Transcripts For BLOOMBERG Bloomberg 20240703

Over in the u. S. , moodys warns over a potential Government Shutdown as the deadline nears, adding to the fire when it comes to the west bond market. The eu trade chief attacks chinas policy, saying the stance is hurting trade. Buzzer cardio clinical headlines, lets get to the markets, because there is a lot to talk about. Already we are seeing a massive on market move overnight. If you start to see a Government Shutdown, the stock market will get hit first. That is where you are seeing sentiment sour. We will dive into this with valerie in just a moment. Its that red on the screen you saw in the Asian Session that is starting to spillover. Every long standing by in just a moment. Even that defensive bid we saw in u. S. Assets yesterday no longer hold, pulling back even in nasdaq 100 futures. Essentially, your winners of the last you sessions are your losers this morning. A lot of that is largely going to be a liquidity story. Crossas it we go. The bond market story will be crucial, specifically looking at the 10year yield, 4. 54 on that note. Pushing the dollar stronger which is interesting because you are seeing weakness across all the g10 currencies. And of course, our oil check. We are treading further away from the 100 dollars a barrel level. A 95 handle we will call it. Theres your cross assets picture. Lets go back to asia and set the tone for the day. Avril hong standing by in singapore alongside Valerie Tytel in london and jill disis in hong kong. An allstar lineup. Lets start with avril hong, walk us through it. Kriti, were really seeing how when treasury yields flying that momentum carried through into much of the asian trading session. Those yields climbed in new zealand, as well as in australia, as investors recalibrate expectations for Interest Rates. We are not just seeing the selloff in bonds, but stocks, as investors contend with the risks from high Interest Rates, but also, from the deepening property prices in china. The msci asiapacific is headed for yet another day of losses. Losses are accelerating as the session progresses. We are seeing the currency space, that dollar story, as the dollar rose, asian fx also getting hit. We are seeing chinese authorities coming up with yet another strongerthanexpected fix on record to prop up the chinese yuan. The japanese currency getting yen intervention from the finance minister once again, but overall hovering at those weak levels. Lizzy that is the asia story. Lets talk about evergrande, specifically. Avril, i thought the story was over a couple of months ago. It looks like it drags on. It clearly is not over. It looks like we are getting part two, part three and four of the evergrande saga. Evergrande has missed bond payments. Reportedly, several former executives have also been detained. This highlights that the crisis is deepening for what was once one of the Top Developers in the country. Lets not forget that the debt is really piling up. That is raising those fears and the risk that we could see potential liquidation. That is raising concerns about what this is going to mean for the broader chinese economy, especially given the number of Unfinished Projects of this property developer. Kriti certainly, a lot to watch when we talk about how much of this is an idiosyncratic story. Avril hong in singapore with that story. Lets bring in our markets are for Valerie Tytel. We are coming off a massive move in the bond market. Talk to us about what is top of your agenda. What a your medic move in the treasury market yesterday. It was on no major catalysts, that is the terrifying thing to treasury traders. It is rare we see bare steepening move at any point in the cycle. This steepening move led by longend weakness, led by that rise in 30year yields. We had the 5s and 30s curve turn positive the First Time Since august. The rise in yields led the dollar to breach year to date highest. What is the driver behind all this . There really isnt a clear answer. Which makes the situation even more worrying. If you look at how the treasury markets traded in asia, there is still some pressure, especially in the longend. This is continuing, all led off by the fed last week, but many raising an eyebrow to when this move will end. Kriti you said there was no real catalyst. It feels like in the markets language, the word recession comes up again. We are getting comfortable in this idea of u. S. Specific resilience. Talk to us about the warnings we are getting on that front. We had warnings on the consumer from wall street and the fed yesterday. There was a study showing that all but the 20 richest americans have run out of excess pandemic savings. That was a key to why the consumer would turn around in the fourth quarter, because of dwindling excess savings. The consumer will be pulling back on spending in other areas. We also had warnings from wall street banks. Morgan stanleys mike wilson becoming very bearish on the consumer sector, mirroring what Goldman Sachs analysts said. We had jeffries downgrading consumer stocks yesterday. A lot of these had the same narrative in common, all about this Student Loan Repayment starting to pick off kick off. The rise in oil prices eating into consumers savings. We have to look at how the Government Shutdown will change the narrative. It could be another drag on gdp in the fourth order. Kriti watching how quickly the tide changes on that front. Valerie tytel walking us through that story. One of the major factors that could affect the bond market is the idea of a potential looming Government Shutdown. We have 3. 5 days left before we get that deadline, at least weekdays, how much closer to we get to that crisis point . Something moodys mourned would affect the u. S. s credit rating. To walk through all of it, jill is standing by. This feels like quite the stark warning. It really does. There is a couple things we have to keep in mind when it comes to the moodys morning. Obviously, they are not downgrading the u. S. From its aaa sovereign rating. But when you take into account the fact that fitch jested a downgrade not to recently, you have concerns about this Government Shutdown. I think the framing of this morning is interesting. They talk a lot about how there is not a ton of economic effects from a shortterm shutdown of government. Just the fact that we have been having this conversation is impacting confidence around governance and the u. S. Relative to other aaa sufferings. Combine that with that fitch downgraded which was really jarring and weighed quite a bit after. This is a pretty stern warning from moodys. Kriti pretty stern warning. You had warnings from the likes of kevin mccarthy. His middle name is basically austerity. He is trying to create some sort of deal on the gop side. That doesnt have the same momentum than some of his previous offers have had. How does this get fixed . It really seems like it doesnt have all that much momentum. What we have heard is maybe republicans and democrats are reaching some kind of shortterm deal to make the initial deadline. That lasts 46 weeks and doesnt address underlying issues republicans have singled out. In particular, looking at emergency spending as it pertains to you. Pertains to ukraine. We were talking about shutdowns. We are at risk of ending up in that situation. Maybe we reach some kind of shortterm deal. But it looks like we will have to do a lot more so it feels more longterm. Kriti something we will be watching very closely. This will have repercussions for the entire world. For our markets audience, its a question of where you allocate your money . Is the u. S. The best bet. Lets get to things we are watching out for. At 8 00 a. M. U. K. Time, the ecbs chief economist speaking at the bank of france in paris, as well as on macroeconomics. At 1 00 p. M. U. K. Time, the Hungarian Central Bank delivers its latest rate decision. Most economists seeing a 100 basis point cut taking its rate to 13 . At 3 00 p. M. U. K. Time, home sales numbers, something you will want to watch closely. And more insight into the health of the u. S. Economy, Consumer Confidence data due out at the same time. Lets get a roundup of stories you need to know. All you have to do is type in dayb on your terminal. Of the top stories, you will see the idea that stock leverage is top of the agenda. Jamie dimons warning as well. We will dive into all of those topix coming up, David Solomon warning that it will be hard for inflation to cool without an economic slowdown. We will bring you the words from the chief of Goldman Sachs, next. This is bloomberg. It is going to be hard to get inflation back to the target. That probably means if inflation is sticky, we will see additional Interest Rate increases, and ultimately that probably does lead to more of a slowdown in the economy. Whether thats a recession, or just a slowdown, its hard to say. But it would be unprecedented to go through this type of tightening cycle and not see us get to slower Economic Growth than what were seeing right now. Lizzy Goldman Sachs ceo David Solomon speaking at the American Energy Security Summit panel in oklahoma city. Lets get more with paul dobson, executive editor for asian markets. Lets kick off with market pricing. As David Solomon said, a slowdown may be on the cards. Talk to us about what that looks like in terms of pricing in a latecycle piece of the economic expansion. Markets are a little confused by everything right now. In some ways, you can see that the soft landing pricing is still in there, and yet, there is more risks starting to emerge. Risks, on the one hand of more aggressive fed tightening, and risks on the other hand that that acceleration in tightening causes something nasty to the economy three or six months out from here. If you look at the bond yield spectrum, we have had rising shortterm yields, and that is starting to infect the longerterm side of the race market. Embedded with that is inflation risk, fed risk, supply risk from u. S. Fiscal spending. All of it pushing up back end yields, leading to a little bit of a shallower inversion of the yield curve. So far, you could say thats okay, people have been able to tolerate higher u. S. Interest rates but we are starting to see some wobbles now in the equity market. Some of the most shorted stocks getting more beaten up. Some of the markets best ways of expressing those recession risks are starting to feel more of a heavier weight on them as well. Kriti if thats the economic piece of it, and we are talking about the fiscal side of the equation, u. S. Shutdown looms again. There is complacency as we talk about shutdown every couple of months anyway. Paul, should the markets care about it . There are reasons to care, kriti. Number one, theres going to be an absence of data. So, its going to be hard for investors and the fed to gauge exactly what the state of the economy is, and how you should be pricing that. That blackout of information could be risky, or could exacerbate market risks. Although really from the perspective of ongoing servicing of debt, its not that significant, as moodys has been explaining, another sign of dysfunction within the government and the inability to get deficit plans agreed. The market doesnt like all of that uncertainty. It starts to price a little more risk into the u. S. Yield curve. As a result of this sort of, the uncertainty there, almost the credibility risk, or the credit risk. From that perspective, it may drive a little risk off sentiment. The iranian is that risk off sentiment pushes the market toward its favorite haven. Right now the favorite haven is the u. S. Dollar and u. S. Dollar cash securities. It is back into a positive u. S. Mindset in some ways as well. Kriti it is the exact trade in todays session. Our markets reporter reminds me that if we do see this Government Shutdown, payrolls data next week could be delayed. That will throw a loop for the markets. We have covered the economics and the fiscal side. Now we get to the juicy stuff, the Monetary Policy. We heard Neel Kashkari, the governor of the minneapolis fed, to i want to say overnight. He spoke about how hawkish he is. Take a listen. There is a lot of uncertainty about how tight is Monetary Policy right now . Thats why, if you look at the projection rather, we have a majority of participants have us raising rates one more time this year. Basically, we will take our time, see what happens to inflation before determining how high we need to go. Kriti talk to us about that. One more rate hike. Is that going to make a difference . Well, its more the expression and the longerterm filter through that the markets take away would be. One more rate hike by the end of the year means another few months before we get closer to cutting rates where we are at this moment created emphasizes the higher for longer rhetoric and stresses the feds determination to keep going with higher Interest Rates until it is done fighting inflation. And it can leave open the door to two more rate hikes. Maybe another one next year. Market pricing, as kashkari was saying, is not very much further from here. The fed wants that twoway risk to still be in the market. It wants perception that rates could go higher if they have to to startling down inflation expectations. Kriti it really isnt a surprise that Neel Kashkari is asking for one more rate hike, when the consensus is wanting to pause for a little longer. That will be something we digest. Paul dobson, executive editor for asian markets, we thank you. There is more markets coverage and geopolitics ahead. This is bloomberg. Kriti welcome back to daybreak europe. We are monitoring be inflation story and the Monetary Policy story which hinges on the commodity story which brings me to the oil market. We talked about 100 a barrel on the horizon. Something Goldman Sachs is saying will be the 12month forward price, but brent retreating further from the 95 it hit in the middle of last week. In the u. S. , nymex crude trading below that 90 mark. Not a ton of momentum in either direction, down 0. 4 , but pricing is on the minds of not just people in Monetary Policy, but the bigwigs in u. S. Oil majors, which brings me to Continental Resources c out saying the price of crude oil will absolutely rise to 100 a barrel. We will see volatility in the 80100 dollars a Barrel Oil Price environment right now. The higher prices a reality we will have to deal with as we think about the energy needs of the globe. Kriti meanwhile, occidental petroleums ceo discussed the outlook for crude races. Crude prices. Alix steel has that interview. She says the Company Plans to keep reduction study production study. We all have an opinion on oil prices, but usually, were wrong. I would like to say, the fact is that since china, brazil, india, and russia had their gdp spurt back in 2004, real wti prices have averaged more than 80. Now that indicates the midcycle price of oil is around 80. The reason the prince has been doing what he has recently is to balance the markets area there was a time of overspend follow by a long period of underspend in the industry. Now, to balance the markets is best for all of us. If you wasnt doing that, prices could potentially go over 100 paid in balancing the market, you protect the downside so you have a healthy oil and gas industry but without damaging economies around the world. Some of the undersupplied was because of you guys, shale players. Certainly, our industry has gone to the point where we are practicing much more discipline than we used to to practice. You see that prices have been moderated recently. A lot of people had predicted 120100 30 oil. You havent seen it, because the industry doesnt want to go there. In that time period i described since 2004, prices were above 100 26 of the time. They will be cap disciplined or you will pump more . We are cap discipline. We dont pump significantly in a market where we dont see the balance. And then it would be at a moderate pace. We are focused on returns than production volumes. Any demand destruction . Are you noticing anything on the backside in terms of demand . We dont see any demand dysfunction. Destruction. It prices above 100, it wont destroy demand. We are seeing gradual improvement. Even in recession, i dont think demand would drop so significantly that it would drive prices. We are at an Energy Security summit. Part of the line is lets unleash american oil. Oil can go to 4050 five dollars a barrel, you need higher prices. If you got the goahead do whatever you want, would you . Are there other constraints . The constraints are making sure you increase value. That you dont destroy value. That 26 of the time that prices were above 100, a lot of value was destroyed because we drove up the cost of what we were doing. We were inefficient at that activity level, the industry in general. Now there is a lot more discipline around how to do it, how to do it better, and not to get into an oversupply market. Kriti the occidental ceo speaking at the American Energy summit. The core of the story is how much do you American Oil Companies want to increase production . 100 oil and if its they might be hardpressed to bring that to market. The eu trade chief warning chinas stance is hurting trade. The latest from dombrovskis and his trip to beijing. This is bloomberg. Youre probably not easily persuaded to switch mobile providers for your business. But what if we told you its possible that comcast business mobile can save you up to 75 a year on your wireless bill versus the big three carriers . Have we piqued your interest . You can get two unlimited lines for just 30 each a month. There are no Term Contracts or line activation fees. And you can bring your own device. Oh, and all on the most reliable 5g mobile network nationwide. Wireless that works for you. Its not just possible. Hi, im jason. Ive lost 228 pounds on golo. So when my doctor told me i needed weight loss surgery, its happening. I knew i had to make a change. Golos helped me transition to a healthier, sustainable lifestyle. Im so surprised just how crazy my metabolism has fired up. I have a trust in golo cause i know it works. Golo isnt like every other program out there, and im living proof of it. announcer change your life at golo. Com. Thats golo. Com. Weve been the brand leader for over 75 years. When i finally could hear for the first time, i could hear everything. Try miracleear hearing aids with no commitment during our limited time sounds of autumn event. Call 1800miracle now. Kriti good morning. Welcome back to daybreak europe. Im kriti gupta in london. Ever grands crisis deepens after its default on a 4 billion yuan bond. In the u. S. , moodys warning over potential Government Shutdown as the deadline nears, adding fuel to the fire in the u. S. Bond market. The eu trade chief attacks chinas foreign policy, saying its stance on ukraine is hurting trade. There is a lot to digest across the world. Lets kick it off with how asian markets are faring. Avril hong in singapore standing by. Certainly, a lot for investors to digest. Top of mind is how were seeing that recalibration of Interest Rate expectations. As you guys have been covering, those trade for yields climbing. We have seen that filter through into be asia pacific. Yields climbing in australia and new zealand as momentum continues. It is not just that bond market selloff, but also among ems as the dollar rises, given how treasury yields are climbing. The sentiment is also weak among stockmarket investors. Not just because of rate expectations, but also, because of how these chinese property crisis is deepening. I told you yesterday about however grand scrapped key creditor meetings. Now, the latest news is how it has missed those bond payments for the onshore bond. Throwing a spanner in the works of what the fate of this company will be. That is showing up in the gauge of Chinese Property Developers and showing up in the benchmark on the mainland and in hong kong. Kriti something were watching closely in terms of the contagion effect to the rest of the world. We go from asia to the european continent. The eus chief trade negotiators trip to china has wrapped up with a press briefing alongside chinas vice premier. Take a look at what he had to say. The eu will exercise caution and continue to keep this market open. This benefits consumers and the local development of europe and Global Climate change cooperation. The eu has a trade deficit with china of almost 400 billion euros. European companies in china are raising concerns about the business environment. Addressing these concerns will help china retain its capacity to attract Foreign Investment and meet its objective of sustainable, highquality economic development. Kriti bloombergs european correspondent maria tadeo joining us this morning. Maria, is this the start of a new china doctrine for the eu . Its a good question. At this point, it is too early to say. I have washed a lot of speeches over the years. Probably a new approach. To the extent that the trade commissioner tells china directly, you have to balance out this relationship, or it will not work anymore. When you put together the entire narrative, over the past 24 hours, we heard a lot about reciprocating. He pointed to that trade imbalance when it comes to the deficit that is in favor of china. Dombrovskis suggested the relationship is at an existential crossroads. It is up to china if they want to make it mutually beneficial, or set them on separate roads. It is interesting how the head of the trade mr. Dombrovskis also said it is up to china to reciprocate and make this better trade policy if they want to maintain that Foreign Investment that come from europe. Kriti what is chinas response to all this . Its one thing to make eu the middle ground between the u. S. And china. Now perhaps they are backed into a corner. Im not sure that europe wants to be seen as a power that is caught in between. They have always said they want their own independent relations. Some countries, it is difficult to define the relationship, there are differences in the eu, some are way more hawkish, and some that believe there still needs to be more cooperation. Beyond that, the chinese have said they are concerned. That they are dissatisfied with some of the language that they hear. This idea of know to decouple, but yes to derisking is just a polite way of saying we will isolate china. Nonetheless, european officials would point to that trade deficit of 400 billion euros. It is growing between the two countries. If anything, the bloc that should be concerned is the european union. I should know that none of the two sides have said they want to see a trade war or have mentioned tariffs. So on that front, it is contained for the time being. Kriti maria tadeo all over that story. Lets get more in terms of the reaction into other sectors. Oliver crook is all over that. Walk us through exactly how european policymakers are going to perhaps react to china. Lets start with the trade conversation maria was highlighting. Lets look at Division Within the eu, this is where this gets interesting. Frank stated 90 billion worth of trade with china last year. Germany did 300 billion worth of trade. If you look at carmakers, renault get 6 of revenue from asia pacific, for full its like an, bmw and mercedes, it is more than a third of all the cars they sell. We are talking about highend, fat margin cars that are assembled in germany and shipped to china. The really high stuff is made in germany and europe. If you start throwing up tariffs on cars that are built somewhere else, this will hit the german automakers dead center. This is the stuff from porsches, may blocks maybachs, the stuff you drive around in, kriti. Kriti i really exude that. Oliver crook, we thank you for that. Much more to come after the break. We will talk about other geopolitical stories from around the world. A reporter lineup you dont want to miss. This is bloomberg. We have a lot of resources in the country, human and natural resources. We hope that he and his team will be able to bring confidence and trust back to the nigerian economy. Kriti a nigerian tycoon speaking on the new leadership at the nations central bank. The largest economy has a new central bank governor. Its important when we talk about these broader nigeria conversations and african Central Banks. We dont necessarily think easily investable, but Central Banks could change some of that trade thats crucial especially when we talk about the commodity landscape. When we talk about commodities, the initial rate will be to some of the frontier markets, and then by extension, the developed markets. Thats why changes at Central Banks around the world, specifically in africa, are relevant to the investor playbook. For now, lets look at other stories we are following today. Ukraines military says its troops have made advances along the southern frontline against entrenched russian defenses, as u. S. Battle tanks arrived to bolster the fourmonthold counteroffensive. Over in saudi arabia, they took a key step toward advancing its nass into Nuclear Power program, telling International Investors they will have wider access to saudi facilities. Saudi will be able to access supplies, official material, and Begin Operating its first reactor. The de facto saudi ruler known as mbs has repeatedly warned that his country would have no choice but to enrich its own your materials Nuclear Materials if its rival iran is allowed continue to do so. He warned if iran does develop a nuclear bomb, saudi arabia will look to do the same. Ken griffin may provide backing in the race to take over the u. K. Telegraph media group. The republican donor is supporting a bid led by a fellow hedge fund manager. The media group owns conservative publications the telegraph, as well as spectator magazine. I want to bring it back to africa. Its crucial to the investor playbook, especially if youre looking for that extra yield. Africas largest economy has a new person at their central bank held. Bank helm. Joining us for cardozo is our lagos bureau chief. What we know about those appointments . The new governor is a former chairman of nigerias citibank. And also, a former commissioner under the current president tino bu when he was the governor from 19992007. He has some close relationship with the president. He has been an ally of the president for years. He has a lot of challenges ahead of him. Inflation is at 18year high, at 25. 8 , food inflation is even worse, at almost 30 . The naira on the street is selling at almost 1000 naira to the dollar, thats 30 weaker than the official rate. People cant really get dollars because liquidity is low. They tried to float it recently, but they have not got enough inflows to support the currency at the official rate. They are in a currency crisis he has to immediately deal with, he has to deal with rising inflation, and bring some confidence into this central bank system. Before now, his predecessor had no confidence. So, now he has to restore some confidence into the banking system, and into central banking policies. Kriti you mentioned it, that Record Exchange rate will be hurtful in terms of what the readthrough is from policy. You said 1000 naira per u. S. D ollar, that is inflation if ive ever seen it. Now we come back to europe after spains inconclusive elections in july, the centerright Opposition Leader is making a final attempt to search the parliamentary math in his favor. Rodrigo, this is a story that i feel like has lasted over a year and counting, talk to us just how he will make his case to lawmakers. And what that looks like. There isnt much of a case he can make at this stage. He is four lawmakers short of having what we call an absolute majority, which is more than half of the chamber. However those four seemed impossible to get. The main reason is spain has a lot of regional nationalist parties, the basque and catalana s, and those parties want nothing to do with a coalition between fejos party and the far right. The other parties want nothing to do with that party, so there wont be slim chances of feijoo changing his fate ahead of todays debate. Tomorrow there is a vote, and 48 hours later, feijoo as a Second Chance where he needs more yeses ses than nos, but it seems the maths dont go in his favor. Kriti if he is not elected, what is the worst Case Scenario . There is basically two scenarios. We are expecting for sanchez, the current prime minister, to come in next week or as soon as feijoo is clearly defeated. The king following protocol has to invite all leaders and then designate somebody, which would be sanchez, to form government. Sanchez has two months. Either sanchez gets elected within two months, or he does not, because he is also struggling. If he is not elected, e ould have a new election which would take place probably around january 14. But there is very little clarity as to whether we will have a clearer outcome in january. Thats the big question everyone has. Spain is entering a flex frame cycle of forming government in the foreseeable future or not. The possibility is that sanchez will form a government over the next few months. Kriti the idea for our broader International Audience is you need legislation to tackle issues like inflation. Without that cohesiveness, you just cant area that has been the case for at least a year and counting. Rodrigo on a crucial story out of spain. Airbus just got a leg up over his archrival boeing, thanks to a massive new order. Air franceklm is renewing its longhaul fleet with an order for 50 airbus a350s. It will make Air Franceklm the single biggest operator of the jet trade was bring in benedict camel from berlin. A pleasure to have you on this morning. Why did air france make this choice . For air france, it came down to the wire. We spoke to the Ceo Ben Smith last night after this order was announced. He said it could have gone either way. And in the end, airbus had slightly more aggressive pricing. They were able to provide slots earlier. This is important, Airlines Want these planes sooner rather than later. Airbus was able to deliver on that ledge and boeing coated, according to the ceo. In the end, winner takes it all. Airbus won the entire 50order haul, and another 40 in the wings as it were. This is a plane that costs north of 300 million, back of the envelope were talking about 1517,000,000,000 dollars in commitments airfrance made last night. Kriti if you look at how much weight vstoxx hold, a lot of the math dragged down the major indices, the dow jones in the u. S. And euro stoxx here because there wasnt demand for longdistance travel. Domestic travel was more in vote. How much has that changed . We have seen since the summer, that this has come back. Short haul routes, your london to frankfurt, paris to madrid, those types of trips were in high demand initially as people started flying again after the pandemic. It was longhaul that was lacking. That has come back. You have seen a lot of socalled revenge spending. Leisure travelers upgrading into Business Class has been hugely popular. We heard from the lufthansa ceo yesterday saying we are doing great. Talking specifically about the longhaul part of the segment. That has come back. That has constrained the slots that are available for these aircraft. That was important for air france, that airbus could provide something. Deliveries will start in 2026 and run through 2030. This is a very important moment. They can get new planes at far lower fuel consumption. As the biggest cost for airlines so very important to get that upgrade. Kriti it could make or break the case for airbus and boeings progress especially with the backlog. As we speak about the ceo of air france, we will have him on later in the week. You dont want to miss that exclusive interview coming up friday at 9 15 a. M. London time. Yields are running higher, as traders speculate on that higher for longer narrative. All that ahead of the european open, coming up next. This is bloomberg. Kriti jp morgans Ceo Jamie Dimon is warning that the world may not be prepared for u. S. Rates at 7 , combined with stagflation. Thats something we are talking about for a lot of different places. Remember when 5 turned into 6 , now we are talking about 7 . Lets get a quick take with markets reporter Valerie Tytel. 7 , is that even reasonable . Especially when it comes to the readthrough into the stock market . If this economy doesnt slow down, it is reasonable. Many people think the u. S. Economy is going to slow down. One place that is not ready for 7 rates is the equity market. If we look under the hood, recent developments show people are becoming less bullish on the equity market. One of them being the drop in the net leverage by hedge funds. That just shows we are taking a less bullish stance on equities when this net leverage drops. One note from goldmans desk, last week they saw the biggest line item portfolio leverage since the depths of the pandemic bear market in 2020. The dollar amount of selling the highest level since january of 2022 last week. Morgan stanley noting that clients are boosting short positions against technology and consumer shares, retail and ai beneficiaries. Under the hood, we are getting a bit more bearish. It was very notable yesterday in the session that we had this move in treasury yields. Equities seemed quite resilient. It goes without saying, what we have been reporting on when it comes to Hedge Fund Positioning shows that many are changing their tune and becoming less bullish on stocks. Kriti fascinating that we are talking about less bullish, because it felt like Economic Resilience translated into an immediate bid into the u. S. Stock market. If youre talking about recession or shutdown, you have a defensive bid. To see that fall apart is fascinating. 30 seconds here, what is the game changer for the stock market . What creates a bull case . Continued Economic Resilience. We have set this time and time again how surprising u. S. Economic growth has been even under the weight of 5. 5 fed funds. Maybe we will test that 7 that dimon talks about if u. S. Growth keeps up resilient. That is why we are seeing hawkish fed chat. Kriti bloombergs Valerie Tytel over all of that market story. Markets today is up next. They will have more on this topic, as well as all the moves when the european markets open. They will also speak to the uae ambassador to the u. K. , that interview coming up at 8 30 a. M. U. K. Time, an interview you do not want to miss. Stick with us. This is bloomberg. se fue la luz pero todavia tenemos wifi para hacer las tareas. ¿y eso es algo bueno . Wifi y estudiar. Buenisimo. Wifi y pedir una pizza online seria buenisimo. Presentamos storm ready wifi. Solo de xfinity. 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