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00:00From the financial centers of the world. This is Bloomberg Markets with Alix Steel and Guy Johnson. It's 30 minutes into the US trading day Wednesday July 6 here. The top market stories we're following for you at this hour about Joe DAX and UK Prime Minister Boris Johnson vows to quote keep going in the face of calls for him to quit and talks about potential new confidence vote after a wave of ministerial resignations. Bonds in flux. Thirty year Treasury yields have dropped below 3 percent following an inversion in the two Tan's yield curve. What exactly are bond traders pricing. We're here to discuss all of it. Gas prices meanwhile take a breather. European natural gas prices halting their rally after Norway's government intervened. And an energy workers rate in Germany took steps to ease its supply crunch. From New York I'm pretty cooped up with Guy Johnson in London. Alix Steel is off today. Welcome to Bloomberg Markets guy. I keep feeling like I'm hosting the show with you every single day I do. A new piece of history is written. At least that seems to be the case in the UK today. We may see a little bit later on here in the UK. We're certainly watching what is happening your side of the pond very carefully right now with the data that are breaking. Let's walk through the numbers. We need to figure out whether we are late cycle or whether we are recessionary. Maybe we're starting to get some clues. The ISE Services Index declined some fifty five point nine down to fifty five point three. The market was looking the economists were looking for 54 on the no. So a number that is slightly better than anticipated but still a slowdown. But actually this is not the kind of slowdown we were looking for really quite a good number I think in terms of what is happening in the service sector in the United States. There was this idea that we would slow down to a more maybe sustainable pace with the services sector but that would have inflationary impacts. So just breaking down that number as well. The index falling though to its lowest level since 2020. Orders index falling to fifty five point six from fifty seven point six. So quite a big drop there in terms of the component parts. The activity gauge rising to fifty six point one fifty four point five. So a mixed set of data coming out of these services. Number on the ESM prices paid at 80 down from eighty two point one. So a softening in terms of the inflation but actually the headline number still relatively strong. The jobs number which remember is very rare were rear mirror in terms of the the the date the data was taken on. But we are still and Levin points to five million jobs open in the United States on the jobs number. The prior number revised up a little bit. So actually we are tightening the labour market maybe a little bit more quickly but nevertheless still a a very very tight labor market. There's a lot to work through here in terms of these numbers particularly in terms of the ISE and Treasuries are extending that slide off to the ESM services number comes in and beats expectations. The component parts though are impulses. So let's talk about our question of the day Kristie and figure out what is happening here. Is this what a recession feels like. Well maybe today's services data tells us that we are not anywhere near a recession despite the fact that I've heard an awful lot of commentary about the fact that we are in a recession now. Already on Bloomberg Television today Bloomberg's international economics and policy correspondent Mike McKay joins us now. Of course ahead of the Fed minutes IRA Jersey chief U.S. right strategy is the Bloomberg intelligence back at his usual perch in Princeton. Mike what do you make of the data. Well Guy it does surprise that the services industries remain as strong as they do. But you wonder if some of this recession talk isn't people on trading desks who have lost money because the markets have gone down whereas the average American is still feeling like they can spend a couple of interesting points in that services. Number one is employment. It does slip into contractionary territory. But is that because people aren't getting hired or because companies can't find people to get hired. That was the indication from the ISAF people from the the Institute for Supply Management. I also think you look at exports exports drop and so do imports. Now the big reason we saw recession or at least a contraction in the first quarter was because exports were so much greater than imports than that. We are so much smaller that it subtracted from growth. So if that is going to reverse then that is better news for second quarter growth. I read Jersey hopping here because just as Michael McKee was talking we were getting that data out. The reaction in the bond market is pretty crucial. A major sell off across the curve passing the 10 year yield back up to two eighty five. And this of course comes after that inversion that we saw yesterday believe the tooth tends remains inverted. Is this the price action that we should be seeing at this stage of the cycle. Yeah. So this is kind of mid cycle ish kind of levels here for for the yield curve in general. I think it's interesting that you've seen such a large turnaround you know this morning. We were rallying because you had you had a pretty decent rally in in Europe and you everyone was worried about a recession coming. And now just in the last half hour or so we've seen a pretty substantial turnaround year with two year yields now up by almost by almost 9 basis points after having after having been down a little bit. Right. So so the inversion I think is important because it is signaling that the market at least is thinking that the Fed at some point the not too distant future is going to hike too much and then have to take back some of those cuts. And that's the Dems. And you see a lot of this inversion in the curve. IRA we are all over the place. The market doesn't know where to go next. We've got a Fed that is clearly trying to figure out what they what the landscape looks like with inflation. We got a market that's trying to second guess the Fed trying to second guess the data and consistently in some respects. And today maybe a good example getting it wrong. We're all over the place. Why. Yeah I think liquidity has been very poor basically since the Federal Reserve stopped its asset purchases. And and now it's just going to be worse. Remember last Thursday we had the first big round of quantitative tightening where you didn't see the Federal Reserve reinvest a lot of its a lot of its coupons that were maturing. So you're in an environment where you're just going to see 10 12 15 basis point moves more regularly across the yield curve in part just because there's a lot more bonds outstanding. And like you said Guy you know I think the market is still trying to figure out like hey are we going to continue to be in a low interest rate environment or is inflation going to be somewhat more persistent and because of that will wind up seeing yields move even higher now. Now my view is is that we may have seen the peak in the 10 year yield but I don't think we've seen the peak yet in the two year yield. So I do think that the yield curve in general could get significantly more inverted as we get deeper and further into this into this business expansion here. Before we go back to Michael McKee I want to point out a couple of days ago I had a conversation with Mike about what exactly defines a recession. You know we I feel like the markets have kind of been taught that two negative quarters Michael McKee said yep that's cute. That's adorable. That's not what it is. Actually you can't actually tell when until you're out of it. You can't tell in retrospect optically. Yeah exactly. And you can only do it retrospectively basically. Exactly. And you know I think as a market participant nationally investors don't necessarily think in that direction. They're trying to time this out so perfectly. But Michael we bring you back here because in addition to correcting my logic there their first answer earlier when you spoke to a guy was very much in the economist's take. I have to ask could these economists take actually be wrong here. Could the market be right in that perhaps we are in a recession right now and the pricing that you're seeing is 100 percent on the dot. Well economists can go either way of course. We are two handed but I think in this case there is very little chance that we are in recession right now. The numbers are still strong enough on the consumer spending and business investment side and in the labor market that it would be hard to call a recession. Now the National Bureau of Economic Research is the arbiter of recessions and they usually take a couple of years to say when one began and one ended. But unless the employment data in particular were revised down it would be hard for them to do that. I do have to make a correction Kitty not a correction but a clarification. It is not an official definition to say two quarters two consecutive quarters is a recession but we have not had a recession that didn't have two consecutive quarters of negative growth together. So you can back like let's say maybe it's worth looking at. Let me put it another way. You normally feel a recession before it is confirmed. Does this feel like a recession. Have we ever seen a recession when you've had a I assume services index that prints fifty five point three. Because I just said this is mid cycle. These are going to mid cycle numbers. Not a good late cycle numbers. Yeah I mean they are essentially we're seeing mid cycle numbers you look at the first quarter GDP numbers that got everybody worried that contracted while business spending expanded by 10 percent for nonresidential fixed investment. That's not recessionary kind of number. Again going back to that chart I showed earlier it wasn't just exports that fell so dramatically. It was imports didn't move a lot because companies had imported so much in the fourth quarter. All the stuff that had been backed up at the ports finally got here. And so inventories add to growth. They didn't last time. And so that also cut the growth figure in the first quarter. Inventories and exports aren't something that are really going to impact the average working person. It's been interesting to me to see the confidence numbers so bad. And I think it's probably partly recency bias in that things were never this bad for a couple of decades. I mean it's the 70s and early 80s that we saw the Volcker inflation and because gasoline prices got so high. But if you've noticed lately in the last two weeks gasoline prices have started falling. They certainly have and of course as we compare that to the recessionary dashboard layoffs etc. it'll be interesting to see which side is right. The economists or the markets folks. Bloomberg's Michael McKee and IRA Jersey of Bloomberg Intelligence we thank you as always. Coming up Wall Street's debating when a recession will hit. We just had that conversation. We'll get more of it. Many consumers feeling like well we're already there. We discuss that with Joe Gilbert of Integrity Asset Management. And in the meantime we're gonna keep an eye on what's going on across the ocean. You're looking at a live shot right now. A British prime minister Boris Johnson facing more tough questions this time from a select committee in parliament. We're going to have all of that coverage ahead. This is Bloomberg Businessweek near the top of the Great Leap. It's going to be sent to. Sure. The. The the. This week all eyes are on some valley where the titans of tech and media meet to talk business. And Bloomberg will make sure your part of the action with live coverage and impactful interviews. It all starts Wednesday July 6th right here on Bloomberg. Today's Bloomberg Quicktake focuses on the state of the economy while Wall Street debates when a recession will hit many consumers already feeling like they're in one. They take us back to our question of the day. Is this what a recession feels like. We're gonna ask that to Joe Gilbert Integrity Asset Management portfolio manager. Joe thank you as always for joining. It's interesting when you look at the recession dashboard here when you look at layoffs a crunch in business investment when you're looking at simply how much spending ability the average American has and the kind of combine that with what the market is actually pricing in Joe. Is this what a recession feels like. I cried. Thanks for having me on. You know I think right now we really have. So we're kind of in flux because traditionally this is not what a recession feels like. There's usually more job loss that companies. But right now I think that you know we had the first quarter which turned a negative number of GDP this quarter where possibly most likely gonna do it as well which is a technical recession to an extent I guess. I guess Mike has already said earlier that you know we've never had a recession. What else to call second negative quarters. But I think right now we have consumers. We've had a fair amount of demand destruction. So I know when we talk about gasoline prices rolling over their wallets just rolling over because you've gotten to a point where demand has been crushed. So I think on the margin is this a typical recession. Not in a typical sense but I think what we are seeing right now is probably more of a show where it's not as long in duration or recession. Yeah. OK so Joe hey where are we in the cycle. We've just seen data from the IRS and the services number which I wrote Jersey described as mid cycle. Are we still still mid cycle. And if so how do I invest if it's mid cycle. Are we late cycle. If it's late cycle am I correctly positioned. If I'm in a recession how do I want to how do I want to position for that. Where do you think we are in the cycle. What does the data tell you. And where do you want to be positioned for where you think the answer to that question is. Yes. You know I think that we have to take a step back and realize that the data is never perfect. There was never any indication there is no one rings a bell at the top or at the bottom. So I think right now we're probably you know the way you look at the equity market especially coming on the last quarter you know stocks are pretty much discounting that we're past late cycle and we're into a downturn in the last thing that the shooter for was it was energy because as we went through the year energy was only on Satya Nadella as positive returns. And then you know last month we started seeing this degradation in returns. Not only the equities but also in commodities. So I think that the market on least from equity market standpoint is getting to a point where we're past the late cycle we're on the verge of the downturn. And I think this kind of also reconcile when you look at the fixed income market where the yield curve flattening now actually to a point of inversion. So we're taking note you'll triangulate. No those things it looks like it seems it is more likely for investors to start positioning themselves for slighter you know a downturn. There won't be long in duration. So with that you know I think you've had consumer staples and health care utilities. Those names have already been priced off. Investors have gone out and bought insurance. And that's why his name is trading at such a high multiples of the market right now. We weren't thinking that opportunity actually lies in some of the earlier cycle names but obviously more typically some more thinking about more consumer discretionary financials there. So Joe I'm interested to know what actually investors need to see to it to turn this around. I guess I'm wondering more of I mean you're you have so many different components as you do for it for a recession. You have extremely tight labor market and you have a shrinkage in the workforce. To some extent. You have a shrinkage in business investment. You're already seeing that with a lot of these tech companies even Wall Street banks kind of slowing down some of their hiring and even laying people off in addition to a major major housing shortage. I'm curious at what point or what data point are investors most glued to when it comes to either predicting the end of the recession or predicting the depth of it. You know that that's a very good question. And you know there's no perfect answer for that. I think right now investors are really you know front of sun on investors minus the Senate's going to do. You know that though adage is don't fight. The Senate side has been raising rates this entire year. The equity market has had negative returns. Fixed income market is as well as we think that there is definitely correlation there. So right now you know it really I think investors are waiting to see if the Fed will make a policy error. And I think right now you know we're factoring in we'll do still do 75 basis points this month. And hopefully you know our hope is that you know they will see what you know inflation numbers come and go over the next couple of months. Also payroll numbers and in September ticked the opportunity to pass. Now that's are what we're hoping for. Hope is not a strategy. So I think the market is really more concerned going if the Fed is going to make a mistake and tip us too far. And that will actually give us more of an indication of where this is going to be a longer slowdown or not. Joe Brents now down below 100 bucks a barrel that's the first time that's happened since April the 25th. The energy trade that everybody's relied on so far this year to deliver is now turning around. If energy is not delivering. How do I avoid losing money in this market. Where can I actually hide out. Because the police's are far and few between. No no you're absolutely right and that goes back to my earlier point that you know we kind of needed to see energy rollover. So it's just that we have actually moved past the late cycle because energy and materials those name for Jihye Lee later cycle names that hold up well when we're in a higher inflationary environment. So what the market is suggesting is that inflation has peaked. We are moving by. We'll pass those later cycle names because demand has either been destroyed too on the margin or that there is just going to be a lot slower growth. So right now you know what we're thinking about positioning wise is Mr. Sumer discretionary names. Because when you look at we look at these names a lot of these names are trading. Similar to their where they were in 2020 when the economy went in the globe was completely shut down. They're trading close to book value. So and so much as financials. So we think that those names are already overly discounting a major slowdown. And that's where the opportunities are. A great catch up. Thank you very much indeed. Jo Gilbert of Integrity Asset Management greatly appreciate it. I want to take you back to Westminster here in London Boris Johnson the current prime minister of the U.K. taking questions from the liaison committee. Oddly it feels odd after the events that have unfolded over the last 24 hours. They're asking him his policy questions. Maybe. Maybe they're moving on. I just heard I heard the word resignation mentioned just then. But up until now we've seen policy questions being put to him which seems a little bewildering given what's going on outside the room anyway. Let's take a listen as we head into break with the employees. You'll be on gluten duty again. Your mother Paul Young and you want to cheer the players down. And the warning that we're getting is if it's assured destruction of the prime minister you might make it mutual. You might call a general election of a couple of Tory MP something. Of course they'll be very welcome in many states. But the point of clarification and disagreement that some of us have had in light of power has been taken away from the fixed in Paul Allen. British politics front and center I've been on resignation watch today I've been on parity watch today the British prime minister Boris Johnson earlier in the House of Commons warning that he's going to keep going. There's lots of calls to quit there coming from every angle. There are resignations all over the place. Plotters in his own party potentially planning a new vote of confidence that could take place today next week. How long will Boris Johnson last. It does seem as if the writing is on the wall but this is what he had to say in the House of Commons earlier. I abhor bullying and abuse of power anywhere in the parliament in this party or in any other party. None of that explains why he promoted him in the first place. And we've heard it all before. I'm not going to trivialize what happened. It's absolutely true Mr Speaker that it was raised with me. I greatly regret that he continued in office. So what they're discussing there was the pincher incident which is basically the latest elements of Boris Johnson's downfall. He appointed him as deputy chief whip and it turned out that as a result he was facing a lot of calls himself to resign because of the fact that Boris Johnson had been briefed on the fact that Mr. Pincher had faced face some serious allegations and investigations. Joining us now with the latest is Bloomberg's Joe Mays joining us in 10 Downing Street. Joe. Well Boris Johnson to be prime minister by the end of the day. Well that is looking increasingly unlikely. I mean we know we have this meeting of the 1922 committee late this afternoon where they could decide to change the rules to allow a leadership vote in Johnson which could happen even later tonight or indeed tomorrow. But it could be the case that if Johnson sees that's coming he might think that the game is up. And I should go. And we have reporting of pulling back saying that more cabinet ministers are threatening resignation if he doesn't go ahead of that rule change. So this could be Boris Johnson's final day as prime minister. That's true. Joe speaking of that rule change I mean just for our internationals specifically our American audience who aren't familiar. This is for the 1922 committee if I'm not wrong. Talk to us about the odds here that that new confidence vote does actually be brought up to as soon as next week. What kind of numbers what kind of support or lack thereof is four shots looking at. Yes. So the 1922 committee sets the rules when to lose elections can happen and we know that current rules say if you survive a confidence vote there's a year and so you can face another. And that's what's protecting Johnson right now. It's looking pretty likely that those rules would change tonight either by the chess. Graham Brady deciding that this has to happen and then we are into a vote. Could be next week. It could be it could be tonight. It could be. It could be tomorrow. And then wide expectations Johnson would lose that vote. It's recognized 40 percent of them votes against him in June. And since there were 28 resignations in the last 24 hours moving against Johnson if that number were to shift him to the no confidence column against Boris. The game is over under said Bloomberg's Joe. Giving us all the information from Westminster. Thank you as always. We're gonna check in with him later and bring you constant coverage. This is Bloomberg. For about an hour into the U.S. trading session Boomers Abigail Doolittle is tracking the moves. Abby. Well Kristie we do have flip flopping moves at this point. The S & P 500 trying for its third up day in a row up ever so slightly. This of course after being up and down in the premarket right now. If it does hold that tiny gain the third update and the longest winning streak since the end of May. You can see the Nasdaq 100 indecisive. What is very decisive though is oil back below one hundred dollars per barrel now at ninety six fifty on a technical basis below the 100 day moving average suggesting oil will slip to that 200 a move moving average closer to eighty seven dollars per barrel. This of course on fears of a global recession demand slowing. That's really weighing on oil. And you can also see that the 30 year yield right now at three point 0 9 percent. But earlier it was below thirty three percent on a bit of a haven demand. Let's take a look at some of these specific sectors that we have going on in here. And first for you to take a look at volatility. What we're looking at here and why does the VIX or the volatility index for stocks in blue the move index volatility for bonds and then in yellow the foreign currency volatility index you can see all are elevated really the VIX not so much at all but currency and bonds much more so bonds truly elevated. This of course after we've had these massive moves in yield that 10 year yield the last time I looked and probably moved since then below 2.8 percent is can be interesting to see what happens. As for those sectors here we have weakness on fears of a recession. The autos component index down one point nine percent. This is GM received a negative suggestion from a Wall Street bank. The consumer services index down this as the airlines down one point six percent. Of course airline travel absolutely snarled. And then the super composite trucking index down seven tenths of 1 percent as the class the big truckers the 18 wheelers. Orders are sharply lower. And then finally rounding it out. All this has one thing potentially in common and that is the idea that a recession could be ahead. This is a Bloomberg economic model of representation of a Bloomberg economic model. And the idea that recession is very likely 98 percent likely in the next two years. So explaining lots of the different sector and moves that we're seeing among various asset classes guy. Go it's all around that recession narrative. But I have to say the services data we just got from the ESM maybe indicating we're not that close to a recession. As Abigail was saying the data certainly feeding back into the energy market in a fairly brisk way. Brent crude a few minutes ago back below 100 bucks a barrel. That's the first time we've seen that since April. We're just flirting with that flat line right now. As you can see we're right on 100 bucks a barrel for Brent. But to lie down at ninety six. Seventy five. Joining us now Josh Young bison interests seat I O Bison an investment firm focused on oil and gas. Josh great to have you on the program. Got Brent at 100. Is that the right price if we're heading to a recession or are we heading to a recession. My my crystal ball is broken so I don't know. I do know that wheel does seem too low relative to very tight supplies and relative to quite healthy demand. Josh let's talk about the tradeoff here between crude and natural gas because of course we know in Europe there is this major crisis going on with soaring natural gas prices. But here in the States it's a different trade here where you do have at least first all these utilities this idea that if natural gas is getting too expensive they're going to kind of feedback in and help or need more crude oil. How much of that sort of demand could help lift prices. Yeah I think it's great that you're talking about that and it's a huge factor that hasn't really been covered that much. So this past winter it looks like there is as much as 2 million barrels a day of demand for power and for heat mostly in Europe but also a little bit in Asia. And I've seen estimates of as much as potentially and this is on the high end 5 million barrels a day of potential demand especially as European and Asian natural gas prices price in close to 300 dollars per barrel equivalent. So that's a very high price relative to the current price for oil. And I haven't really seen this too much in sell side models. And I think I think there's a real potential for demand to surprise. And again you can see oil prices falling. And so it kind of sounds weird to be very bullish on oil while the short term price is moving. But I mean just look at the fundamentals and look very strong. If we were to see the Russians cutting gas off from Europe how extended is that trade become. Yeah I mean we're already seeing them cut it off to some extent so Nord Stream one is under maintenance. Their deliveries have been falling off around the same time that the free port facility here in the US was exporting gas had an explosion. And so you know we're already seeing reduced supplies to Europe which is I think part of the contributor to higher European natural gas prices. And you know I think obviously if Russia cuts off more than that could be even more extreme. But in the current circumstance even if Russia resumes limited flows of gas and even as Nord Stream one comes back online there can still be a pretty big disconnect and there could still be much more oil burn for power and this winter for heat than it looks like people are expecting. Josh it kind of sounds like you're saying no matter what. Correct me if I'm wrong but no matter what there is kind of this bull case for oil some water. I guess the argument we make even in the housing market that even if there is a decelerating story there is still a massive shortage in the market. I have to ask though what alleviates that. What kind of timeframe are we looking at. Yeah. So I think a better policy would alleviate it but I wouldn't hold my breath on that either. A very deep recession where there's so much power demand destruction as well as transportation demand destruction that you actually see the market balance out. And it seems like the market starting to price that in right now although again who knows. And it does look like maybe the short term recession calls might be a little overstated. But in the medium term if you see a lot more drilling and you also just see a slower global economy that could sort of balance things out likely at much higher oil prices than today. A lot of people have done well by being in oil companies this year. It's been one of the few places of the stock market that has performed. That's starting to get nervous as they see crude coming down sharply as we've seen over the last few days. What would you say to those people. Stick with the trade if you're in that trade. Why do you want to be. Yes. So the consensus from the sell side perspective is that these stocks are pricing in 55 to 60 dollar oil. Oil and gas stocks were very unpopular for many years and they've only very recently started to outperform. So a lot of the money that's in it is sort of hot money and is new to the sector. And I think it's a little bit unfamiliar with the huge volatility volatility that we've experienced over the last number of years. And so I think I think there's sort of this tradeoff between accepting additional volatility while accepting additional returns and the more volatility and the more of these sort of pullbacks that we've seen. I mean we've seen a number of these very high percentage pullbacks since this oil bull market started in November of 2020. The more volatility there is the harder it is for the sector to deploy capital and the harder it is to deploy capital and attract capital the higher the oil price needs to be and the higher the return on investment needs to be to get that capital to play. So I think I think oil and gas stocks are very mispriced. And again it still funny saying this oil down in the stocks down even more. But you know that this has happened many times before and it does look like we're in this sort of secular or supercycle bull market for oil even as we experience these pretty painful pullbacks on the equities and on the commodity. Josh we'll talk about the natural gas side of the equation here because there is a almost inflation when it comes to American market just given that natural gas isn't as used perhaps in the United States as it is in Europe and therefore perhaps insulated from some of the thawing gas pressures that you are seeing across the Atlantic. But I'm curious as the United States looks to create that infrastructure deploy that capital as these that actually export natural gas more and more. Is that a trade that works perhaps in the longer term. Yeah I think I mean it looks like we're exporting just over 10 million or so 10 billion cubic feet a day of gas and we have some projects that are planned that could get us closer to 18 GCF a day over the next five or so years. And so that would obviously be a very significant factor to the local gas market as well as more adequately supplying the global liquefied natural gas market. There's been this really big disconnect in local natural gas prices as Freeport came off line and as the repairs there have taken longer than one might reasonably expect given how important that gas is for Europe. And so you know we've seen this very rapid very significant move down in natural gas prices which again is I think scaring away capital investment here in the shorter term and may lead to much higher natural gas prices once Freeport comes back online. And as we get into the next demand season coming this winter. So yeah I think I think U.S. natural gas export it is fantastic for the world. I think having low natural gas prices here right now is a huge advantage for the U.S. economy and is likely going to help in the short term in terms of lowering costs for businesses and maybe even bringing energy intensive businesses and extra utilization for the businesses here versus Europe. Josh Young Bison Interests CIO Oh thank you as always crucial crucially you mentioned that Freeport terminal is going to be a very interesting part of the oil equation coming up. They call it the summer camp for billionaires. Tech and media moguls are meeting once again in Sun Valley Idaho. We'll give you the key themes to watch. And from Sun Valley Idaho we go to London England. You're looking at a live shot of British Prime Minister Boris Johnson facing more tough questions this time before the liaison committee. We're going to give you all the headlines and all the news around what's going on in that part of the world. This is what I don't know. That's the is right. There are that many. This is Bloomberg Markets CAC. You're looking at a live shot of the principal room coming up. Ian Bremmer the president and founder of Eurasia Group joining Bloomberg Television. Twelve thirty p.m. New York time. This is Bloomberg. Keeping you up to date with news from around the world. Here with the first word answers give it in Highland Park Illinois authorities have charged the suspect in the shooting at a Fourth of July parade with seven counts of first degree murder. They say that dozens of more charges will be filed in the coming days if he's convicted. The 21 year old could be sentenced to life in prison without parole. Illinois is no longer the debt. It no longer has the death penalty in Hong Kong. Health officials warn that the Covid outbreak is getting worse. The number of rotavirus patients in the city's hospitals has doubled in recent weeks. Officials have been preparing for the number of new cases to increase. Still they're concerned it could put tremendous pressure on Hong Kong's health care system. And shares of electricity to France soared after French prime minister ends with fraud. Says the government wants to own 100 percent of the nuclear giant. France already owns 84 percent of EDF. During his re-election campaign President Emmanuel Macron said that the company should be nationalized to bolster French energy independence. Global news 24 hours a day on air and on Bloomberg Quicktake powered by more than twenty seven hundred journalists and analysts and more than 120 countries and which we get to. This is good that guy. Thanks very much indeed. These streaming TV wars entering a new phase. This after Netflix is supplies surprise loss of customers. Warner Brothers. Discovery CEO David ISE Love says the industry is now focusing on creating fewer and better shows. He spoke at the Sun Valley Media Conference in Idaho. I think it's going to be a lot of turmoil in the business. But DAX is having a lot of opportunity and Warner Brothers discovers that great quality content. I think the world has changed and it's not about how much. It's about how good. Summer camp for billionaires. They look like they're probably gonna have some fun but I suspect the backdrop is getting increasingly difficult. There are some big MDA stories that we're still watching very carefully of course in this space of colluding. What is going to happen with Twitter at Ludlow as ever on the scene in Sun Valley ads as the sun may be lacking but the stories certainly aren't. And I'm wondering if you've seen Elon Musk yet. You know I haven't see a mosque I'm told by sources that he still expected but not until later in the week. I've seen Ned SIEGEL Twitter's CFO. I have not seen Parag Agarwal Twitter's CEO. But that you know in terms of the deal context that's the one that everyone wants to talk about. Right. This is an interesting gathering of people. Traditionally Allen and CO. The boutique investment bank that hosts it do invite a broad range of TMT names. Right. Streaming has been the story of the last 12 months. But in the background you have this ginormous social media deal that everyone's talking about in the corridors. Ed. Well speaking of social media let's talk about one of the big deals that have been I would say roiling markets even on a macro basis that you on must Twitter deal alone must there. Where is he. You know Elon Musk works on Elon Musk time. I think what's interesting is that you know he had this period of silence. End of June beginning of July where he wasn't tweeting the spread on the deal which is the difference between the offer price. Fifty four dollars 20 cents a share in Twitter's current share price remains pretty wide. And merger arbitrage specialists still have some doubts right. The probability of odds that the deal remains the same that it is low. When Ned SIEGEL the Twitter CFO walked past I said hello. I say will you meet with Elon Musk. He smiled and said maybe once or twice. So we'll say it definitely is the expectation. And Elon Musk is who we're waiting for to turn up here. We're gonna live with that. Thank you very much indeed. Bloomberg said lovely. We're getting this kind of out of sequence. Thank you very much indeed Kitty. Yes I'm very sorry about that. Coming up U.S. equities really struggle for direction as traders wait for the Fed's June meeting minutes. We're going to talk with Jon Karl of US Macro Risk Advisors chief technical strategist. This is Bloomberg. U.S. stocks struggling for direction as investors await the Federal Reserve minutes. Joining us now John Coll of us the chief technical strategist for Macro Risk Advisors. John thank you as always for joining us. Let's start with simply what this market is actually trading on here. The S & P 500 it seems went from fundamentals to press technical levels to an all out. Throw your hands up in the air. Lack of participation. What's your take. Yeah. Thank you for having me by the way. So my take is this S & P 500 is in a bear market. Last time I was on I think you would ask me is there a magic level than market to get down to. And I said hey look listen support levels don't really work when you're in a downtrend particularly in a bear market. But one of the charts I wanted to show today would be where could we potentially see stabilization. Because sentiment is so bad downtrend is very exhausted somewhere between thirty four hundred and thirty six. If you notice you look real close on the chart. We kind of got there in the middle of June. But one thing I wanted to elaborate on is that I need to see panic selling turn into panic buying. So it doesn't matter how oversold we don't have DAX sentiment is we need to see a rush of buyers back into the market. So one example the breath rest would be the percentage of stocks above their 20 day moving average when it spikes above 90 percent from an oversold condition. Then the markets are trying to tell us something about the bottoming process. So that is something I'm watching very closely. And another way to think about it is it's not up to the bears here to decide really up to the bulls to prove themselves and think about whether or not we are in a recession or not. I can kind of get my head round what is happening in the equity market right now. The volatility that I'm seeing in the bond market. We are being whipsawed from thinking we're mid cycle to late cycle. We're in a recession. We've seen huge pullbacks in terms of yields. The bond market catching a bet today would going the other way round. Twos and tens. Very different narrative. John what we through what you are seeing in treasuries right. Absolutely. So a very strong bond bond rally that has occurred since the middle of June. What that has done is taken rates down to a very important technical level around this to seventy two to sixty five area. And you see that in the chart that we're actually bouncing off of today. And in terms of trend if you break underneath there then I could very well see the tenure get down to around 230 maybe even dare I say 2 percent to continue this. This is bond rally. But I think what is super important you just hit on it is the volatility that's going on with and by markets absolutely chaotic. What's going on there. And we really need to see volatility stabilize dare I say see the move index back under a 100 I have here plotted on a chart. One hundred and fifty day moving average. That would be a huge welcome sign for risk assets. So this is a key level right now for the bond market. Like I said you break this to 65 area. We could see this recession trade pick up momentum quite quickly. Well speaking of the recession trade picking up momentum it kind of seems like that's what's been happening with oil with commodities broadly. I'm curious about where you see the bull case perhaps coming back for oil. Fair enough. So yeah. But case is one thing we've got to remember is that oil is in a secular uptrend right when it went negative in 2020. I mean that's a sentiment extreme as you can come up with. So we're in a generational bull market for oil. Question is how we're gonna navigate and thread the needle here. Shorter term I see support for oil somewhere around the 85 dollar area. So another 10 dollars from where we are. And guess what. While it's painful in percentage terms that's quite normal in terms of what a gift back is allowed us to curb. Right. So I see support around eighty five to get to 80. Possibly but good support around eighty five. I would be looking around there for stabilization. John which asset class do you think is leading the narrative in which asset classes are following right now. Leading the narrative. I think right now it's the commodity markets. Look at look at copper which is crashing. I think Dr. Copper is telling us something hugely important. Agricultural commodities completely fell out of bed. We just talked about oil. You got to have your finger on on the commodity market quite closely. Those that are lagging a fantastic question and maybe to a certain extent the equity market is think about we just talked about the move index really high whereas the VIX having the VIX hasn't spiked. And that's one thing that's worrying us and a lot of our clients is that this cross as the signals that are going on is we can have a go markets. What's going on with the S & P. John really useful insight. Thanks very much indeed a lot of people trying to figure out the answers to those questions. Tom Keene was macro risk advisors. Chief technical strategist thank you very much indeed. I want to take you back to Westminster and what is happening with Boris Johnson. Boris Johnson the current British prime minister being questioned by the liaison committee when we owe a wide ranging discussion. Let's put it that way. We've dealt with Lebedev. We've dealt with Ukrainians coming in through the port of Dover. But the question that everybody wants to know the answer to is will Boris Johnson will be prime minister this time tomorrow. We're going to continue to cover that story as we work our way to a key meeting of the 1922 backbench committee. That will be coming up a little later on in the next hour and into the following hour. We'll certainly cover that for you. European Clothes is coming up as well. We'll get some analysis around all of these stories with relation to the markets. Charlotte ROWLAND joining us. Co of Investments the CCMA Investment Management. She's going to be joining us to talk about well what is happening on the screen right now what is happening with these markets. We are certainly seeing a lot of movement today. The US ESM data committee was a little stronger I thought than anticipated. And as a result of which we've got stocks higher. But you've certainly got a weaker pound vs. the dollar and a weaker euro versus the dollar when I won 91 and 119. This does seems to be some symmetry there. There is some symmetry. But you know I have to ask in this kind of broader narrative does it even feel like a recession. Bringing it back to our question of the day. It's simply that if you are seeing the same issues in the recessionary dashboard your layoffs your business investment you're even more of your crunch in spending despite what the numbers and say sentiment say or what the market is pricing. Is it fair to actually predict something like that. So that's interesting as we saw really digest the ISE numbers. Yeah we'll try to dig into the details of that. Trying to get an answer to that question shall arrive. And as I say co head of investments that CCMA Investment Management is going to be joining us. You've also got Kit Dukes coming up. We'll talk to him about what is happening in the FCX space as well. Busy next hour plenty to talk about. This is Bloomberg.

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Bloomberg Markets (07/06/2022)

Alix Steel and Guy Johnson bring you news you need to know and trends you need to watch as U.S. markets get into the trading day. (Source: Bloomberg)

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