engineer but i will come over for dinner. it does underscore there's a real risk in falling behind. something as ubiquitous as google search gets completely upended by chatgpt. that is the risk for meta. even though they are spending lots of money, if they don't do something in artificial general intelligence, the next leg up, does that mean they will have spent billions for nothing? someone can completely disrupt that. they need to spend what is an ungodly amount of money trying to form a moat to make sure that doesn't happen. jonathan: remember the facebook days and they left the desktop behind and he said he didn't want to hear about anything improvements to the desktop experience? it feels like it is that but with ai. dani: it does feel like that. i wonder what the corollary is of our parents using desktop facebook. jonathan: who still uses

desktop facebook? dani: there's a generation. my mother loves on and gives a thumbs up. i don't know if people still the pokes on facebook. jonathan: i'm not there when shaded mrs. burger. apple fighting to impress investors, announcing it will roll out new software and features like live translation. it has yet to strike a major ai deal and says it still needs more time to bolster some ai elements. dani: it feels like apple is trying to learn the missteps of their last worldwide developers conference. they came up punchy with what they saw happening in ai. they talked about siri advancing. what happens when you get the open of the worldwide developers conference? a delay to siri. perhaps it is a more conservative apple and doesn't want to promise anything and giving us all these flashy liquid glass or whatever it's called -- and your favorite, g enmojis.

jonathan: the stock is down. you today, close to 20%. -- year to date, close to 20%. bank of america releasing a report on how tariffs impact is spending in the month of may. joining us now is david tinsley. you know how much we enjoyed update on the story. we understood there was a frontloading of purchases from consumers ahead of tariffs after we saw the big announcements. are we starting to pay the price for that? david: thanks are having me back. very much so. in our latest data from may, the data felt 4.7% -- fell 4.7%. the reason is the payback. we saw electronic spending ramp in march, april. it fell back to a negative year on year growth rate in may. there were other reasons for the

weakness, the relatively soft print. one was the weather. it was wet and cold around memorial day. there was also a broader slowdown across the u.s. regions as well. i think those are the kind of mitigating factors i would say, the underlying spending growth is probably stronger and you can see that in the labor market data. dani: i think these updates are get opportunity to do the quarterly panic of should we be worried about by now, pay later. you talk about millennials and gen z's are spending more than their gen x counterparts. is there a reason to be worried if that picks up among the younger cohort that tends to have more credit issues in the older? david: in this report we pull apart the differences of the generations. older generations' spending

growth is solid while younger generations are spinning right around zero -- spending right around zero. they have all these other pressures that don't shop on card spending. student loans, housing costs, childcare costs. those are all leading into their reasonably strong wage growth. two pressure points in the report are credit card utilization is rising somewhat for millennials. a little bit above 2019 levels. good news. it had flattened off. and by now, pay later -- buy now, pay later issuing a trend rise. i would qualify that by saying only around 10% of millennials and gen z are making those payments in latest month. by no means a pervasive thing. that is rising. dani: if we have that rise, if

there are pockets of weakness, how important is it that we get some resolution in the tariff discussion? how much of the consumer spending of credit card utilization, the willing to make the purchases hinging on outcomes from washington, d.c.? david: i think it does help. i would qualify that we discussed this in a report today. this wings in economic uncertainty and consumer confidence often have a surprisingly weak connection with what consumers actually do in our data and the broader macro data. i'm not saying it's not important. it is important. i think consumers, all the time there is job growth and wage gains, they will keep spending. the weakness, if it came from the tariff story, the trait story, would come from corporate, slowing jobs growth and then on to the consumer.

jonathan: let's talk about relative to incomes. our income levels holding up? a -- are income levels holding up? david: we had jobs growth last friday. we were pleased to see our data stacking up closer with other reads. we did see the growth of that rising across all income cohorts. it's strongest for the younger generations. weaker for the older generations. when you look at it by income, it has been softer over the last six months for lower income households. the pickup was across the board. when you see that against what we saw with jolts, the payrolls, it doesn't seem a situation in which the labor market is weak

enough for the consumer to reign their spending in. jonathan: as an economist, when you think about second round of effects coming out the back of the tariff story, maybe there is fertile ground left ear for inflation to bubble up? david: that's a good question. consumer spending is not in an underlying sense soft. in some sense consumers are giving economy room for some pass-through from cost pressures into cpi. i don't make these inflation forecasts, thankfully. i do think we are not necessarily in a week enough -- weak enough disinflation environment to take hold. it's still a stagflation story. jonathan: interesting.

appreciate the update. david tinsley of the bank of america institute. i think we have all been super frustrated with the image survey. it looks like a political poll and not a survey at all. income levels will tell you a lot if people will spend or not. that is where david took that conversation. dani: the new york fed survey is another great reason to completely ignore umich. labor market statistics and surveys were also really strong. maybe you can say it is noisy, the data is noisy, is volatile. -- it is volatile. it's a reason not to put too much importance on some of these. jonathan: equity futures just about unchanged on the s&p. with your bloomberg brief, here is yahaira. yahaira: ukraine says russia attacked it with drones and missiles early this morning in kyiv after the site started a

major prisoner exchange. the first groups of prisoners under the age of 25 were transferred. the planet swap of 1200 people of each side said to be the largest to date the invasion of ukraine. hallway founder -- huawei's founder is not concerned about u.s. exports on china. he is confident they can make breakthroughs. but they are lagging one generation behind the u.s.. the florida panthers had a commanding win in game three, beating edmonton 6-1 on home ice. sam bennett scored his 14th goal of the playoffs. the win gives florida a 2-1 lead ahead of game 4 on thursday night. jonathan: thank you. up next, the test for the

treasury market. >> treasuries have not lost their edge as a hedge against the state of the world in which growth decelerates. you still want to keep exposure to duration to protect yourself with jonathan: we will catch up with tony rodriguez on the bond market and give you the latest, an update on the trade talks in london between the u.s. and china. ♪

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jonathan: tuesday morning. equity futures just about positive by almost 1/10 of 1% on the s&p, likewise on the nasdaq

. >> treasuries have not lost their edge as a hedge against the state of the world in which growth decelerates. yields are lower. from a multi-asset standpoint you want to keep a little bit of exposure to duration to protect yourself. jonathan: $119 billion in treasury notes up for sale this week. "long-duration is attractive as a hedge or equities and broader risk assets." tony, good morning. do you think a more comfortable correlation does return? tony: we are seeing signs of that. we've had hiccups in the equity market. we finally have a yield level that is reasonably attractive. you have markets that are fully valued. when you look at the equity market or risk assets, it is hard to argue anything is

supercheap. when you look at the economy slowing down, rates being high, investors looking for income and a hedge, we think you will see the rally in treasuries. we think that will reduce any inflationary pressure that comes into the economy through wage pressures. therefore, rates can fall to a negative outcome which is not a base case. we think it will serve as a hedge. jonathan: that is the risk aversion test for the treasury. let's talk about the supply test this week. close to 5% on 30's. sufficient level to bring a demand will be give auctions this week? tony: not enough to bring an excess demand. you will not get the strongest auction statistics you have seen but they are fair value. not expecting a failed auction this time. tails have been average. we expect a similar story.

everyone is on alert for the first option that shows a negative soft outcome. dani: it seems like we have been on alert for a while. it has happened abroad. you saw weak auctions in japan. how exposed are we to international results from auctions and higher bond yields across the ocean? tony: we have seen term premium rise across multiple global markets. we have seen yields rising. we are sensitive to that. you have seen policymakers also respond to that. the bank of japan responded with quantitative tightening. we saw the u.s. treasury secretary say they may consider adjusting some of their supply expectations in the coming months. policymakers are responding to the potential for soft demand and longer duration assets. that is supportive.

dani: is that not a problem that they have to respond? this is what you see in emerging markets. there's not enough demand for longer-term debt so you get changes or inability to actually issue longer-term debt. is the actions within themsel ves, the fact they have to do it a problem? tony: it's reflective that the fiscal pressures we are seeing globally that dominate by the u.s. in terms of 6% december sent deficits, those have to -- to 7% deficits, unlike in emerging market countries where the balloon pops and you get a crisis, the debt balloon at a country like the u.s. is more like japan in the 1990's. the air comes out slowly. the u.s. will not have some sort of immediate sharp crisis. we will have this slower weakening that takes place from elevated rates that are a weight

on growth and take away supply and ability for companies to finance as attractively. that places a dampener on growth broadly. it is a slower kind of pain than necessarily a sharp disruption. jonathan: you said risk assets were fully valued. does that include credit and high-yield? tony: we think it's fully valued and reflecting strong fundamentals. not affecting price-performance from tightening spreads. we think that carrie, the yield is attractive -- carry, the yield is attractive. it is comparable to equities with a lot less risk. it is reflective of solid balance sheets, good cash flow. defaults will rise but not much. we are hesitant because spreads are only fair. ccc credit risk might do great the economy performs well. the risk reward is not as attractive as sitting in double digit credit, higher single beach credit where fair

compensates you for good fundamentals and strong technical conditions. dani: you can fool yourself into think the there is no concern with the chunkiest of credit. may was the strongest amount of junk bond issuance of october. is it a false sense of calm? are we tricking ourselves into believing -- tony: a lot of companies fail because of lack of liquidity. business fundamentals they cannot work through. that liquidity is important. the high-end market has been having below normal supply. that has accelerated but not to an excess level in our minds. it is back to her normal supply-demand relationship. we think that is healthy. we think liquidity is going to remain in place. that is why we think it's a

false story. it will not be a sharp rise in with you get a negative exogenous shock from tariffs or geopolitical. absent that, underlying fun and metals for cash flow and liquidity conditions are pretty supportive of remaining at these fair value levels. jonathan: listening to you here it feels as if april never happened. look at where markets are priced. it looks like april never happened. does anything change for you fundamentally? tony: yes. the fragility that exists is greater today. we thought we would be growing at 2% coming into this year without the april news. then you can absorb a punch, whether it was oil, geopolitical. now i think it is 1% growth. that 1%, any shock or disruption to an auction, for example, that can push you into recession.

that tail risk has increased trust. recession risk, 20% coming into the. 35% now. still not base case. i have to say what gets tipped over into default in that environment is the ccc weaker credits. if they survive, we avoid recession and we will define. if we have that hick up, you want to be a little bit higher in quality, a little higher in liquidity to give you room to adjust to those weaker conditions. jonathan: tony, appreciate it as always. tony rodriguez on fixed income. cpi, ppi, 10-year, 30-year debt auction. up next, mike wilson, ben kallo, matthrew luzzetti, and thierry wizman. mike wilson has three words for you, don't fight it. that conversation is annexed. ♪ -- is up next. ♪

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>> right now, we are when -- missing repricing. >> the market has gotten desensitized to the daily gyrations and numbers. >> the markets have been tolerance to a >> lack of concrete progress. >>tariffs are overstated. the fear is more important than the fact.

>> this is bloomberg surveillance with jonathan ferro, lisa abramowicz and annmarie hordern. jonathan: live from new york city and good morning. the third hour of bloomberg surveillance starts now. 19 minutes away from the opening bell and quiet. equity futures quiet on the s&p 500 following back-to-back gains and it is day two of trade talks between the u.s. and china. anne-marie reported that they were on a lunch break until 2:00 p.m. london time. for the next 60 minutes or so. lisa: that is good news because we do not want to see anybody walking out for any other reason besides food. we are hearing this more and more that the trade talks are not the most important thing but the earnings. there seems to be headline fatigue of trying to trade on each individual thing that comes out of this time around london and you need to focus on the company fundamentals and

earnings season was not bad. jonathan: the earnings have been ok but decent. if payrolls were that on friday and some people think it was bad and i think we would be having a very different conversation. dani: the labor market has not been holding up and things look cyclical and industries are starting to suffer even if the data was bad i wonder how much that would cause a temporary put. there is a belief that you cannot trust the data and you are seeing pull forward affects and sentiment is biased by politics and there is a sense that you will not get clarity until later this year. jonathan: more data this week. cpi and ppi are coming up wednesday and thursday we talked about the data issue still to come. the trade talks continue in london. through this hour we'll catch up with mike wilson of morgan stanley. and then ben callow to take off the trading week and matthew lose eddie looking ahead to the

u.s. cpi print. we begin with our top story, trade officials from the u.s. and china meeting in london for a second day of talks. anne-marie joins us with the latest. what is the latest? annmarie: there is no breakthrough but we know that there is a break for lunch. we did see the chinese vice premier leading the chinese delegation leave lancaster house and there is a break for lunch and then they will commence at 2:00 p.m. local. you can see the talks feel like they are coming down to a wire. not only that the -- did the talks last more than six hours yesterday but they had a lead into a second day and we did know that the treasury secretary has to get back to washington, d.c.. he has set to appear tomorrow in the house ways and means committee and the following day in front of the senate. he needs two hearings to get back for so it does feel like talks are coming down to the while -- to the wire. what we could see is what we saw

in geneva. the united states might get more licensing of rare-earth and magnets. and the most recent export controls that we saw since the geneva talks could be lifted. jonathan: reluctant to make too much of it or introduce drama where it is not required, but these things take time. the white house themselves made this sound straightforward, listening to the national economic council director yesterday, he said it could get wrapped up quickly. there is a range of different outcomes, either what they thought it is easy as out to be hard, or they are shooting for something bigger. annmarie: that is right. at the moment we do not know. there has not been a ton of dialogue with the individuals actually inside the room. yesterday when secretary bessent left he said it was a good meeting. howard lutnick, who, is in

addition from the geneva talks is also here which makes you think export talks are on the table. he said that they were fruitful. on the way in he said to us that they talked all day yesterday and they will talk again today and they are spending a lot of time together. that does not mean we are going to get end negotiation. potentially china is viewing this moment as leverage knowing that the treasury secretary has to get back to washington, d.c.. the president told tyler kendall in the white house that china can be difficult to deal with. really what comes to mind is what is the u.s. redline. if they are really -- willing to lift the most recent export controls. software for some chips and nuclear and chemical materials, jet engine parts. what china wants to get their hands on is being to -- being able to get the nvidia chips.

is that the redlined they are negotiating right now? it remains to be seen but we do know that talks continue at 2:00 p.m. and they had a short break for lunch, but for the treasury secretary he is on a stopwatch. jonathan: stay close and we will catch up with you with those talks set to commence in 55 minutes. mike wilson of morgan stanley taking a very constructive you writing "the rate of change has turned for better and most france which keeps us positive on u.s. equities. we expect pullbacks to be shallow and unsatisfying for those looking for a fatter pitch. mike joins us this morning. i love the note, do not fight what? what parts of the market move should we fight? mike: the headlines remain noisy and this has been the case for the whole year. our view has been different. we thought the first half would be tougher and the rate of

chains on a lot of things that change on a lot of things would be negative. that all got priced in the week after liberation day. it was deleveraging. and now as we look at the data it is all inflicting higher. do not ignore everything, but ignoring the headlines is a good strategy and focus that the data has turned up. and i do not know where the trade negotiations are going, but it is unlikely we will go back to where we were a month and a half ago. we bottomed in terms of the pain of that initial announcement and how bad the tariffs were. unless it really really escalates in a negative fashion i do not think the trade issue will be enough to take the momentum out of this market. jonathan: they would say that some of the data and earnings have been flattered by the pull forward and we get the bill later for that. do you think the price will slow down in the summer months? mike: that is probably right.

one was better than we feared because the numbers came down a bunch. i think the second quarter is expected to be weaker. i think the biggest risk for the markets will be rates north of 4.5% or we go into earnings season and it is not as good as people were hoping and we have a five to 7% correction. that is not what people want. they want another 10 to 15% drawdown to get more exposure. and i do not know how you get there. i have seen that you want it but you will have a shorter trigger finger. dani: you had seen retail buying the dip and that is who participated in you got those ruptures. if we will not get tips like that, what is the willingness of institutions to continue to put money to work even if they did not buy the past that -- dips that we have seen? mike: the one area we have to watch as the systematic strategies.

we saw almost $500 billion of deleveraging in the period of early march through mid april and they have re-risked 30% of that. it is not fundamentally driven. and that is the underlying bid. most into two shins have re-ris ked. and people are making the quality back. this is not the beginning of a new cycle, but an extension of the existing cycle, and the fed will probably be cutting at some point, and that really behooves the large-cap quality and equities. dani: does it who companies who can also wait out some of the tariff uncertainty? this is a big part of the narrative. capex has largely stalled unless you are tech. is there an element that even though we do not have tariffs resolved you have companies who get on with it and put capital to work? mike: they have to run a business.

large-cap businesses can mitigate the risks whether it is tariffs or the government cutting back on certain spending. one of the things it is getting through this tax bill is the tax incentives for capex and r&d spending. that could add 3% to 5% to cash earnings growth for these large multinationals. that is a big tailwind. there is a lot of tailwind from an earnings standpoint and this is almost a perfect environment to climb the wall because the economic data in the geopolitical data is messy and scary. but as long as the revision factors are heading north, it is hard for it to go down. jonathan: i think of a handful of tech companies but doesn't go beyond tech leadership? mike: this is about capital goods and not just about ai capex. keep in mind, the i.t. has been good and really concentrated just in ai. the traditional upgrades that

you have seen in the enterprise and in the household have not been happening because there was a giant pull forward. 2020 and 2021. if you look at the i.t. cycle, it was a soft recession. that is another part of the thesis, we have been going through rolling recessions. the big catalyst to keep in mind is when the fed singles -- signals. i do not know when it will be but sometime in the third quarter they will start to signal that and that is when you get a broadening out. jonathan: does the y matter? do we need it because inflation has come again or because the labor market is cracking? mike: last fall it was both. as soon as they signaled they were ready to sit -- to step in the market went up anyway. if we finally get the broad recession labor cycle, the equity markets aren't going nowhere near the april lows because we are pavlovian. if retail is buying when the fed

is not cutting. if they are cutting there will be a big bed. there always risks and something to be worried about and things to be bearish and bullish on. i think the issue of -- of navigating that we have done well and we are shifting what we want to own. jonathan: you have acknowledged the one thing, interest rates and you wrote about it over the weekend. what about it -- what about 450 is challenging to the market. based on the running we do not see much of a challenge. mike: it has stabilized and we identified this level two years ago and it has been like a charm. as soon as you cross 450 the correlation between stocks and rates goes negative. i do think that we went to 470 in the april period, and then we calmed down. the market is feeling comfortable because they have enough tools to keep it at 450 or below with need to.

we talked about it the last time. 475 is a worse place because that is where markets get nervous. 5% i get bullish because and i know that they will intervene with their liquidity injections or other tools at the treasury secretary talked about. we are optimistic that that could be managed and that risk would be a risk for percent or 7% but ultimately it will get managed. jonathan: do you get clients asking about the dead auctions? mike: people do ask about it for sure. and once again, we have seen many soft auctions for the last two or three years. and then they get control of it again. i do not want to dismiss the risk. that is, to me, the risk. it is not only the one for markets, but for the u.s.. we have too much debt, and this is a focus. if we do not ultimately cut the

budget over time and may be the market is not giving them a lead like 12 months, but if we do not get serious about budget reconciliation and reducing the size of the budget, this is an issue that will stay with us. jonathan: mike wilson with three words for the weekend, don't fight the market. let us get a look at stories elsewhere with the bloomberg brief. >> the trump administration has played 700 marines to respond to protests around immigration. the state of california is suing to try and stop the deployments with the national guard already there. president trump back comments that the california governor could be arrested if he interferes with the response. blackstone is planning to invest as much as $500 billion in europe over the next decade. in an interview, the ceo said that region as "a major

opportunity." it is the latest sign of more investment firms turning to europe. china has invited american social media influencers to join a 10 day all-expenses-paid trip to the country next month. this is part of the efforts to boost people to people exchanges and showcase the "real china." they will enlist influencers with at least 300,000 followers to collaborate with chinese content creators. jonathan: or recruit them into the propaganda machine. the next on the program are the morning calls along with the downgrade of tesla ahead of the robotaxi test. that conversation is not -- up next. you are watching bloomberg tv. ♪

jonathan: the opening bell is one hour and 12 minutes away. equities into that positive by 0.2%. 0.2% up on the nasdaq 100. if you are tracking trade talks between the u.s. and china taking place, day two in london in lancaster house. they will reconvene in about four minutes -- 14 minutes time. red burn, double downgrading saying that weight loss drugs are suppressing consumer appetites so mcdonald's is down by 1.2%. luke capital raising its price target on disney to $130, citing a stable of iron meant. -- environment. the stock is down by 0.5%. have you seen how expensive hulu

is now? dani: i do not have it for that reason. jonathan: ubs rating apple neutral noting a lack of ai announcements and the stock is down by .1%. tesla set to unveil its robotaxi on thursday. ben kallo downgraded the stop saying "we believe the comments regarding the robotaxi ramp rate are a bit too optimistic. this excitement has been priced into shares." we appreciate the update. i want to say upfront you are constructive over the long-term. walk through change now. ben: i did not want to make it about the dispute between the president and elon musk. this was something that we have contemplated for quite a while. i do think that the valuation has gotten ahead of itself around the robotaxi. it is a big event and has been in the works for a long time.

i do think two things. it will be higher competition when you get out there. waymo and others, i do think the rollout will take longer. i do think that, at first, it will require more people, so people in control centers making sure that the cars do not get into accidents or something like that. so the economics will not be as good as they could be over the long term. i think as we get through the hype and it becomes reality and rolling this out will be very difficult. not to say that tesla has not done difficult things in the past. i think there are other risks. the key person risks outside of the president and musk's spat. retaining talent is something that i worry about. we did see the head of the optimist program leave recently. the best thing about tesla is there employees and their

innovation. i think they will always be able to recruit very strong engineers. this makes it more difficult. and very near term, i do think the numbers are too high for deliveries. we are seeing a lag in all auto sales. but with tesla and the brand damage that has occurred in different regions, that is a risk as well. and then we have tariff risk and we can go on for other risks. and we are just going to the sidelines as well. we remain constructive in the long-term. short and medium-term, there is some downside. jonathan: three buckets of risk, lofty expectations, key man risks and competition. what is the competition and who do you worry about? ben: china has the most feared

competition on the electric vehicle side. in the united states, the ron haley robotaxi service will have competition from the likes of the incumbents of uber and lyft, to waymo and others and the owner of several other companies out there. amazon has a company that is working on a taught me as well. i think the economics will not be as lofty as some people think. additionally, it is a consumer product. when we worry about brand damage for vehicle sales, you have to worry about any kind of brand damage when you get into a car without a driver. third, in europe, you have a host of competition. lots of people have talked about competition and it has not gone anywhere. but you have byd selling into europe and tesla sales were

better in the last month than byd, but they are catching up with them. and you also have germany, who are making a big push for their domestic oem's, giving them some types of credits or breaks on their cars to try and catch up with tesla as well. you have it coming in all different directions as well. dani: on the driverless vehicle we learned that uber will be partnering up with wave to launch robotaxis in the u.k.. a really tried-and-true business model works in america and then exports it abroad. when it comes to a robotaxi for tesla, is that business model not as available because of the brand damage that you have been talking about? ben: i think it is. one thing about the risk and elon as a double-edged sword. i remember during the biden

administration he gets on a plane and meets with xi just out of the blue. and you know, he had his reach stretching very far. i think there are difficulties in china about data. they have made progress. europe and the e.u. is a little more bureaucratic and more difficult. it is patchwork to get approval. in the u.s., one of the fundamental things that the relationshipmsu relationship between the trump administration and musk was that it was able to move. one of the advantages that they have is that they are going through this all visual and all camera approach versus the

higher cost for waymo. that vehicle costs over $200,000. so it is much more capital-intensive. there is a big debate whether the tesla approach will work in the long term. but that remains to be seen. jonathan: i know you do not want to make the downgrade about the spat but i would love a comment about that. do we make too much of a big deal? what was your reaction to how that played out? ben: i think it is bad for the country. and you know, i love our country. and i think that being public in this dispute about that and it got pretty racy. i do not think that is good for anyone. tesla and spacex and the other companies are some of the most innovative companies in our country right now. and getting down and dirty in the sandbox does not do anyone any good. jonathan: it is hard to disagree

with that. thank you. ben kallo. tesla positive in early trading. up next we will catch up with match -- with matt with a key inflation due out and why this means may be the economy has adapted to interest rates at four or 4.5%. live from new york, you are watching bloomberg. ♪

jonathan: the opening bell is 60 minutes away and equity futures positive by a little bit more than .1% on the s&p. a similar move on the nasdaq. one hour until the cash open with your morning movers. >> we start with jm's with the shares falling 8%. it reported results and profit forecasts disappointed because the company behind full jurors and jif -- folgers and jif said that tariffs are hitting them and consumers are pulling back. it still plans on raising prices. once the bright spot at the company that they did mention is that uncrustables are flying off

the shelves. not the same makes -- the same enthusiasm for mcdonald's which is down 1.3% after it was hit with another analyst downgrade by red burn. and then there was luke capital that flagged that people were complaining about the crispy chicken strips that said not only were they smaller but they had less bread. so they cut their rating. turning to something outside of food, we turn to meta platforms and the shares are up 1% as we report that mark zuckerberg is apparently frustrated with the chatbot models. because of days he has personally building a secret super intelligence team and even having recruiting events at his homes as he tries to assemble the best of the best to try and achieve artificial general intelligence. jonathan: thank you very much. three of the movers to look at

going into the opening bell. later we start work through some debt supplier. the 10 year notice and $39 billion worth and after that $22 billion worth. all of this is taking on additional importance after the tax bill advanced into the senate and a lot of the debt concerns. that is the debt supply story. and a double dose of inflation data. cpi due tomorrow. mike mckee has more. mike m.: the cpi report tomorrow could actually be important to the market. it will not change what the fed will do, but we might get our first clues as to some tariff pass-throughs to consumers as companies try to deal with the uncertainty in the tariffs that we have already seen. the consensus is that we will see a rise in both the headline. the survey says the risk is to

the downside, if there is a surprise it might be less inflation than anticipated. we will be parsing all of these categories for tariff effects. the pass-through is expected in food and home. grocery prices are down according to the usda which does its own monthly survey. furnishings and electronics are imports that we could see higher prices. and used a new cars because of the tariffs that the president has put on automobiles. on the other side we have declining gasoline prices and natural gas prices so energy could be lower and core services could be lower. airfare and lodging have probably fallen because travel has fallen off. those are things to watch. there is one other thing that the nerds will be watching which is the trump pass-through to the survey itself.

because the bureau of labor statistics had to let go people and people have quit, it appears last month that the survey had a larger than expected response rate because perhaps they dropped some survey places from the list. that would require them to impute more prices than actually getting the specific price levels. there might be questions about the data and that is something to keep an eye on. jonathan: thank you. it could be the calm before the storm. matt is with us. good morning. let us talk about whether it is too early to see the inflation impact tomorrow or not. is it? matt: broadly, it likely is. you begin to see it showing up in some of the data points but that has been offset by the discretionary services. you saw it in the ppi data last month and it typically takes a few months for that to show up

in the cpi. the baseline expectation is you get more evidence in the print but it takes the june, july and then augustana data to get stronger evidence. jonathan: what would you need to see to stay -- to say this could be sticky and a one-off shot? matt: it will be hard. you go back to the trash to the post-covid environment there was a view that it might be transitory and the view was dominated by the fact that it was narrow on a few items. i think to think about it being stickier you want to see it broadening out so probably not in the goods items that you can randomly identify, but other items. you get vehicle tariffs and you get car repair and pick up with some lag and car insurance and inflation. those are the effects you will want to see that is a little bit stickier than anticipated. dani: there was some expectation

that you would see a lot of shipments that people will front run and we have not seen that. action and is this still an economy in suspended animation and if so? matt: in a lot of ways it is. a lot of the stalling is to get back into q1. particularly in the trade data we had a lot of data where net exports were very weak and they will be strong lifting the gdp data. the market understands that. we are now in an environment of where is the pass-through on what the fed cares about. are we seeing labor market hiring deb but the answer is not yet. the mixer -- the report was mixed but resilient enough. and when will we see the inflation data? the ppi data and we are still waiting to see it. the baseline expectation if you go back to 2018 or 2019 it will

take until the june data. dani: i want to flag the data you asked has there been weakness you said not yes, but not know. are there pockets that you are concerned that might bubble up? matt: you still have the labor market which has been identified by a low firing and hiring environment. that has always been a fragile equilibrium. nothing has broken and the equilibrium has persisted but there were worries that the tariff shock and uncertainty if financial conditions were tightening that could lead to layoffs that could break that fragile equilibrium. we did not see that last week, but that is still a risk. jonathan: you mention something about interest rates stabilizing around four 4.5%. do you think we have fully adapted with an interest rate to

something close to 4% and what does that tell you about how much this fed might cut? matt: the main chart was showing that if you look at where the fed funds rate has been we have been at 4.3%. if you look like -- if you look at headline inflation it is 2.8%. and the unemployment rate has been stuck at 4.2%. that 4.2% is in line with what the fed thinks the long run unemployment rate is. it looks like you have settled into a steady state for the economy and stimulated the economy through a model where you are at equilibrium and everything is working out. we have been in that camp for a while and pegged at the nominal rate between 3.5 and three point -- 3.75. we are proposing the possibility that there is not much evidence that we are not far away from neutral. jonathan: this conversation was kicked to the side because of the tariff story. what is the fed -- is the fed

moving closer towards you in the coming meetings? matt: i think so and we will get the dot plot next week where there are broader expectations that the fed will signal a hawkish stance. we will be looking at the long run dot. we have been at 3% and that probably continues to move higher. the balance of estimates are closer to 3.5%. to fully embrace the idea that neutral is higher you have to get beyond the tariff concerns and the uncertainty shock that we have had and have a labor market that looks resilient. jonathan: let us sit on next wednesday. how do you see the rest of the sep from the federal reserve? matt: ciao -- chair powell likes to downplay the sec when it is immediate and this is an environment that is convenient. if the market shows one cut next week, which is broadly anticipated, the market will move to what does next year's

forecast show. does inflation rise and are they showing less cuts? i think that that could single -- signal a more hawkish stance but i understand that chair powell tries to walk that back. they do not have huge confidence about what the policy will do because there is tariff related uncertainty and fiscal policy uncertainty and a view of what the policy would be. jonathan: he will not be there through much of 2026 and as -- does that complicate signaling? matt: they are focused on the near-term. they are sending a signal that they are well-positioned to respond to risk and i think the signal will continue. over the summer months you will get evidence of who president trump might appoint the board in replacement of governor kubler that that could be the next potential fed chair and the market focus will shift. jonathan: we appreciate your time.

looking ahead to inflation on wednesday and then a week from tomorrow we get the federal reserve meeting and an update to the summary of economic predictions. welcome to the program. equity futures almost totally unchanged. up by something like .2%. with an update on stories elsewhere, let us get the bloomberg brief. >> trade negotiations between the u.s. and china are continuing for a second day in london. the u.s. signaled a willingness to remove restrictions on some tech exports in exchange for a certain -- assurances that china will ease tariffs on rare earth ship mitts. the talks have been called fruitful. the u.s. health secretary robert f. kennedy, jr. dismissed all 17 members of a key federal vaccine advisory panel accusing them of conflicts of interest. before joining the trump administration he was known as a

critic of the committee, which advises the director of the cdc and the national public health guidelines. apple unveiled the most sweeping redesign in its history at its worldwide developers conference. the design called liquid gatt -- liquid glass unify user experiences from iphones to macbooks as part of its rebranding efforts. they confirmed that they will use letters and not version numbers to identify software. jonathan: very much so -- very much so. next we will set you up to the day ahead plus catch up with terry wiseman about key treasury options coming up. and a 30 year debt plus the conversation continues in london with the negotiation between the u.s. and china. we will touch base in just a moment. from new york, you are watching bloomberg. ♪

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jonathan: the cash open in the opening bell about 44 minutes away and equity futures closed 2.2% on the s&p and the nasdaq. up by 0.17%. a bit of a snooze in the equity market. in the bond market, things could get interesting tomorrow. this morning u.s. down by two basis points. close to 5%. 4.91. nothing to see here and nothing to worry about. dani: there is a sense that that is an attractive yield with some volatility perhaps we look back

and say around 5% was a buy of a lifetime. you have an auction coming up and that is not to entice outside demand. jonathan: more on treasuries in a moment. close to 4.50. looking ahead to the debt auctions and looking ahead to this. the trading diary is shaping up as follows. the u.s. and china holding trade talks. cpi data tomorrow plus scott bessent testifying on capitol hill. he is in london right now. thursday, epi and jobless claims and then tesla's robotaxi launch and then on friday the political poll that is now the image sentiment, the consumer sentiment survey. trade talks underway early this morning. annmarie joins me now. they broke up for a lunch break in the last hour or so. what is left to negotiate for the day ahead? annmarie: that is a great question.

there with -- there is no update but after six hours of talks they did break for lunch and they should reconvene around 2:00 so in the next 15 to 20 minutes or so. we still do not think they have an agreement in place and china -- and we heard from the president that china was difficult to deal with. we talked about how we would be easing some export controls. so, we are waiting to hear on what the update is. we should remind our audience that this was really about reigniting competence between this relationship after 10 days ago. the treasury secretary felt that talks stalled between china and washington. this had to do with what they agreed upon in geneva. the united states wants to see an accelerated pace of the licensing of rare earth send magnets. the china -- and china wants easing of export controls.

will it be the most recent controls or the h20 chip on the table? let's see what they come out with. the talks are still ongoing. jonathan: a theme for us so far, how long it took to secure is a -- to secure deal. i remember things getting harry and it took 18 months to sign the phase i deal in january 2020 and then we got into the pandemic and it was quickly forgotten about. how different will things be this time around? annmarie: trade talks and trade deals take longer. they take years and not days. we are in the first inning of this relationship, to your point. trump's first administration and we are talking about a purchasing agreement starting in 2018 and ending in 2020. when you look at the contours of what we are discussing at the table, there is a whole host of issues that potentially

different tools in the toolbox that the united states and the chinese will use. at the table today we are talking about rare earth and export controls and now you have national security taking center stage. trump 2.0 negotiation seems more complicated than the first administration. jonathan: we are hopeful that we will get you back tomorrow. let us see if that is wrapped up tomorrow. we are keeping a few eyes on the treasury auctions. 10 year and 30 year notes. good morning to you. should we worry about the 10 year and 30 year decline? thierry: the 30 year. i think based on what we have seen out of the indirect bids and purchases, foreigners are stepping away from the long end of the curve. we have had strengthening of direct bids at the shorter end of the curve.

that means foreign investors are moving out of the u.s. curve and going into the safer zone in the shorter end. in part because they have lost some confidence in the dollar and the ability to manage. i think these are part and parcel of the narrative around why the 30 year yield has gone up as much as it has. jonathan: the price surely matters. those 5% help? thierry: what i tell clients if you look at bond yield there are two approaches. a cyclical approach on the presumption that global growth is slowing and u.s. growth is slowing because of the tariff shock and you should expect yields to come down. even the 450 has room to calm down. but, from a longer-term perspective, 5% might not be enough for 4.5%. we might have to see higher

yields to liberate demand and supply interview of a lot of things that are inflationary and tend to move people away from a willingness to buy nominal assets like u.s. treasuries. what are those tendencies and trends? deglobalization and demographics. not just for the u.s., let for the world over the next few years. from that perspective i am not saying the 30 year should go to seven, but we are seeing the leading edge that is coming with the realization that we might be stuck in a higher inflationary regime going forward. dani: if it is not five or seven, where is the level that makes sense that you would be more willing to dive in? thierry: a lot of this depends on people's perception of the deficit in the u.s. will remain adverse and pessimistic or optimistic. it is too early to say because

we do not know whether the senate will push back on the house's bill. let's say they do not and there is more nervousness about long-term supply, i can see the 30 year moving higher. dani: they argued that it is an issue that i have -- that you have -- you have have the fixed income being issued to the government. is that a real problem when you have so much of the issuance skewed towards government debt? thierry: in a country like the united states where saving rates are low and it is difficult to motivate savings out of consumers and businesses, yes. the more issuance it is there is more pressure on the yields and to some extent this will crowd out private investment. it does not mean that the government has a lower rate of return and we should promote private investment at the expense of what the government is doing. to the extent that yields are higher, there is crowding out

and it is standard economic theory and accepted by the market. the more issuance you have the higher the yields will be. it is not just the supply issue but the risk premium. you have seen cps spreads moved to 58 or 55 basis points and it is rivaling greece which asked -- which reflects nervousness and that is an aspect yon supply of the u.s.'s fiscal outlook. jonathan: you do not just cover interest rates but foreign-exchange. i would love your view on fx. you talked about foreign interview -- foreign investors leaving behind the long end of the curve and some just pulling out of dollar nominating assets wholesale and retreating to the mystic markets. price action shapes narratives and reinforces behavior. how much of that become self-fulfilling that people sees the dollar weakness and accelerates the moves? things have seemed to settle

down but you see bouts of this. thierry: that is a technical argument and description of what could happen. eileen more on the fundamental outlook which is not necessarily good for the dollar because we are coming off a 12 year period of dollar appreciation real terms. if you look back to 2012 compared to the end of 2024 we have had a 40% real appreciation. we are starting from a situation where the dollar is rich and where people all of a sudden are very concerned about policy uncertainty from the u.s.. that will be an important driver of perceptions around the dollar and the brand value has faded over the last few months because of the uncertainty and aggressiveness and the policies coming out of washington. we are on a long-term downward trend for the dollar. not to say there is not a conservative class of investors to buy on the dip. i would keep my eyes on that for

the next two to three years. jonathan: as always, thank you. looking ahead to some key economic data points. we are talking about the 10 year auctions and the thirty-year debt supply. we catch up with oral since lock and we will speak to seth carpenter of morgan stanley and david kelley of jp morgan asset management and she is off to follow. dani: off to l.a. to cover the bloomberg credit forum so we will be leaving you alone. jonathan: looking forward to the coverage and hopefully anne-marie makes it back in time for the program tomorrow morning to cover the talks in london between the u.s. and china. from new york, thank you for choosing bloomberg tv. it is a quiet start and it gets busy as we look ahead to cpi data. this was bloomberg surveillance. ♪

at: 30 minutes until the start of the cash trade. bloomberg open interest starts right now. coming up, the ai race. meta assembles a super intelligence team while apple expands. the u.s.-china trade talks continue as the two sides look to ease tensions over key tech and industrial goods and a bargaining chip. how borrow -- has boeing has emerged as the preferred trade tool to earn leverage in negotiations. what are the stocks that we are watching? katie: