• 00:00> > 'S IS "BLOOMBERG SURVEILLANCE: EARLY EDITION" WITH FRANCINE LACQUA. > > GOOD MORNING AND WELCOME TO "BLOOMBERG SURVEILLANCE: EARLY EDITION." GLOBAL EQUITIES RALLY AHEAD OF TODAY'S U.S. JOBS REPORT AMID SPECULATION THAT THE FED WILL HOLD OFF HIKING RATES THIS MONTH WHILE OIL GAINS FOR THIS WEEKENDS OPEC PLUS MEETING. THE DEBT CEILING BILL CLEARS THE SENATE REMOVING THE RISK OF A U.S. DEFAULT. THE MEASURE GOES TO PRESIDENT BIDEN FOR HIS SIGNATURE. PLUS, BLOOMBERG UNDERSTANDS THAT MEHMET SIMSEK WILL BECOME THE NEW TREASURY AND FINANCE MINISTER OF TRICKERY AS -- TURKIYE AS PRESIDENT ERDOGAN TRIES TO SHORE UP MARKET CONFIDENCE. A LOT OF THE FOCUS IS ON THE CHINA TECH RALLY AND A LOT OF FOCUS IS ON WHAT WE UNDERSTAND FROM THE FED THAT WE WON'T HAVE A HIKE IN JUNE. THAT COULD CHANGE BECAUSE OF THE U.S. JOBS REPORT LATER BUT LOOK OUT FOR CHANGE IN TREASURIES AND T-BILLS THAT ARE NOW REALLY IN A SIGH OF RELIEF AFTER THE DEBT DEFAULT HAS BEEN AVERTED. EUROPEAN STOCKS GAINING .1%. REAL ESTATE AND FUTURES IN THE U.S. .3% HIGHER. IT IS THE DRIVER THAT WE ARE SEEING WITH THE TEXT IN ASIA THAT IS FILTERING THROUGH OPTIMISM IN EUROPE AND TURKISH LIRA. THIS IS A BLOOMBERG'S CORP. -- SCOOP THAT THERE IS A MARKET DARLING MEHMET SIMSEK, THAT BINANCE MINISTER 10 OR 15 YEARS AGO THAT COULD BE APPOINTED AS SOON AS SATURDAY. THIS WOULD REALLY GIVE A SIGH OF RELIEF TO THE MARKETS, THINKING THAT MR. ERDOGAN IS LESS MARKET AVERS. THE TURKISH LIRA AT 20.8804. THE SENATE HAS PASSED LEGISLATION TO SUSPEND U.S. DEBT CEILING AND IMPOSED RESTRAINTS ON SPENDING ENDING DRAMA THAT THREATENED THE U.S. FINANCIAL CRISIS. THE MEASURE GOES TO PRESIDENT BIDEN FOR HIS SIGNATURE WHICH HAS BEEN WELCOMED BY CHUCK SCHUMER. > > THIS DEMAND FOR A BIPARTISAN SOLUTION AND WE KNEW WE NEED TO COME TOGETHER FOR A SOLUTION LIKE ONE THAT PASSED TONIGHT AND I'M HAPPY TO STAND HERE PASSING THIS CRITICAL LEGISLATION TO SUPPORT OUR FAMILIES, PRESERVE VITAL PROGRAMS, AND MOST IMPORTANTLY, AVOID CATASTROPHIC DEFAULT. FRANCINE: AFTER THE VOTE, TREASURY SECRETARY JANET YELLEN HAD A MESSAGE FOR LAWMAKERS. SHE SAID I CONTINUE TO STRONGLY BELIEVE THAT THE FULL FAITH AND CREDIT OF THE UNITED STATES MUST NEVER BE USED AS A BARGAINING CHIP. LET'S BRING IN RUSS MATHESON WITH THE VERY LATEST. WHAT MAKES UP THE DEAL? > > IT TAKES IT OFF THE U.S. ELECTORAL CYCLE NEXT YEAR. IT KEPT SPENDING FOR TWO YEARS AND TAKES OUT OF THE ELECTORAL MACHINE FOR THE 2024 IS A MENTAL ELECTION. WE KNOW IT WILL CAP SPENDING AND THERE ARE SPECIFICS IN TERMS OF STUDENTS WILL HAVE TO START REPAYING THEIR LOANS AGAIN. THERE WILL BE RESTRICTIONS ON SERVICES AND BENEFITS FOR POOR PEOPLE. A PIPELINE WILL GET THROUGH BUT THERE'S A LOT WE DON'T KNOW. IT HAS TO BE DISCUSSED AND ARGUED FURTHER. $64 BILLION POTENTIALLY HAS TO BE AGREED IN THE NEAR TERM AND WHAT DOES THAT MEAN? CERTAIN SERVICES WILL HAVE TO BE CUT. THAT WILL BE A PAINFUL DEBATE BETWEEN ULTRACONSERVATIVES AGAIN IN THE REPUBLICANS AND THE PROGRESSIVES THE DEMOCRATS. THEY HAD TO GET THAT DONE BY OCTOBER. WE ARE GOING TO SEE MORE OF THE ACTUAL SPECIFICS ABOUT NOW. THE BROAD DEAL IS DONE BUT THEY LEFT A LOT OF WORK ON THE TABLE. FRANCINE: IS THIS SOMETHING PRESIDENT BIDEN CAN SELL TO THE AMERICAN PEOPLE AS A WIN? ROSALIND: HE WILL ADDRESS THE NATION THIS EVENING AND SPELL THAT OUT. HE WILL SIGN A DEAL WHICH IS A PERFORMANCE THING. MOST AMERICAN PEOPLE ARE PROBABLY PRETTY TIRED OF THIS AND RELIEVED THAT IT IS DONE. IT HAS EXPOSED HOW POLARIZED WASHINGTON IS, MESSY DISAGREEMENT THAT IS OFF THE TABLE NOW. PRESIDENT BIDEN DOES NOT FACE ANY SERIOUS CHALLENGES IN THE PRIMARIES. THE LEFT WILL LINE UP BEHIND HIM DURING THE ELECTION AND THIS SHOWS HE CAN NEGOTIATE ACROSS THE AISLE. THAT IS A POSITIVE FOR HIM POTENTIALLY. THE DANGER IS FOR THE REPUBLICAN SPEAKER OF THE HOUSE KEVIN MCCARTHY WHO MAY FACE A REBELLION IN HIS OWN RANKS NEXT WEEK. FRANCINE: NOT EVEN JAMIE DIMON? IS HE RUNNING OR NOT, WHAT PARTY? ROSALIND: HE HAS TO DECIDE THE NEXT COUPLE OF MONTHS IF HE IS GOING TO. FRANCINE: ROSALIND MATHIESON LOOKING AT THIS IMPORTANT U.S. DEBT CEILING. OFF THE BACK OF THE DEBT CEILING, TRADERS TURN THEIR ATTENTION TO THE FED TO FIGHT AGAINST INFLATION WHETHER THERE IS A PAUSE OR HIKE IN RATES IN JUNE. JOINING US FOR MORE ON MARKETS AS KARIM CHEDID. THIS IS A BIG DAY. IF YOU LIKE IT IS THE LONGEST IN A VIEWER WROTE IN IT WAS A LONGEST FOUR-DAY WEEK THAT HE IS EXPERIENCED. WHEN YOU LOOK AT WHAT THE MARKET IS PRICING IN FORTUNE, DOESN'T MEAN THAT WE DO NOT CARE AS MUCH WITH THE JOBS REPORT TODAY OR COULD IT CHANGE EVERYTHING? KARIM: IT DEFINITELY HAS FELT LIKE A LONG WEEK BUT WITH THE DATA WE HAVE HAD TO CONSUME AND LOOKING AT THE PAYROLLS, I THINK THE FED IS GOING TO BE LOOKING AT THE PARTICIPATION RATE AND UNEMPLOYMENT. IF WE SEE ANY SIGN OF SLACK OR BUDGE. FOR JUNE, IT SEEMS TO BE LARGELY OFF THE TABLE. THE QUESTION IS AROUND JULY AND WHAT THEY DO AFTER JUNE. IS IT A SKIP OR A PAUSE? FRANCINE: WHAT YOU THINK WILL HAPPEN? DOES IT CHANGE WHAT THE MARKET THINKS THE FED DOES IN DECEMBER OR EVEN OCTOBER AND NOVEMBER, DECEMBER AND IN TERMS OF CUTS? KARIM: THE KEY THING IS THE FED IS NOT GOING TO CUT THIS YEAR. EVEN IF WE SEE SOME SIGN OF SLACK, THAT IS WHAT YOU WANT TO SEE. EVEN THEN, WE STILL HAVE A LOT OF PRESSURE IN WAGES THE LABOR MARKET. MACRO DATA HAS BEEN FAIRLY RESILIENT IN THE U.S. IN QUEUE TWO. -- Q2. WE WANT THEM TO SEE A SIGN OF SLOW DOWN AND SLACK IN THE LABOR MARKET. THE KEY THING IS THAT THEY DO NOT CUT. FRANCINE: WHAT I STRUGGLE WITH IS THE FACT THAT THE MARKET IS VERY ABRUPT AND THINKING THINGS ARE FINE, THINGS ARE NOT FINE. THE DATA FROM CHINA HAS BEEN CONFUSING. EARNINGS DATA FROM SHARES HAS ALSO. HOW DO YOU SEE THIS PLAYING OUT THROUGH THE SUMMER? KARIM: Q2 HAS BEEN VERY INTERESTING SO FAR BECAUSE WE HAVE SEEN THE MARKET INTERPRET EUROPE AND EM, EVEN CHINA SOMEWHAT IN A GOLDILOCKS SCENARIO WHERE INFLATION HAS STARTED TO FALL. GROWTH IN EUROPE HAS BEEN BETTER-THAN-EXPECTED. CHINA IS STARTING TO FALL A LITTLE BIT SCARED IT COMES THROUGH IN THE ETF FLOWS WITH INVESTORS BUYING A MORE EUROPEAN AND EM EQUITIES THAN THEY HAVE U.S. EQUITIES. AS WE GO TO THE SUMMER, IT IS THE EVOLUTION OF THAT. DO INVESTORS DOES THE MARKET START TO ANTICIPATE THAT THE GOLDILOCKS TRADE IN EUROPE IN EM IS OVER, AND DO THEY APPLY THAT TO THE U.S. OR MORE OF A HARDER LANDING IN THE U.S.? FRANCINE: THE DIFFERENCE I FIND SURPRISING BETWEEN WHAT U.S. AND EUROPE ARE DOING. THE U.S. ECONOMY SEEMS RESILIENT WE LOOK AT LABOR. IN EUROPE, WE ARE SEEING CRACKS AND A LOT OF THE ECB POLICY FILTERING THROUGH TO INFLATION. IS THAT BECAUSE OF THE COMPOSITION OF THE ECONOMY'S OR THE U.S. IS JUST DOING BETTER? KARIM: IN EUROPE WE HAVE HAVE HELP FROM THE FOOD AND ENERGY PRICES WHICH HAVE ALWAYS BEEN A BIGGER COMPONENT OF THE INFLATION PIECE. YOU SEE THAT IN THE HEADLINES. WHEN YOU DIG DEEPER AND LOOK AT THE CORE CPI YESTERDAY, I WAS LOOKING AT THE BREAKDOWN OF THE NUMBERS AND WE DO HAVE THOSE PRESSURES IN EUROPE TOO. THEY MIGHT NOT APPEAR AT THE HEADLINE AS MUCH, BUT THEY ARE HERE. LOOK AT THE WAGE DATA OVER THE PAST COUPLE OF MONTHS. IT IS SIMILAR TO THE U.S. STORY. DIFFERENT DRIVERS IN TERMS OF THE TIGHTNESS BUT CERTAINLY SOME PRESSURE. I WOULD NOT GET TOO CARRIED AWAY WITH ASSUMING THAT EUROPE IS IN A DIFFERENT SPOT ON THAT S. FRANCINE: WHAT DO YOU EXPECT FROM THE ECB? WHAT YOU DO WITH ISHARES? IS THERE A DIFFERENCE BETWEEN INVESTOR APPETITE FOR EUROPE AND THE U.S.? KARIM: YES. LOOKING BACK, THERE HAS BEEN A BIG DIFFERENCE. INVESTORS HAVE BEEN TRADING IN EUROPE LIKE GOLDILOCKS WITH MORE MONEY IN EUROPEAN EQUITIES. THAT WAS HELPED BY THE CHINA REOPENING FOR SURE. LUXURY NAMES WE HAVE BEEN FOLLOWING CLOSELY HAVE SEEN A LOTS OF BUYING FROM ETF INVESTORS WHEREAS IN THE U.S. HAS BEEN WERE SLUGGISH. THE FLOW PICTURE IN THE U.S. HAS BEEN AS CONCENTRATED AS A RALLY. THE RALLY HAS BEEN CONCENTRATED IN TECH AND THE FLOWS AS WELL. LOOKING FORWARD, THE ECB HAS ROOM FOR A HAWKISH SURPRISE THERE. THE MARKETS ARE PRICING A COUPLE MORE HIKES BUT STARTING TO PRICE CUTS LATER. I DON'T THINK THAT WOULD HAPPEN. FRANCINE: WHAT DO YOU DO WITH CHINA? THE BIG UNKNOWN. ONE DAY IT IS GREAT IN ANOTHER IT NEEDS SUPPORT FROM POLICYMAKERS. KARIM: THIS WEEK WE HAVE HAD BAD AND GOOD DATA FROM DIFFERENT EMI RELEASES IN CHINA. -- PMI RELEASES IN CHINA. I THINK WITH CHINA, THE KEY THEME IS THAT POLICYMAKERS TO HAVE A BIT OF ROOM TO EASE THEY WANT TO BECAUSE DEFLATION HAS BEEN A KEY FEATURE OF THE CHINA REOPENING. THAT IS A KEY DIFFERENCE VERSUS DEVELOPED MARKETS WHERE INFLATION HAS BEEN THE FEATURE OF THE REOPENING. FRANCINE: THANK YOU SO MUCH. SHE'S INVESTMENT STRATEGIST AT BLACKROCK KARIM CHEDID. COMING UP, TURKISH PRESIDENT BRINGS BACK MEHMET SIMSEK AS FINANCE MINISTER. WE WILL BRING YOU THE LATEST ON THAT. THIS IS BLOOMBERG. ♪ FRANCINE: ECONOMICS, FINANCE, POLITICS. THIS IS "BLOOMBERG SURVEILLANCE: EARLY EDITION." BREAKING NEWS OUT OF BROOKFIELD AMONG INVESTORS IN EARLY TALKS ON SBB ASSET SALES. BROOKFIELD HAS BEEN IN THE NEWS BECAUSE THE INQUISITIVE STANCE OVER THE LAST COUPLE OF MONTHS AND QUARTERS. AT THE MOMENT, YOU CAN SEE SBB, THE UNPRONOUNCEABLE NAME. JOE EASTON WAS TELLING US IT IS GETTING 24% ON THE BACK OF IT NEARED THERE IS BROOKFIELD INTEREST IN EARLY TALKS FOR ASSET SALES THAT SBB IS TRYING TO PUT IN PLACE. BLOOMBERG HAS ALSO LEARNED THAT TURKIYE'S PRESIDENT MR. ERDOGAN IS SET TO ANNOUNCE MEHMET SIMSEK AS HIS NEW TREASURY AND FINANCE MINISTER. SIMIN DEMOKAN JOINS US NOW FROM ISTANBUL. THANK YOU FOR JOINING US ONCE MORE. DOES THIS SUGGEST THAT PRESIDENT ERDOGAN IS GOING TO STEP BACK FROM CALLING ALL THE SHOTS ON THE ECONOMY? SIMIN: THAT IS TOO EARLY TO TELL RIGHT NOW. HOWEVER, WHAT WE DO KNOW ABOUT MEHMET SIMSEK, HE USED TO BE TURKEYS FINANCE MINISTER BEFORE, IS THAT INVESTORS KNOW HIM AND TRUST HIM AND RESPECT HIM FOR BEING THE DEFENDER OF ORTHODOX MONETARY POLICY. HE USED TO BE A BANKER AT MERRILL LYNCH, AND OF COURSE, PRESIDENT ERDOGAN REALLY NEEDS TO IMPROVE MARKET SENTIMENT. IN THIS IS MAYBE EXACTLY WHY ERDOGAN ONCE MEHMET SIMSEK BACK. HE WILL BE THE FINANCE AND TREASURY MINISTER AND INVESTORS WILL BE LOOKING TO SEE IF HE SIGNALS WHITE EARLY ON WHETHER HE IS GOING TO HAVE A POLICY FOR BIT. FOR YEARS NOW -- POLICY PIVOT. ERDOGAN HAS BEEN FOLLOWING AN UNCONVENTIONAL GOVERNMENT POLICY WHICH INCLUDES LOW INTEREST RATES DESPITE SKYHIGH INFLATION, WHICH IS STILL IN DOUBLE DIGITS. LATE LAST YEAR IS SURGED TO A 24 YEAR HIGH. MEHMET SIMSEK REPLACE NUREDDIN NEBATI WHO CAME INTO THAT ROLE IN LATE 2021. AS I SAID, HE WILL BE HAVING TO SEND STRONG SIGNALS TO INVESTORS PRETTY SOON BECAUSE THEY ARE LOOKING FOR ANSWERS. FRANCINE: THEY CERTAINLY ARE. WHAT HAS BEEN THE MARKET REACTION SO FAR? SIMIN: OVERALL TODAY EVER SINCE BLOOMBERG BROKE THE STORY THAT MEHMET SIMSEK WILL COME BACK AS FINANCE MINISTER, WE HAVE SEEN A POSITIVE MARKET REACTION. ISTANBUL IS UP MORE THAN 3% SO FAR TODAY. THE BANKING INDEX UP MORE THAN 6.5% BUT THE LIRA IS STILL NEAR RECORD LOWS AGAINST THE DOLLAR. SPECULATION OVER THE PAST WEEK THAT MEHMET SIMSEK WOULD COME BACK HAS PARED LOSSES FOR THE WEEK, BUT IT IS STILL TRADING ABOVE 20 PER DOLLAR. WHAT INVESTORS ARE LOOKING FOR REALLY AS WELL MEHMET SIMSEK SIGNAL A PIVOT IN POLICY AS WELL AS REESTABLISH CENTRAL-BANK INDEPENDENCE AND INDEPENDENCE FOR ECONOMIC POLICIES WITHOUT PRESIDENT ERDOGAN BEING TOO INVOLVED. FRANCINE: THANK YOU SO MUCH. SOME ENDEMIC ON WITH THE VERY LATEST ON TURKIYE. OIL IS INCHING HIGHER ON TRACK FOR WEEKLY DECLINE AS OPEC AND ALLIES PREPARED TO MEET IN VIENNA OVER THE WEEKEND. THE OIL CARTEL WILL DISCUSS OUTPUT IN THE STATE OF THE SECTOR AGAINST THE BACKDROP OF GLOBAL ECONOMIC UNCERTAINTY. LET'S GET MORE WITH BLOOMBERG'S MANUS CRANNY WHO IS HEADED TO AUSTRIA. WHAT ARE THE BIGGEST RISKS AS WE LOOK TO THE MEETING? MANUS: A LACK OF CONSENSUS. NOT ONLY IS THE CHINA RECOVERY FALTERING BUT THERE'S A LACK OF CONSENSUS AND COHESION I WOULD SAY. THERE IS SO MUCH OVERSUPPLY FROM RUSSIA, FROM MORAN AND VENEZUELA -- FROM AROUND AND VENEZUELA. THAT SUPPLY IS SOMETHING THAT IS GETTING DIFFICULT TO CONTROL. RUSSIA WAS SUPPOSED TO CUT MORE AGGRESSIVELY IN REACTION TO SANCTIONS THAT HAS NOT HAPPENED. HERE WE ARE ON THIS ROAD TO VIENNA AND I CAN TELL YOU THAT THERE IS A RELAXATION OUT THERE. IF BLAME GAME HAS BEEN THAT SPECULATORS ARE RESPONSIBLE FOR TAKING OIL DOWN FROM THE $1900 RANGE DOWN TO THE $70 AREA. WE HAVE HAD A TOUGH WEEK. THE DAILY VICISSITUDES OF THE DEBT CEILING HAVE NOT GRANTED A RISK IN THE OIL MARKET BUT THEY HAVE BEEN THREE MAJOR ATTEMPTS TO PERHAPS CONTROL THE NARRATIVE. $100,000 BARREL CUT IN SEPTEMBER WHEN OIL WAS AT 92 MILLION BARRELS WOULD BE A PAPER CUT. THAT WAS IN THE AUTUMN. WE WERE AT $90. THEN THERE WAS A VOLUNTARY CUT OF 1.2 MILLION BARRELS WHEN WE WERE AT $80. SAUDI ARABIA HAS DONE THE HEAVY LIFTING AND CUT BY 500,000 BARRELS BUT THE RUSSIANS ARE NOT DELIVERING AT PACE AS PERHAPS THE OVERALL OPEC GROUP WANT. THE RISK IS, FRANCINE, A LACK OF COHESION AT THE END OF THIS WEEKEND, AND AS A REAL MATERIAL ISSUE. WILL THE RUSSIANS CUT MORE? THERE DOES NOT SEEM TO BE OVERALL SURE -- OVERARCHING DESIGNED TO CUT -- DESIRE TO CUT BUT YOU HAVE TO BUILD CONSENSUS FOR THAT. WE WILL BE ON THE GROUND CHASING MINISTERS. I WILL GO TOMORROW AND HAVE FULL REPORTS ON MONDAY MORNING. FOR ANY MINISTERS THAT FANCY GIVING ME A CALL RIGHT NOW, YOU ARE VERY WELCOME ON TV RIGHT NOW OUTSIDE OPEC HEADQUARTERS ANYTIME. FRANCINE: OUTSIDE BUT WE KNOW OPEC IS EXCLUDING SOME REPORTERS. I HOPE THAT THEY CHANGE THEIR MIND AND BLOOMBERG WILL BE ALLOWED INSIDE. WE WILL GIVE YOU THE NUMBER. EVERYONE SHOULD CALL MANUS AND GET EXCLUSIVE INTERVIEWS THERE ON THE GROUND IN VIENNA. COMING UP, SOUTH AFRICA SAID TO BE CONSIDER SWITCHING THE LOCATION OF THE UPCOMING BRICS SUMMIT. IT IS MISSING A DILEMMA OVER THE ARREST WARRANT FOR PRESIDENT VLADIMIR PUTIN. THIS IS BLOOMBERG. ♪ FRANCINE: ECONOMICS, FINANCE, POLITICS. THIS IS "BLOOMBERG SURVEILLANCE: EARLY EDITION." LET'S GET TO THE BLOOMBERG FIRST WORD NEWS WITH LEIGH-ANN GERRANS. > > BLOOMBERG HAS LEARNED THAT JAMIE DIMON IS TO VISIT TAIWAN AFTER WRAPPING UP HIS HIGH-PROFILE TRIP TO CHINA. THE STOP FOR THE JP MORGAN CEO COMES AT A TIME OF HEIGHTENED TENSIONS BETWEEN BEIJING AND WASHINGTON. LVMH CEO BERNARD ARNAULT HAS BECOME THE LATEST COMPLETE BOSS WITH PLANS TO VISIT CHINA AS TESLA'S CEO ELON MUSK RETURNS FROM HIS WHIRLWIND TOUR OF THE COUNTRY. RISHI SUNAK'S ADMINISTRATION HAS REFUSED A DEMAND FROM THE UK'S COVID-19 INQUIRY TO HAND OVER FORMER PRIME MINISTER BORIS JOHNSON'S WHATSAPP MESSAGES AND PANDEMIC DIARIES. THE GOVERNMENT'S CABINET OFFICE SAYS IT IS FILING FOR JUDICIAL REVIEW INTO THAT REQUEST FOR DOCUMENTS. THE MOVE IS SETTING UP A LEGAL BATTLE THAT RISKS IMPLYING -- AMPLIFYING ACCUSATIONS OF A COVER UP. THE PENTAGON IS TO BUY STARLINK SATELLITE COMMUNICATION TERMINALS AND SERVICES FROM ELON MUSK'S SPACEX FOR USE BY THE UKRAINIAN MILITARY. THE U.S. HAS PRAISED THE ROLE THAT THE TERMINALS HAVE PLAYED IN KYIV'S WAR EFFORTS, SEEING THEM AS VITAL FOR THE COUNTRY'S DEFENSE. GLOBAL NEWS POWERED BY MORE THAN 2700 JOURNALISTS AND ANALYSTS IN OVER 120 COUNTRIES. I'M LEIGH-ANN GERRANS, AND THIS IS BLOOMBERG. FRANCINE? FRANCINE: SOURCES HAVE TOLD BLOOMBERG THAT SOUTH AFRICA IS CONSIDERING SWITCHING THE VENUE FOR BRICS LEADERS TO A DIFFERENT COUNTRY. IT IS DECIDING WHETHER TO EXECUTE AN INTERNATIONAL ARREST WARRANT FOR VLADIMIR PUTIN. JENNIFER ZABASAJJA JOINS US FROM CAPE TOWN. WHY ARE THEY CONSIDERING MOVING THE EVENT AND HOW SERIOUS IS IT? > > IT'S REALLY IS A CONSIDERATION AT THIS POINT IN TIME BECAUSE AS YOU MENTIONED, THE ARREST WARRANT FOR VLADIMIR PUTIN BY THE ICC HAS BEEN CAUSING A LOTS OF CONCERNED -- CONCERN AND UNNERVING DOMESTIC AND FOREIGN INVESTORS BECAUSE SOUTH AFRICA AS A SIGNATORY OF THE ICC WOULD HAVE A DUTY TO ARREST HIM IF HE WERE TO COME. STILL, WHAT WE'RE HEARING FROM FOREIGN MINISTERS HERE IN SOUTH AFRICA BECAUSE THEY ARE GATHERED HERE IN CAPE TOWN, IS THAT THE 15TH BRICS SUMMIT HELD IN AUGUST IS GOING TO GO AHEAD AS PLANNED IN JOHANNESBURG AS FAR AS WE KNOW AT THIS POINT. THE FOREIGN MINISTER YESTERDAY IS DISCUSSING AND REITERATING SOUTH AFRICA STANCE AS A NONALIGNED STATE AND SAYING THE PRESIDENT IS GOING TO CONTINUE TO EXPLORE LEGAL OPTIONS. AT THIS POINT, THE COUNTRY IS STILL PLANNING TO HOLD THIS SUMMIT, WHICH COULD POTENTIALLY STIR A LOT OF NERVES FOR A LOT OF PEOPLE DOMESTICALLY AND ALSO GLOBALLY. FRANCINE: WHERE IS THIS ROUT ON POTENTIALLY CREATING ITS OWN CURRENCY? -- WHERE IS THIS BLOCK ON CREATING ITS OWN CURRENCY? JENNIFER: IT IS TOP-OF-THE-LINE AT THE BRICS SUMMIT AND WE WILL SEE A LOT OF FOREIGN MINISTERS FROM PLACES THAT ARE LOOKING TO BECOME A PART OF THIS BLOC LIKE SAUDI ARABIA, THE UAE AND KAZAKHSTAN. WE HEARD ON THURSDAY THE MESSAGING THAT THEY ARE TRYING TO CREATE A BLOC THAT IS POTENTIALLY SHAPED UP FOR A REBALANCED WORLD AND CAN REALLY EXERT THEIR OWN INFLUENCE. PART OF THAT HAS TO DO WITH THIS CURRENCY AS YOU MENTIONED AND WHAT WE HEARD FROM OUR RESOURCES AS IT COULD POTENTIALLY BE A WAY FOR THESE COUNTRIES TO EVADE SANCTIONS. ONE SPECIFIC QUOTE THAT STUCK OUT TO ME WAS ONE OF THE FOREIGN MINISTER THEY EXPRESSED CONCERN ABOUT UNILATERAL ECONOMIC COURSE OF MEASURES SUCH AS SANCTIONS SUCH AS THREATENING THE DEVELOP WORLD. THEY ARE POTENTIALLY TALKING ABOUT THE U.S.. RIGHT NOW, AT THIS STAGE THIS CURRENCY DEBATE AND DISCUSSION IS AT THE PROPOSAL STAGE BUT WE HAVE HEARD FROM A NUMBER OF FOREIGN MINISTERS CONTINUING TO EXPRESS THEIR CONCERN ABOUT THE DOLLAR AND THE DOMINANCE THAT THE DOLLAR HAS HAD OVER THERE OWN NATIONS AT THIS POINT. IT IS A TREND WE ARE SEEING GLOBALLY. FRANCINE: JENNIFER ZABASAJJA THEY ARE IN CAPE TOWN. COMING UP, THE MARKET FOR AI AVATARS IS FORECAST TO RAMP UP RAPIDLY. FRANCINE: GLOBAL EQUITIES RALLY AHEAD OF TODAY'S U.S. JOBS REPORT AMID SPECULATION THAT THE FED WILL HOLD OFF HIKING RATES THIS MONTH. OIL GAINS BEFORE THIS WEEKEND'S OPEC+ MEETING. THE DEBT CEILING BILL CLEARS IS THAT IT'S REMOVING THE RISK OF A U.S. DEFAULT. THE MEASURE GOES TO PRESIDENT BIDEN FOR HIS SIGNATURE. PLUS, BLOOMBERG UNDERSTANDS MEHMET SIMSEK WILL BECOME A NEW TREASURY AND FINANCE MINISTER OF TRICKERY -- TURKIYE AS ERDOGAN TRIES TO SHORE UP MARKET CONFIDENCE. WELCOME TO "BLOOMBERG SURVEILLANCE: EARLY EDITION. " THE AI FRENZY IS CONTINUING TO RAMP UP. IT IS GROWING FAST IN OTHER BUSINESS SECTORS LIKE MEDIA AND E-LEARNING. ACCORDING TO A FORECAST FROM EMERGING RESEARCH, DIGITAL AVATARS COULD BE WORTH MORE THAN $525 BILLION BY THE END OF THIS DECADE. LET'S BRING IN OUR VERY OWN TOM MACKENZIE WITH A WONDERFUL, WONDERFUL FUN STORY. FUN AND ALSO A LITTLE BIT SCARY. YOU CREATED YOUR OWN AVATAR. TOM: HAS BEEN A LOT OF FOCUS AND TALK ABOUT GENERATIVE AI. ONE PART OF THAT ARE DIGITAL AVATARS. WE WENT TO A STUDIO IN EAST LONDON WITH A COMPANY THAT IS AT THE CUTTING EDGE OF THESE VIDEOS AND DIGITAL AVATARS. WE GOT ONE MADE TAKE A LISTEN. TOM: WITH US NOW IS A VERY SPECIAL SLIGHTLY WEIRD GUEST THAT IS, IN FACT, MY OWN DIGITAL AVATAR, TOM MACKENZIE. DIGITAL TOM, WELCOME TO THE SHOW. AVATAR TOM: IS A PLEASURE TO BE HERE ON BLOOMBERG TV. I AM IN AI-POWERED DIGITAL AVATAR DESIGNED TO PROVIDE INSIGHTS AND INFORMATION ON A WIDE RANGE OF TOPICS. TOM: OK, THIS IS ALL VERY ODD. WHAT EXACTLY ARE AVATARS? AVATAR TOM: DIGITAL AVATARS POWERED BY GENERATIVE AI ARE VIRTUAL REPRESENTATIONS OF INDIVIDUALS THAT CAN MIMIC HUMAN BEHAVIOR, APPEARANCE, AND INTERACTIONS. THEY WORK BY UTILIZING AI ALGORITHMS TO ANALYZE AND LEARN FROM VAST AMOUNTS OF DATA, INCLUDING FACIAL EXPRESSIONS, GESTURES, AND SPEECH PATTERNS. THIS ENABLES THEM TO GENERATE REALISTIC AND RESPONSIVE VIRTUAL CHARACTERS. TOM: OK, SO AVATARS ARE NOT JUST GIMMICKS THEN, BUT WHAT ARE THE REAL-WORLD IMPLICATIONS? I'M THINKING ACROSS THE ECONOMY, ACROSS DIFFERENT INDUSTRIES. WHAT ARE THE IMPACTS ACTUALLY LIKELY TO BE? AVATAR TOM: THEY CAN REVOLUTIONIZE INDUSTRIES SUCH AS ENTERTAINMENT, GAMING, AND VIRTUAL INFORMATION. -- COMMUNICATION. AVATARS HAVE THE POWER TO ENHANCE USER EXPERIENCES, ENABLING IMMERSIVE VIRTUAL INTERACTIONS AND PERSONALIZED CONTENT. THEY CAN FACILITATE REMOTE COLLABORATION, TELEPRESENCE, AND EVEN ASSIST WITH CUSTOMER SERVICE. TOM: OK, THERE HAVE TO BE SOME DOWNSIDES THOUGH, SO WHAT ARE THE RISKS OF THIS KIND OF TECHNOLOGY? AVATAR TOM: AS AI BECOMES MORE PERVASIVE, ETHICAL CONCERNS ARISE INCLUDING ISSUES RELATING TO BIAS AND FAIRNESS IN AI ALGORITHMS, TRANSPARENCY, AND EXPLAIN ABILITY OF AI DECISION-MAKING, DATA PRIVACY AND SECURITY, AND THE POTENTIAL FOR AI TO PERPETUATE EXISTING SOCIAL INEQUALITIES. FRANCINE: THAT WAS FUN AND VERY FREAKY. WHAT ARE THE ETHICAL CONCERNS SURROUNDING THIS? THIS IS NOT DEEPFAKE WHICH WE NEED TO PUT AN ACCENT ON. TOM: THE COMPANY WE WORK WITH TO CREATE THIS AND CHATGPT TO GIVE RESPONSES. THEY DEFINED DEEPFAKES AS IMAGES THAT EXIST IN ARE MANIPULATED. THEY DO NOT DO THAT BECAUSE THEY CREATED IT ORIGINALLY. I WENT IN THERE AND RECORDED MY VOICE AND IMAGE IN THEY BUILT THE ALGORITHM AND FELT THE DIGITAL AVATAR ON THE BACK OF ALL THAT DATA. THAT IS A KEY CONCERN. WE HAVE HAD EXAMPLES IN COUNTRIES LIKE VENEZUELA WHERE PEOPLE USE DEEPFAKES TO TRY TO PUSH THEIR OWN POLITICAL ENDS. THE COMPANY HAS THE SYSTEMS IN PLACE TO AVOID THAT SCENARIO, BUT NIGHTMARE SCENARIOS AS YOU GET A LEADER IN THE VIDEO IS MANIPULATED AND THEY MAKE A BIG DECISION. THEN JOB DISPLACEMENT. TO WHAT EXTENT WE LOSE A JOB? THEY DON'T WANT COMPANIES TO BE USING VIDEO PRODUCTION SCHEMES BUT USE THE AVATAR AND USE THAT. IT IS NOT HARD TO IMAGINE THAN A COUPLE OF YEARS TIME STREAMING COMPANIES AND THOSE MAKING FILM COULD USE DIGITAL AVATARS TO REPLACE ACTORS. THAT IS WHEN IT COMES TO DIGITAL TWINS. GENERATIVE AI, THERE ARE QUESTIONS ABOUT THE MUSIC INDUSTRY, ARTS I'M, SCRIPTWRITERS. THOSE ARE SOME OF THE CONCERNS THAT ARE BEING FLAGGED. FOR A COMPANY LIKE THIS THEY HAVE MADE VIDEOS FOR A LOT OF THESE. THE MARKET HAS SEEN THIS AS $525 BILLION. FRANCINE: A LOT OF MUSICIANS RECORD NOTE BY NOTE AND THEY DID A SYNTHETIC AI GENERATED DRAKE AND THAT BLOWS UP THE BUSINESS MODEL COMPLETELY. TOM: THE AI GENERATED DRAKE RAISED EYEBROWS AND GOT DISCUSSION WITHIN THE MUSIC INDUSTRY. IT IS A LIVE TOPIC ABSOLUTELY. FRANCINE: TOM MACKENZIE WITH HIS VERY OWN AVATAR. 3COM'S ONSET. JOINING US FOR MORE IS FREDERIC COURT FROM FELIX CAPITAL. THEY HAD THE LARGEST WITH ASSETS UNDER MANAGEMENT TO REACH BE CORP. CERTIFICATION. DOES THAT WARRANT ITS OWN AVATAR BUT YOU ARE CERTAINLY AT THE CUTTING EDGE OF A LOT OF THINGS THAT YOU HAVE BEEN INVESTING IN IN TERMS OF RETAIL AND E-COMMERCE IN THE WAY IT CHANGES THE WAY WE LIVE AND BREATHE. HOW WILL AI CHANGE THAT FURTHER? FREDERIC: THAT IS EXACTLY WHAT WE DO. WE FOLLOW AN BACK FOUNDERS USING THE TECHNOLOGY TO CHANGE THE WAY WE LIVE AND WORK AND COMMUNICATE, THAT WOULD BEGET ENTERTAINMENT ETC.. AI IS A WHOLE NEW PLAYGROUND BASICALLY, AND WE EXPECT VAST IMPACTS ON OUR DAILY LIFE. THE VAST IMPACT THAT WILL BE SO STRONG THAT WE WILL NOT SEE IT BASICALLY. IT WILL BE ABOUT AI GETTING INTO OUR DAILY LIFE WITHOUT US SEEING IT LIKE RIGHT NOW IT LOOKED ODD. FRANCINE: THE VOICE OF ROBOTIC. FREDERIC: THIS IS THE BEGINNING. AT SOME POINT YOU MAY BE TALKING TO SOMEONE INCLUDING A BUSINESS OR BOOKING A HOTEL AND TALKING TO A MACHINE AND A GREAT EXPERIENCE. THIS IS ONLY A QUESTION OF TIME. FRANCINE: I DON'T KNOW IF I SHOULD ASK YOU PHILOSOPHICAL QUESTIONS BUT SHOULD ENTREPRENEURS AND VCS HAVE A PROBLEM IF A HUMAN LIKE ME CANNOT TELL WHETHER I'M SPEAKING TO ANOTHER HUMAN OR AI GENERATED AVATAR? FREDERIC: USUALLY TECHNOLOGY IS AHEAD OF USAGE AND RADIATION. THESE THINGS WILL COME TOGETHER. WE TALKED ABOUT MUSIC AND WE REMEMBER WHEN NAPSTER CAME IT WAS SUPPOSED TO BE THE END OF MUSIC. LATER IT WAS ALL ABOUT STREAMING. THIS IS WHAT WILL HAPPEN. USAGE AND REGULATION ARE GOING TO FOLLOW. WE DEFINITELY NEED TO FIND THE RIGHT ETHICAL ENVIRONMENT AND USER TECHNOLOGY. FRANCINE: I'M NOT DOWNBEAT ON AI AT ALL. NAPSTER MEANS THAT I HAVE BETTER ACCESS TO THIS AS A HUMAN WHEREAS YOU PUT TECHNOLOGY FOR THE HUMAN. WHAT DOES IT MEAN FOR YOUR INVESTMENT? ARE YOU LOOKING AT PLACES WHERE IT IS DESTRUCTIVE OR DO USE IT TO FIND COMPANIES? FREDERIC: WE SEE AI AS BEING AT THE PRE-LEVEL ON HOW WE WORK AND BE MORE EFFICIENT IN USING TECHNOLOGY TO HAVE MORE EFFICIENT WAYS TO AUTOMATE INTERACTIONS WITH COMPANIES AND THAT KIND OF THING. SECOND, IMPACTING THE WAY COMPANIES WORK. FOR INSTANCE, WE HAVE INVESTED IN A VERY LARGE CORPORATE TRAVEL BUSINESS WHICH HAS OVER 1000 PEOPLE IN THE CALL CENTER. THAT WILL BE VASTLY TRANSFORMED AND IMPACT THE MARGIN BY USING AI AUTOMATING TEXT. FINALLY IT IS ALL ABOUT CREATIVITY AND ABOUT CHANGING THE WAY WE DO THINGS TODAY BUT ALSO CREATING NEW HABITS. THE SAME WAY THAT THE IPHONE AND SMARTPHONE LED US TO INSTAGRAM AND TWITTER WHICH HAVE CHANGED INDUSTRIES, WE EXPECT AI TO BE A NEW PLATFORM AND THERE WILL BE NEW THINGS COMING WHICH IS WHERE A -- AIS. FRANCINE: IS THERE NOT -- ENOUGH INVESTMENT TO PUT CAPITAL TO WORK? FREDERIC: THERE'S A LOT OF CAPITALS IN THE MARKET AND THE CAPITAL AT OUR END OF THE MARKET IS BEING INVESTED AND DEPLOYED MORE SLOWLY COMPARED TO THE PAST COUPLE OF YEARS DURING THE PANDEMIC. FRANCINE: BECAUSE A RECESSION OR RISKS? FREDERIC: IT ALL GOES BACK TO PEOPLE IN PERSON AND VALUATIONS HAVE BEEN RESET. IN AI, WE HAVE SEEN A LOT FRENZY . PEOPLE DON'T LEARN THEIR LESSONS. SOME OF THE VALUATIONS ARE AT THE POINT WERE BUSINESS MODELS ARE NOT PROVEN YET AND IT SEEMS WAY TOO HIGH. AT THE SAME TIME IT REFLECTS THE SCALE OF THE OPPORTUNITY. FRANCINE: WE CHART THE CONVERSATION ON BLOOMBERG AND SIX MONTHS AGO IT WAS ALL ABOUT THE METAVERSE AND NOW IT IS ABOUT AI. FREDERIC: REMEMBER THE SLIGHTLY AWKWARD VIDEO OF ZUCKERBERG? IT THAT WAS JUST THE BEGINNING BUT EXCEPT THEY DID NOT FIND A REAL USAGE. THEY TALKED A LOT ABOUT IT BUT DID NOT TRANSLATE INTO USAGE. CHATGPT TODAY IS A FAST DIGITAL SERVICE TO BE ADOPTED ONLINE. THAT IS VERY SIMPLE AND TALK TO MY DAUGHTER YESTERDAY AND SHE WAS DOING HOMEWORK AND SOME OF THE QUESTIONS THAT SHE WAS WORKING ON SHE DID NOT GENERATE THEM WITH AI BUT SHE WAS SOMEHOW POWERED BY IT. FRANCINE: I HOPE THE TEACHER IS NOT LISTENING. PLEASE IGNORE IT. FREDERIC: TEACHERS HAVE TO EMBRACE IT AS WELL. FRANCINE: YOU ARE ONE OF THE EARLY INVESTORS IN SOME OF THE MAINSTREAM THINGS THAT WE USE EVERY DAY. THIS IS ALSO THREE SEARCH ENGINE SO ALGORITHMS AND I TYPE I NEED THIS AND A CREAM OR WHATEVER. IF AI TAKES OVER THAT WE HAVE PERSONAL ASSISTANCE, AS AN INVESTOR DO YOU THINK ABOUT HOW THEY FIND YOUR COMPANY? FREDERIC: WE BACK A LETTER BRANDS AND THAT IS VERY MUCH POWERED BY THE HUMAN CREATIVITY BECAUSE IT IS SOMETHING WE NEED BUT ALSO SOMETHING WE DON'T NEED TO. FRANCINE: WE GOOGLE A LOT. FREDERIC: IT CHANGES THE WAY WE INTERACT WITH TECHNOLOGY SEE MICHAEL TO THE WEBSITE AND RIGHT PROMPTS LIKE THEY DO IN CHATGPT AND IT WILL BE DIFFERENT FROM WRITING A SEARCH ON GOOGLE. IT WILL CHANGE THE WAY WE TRACK WITH A SERVICE AND MAKE IT SMOOTHER. WE EXPECT A LOT OF INNOVATIONS IN TERMS OF PERSONALIZATION, IN TERMS OF FINDING THE RIGHT PRODUCT FASTER, AND JUST LEADING TO A BETTER EXPENSE. FRANCINE: YOU ARE FOCUS ON THE SUSTAINABILITY PLAY, WHICH IS WHY YOU BOUGHT A STINK -- MISTAKES AND EIGHT FRENCH ENERGY COMPANY. WILL THAT BE FASTER OR SLOWER THAN EXPECTED BECAUSE OF THE WARS IN UKRAINE AND THE TRANSITION WE ARE GOING THROUGH INTO RENEWABLE? FREDERIC: THAT IS A GOOD QUESTION. THE PRICES OF ENERGY GO UP AND THERE'S MORE INCENTIVE TO CHANGE THE WAY YOUR HOME IS OPERATING. ENERGY IS A MASSIVE TREND SO WE ARE BACK TO A COMPANY GOING AFTER INSTALLATION OF MORE SOLAR PANELS IN FRANCE AND WAYS TO HAVE A MORE SUSTAINABLE HOME. YOU LOOK AT AI SUSTAINABILITY AND THERE ARE TWO BIG THEMES. VERY STRONG TAILWINDS WHERE WE GET EXPOSED FOR THE NEXT DECADE. FRANCINE: ANYTHING ELSE YOU ARE LOOKING AT? YESTERDAY WE HAD A SPECIAL ON THE CAR INDUSTRIES IN THE U.K. AND BATTERIES. HIS ARE STILL INVESTMENT OPPORTUNITIES IN THESE KIND OF THINGS THAT WILL TRANSFORM THE WAY WE LIVE OUR LIVES? FREDERIC: WE ARE MORE FOCUSED ON USERS AND THE APPLICATION LAYER THAN THE DEEP TECHNOLOGY. OBVIOUSLY, THE MOBILITY IS GOING TO CONTINUE TO CHANGE. AI WILL GET INTO CARS AND PEOPLE WANT A MORE SUSTAINABLE LIFE SO THEY ARE GOING TO EMBRACE IT AND GET MOBILITY FASTER. WE ARE LOOKING AT ALL THE IMPLICATIONS AT THE CONSUMER LEVEL AND SOFTWARE LEVEL. YOU NEED TO PLAN FOR STARTUP AND INSTALLATION FOR BATTERY RECYCLING IN THIS KIND OF THING. THERE ARE LOTS OF NEW MARKETS THAT ARE EMERGING. WE ARE IN THE WORLD WHERE WHAT IS NOT CHANGING HIS CHANGE. A YEAR AGO AI WAS THERE BUT NOT IN THE PUBLIC EYE. IT IS TODAY. THAT IS VERY EXCITING FOR THE FUTURE. FRANCINE: THANK YOU FOR JOINING US. THAT IS FREDERIC COURT FROM FÉLIX CAPITAL. GOLDMAN SACHS LEADING A $1.6 BILLION DEAL FOR EACH KEY TO -- E QT TAKE. WE TALKED ABOUT A LOT OF THE DEALS ANNOUNCED ON A MONDAY. TODAY IT IS M & A FRIDAY. BLACKSTONE IS INTERESTED IN CERTAIN ASSETS THAT SBB WAS CLOSING UP. BLACKSTONE AND GOLDMAN TOGETHER ARE TRYING TO BACK A DEAL AND ARE NARROW LEADING -- ARE NOW LEADING A $1.6 BILLION DEAL FOR EQT TAKE PRIVATE. WE WILL SEE WHAT THAT LEADS TO IT IN THE COMING DAYS AND WEEKS. COMING UP, MORE PAIN HAD FOR BRITAIN'S HOUSING MARKET. WE WILL TELL YOU WHY IN A MOMENT AND THIS IS BLOOMBERG. ♪ FRANCINE: ECONOMICS, FINANCE, POLITICS. THIS IS "BLOOMBERG SURVEILLANCE: EARLY EDITION." THE U.K. HOUSING MARKET IS SPUTTERING WITH THEM PREDICTING A DOWNTURN HAS FURTHER TO RUN. THAT IS AS RISING INTEREST RATES BITE INTO CONSUMER BUDGETS WITH DATA SHOWING CONSUMER PRICES HAVE RESUMED THEIR DECLINE. LET'S BRING IN LIZZY BURDEN. HOPES OF A RECOVERY SEEM TO BE FAIRLY SHORT-LIVED. LIZZY: WE HAVE HAD INFLATION SHOCKS INCLUDING CORE INFLATION AND THE U.K. SO THAT IS WHY TRADERS ARE PRICING A PEAK RATE 5.5% WHICH IS ABOVE THE DANGER LEVEL THAT THE BANK OF ENGLAND IDENTIFIED FOR MORTGAGE DISTRESS. DEBT DISTRESS AND MORTGAGE BORROWERS. THAT IS LOOKING TO THE FUTURE. STILL HAVE PREVIOUS HIKES YET TO FEED THROUGH. WE WERE SPEAKING TO MICHAEL SAUNDERS ON THE U.K. POLITICS PODCAST THIS WEEK AND HE SAID IT IS THE NEXT FEW QUARTERS WHERE YOU WILL SEE THE WORST PAIN FOR THE HOUSING MARKET BECAUSE THE MAJORITY OF MORTGAGE BORROWERS TO THE U.K. ARE A FIXED RATE. THE BANK OF INLAND ESTIMATES THAT ONLY ONE THIRD OF THE RATE HIKES HAVE ALREADY BEEN DONE OF PAST YOU ALREADY. THIS IS THAT LEG IS AN MONETARY TRANSITION THAT THE DOVES ON THE MPC REFERRED TO. IT'S A DATE -- IT IS A BLUNT TOOL AND THE PAIN IS SLOW. IT IS ALSO UP FOR THE CONSERVATIVES OF COURSE HAVE LONG MADE HOMEOWNERSHIP MEANT TO BE THERE DREAM. HE HAS MADE HIS NUMBER ONE PRIORITY CUTTING INFLATION IN HALF BY YEAR END. IF HE CANNOT DO THAT, AND THERE IS PAIN IN THE HOUSING MARKET THE OPPOSITION WILL WANT THE JOB. FRANCINE: THERE ARE SOME SMALLER PLAYERS THAT HAVE ALSO HAD TO PULL MORTGAGES. IT IS NOT A GREAT TIME WITH INTEREST RATES GOING UP BUT SOME ARE ACTUALLY TRYING TO BUFFER HOW MUCH THEY CAN BORROW AND FOR HOW MUCH. LIZZY: WE HAVE SEEN 800 DEALS BEING PULLED FROM THE MARKET WHICH HAS CLOSE OF THE LIZ TRUSS ERA IF WE CAN CALL IT THAT LAST YEAR. WE HAD LOTS OF DATA THIS WEEK. THE BANK OF ENGLAND LORD -- MORTGAGE APPROVALS DATA DROPPING UNEXPECTEDLY THIS WEEK BUT ALSO AN UNINSPECTED RISE, UNPRECEDENTED I THINK IT'S IN HOW FAST PEOPLE ARE PAYING OFF THEIR MORTGAGES BECAUSE THEY ARE AFRAID OF WHAT IS IN THE PIPELINE. YOU SOUGHT IN THE NATIONWIDE DATA AN UNEXPECTED DROP IN HOUSE PRICES WHICH IS ONLY MODEST. IT WILL NOT HELP THOSE PEOPLE WHO ARE TRYING DESPERATELY TO GET ON THE HOUSING MARKET AFTER THE DECADES LONG BOOM ESPECIALLY IN LONDON. ECONOMISTS AT BLOOMBERG ECONOMICS RECKON YOU WILL STILL GET A DOUBLE-DIGIT DROP COMPARED TO THE PEAK LAST YEAR. THE CORRECTION HAS A WAY TO GO. FRANCINE: LIZZY BURDEN WITH THE LATEST ON HOUSES AND MORTGAGES. LET'S GET TO THE BLOOMBERG BUSINESS FLASH WITH LEIGH-ANN GERRANS. > > GOLDMAN SACHS ARE WARNING OF A SHARP SLOWDOWN IN ITS INVESTMENT BANK AS COMPARED TO THE BUMPER GAINS A YEAR AGO. IT'S PRESIDENT JOHN WALDRON SAYS THE TRADING BUSINESS IS TRENDING DOWN MORE THAN 25% THIS QUARTER. GOLDMAN IS WORKING ON WHAT WOULD BE ITS THIRD ROUND OF JOB CUTS IN UNDER A YEAR. BROADCOM SAYS ARTIFICIAL INTELLIGENCE-RELATED SALES WILL DOUBLE THIS YEAR, BUT THAT WON'T BE ENOUGH TO OFFSET A BROADER POST-PANDEMIC SLOWDOWN. THE CEO HOCK TAN SAYS AI-FOCUSED CHIP REVENUE MAY SOON MAKE UP 25% OF THE SALES. TOTAL REVENUES ARE EXPECTED TO RISE LESS THAN 5% THIS QUARTER, AS BROADCOM'S SLOWEST GROWTH IN -- BROADCOM'S SLOWEST GROWTH IN YEARS. THE CEO OF PALANTIR SAYS NEW AI DEVELOPMENTS ARE SO POWERFUL THAT HE IS NOT SURE IF THEY SHOULD EVEN BE OFFERED TO SOME OF THE CUSTOMERS. SPEAKING EXCLUSIVELY TO BLOOMBERG, ALEX KARP SAYS HE IS WORRIED ABOUT PROVIDING THE TOOLS TO LOCAL LAW ENFORCEMENT AGENCIES FOR PURPOSES SUCH AS SURVEILLANCE. ALEX: USUALLY, WE WAIT AND HAVE TO GO OUT AND FIND PEOPLE. NOW WE HAVE CUSTOMERS, ESPECIALLY IN THE U.S., JUST CALLING US EVERY DAY. > > YOU SAID DEMAND IS HUGE. CAN YOU QUANTIFY IT? ALEX: AGAIN, WE HAVE HAD A NUMBER OF INBOUND CALLS FOR THE YEAR THAT WE USUALLY HAVE IN A YEAR, IN A MONTH. WE ARE OFFERING THINGS SO POWERFUL THAT, IN REALITY, I'M NOT SURE WE SHOULD EVEN SELL THIS TO SOME OF OUR CLIENTS. GLOBAL NEWS POWERED BY MORE THAN 2700 JOURNALISTS AND ANALYSTS IN OVER 120 COUNTRIES. I AM LEIGH-ANN GERRANS, AND THIS IS BLOOMBERG. FRANCINE? FRANCINE: HEDGE FUNDS WILLING TO PAY A HIGH PRICE TO HIRE THE BEST TRADERS. THIS IS BLOOMBERG. ♪ FRANCINE: > > HOW IS THE TELEPORT GOING? HOW UGLY IS IT -- TALENT WERE GOING? HOW UGLY IS IT? > > IT IS LEADING TO CONFLICTS BETWEEN HEDGE FUNDS. IT IS LEADING TO LITIGATIONS AND IN ONE CASE, TWO FIRMS BASICALLY BANNING TRADERS FROM LEAVING, OR ELSE THEY WILL BE FINED. THAT IS HOW UGLY IT IS BUT IN TERMS OF COMPENSATION I HAVEN'T SEEN ANYTHING LIKE THIS. I HAVE SPOKEN TO MANY INDUSTRY PLAYERS WHO HAVE BEEN HERE THREE DECADES AND THEY HAVEN'T SEEN ANYTHING LIKE THIS. FRANCINE: WHY IS IT HAPPENING? IS IT ATTRACTING THE BEST TALENT FOR HUNDREDS OF MILLIONS OF DOLLARS? > > WHAT IS DRIVING IS THE DEARTH OF GOOD QUALITY TALENT THESE HEDGE FUNDS ARE LOOKING AT. ESSENTIALLY IN 2008, THAT USED TO BE THE TRAINING GROUND FOR THESE TRADERS BUT THAT SUPPLIES NO LONGER THERE. AND AT THE SAME TIME, THESE PLATFORMS HAVE GROWN MULTIPLE TIMES IN THE SENSE THAT THEY HAVE ADDED TENS OF BILLIONS OF DOLLARS, SO THEY NEED EVERMORE TRADERS TO MANAGE THAT MONEY AND KEEP EARNING HIGHER AND HIGHER FEES. FRANCINE: AGAIN, OUR TO READ STORY TODAY, HEDGE FUNDS AT WAR FOR TOP TRADERS DANGLE $100 BILLION PAYOUTS. WE WILL PUSH IT OUT ON SOCIAL MEDIA SO EVERYONE CAN HAVE A GOOD READ OF THIS WONDERFUL, IMPORTANT BIG TAKE. CHINA'S PROPERTY MARKET PACKAGE BOOSTED THE ECONOMY. THIS HAS BEEN THE QUESTION OF THE WEEK, WHETHER WE SAW DATA THAT WAS DISAPPOINTING AND WHETHER WE HAVE POLICYMAKERS IN CHINA NEEDING TO STEP IN OR FIND A FLOOR FOR THE ECONOMY. "SURVEILLANCE: EARLY EDITION" CONTINUES IN THE NEXT HOUR. THIS IS BLOOMBERG. ♪ > > THIS IS "BLOOMBERG SURVEILLANCE: EARLY EDITION" WITH ANNA EDWARDS AND KRITI GUPTA. > > 'S 7:00 A.M. IN LONDON, 5:00 A.M. IN NEW YORK AND 5 P.M. IN HONG KONG. CRISIS AVERTED. THE DEBT CEILING BILL CLEARS THE SENATE, REMOVING THE RISK OF U.S. DEFAULT. THE MEASURE GOES TO PRESIDENT BIDEN FOR HIS SIGNATURE. ATTENTION TURNS TO TODAY'S U.S. JOBS REPORT. THE DATA MAY SHOW A SLOWDOWN IN HIRING THAT COULD POTENTIALLY ALLOW THE FED TO PAUSE TIGHTENING IN JUNE. BROADCOM PREDICTS SALES WILL DOUBLE THIS YEAR, BOVA CHIPMAKER IS MIRED IN A BROADER CHIP SLOWDOWN. I'M ANNA EDWARDS IN LONDON WITH KRITI GUPTA IN NEW YORK. PRETTY, WE ARE DONE WITH THE DEBT CEILING. THAT CAME AND WENT THROUGH THE HOUSE AND SENATE BUT NOW WE MOVE TO THE JOBS REPORT. > > IT DOESN'T MATTER WHETHER WE GET THIS RELIEF RALLY WHEN WE ARE TALKING ABOUT GROWTH CONCERNS, WE SNAPPED RIGHT BACK TO THAT INFLATIONARY STORY AND WHAT THAT MEANS NOT JUST FOR THAT FED AND CENTRAL BANKS AROUND THE WORLD. BUT YOU ARE SEEING OPTIMISM IN FUTURES THAT PERHAPS WE GET WEAKENING IN THE PAYROLLS NUMBERS BUT DON'T LET THE GREEN ON THE SCREEN FULL YEAR. EVEN THOUGH FUTURES ARE HIGHER 0.4%, A BIG PART OF THE STORY IS GETTING IN ON THIS TECH-CRAZED RALLY. THIS IDEA THAT IN THE LAST COUPLE WEEKS YOU HAVE NOT ONLY SEEN THE LACK OF BREADTH BUT A HANDFUL OF NAMES ARE SEEING SELLERS ON THE MARKET. PULLBACKS LIKE'S OF WHAT WE SAW IT YESTERDAY NOT AN ENORMOUS MARGIN, SO A LOT OF FOLKS PILING INTO THE TECH STORY AND BY EXTENSION THE BENCHMARKS AS WELL. FUTURES CONTRACTS HIGHER. THAT MAY CHANGE AS WE GET THE PAYROLLS. THE DEAL-YOU'RE IN FOCUS. 4.33 ON THE FRONT END OF THE CURVE. REALLY INTERESTING TO SEE IT HAS SUSTAINED ABOVE 4%, THAT REFLECTS THE IDEA THAT THE MARKET IS PRICING A FEDERAL RESERVE THAT IS SIMPLY NOT DONE HIKING, WHICH IS WHY YOU SEE THE FRONT END REALLY SELLOFF. KEEP AN EYE ON HOW THAT CHANGES WHEN WE GET THE DATA IN A FEW HOURS. WITH THE YIELDS DIRECTIONALLY MOVING LOWER, YOU HAVE SEEN THE DOLLAR FALLING DOWN TO THE TUNE OF 0.2%. THE LATEST WEAKNESS IN THE DOLLAR BASED OFF WHAT YOU HEAR IN CHINA. THE IDEA THAT THEY ARE WEIGHING A PROPERTY MARKET SUPPORT PACKAGE TO BOOST THE ECONOMY. THAT IS IMPORTANT WHEN WE TALK ABOUT CHINESE GROWTH AND HOW THAT IS REFLECTED IN THE COMMODITIES MARKET. NYMEX CRUDE A 71 HANDLE, WE'RE SEEING GREEN ON THE SCREEN. YOU CAN SEE THE LATEST TICK LOWER IN THE DOLLAR RELATIVE TO THE YUAN COMING OFF OF THOSE HEADLINES. LOOKING AT 7.07 ON THE EXCHANGE RATE. ANNA: WE HAD SEEN ROBUSTNESS IN SOME PARTS OF THE CHINESE ECONOMY. THIS IS THE PICTURE IN EUROPE. WE SEE A POSITIVE PICTURE FOR EQUITY MARKETS. MAY BE GETTING ANOTHER LEVEL OF POSITIVITY FROM THOSE CHINESE HEADLINES AROUND THE PROPERTY MARKET. BUT BROADLY SPEAKING A POSITIVE START TO THE DAY FOR EUROPEAN STOCKS, WE ARE LOOKING AHEAD TO THE JOBS REPORT BUT COMFORTED BY THE NEWS OF THE DEBT CEILING OUT OF THE UNITED STATES. A BRIGHT GREEN AREA AT THE CORNER OF THE MAP IS THE TURKISH EQUITY MARKET. I WILL SHOW YOU WHERE WE ARE ON THE ISTANBUL MARKET BECAUSE WE HAVE REALLY INTERESTING REPORTING FROM OUR COLLEAGUES SUGGESTING THAT SOMEBODY WHO WAS PREVIOUSLY FINANCE MINISTER IN TURKEY, COULD HE BE COMING BACK TO THE TOP TABLE, UNDER PRESIDENT ERDOGAN? THAT IS WHAT OUR REPORTING SUGGESTS. WE WILL GET CONFIRMATION OVER THE WEEKEND. HE IS SOMEBODY WHO IS A VERY MUCH QUANTITY FOR MARKETS WITH A CONVENTIONAL TAKE ON MONETARY POLICY THAN SOME OF THE OTHER VOICES WITHIN TURKEY. THIS IS SVB, THESE ARE A COUPLE OF STORIES THAT HAVE A SCANDINAVIAN ANGLE, THE SWEDISH LISTED REAL ESTATE BUSINESS, THE POSTER CHILD FOR THE TROUBLES OF THE REAL ESTATE SECTOR IN SWEDEN. QUICK FEEL THE CANADIAN COMPANY MAY BE TAKING ON SOME ASSETS, IT IS STILL EARLY DAYS BUT THE STOCK UP 26% AS A RESULT OF THE NEWS. HERE IS ANOTHER STORY WITH A SCANDINAVIAN ELEMENT, EQT HAS MADE AN OFFER FOR DECHRA, A PHARMACEUTICAL COMPANY THAT MAKES PRODUCTS FOR PETS. THEY RECENTLY PUT OUT A PROFIT WARNING, LEADING SOMEONE OF THE MARKET TO QUESTION WHETHER WE RECEIVED THIS DEAL PAST. I'VE GOT BRENT. KEEP AN EYE ON THIS OIL PRICE IS IT EDGES HIGHER THE CLOSER WE GET TO THE OPEC+ MEETING. KRITI: SOMETHING WE WILL BE KEEPING AN EYE ON THROUGHOUT THE WEEKEND. WE ARE WAITING FOR THE FINAL SEAL OF APPROVAL IN WASHINGTON. THE SENATE PASSED LEGISLATION TO SUSPEND THE U.S. DEBT CEILING AND IMPOSE RESTRAINTS ON GOVERNMENT SPENDING THROUGH THE 2020 FOUR ELECTION. SENATE MAJORITY LEADER CHUCK SCHUMER SPOKE AFTER THE VOTE IN CONGRESS. > > THIS DEMENTED A BIPARTISAN SOLUTION. WE KNEW WE NEEDED TO COME TOGETHER. SO I'M HAPPY TO STAND HERE PASSING THIS CRITICAL LEGISLATION TO SUPPORT OUR FAMILIES, PRESERVE VITAL PROGRAMS AND MOST IMPORTANTLY, AVOID CATASTROPHIC DEFAULT. KRITI: JOINING US TO BREAK IT DOWN, ROS MATHIESON, CAN ANYTHING GO WRONG FROM HERE? > > IT HAS PASSED THE SENATE, IT JUST NEEDS BIDENS SEAL OF APPROVAL. HE WILL ADDRESS THE NATION TO TALK TO THE AMERICAN PUBLIC ABOUT WHAT THIS DEAL MEANS. IT IS A DONE DEAL AT THIS POINT AND WHAT IT DOES IS TAKES THE DEBT CEILING OFF THE TABLE FOR TWO YEARS, THROUGH THE U.S. ELECTION CYCLE IN 2024 WHICH IS PROBABLY A BIG RELIEF TO EVERYBODY. IT CAPS OFF SPENDING FOR TWO YEARS, BUT A LOT OF THE DEAL IS STILL UNKNOWN. WE KNOW THERE IS CERTAIN MEASURES WHERE STUDENTS WILL HAVE TO START TO REPAY LOANS. WE KNOW THERE WILL BE RESTRICTIONS AND PERHAPS CUTS TO SERVICES FOR POORER PEOPLE, BUT A LOT OF THE DETAILS HAVE TO BE WORKED OUT. THE DEAL IS THROUGH BUT THE REALITY IS NOW WE GET DOWN TO THE NITTY-GRITTY, ON SOME OF THE SPENDING AREAS THAT WILL HAVE TO BE CUT. THE CONGRESSIONAL BUDGET OFFICE ESTIMATE BILLION DOLLARS WILL BE FOUND, AND PRETTY FAST. THAT IS A LOT OF MONEY TO FIND IN THE BACK OF THE CUPBOARD, SO WE CAN INSPECT A LOT OF MESSINESS IN THE NEXT COUPLE OF MONTHS, BECAUSE THAT HAS TO BE AGREED BY OCTOBER. ANNA: HOW WOULD YOU CHARACTERIZE WHAT WE HAVE SEEN PLAY OUT AROUND THIS DEBT CEILING DEBATE? WE SPEND A LOT OF TIME TALKING ABOUT BIPARTISAN INFIGHTING IN WASHINGTON, AND WE FEARED SOME LAWMAKERS MIGHT MAKE A BIG FUSS AND THEREFORE PUSH THE U.S. INTO DEFAULT, THAT HASN'T HAPPENED. > > WE EXPECTED IT WOULD GO DOWN TO THE WIRE BECAUSE IT MAKES POLITICAL SENSE, BUT DO YOU WANT TO BE THE ONE THAT DROVE THE BUS OFF THE CLIFF IN THE U.S.? PROBABLY NOT DURING THE ELECTION SO THERE WAS ALWAYS INCENTIVE TO FIND A DEAL AT THE LAST MINUTE, BUT THE AMERICAN PEOPLE WILL BE LOOKING TO COMMENTS FROM THE PRESIDENT THIS EVENING. THEY ARE PROBABLY RELIEVED THE DEAL IS DONE. COULD YOU JUST GET A DEAL AND LET'S MOVE ON, BECAUSE FOR THEM IT IS ABOUT THE JOB MARKET, THEIR EMPLOYMENT AND SECURITY AND WE WILL SEE THAT IN THE JOBS FIGURES TODAY. IT IS MORE FOR THEM ABOUT WHERE THE FEDERAL RESERVE IS TAKING INTEREST RATES. ANNA: TREASURY MARKETS WILL NO DOUBT ADJUST. WE WILL MARK OUR DIARIES, DECEMBER 2024 TO TALK ABOUT THE SAME THING AGAIN, THE DEBT CEILING. BROADCOM SAYS ARTIFICIAL INTELLIGENCE SALES WILL DOUBLE THIS YEAR, BUT THAT WON'T OFFSET A PANDEMIC SLOWDOWN. JOINING US IS ALEX WEBB WITH ANALYSIS. > > IT WAS A FASCINATING SET OF NUMBERS. THE QUARTER WAS BROADLY IN LINE WITH ANALYST ESTIMATES. THE OUTPUT OR BEEN THE UPCOMING QUARTER WAS SLIGHTLY AHEAD OF ESTIMATES. BUT THE FULL YEAR ESTIMATE WILL ONLY BE 5% GROWTH. WHEN THEY TALK ABOUT AI REVENUE DOUBLING, IT IS DOUBLING TO $1 BILLION FOR A COMPANY THAT HAS SIGNIFICANTLY MORE THAN THAT. NOT LIKE NVIDIA WHICH ADDED 50% MORE REVENUE THAN EXPECTED FROM A I, THIS IS JUST NUMBERS AROUND THE EDGES. THE FULL YEAR THEY ARE LOOKING FOR NOW IS 35 BILLION NOW, SO IT IS NOT ALL THAT SUBSTANTIAL. KRITI: PART OF THE APPLE SUPPLY CHAIN AS WELL. DELL TECHNOLOGIES BEATING ESTIMATES, PERHAPS NOT ENOUGH TO EXCITE INVESTORS. WHY IS THE STOCK DOWN IN THE PREMARKET? > > IT LOOKS LIKE IT IS TO DO THE FULL YEAR OUTLOOK, WHICH IS SORT OF IN LINE WITH ANALYST ESTIMATES, IN FACT SLIGHTLY BELOW. THEY ARE LOOKING AT THE LOW END OF WHAT ANALYSTS ARE EXPECTING, THAT HAS DISAPPOINTED INVESTORS TO AN EXTENT EVEN THOUGH BY CURRENT QUARTER NUMBERS ARE SLIGHTLY BETTER THAN HAD BEEN EXPECTED. IT'S REALLY LOOKING TOWARDS THE FULL YEAR. DELL BENEFITED DURING THE PANDEMIC HAS PLENTY OF PEOPLE INVESTED IN MORE COMPUTING TOOLS. DELL WAS A BENEFICIARY AND IT IS HARD TO COMPARE WHEN WE LOOK INTO 2023? ANNA: LET'S MOVE FROM TECH TO OIL. OPEC+ IS MEETING THIS WEEKEND AND WILL BE GRAPPLING WITH A DIVIDED OIL MARKET TORN BETWEEN REBOUND IN DEMAND AND RECESSION FEARS. JOINING US IS BLOOMBERG'S SENIOR EDITOR FOR ENERGY AND COMMODITIES. GOOD MORNING TO YOU. THE MARKET HAS BEEN SOFT. DO WE EXPECT OPEC+ TO CHANGE POLICY? THEY DID IT IN APRIL, IT WAS A SURPRISE THEN. > > IT IS HARD TO SAY, AS OF FRIDAY MORNING, THE MEETING IS UP IN THE AIR TO SOME EXTENT. THERE ARE REASONS FOR OPEC TO PERHAPS CONSIDER A STEADY AS SHE GOES, OR A FURTHER CUT. THE MARKET IS CLEARLY SOFT, AND HAS NOT GAINED ANY TRACTION FROM THAT SURPRISE CUT IN APRIL. THAT WILL CONCERN SOME MEMBERS AND THEY WILL WANT TO DO SOMETHING ABOUT IT. ON THE OTHER HAND, THEIR THIS -- THERE IS THIS EXPECTATION THAT GLOBAL INVENTORIES WILL START TO FALL. IF A CUT TAKES PLACE, MEMBERS WILL WANT TO BE REASSURED THAT RUSSIA WILL PARTICIPATE. UNTIL THAT HAPPENS, I THINK SOME MEMBERS WILL BE RELUCTANT TO CUT FURTHER. KRITI: IT IS PRETTY COOL THAT OUR OIL TEAM GETS TO TRACK TANKERS MINUTE BY MINUTE. THE RUN-UP TO THE MEETING HAS BEEN OVERSHADOWED BY BLOOMBERG AND OTHER REPORTERS BEING BARRED FROM THE MEETING. > > AS WE WROTE EARLIER IN THE WEEK, OPEC CHANGED HIS POLICY FOR PRESS. NORMALLY YOU APPLY TO BE ACCREDITED FOR THE MEETING NOW THEY SEND INVITATIONS TO REPORT PURSE. NO BLOOMBERG REPORTER, NO WRITERS AND MANY FROM THE WALL STREET JOURNAL. AS OF FRIDAY MORNING, WE HAVE NOT BEEN INVITED AND AS SUCH WILL NOT BE ABLE TO ATTEND. BLOOMBERG HAS COVERED OPEC FOR 30 YEARS. REUTERS FOR LONGER. WE WANT TO BE THERE BUT WE DON'T KNOW WHY WE ARE NOT. WE HAVE ASKED THE SECRETARY OF OPEC TO CLARIFY THE SET JEWISH AND -- THE SITUATION. THIS IS NOT IN LINE WITH THE STATED MISSION TO BRING TRANSPARENCY TO OIL MARKETS BUT THE BALL IS IN THEIR COURT. THE WHOLE TEAM WILL BE THERE AS USUAL COVERING THE EVENT. ANNA: WILL KENNEDY, AS WE LOOK AHEAD TO THOSE OPEC+ MEETINGS TAKING PLACE AT THE WEEKEND. COMING UP, WE GET BACK TO BROADER MACRO THEMES. WE SPEAK TO THE HEAD OF STATE STREET'S RESEARCH ON A DEBT LIMIT RESOLUTION. WE ARE ALSO CUTTING DOWN TO THE U.S. JOBS REPORT DUE AT 8:30 A.M. EASTERN TIME. A FORMER FED GOVERNORS JOINS OUR SPECIAL COVERAGE BEFORE AND AFTER THAT REPORT. THIS IS BLOOMBERG. KRITI: THIS IS "BLOOMBERG SURVEILLANCE: EARLY EDITION". I'M KRITI GUPTA IN NEW YORK WITH ANNA EDWARDS IN LONDON. ONE OF THE BIG QUESTIONS IS WHETHER THIS RALLY IS SUSTAINABLE? IF IT IS SUSTAINABLE, WHY ARE WE SEEING SUCH NARROW BREADTH, IS THIS ONE TIME WHERE THE EXCEPTION MAY APPLY? I WANT TO BRING A CHART TO YOUR ATTENTION. RADIO AUDIENCE, STICK WITH ME. WE ARE LOOKING AT SECTOR PERFORMANCE IN THE S & P 500. THE RIGHT SIDE OF THE CHART SHOWS EXTREMELY NARROW BREADTH. WE'RE SEEING ON THE GREEN ONLY LED BY A HANDFUL OF COMPANIES. THAT'S REALLY DIFFERENT FROM WHAT WE HAVE SEEN THE LAST 10 YEARS OR SO. WE DON'T SEE THIS NARROW BREADTH OFTEN MATCHED WITH THESE KINDS OF GAINS BUT THERE IS AN ARGUMENT THAT SAYS THERE IS REAL MONEY ENTERING THE TECHNOLOGY AND AI SPACE, SO PERHAPS THAT RULE OF BREADTH EQUALING SUSTAINABILITY DOESN'T NECESSARILY MATTER FOR THE BULL MARKET. LET'S BRING IN A TRUE EXPERT, OUR BLOOMBERG CROSS ASSET REPORTER, WHAT IS YOUR TAKE ON THE STORY? IS BREADTH NEEDED FOR A SUSTAINABLE RALLY? > > OF COURSE, WE CAN SEE VERY NARROW BREADTH OVER THE SECTORS. IF YOU COMPARE GROWTH IN VALUE, THERE HAS BEEN INCREDIBLE OUTPERFORMANCE OF GROWTH DRIVEN BY QUITE A FEW STOCKS. YOU CAN SEE IT IN THE S & P 500 IF WE COMPARE PEOPLE AWAITED, THAT REMOVES THE VALUE BIAS -- PEOPLE WAITED, > > WE ARE ALSO SEEING THE WIDEST GAPS IN 30 YEARS. WHETHER THIS IS SUSTAINABLE, OF COURSE, A BIG PART IS AI OPTIMISM, BUT ALSO WE HAD BETTER-THAN-EXPECTED EARNINGS THAT LIFTED SENTIMENT. WE ALSO HAD DEFENSIVE BIAS AND INVESTORS FLEEING TO SAFETY. SOME COMPANIES HAVE STRONG BALANCE SHEETS, THAT IS A BIG FACTOR. WE HAVE SEEN BIG INFLOWS INTO STOCKS THIS WEEK. SO THERE IS ACTUALLY MONEY COMING INTO THAT RALLY. HOW FAR CAN IT GO? THERE ARE A LOT OF FACTORS, ECONOMY AND FED, IT IS TOO EARLY TO STAY BUT THERE IS BELIEF IN INVESTORS THAT IT IS A GOOD TIME TO PUT MONEY BACK INTO STOCKS. ANNA: IN TERMS OF WHERE THE EXCITEMENT COMES FROM IN TECHNOLOGY, AI WAS A BUZZ WORD THEN WE SAW ACTUAL BOTTOM-LINE IMPACT FROM THE LIKES OF NVIDIA. THIS IS CREATED A LOT OF BUZZ. WHAT YOU SAY SOME ASSET MANAGERS DID NOT SEE THIS COMING, WHAT'S THE STORY? > > ACTIVE MANAGERS WERE QUITE UNDERWEIGHT TECHNOLOGY STOCKS, SO THEY MISSED A LOT OF THE RALLY. SOME ARE ATTRIBUTING HEAVY ACTIVITY IN CALLS, SO SOME WERE CHASING THE RALLY AND TRYING TO CATCH THE AI HYPE FOR THE LAST WEEK, SO THAT WAS SUPPORTING MARKETS. BUT WE'RE ACTUALLY SEEING FLOWS OF PEOPLE BUYING THIS WEEK, ALONG WITH ACTIVE MAJORS CATCHING UP ON WHAT THEY HAVE MISSED. ANNA: WE SEEM TO HAVE PUT THE BAD THE CONCERNS AROUND THE DEBT CEILING IN THE U.S., WE WAIT TO SEE WHAT EXACTLY THAT MEANS FOR TREASURY, ISSUANCE AND GOVERNMENT. AND THEN WE ARE MOVING INTO THE JOBS REPORT QUICKLY. WE WILL BE DIGESTING WHAT ALL THAT MEANS FOR THE FED IN JUNE. WHAT'S THE OVERALL MOOD? > > IF WE LOOK AT THE VIX, OR THE ZERO-DAY OPTIONS, MARKETS ARE CALM, VIX IS BELOW 60 WHICH IS REALLY CALM GOING INTO A JOBS DAY. THE ZERO-DAY OPTIONS IS THE QUIETEST WE HAVE SEEN IT IN A YEAR. GENERALLY POSITIONING IS NEUTRAL. THERE HASN'T BEEN BIG BUYING OR SELLING OUT OF THE LAST FEW WEEKS. WE HAVE THAT BIG JOBS REPORT COMING TODAY. WE HAD INFLATION DATA COMING. SO THERE IS SO MANY THINGS THAT CAN CHANGE. WE HAVEN'T SEEN A BIG RALLY AFTER THE DEBT CEILING. THERE ARE ISSUES ABOUT LIQUIDITY, WHAT HAPPENS AFTER THIS BIG TEBOW DELUGE -- T-BILL DELUGE WE WILL SEEN IT FREE. WE HAVE SEEN IMPROVEMENTS IN SENTIMENT BUT NOT ACTUAL ACTIONS BECAUSE INVESTORS ARE PERHAPS WAITING FOR THOSE POTENTIAL HEADWINDS TO MAYBE PASS BY. ANNA: DENITSA WITH A LOOK AT MARKET. YOU CAN FIND THE MARKETS LIVE BLOG AT MLIV < GO > ON THE BLOOMBERG TERMINAL. THIS IS BLOOMBERG. KRITI: WITH NEWS FROM AROUND THE WORLD, HERE IS THE FIRST WORD. UKRAINE AIR DEFENSE SAYS 15 CRUISE MISSILES AND 21 DRONES WERE SHUTDOWN TODAY. THE CAPITAL HAS BEEN ATTACKED BY RUSSIA FROM THE AIR ON EACH OF THE PAST SIX NIGHTS. NO CASUALTIES WERE REPORTED AFTER THREE PEOPLE, INCLUDING A CHILD, WERE KILLED THURSDAY. DRONE ATTACKS HAVE BEEN REPORTED ACROSS A WIDENING SWATH OF RUSSIA. TURKISH PRESIDENT ERDOGAN WILL TAP MEN IT'S INSECT AS HIS NEW TREASURY AND FINANCE MINISTER. HE IS AN ADVOCATE OF CONVENTIONAL ECONOMICS. SUPPORTERS SAY HIS APPOINTMENT WILL SHORE UP MARKET CONFIDENCE. HE IS IN CHARGE OF ALL OF TURKEYS MARKET POLICIES IN THE NEW CABINET. JAMIE DIMON WILL VISIT TAIWAN AFTER WRAPPING UP HIS HIGH-PROFILE TRIP TO CHINA. THE STOPOFF BY THE JP MORGAN CEO COMES AT A TIME OF HEIGHTENED TENSIONS BETWEEN BEIJING AND WASHINGTON. LVMH CEO BERNARD ARNAULT HAS BECOME THE LATEST BIG COMPANY BOSS TO ANNOUNCE PLANS TO VISIT CHINA, AS TESLA'S CEO ELON MUSK RETURNS FROM HIS WHIRLWIND TOUR OF THE COUNTRY. GOLDMAN SACHS IS WARNING OF A SHARP SLOWDOWN IN ITS INVESTMENT BANK COMPARED TO BUMPER GAINS YEARS AGO. JOHN WALDRON SAYS TRADING BUSINESS IS TRENDING DOWN MORE THAN 25% THIS QUARTER. COLD AND IS WORKING ON ITS THIRD ROUND OF JOB CUTS IN UNDER A YEAR. A LOT OF MOVEMENT IN THE FINANCIAL INDUSTRY, FROM JOB CUTS TO DIVERSIFYING REGIONALLY YOU CAN REALLY SEE A LOT OF THE BIG PLAYERS ON GLOBAL WALL STREET STARTED TO FEEL THE PINCH. ANNA: A LOT OF INTERESTING THEMES GOING ON. YOU MENTIONED JAMIE DIMONS TRIP TO TAIWAN. WE UNDERSTAND OTHER LEADERS OF U.S. BUSINESSES HAVE MADE THAT VISIT, THE BOSS OF NVIDIA IT WAS THERE NOT THAT LONG AGO. THERE IS A CONTRAST BETWEEN WHAT THEY WERE SAYING ABOUT THE ENVIRONMENT THEY SEE AND BANK OF AMERICA SAYING THAT THE QUARTER APPEARS TO BE FLATTISH WHEN IT COMES THOSE SAME MARKETS. WE WATCH THE INVESTMENT BANKING STORY, THE FIXED STORY AND THE EQUITIES TRADING STORY. WE GET BACK TO MACRO MARKETS. ELLIOT HENTOV, HEAD OF MACRO POLICY RESEARCH AT STATE STREET GLOBAL ADVISORS. THAT CONVERSATION IS NEXT. THIS IS BLOOMBERG. KRITI: THIS IS "BLOOMBERG SURVEILLANCE: EARLY EDITION". CRISIS AVERTED. THE DEBT CEILING BILL CLEARS THE SENATE, REMOVING THE RISK OF U.S. DEFAULT. THE MEASURE GOES TO PRESIDENT BIDEN FOR HIS SIGNATURE. ATTENTION TURNING TO TODAY'S U.S. JOBS REPORT. THE DATA MAY SHOW A SLOWDOWN IN HIRING THAT COULD ALLOW THE FED TO PAUSE TIGHTENING POLICY IN JUNE. BROADCOM PREDICTS SALES TIED TO A I WILL DOUBLE BUT THE CHIPMAKER IS MIRED IN A SLOWDOWN. I'M KRITI GUPTA WITH ANNA EDWARDS IN LONDON. A LOT TO DIGEST, WE ARE REVERTING BACK TO CONCERNS OVER INFLATION AND GROWTH, WHICH TAKES THE CAKE IN TODAY'S DATA? ANNA: WE WILL BE FOCUSED ON THE LABOR MARKET WON'T WE, AND WHAT THAT MEANS FOR THE LABOR MARKET. LET'S HAVE A LOOK AT THE EUROPEAN EQUITY MARKET. UP OVER 1% H-MART RELIEF AT THE PASSING OF THE DEBT DEAL, ALSO EXCITEMENT ABOUT THE C -- CHINESE LENDING SUPPORT TO THE PROPERTY MARKET. THAT IS LENDING SUPPORT TO STOCKS AND THE EUROPEAN MARKET IS DOING WELL THIS FRIDAY. THE TURKISH MARKET IS DOING WELL, ACCORDING TO OUR COLLEAGUES REPORTING IN ISTANBUL, WE MIGHT SEE THE RETURN OF THE DEPUTY PRIME MINISTER COMING BACK INTO THE FINANCE MINISTRY UNDER PRESIDENT ERDOGAN. IF MEHMET SIMSEK COMES BACK, HE IS A KNOWN QUANTITY, SOMEBODY WITH CONVENTIONAL VIEWS AND A FORMER WALL STREET BANKER WHO THE MARKET UNDERSTANDS. THAT IS PUTTING POSITIVE MOMENTUM ON TURKISH STOCKS TODAY. THIS IS SVP, THE PROPERTY BUSINESS IN SWEDEN, WE UNDERSTAND BROOKFIELD COULD BE BUYING UP THIS BUSINESS OR PARTS OF THE PORTFOLIO OF THIS PROPERTY MANAGEMENT COMPANY, SO THE STOCK IS UP 28.4%. TALKS HAVE BEEN TAKING PLACE IN LONDON. DECHRA BURMA CIRCLES -- PHARMACEUTICALS IS THE SUBJECT OF A TAKEOVER FROM EQ TO, AS A RESULT THAT STOCK IS UP 8.4%. KRITI: HARVEY MY PUPPY WILL BE HAPPY TO HEAR THAT DEVELOPMENT. THE STATESIDE STORY IS SIMILAR TO EUROPE, REMEMBER THE CHINA STORY IS PLAYING A ROLE WHEN IT COMES TO THE STATES STORY. PART OF THE GLOBAL RECOVERY WAS THE MASSIVE INVESTMENT IN STIMULUS FROM CHINA. INCORPORATING THE IDEA THAT THE CHINESE COMMUNIST PARTY AND THE CENTRAL GOVERNMENT MIGHT BE ABLE TO PROP UP THE GROWTH STORY IS A POSITIVE, EVEN FOR S & P FUTURES WHICH HAVE BEEN TICKING HIGHER TO THE TUNE OF 0.5%. WHEN IT COMES TO THE BOND AND FX MARKET IT IS LIKELY TO BE ALL ABOUT THE PAYROLLS REPORT WE GET IN THREE HOURS. THE TWO-YEAR YIELD HOVERING AT 4.3, BECAUSE THAT PAYROLLS DATA WILL CHANGE THE GAME WHEN IT COMES TO MARKET PRICING OF WHETHER OR NOT JUNE IS A PAUSE, A SKIP, OR ANOTHER HIKE. IT WILL LIKELY LEAD THE STORY FOR THE DOLLAR AS WELL. THE GREENBACK DOWN ABOUT 0.2% AND IN THE OPPOSITE DIRECTION TO THE YIELD STORY. THE RIPPLE EFFECT OF THAT WILL BE A TAILWIND SO THE COMMODITY SPACE DESPITE GROWTH CONCERNS. NYMEX CRUDE HIGHER BY ALMOST 2%. ALSO LIKELY TRADING OFF THAT TINY STORY WE WERE TALKING ABOUT. ANNA: ELLIOT HENTOV JOINS US, HEAD OF MACRO POLICY RESEARCH AT STATE STREET. THE PERFECT VOICE TO HAVE ON THE DAY AFTER WE SEE THE DEBT DEAL PASS THROUGH THE SENATE. WE ARE MORE CERTAIN THAT WILL BE AN ISSUE AVOIDED, NO U.S. DEFAULT, BUT WHAT DOES THAT MEAN FOR TREASURY MARKETS? FOR SOME TIME, WE HAVE SEEN DISLOCATION AT THE SHORT END OF THE TREASURY CURVE BECAUSE OF CONCERNS ABOUT THE DEBT CEILING. NOW THAT IS RESOLVED. THE TREASURY ISSUES AND INVESTORS PILED BACK INTO THAT. WHAT DOES THAT DO TO LIQUIDITY AND BROADER MARKET THEMES? ELLIOT: THE FIRST THING WE COULD TRACK IS OUR BEHAVIORAL RISK SCORECARD FOR INSTITUTIONAL INVESTORS. WE HAVE SEEN A SLIGHT COMEBACK IN RISK APPETITE, SO THE RESOLUTION OF THE DEBT CEILING HAS BEEN POSITIVE FOR MARKETS. WITH REGARD TO TREASURIES A MASSIVE ISSUANCE WILL HAPPEN. THAT IS ALWAYS THE CASE WHEN THE DEBT CEILING WOULD BE RESOLVED. THE MECHANICS ARE THERE IS A NET WITHDRAWAL OF LIQUIDITY, THE QUESTION IS WHERE DOES IT COME FROM? THAT MATTERS A LOT. DOES IT COME FROM BANK RESERVES AND FURTHER INHIBITS THE BANKING SECTOR'S ABILITY TO LAND AND EXTEND CREDIT? THAT WOULD BE NEGATIVE FOR MACRO, OR DOES IT COME FROM RESERVE REPO FACILITY WHERE MONEY IS PARKED AT THE FED ANYHOW, THEN THE IMPACT HIS LAST BUT NEVERTHELESS IT IS A MET WITH LIQUIDITY -- NET LIQUIDITY WITHDRAWAL. THE FED DEPLETED ITS CASH PILE, SO SOME GDP FIGURES ARE FLATTER BECAUSE OF THE FACT THAT THE 2% OF GDP CASH DID NOT HAVE TO BE BORROWED IT WAS JUST DEPLETED. ANNA: COULD IT COME FROM OTHER PARTS OF THE BOND MARKET? WHERE DO YOU THINK IT WILL COME FROM? WHAT IMPACT WILL IT HAVE? ELLIOT: IT WILL BE A MIX OF ALL. SOME OF IT WILL COME FROM ABROAD OR BE FOREIGN INVESTORS WHO DECIDE TO LEAVE MORE MONEY IN THE U.S. MARKET, SO THAT IN THE SHORT-TERM SUPPORTIVE OF THE DOLLAR, BUT WE THINK IT IS A MIX. THE MORE OPTIMISTIC VIEW IS A LOT OF IT WILL JUST WANDER OFF FROM THE REPO FACILITY AT THE FED AND OFF INTO THE TREASURY BILL MARKET. THAT'S A BENIGN VIEW. NO MATTER WHAT, NET-NET IT IS NEGATIVE, THE QUESTION IS WHAT IS THE MAGNITUDE, KRITI: IT STARTS TO FEEL LIKE THE NARRATIVE IN THE ABSENCE OF THE DEBT DRAMA HAS SHIFTED TO THE GROWTH STORY. HOW CRUCIAL OR UNDERPRICED IS THE CHINA STORY WHEN YOU LOOK AT EUROPEAN AND U.S. MARKETS? ELLIOT: I'M A BIT PUZZLED BY THIS WHOLE DISCUSSION AROUND DISAPPOINTING MACRO DATA FROM CHINA. TODAY CHINA REOPENED IN DECEMBER WE HAD A FORECAST OF GDP GROWTH OF 5% FOR 2023. SIX MONTHS LATER, WE'RE HAPPY WITH OUR FORECAST, WE ARE ON TRACK. WE THINK NORMALIZATION IS PROCEEDING ROUGHLY ALONG THE LINES OF EXPECTATIONS. OUR VIEW WAS BELOW-MARKET, PERHAPS THE MARKETS GOT TOO EXCITED THAT YOU HAD THIS HIGHLY ACCELERATED REOPENING PROCESS, THE WAY YOU HAD IT IN WESTERN EUROPE AND THE U.S., OBVIOUSLY CHINA WAS ALWAYS GOING TO BE DIFFERENT. PROPERTY IS A STRUCTURAL WEAKNESS SO STRENGTH -- TREND GROWTH FOR YEARS TO COME WILL BE WEAKER IN CHINA. REMEMBER THAT THIS IS A SLOWER PROCESS. IT MAY LAST LONGER, WE HAVE 4.7% GROWTH PENCILED IN NEXT YEAR. LOWER THAN PRE-COVID, BUT THESE ARE DECENT NUMBERS. WE ARE CONFIDENT ON THE CHINA STORY. KRITI: YOU ARE IN THE CAMP OF GROWTH IS GROWTH, A FAIR ARGUMENT TO BE HAD. WE LOVE TO HAVE YOU ON THE SHOW FOR YOUR MARRIAGE OF POLICY AND THE MARKETS. TALK TO US ABOUT WHETHER THIS MARKET SHOULD BE CONCERNED ABOUT THE GEOPOLITICS? EVEN THOUGH IT FEELS LIKE BEIJING AND WASHINGTON, FOR EXAMPLE, ARE AT HEADS, YOU SEE HEADLINES THAT ELON MUSK, BERNARD ARNAULT, JAMIE DIMON, YOU NAME IT, THEY ARE MAKING TRIPS TO CHINA AND TAIWAN. WHAT DO YOU MAKE OF THAT? HOW DOES THAT COMPARE AND CONTRAST WITH WHAT YOU HEAR FROM CLIENTS? ELLIOT: IT'S A BIT PARADOXICAL, BECAUSE IN THE NEAR TERM OUR ADVICE HAS BEEN TO IGNORE GEOPOLITICS. IT IS NOT MARKET RELEVANT PROBABLY FOR MOST OF THIS YEAR, WE'RE MORE WORRIED ABOUT NEXT YEAR WHERE YOU HAVE EVENT RISK THAT COMES BACK. ONE IS PROBABLY SOME TYPE OF PEACE PROCESS ON THE UKRAINE WHARF WHERE CHINA'S ROLE AS PIVOTAL, AND THERE IS NEGATIVE SPILLOVER POTENTIAL. THERE IS THE TAIWAN AND U.S. PRESIDENTIAL ELECTION. BUT IN THE COMING MONTHS, IT IS CLEAR CHINA IS PRIORITIZING NORMALIZATION. U.S. IS PUTTING IN GUARDRAILS IN TERMS OF THE U.S.-CHINA RELATIONSHIP, THEREFORE IT IS NOT A MARKET STORY FOR THE COMING MONTHS. IT WILL RETURN IN A BIG WAY BECAUSE THE LONG-TERM TRAJECTORY ISN'T CLEAR. GREATER RISK AND SPILLOVERS INTO THE MARKETS IN A NEGATIVE WAY. ANNA: WE STARTED TALKING ABOUT THE U.S., I WILL PIVOT BACK TO THE FED THINKING AT THE MOMENT. WHAT IS YOUR THINKING AROUND JUNE? ARE YOU BUYING THIS IDEA THAT WE GET A SKIP, IT IS A NEW WORD FOR A PAUSE, WHAT IS THE THINKING? ELLIOT: SKIP'S ARE VERY UNUSUAL IN CENTRAL BANKING. IT IS NOT WHAT CENTRAL BANKERS TYPICALLY DO. WE HAVE ONLY HAD ONE HEAD HIKING CYCLE WHERE A SKIPPED BECAME HABIT, THAT WAS 2015 WHEN DEFLATION RISK WAS PRONOUNCED POST-FINANCIAL CRISIS AND OTHERWISE. THE REALITY IS A SKIP IS RATHER UNLIKELY. IF THERE IS A POSITIVE PROBABLY MEANS WE HIT PEAK FED. BACK TO THE TREASURY BILL ISSUANCE, YOU ARE GOING TO HAVE LIQUIDITY CONDITIONS DETERIORATE OVER THE SUMMER SO IT IS HARD TO MAKE THE CASE, WHY WOULD YOU HIKE IN JULY WHEN LIQUIDITY HEADWINDS MAKE THEMSELVES FELT? ANNA: THANKS FOR JOINING US. GOOD TO SPEAK TO YOU. ELLIOT HENTOV OF STATE STREET GLOBAL ADVISORS. WRITING THE AI WAVE, WE WILL HEAR FROM THE CEO OF THE SOFTWARE DEVELOPER C3.AI AND LOOK AT THE GROWING INTEREST IN AI-POWERED AVATARS. THIS IS BLOOMBERG. KRITI: THIS IS "BLOOMBERG SURVEILLANCE: EARLY EDITION". I'M KRITI GUPTA IN NEW YORK WITH ANNA EDWARDS IN LONDON. LET'S TURN BACK TO THE AI FRENZY. ONE OF THE BIGGEST PLAYERS IS SOFTWARE DEVELOPER C3.AI. THE CEO SPOKE YESTERDAY, HE SAYS THE AI RALLY IS NOT OVERDONE. > > WHEN YOU SEE THE PICTURE OF PEOPLE MAKING THE SEMICONDUCTORS RENMINBIS AI APPLICATIONS ANNOUNCED THAT THEY ARE ALMOST DOUBLING PRODUCTION IN THE CASE OF NVIDIA, FROM $7 BILLION IN CHIPS TO 11 BILLION DOLLARS IN CHIPS, IT IS UNPRECEDENTED IN THE HISTORY OF THE SEMICONDUCTOR INDUSTRY. THAT HAS PROVED POSITIVE THAT THIS AI PHENOMENON IS VERY REAL, JUST IN THE AMOUNT OF CONSUMPTION WE ARE UTILIZING. > > LET'S TALK ABOUT YOUR COMPANY SPECIFICALLY AND YOUR EARNINGS. YOUR REVENUE FORECASTS WERE SEEN AS DISAPPOINTING, BUT YOU NOTE IN YOUR EARNINGS THAT YOU HAVE A LIMITED LIST OF CLIENTS. A RELIANCE OF DEALS IN THE ENERGY SPACE, COMPANIES THAT USE YOUR SOFTWARE TO ANALYZE HUGE AMOUNTS OF DATA. OUTSIDE OF ENERGY AND DEFENSE, WHO ARE YOU GETTING CALLS FROM? > > WELL, IF WE LOOK AT THE INDUSTRIES IN WHICH WE DID BUSINESS LAST YEAR, WE DID 33% OIL AND GAS, 29% DEFENSE AND INTELLIGENCE, 13% HIGH-TECH, 11% ENERGY AND UTILITIES, 5% IN MANUFACTURING, FOOD PROCESSING AND CHEMICALS SO IT IS GETTING INCREASINGLY DIVERSE. ANNA: THAT WAS THE CEO OF THE SOFTWARE DEVELOPER C3.AI. THE GENERATIVE AI FRENZY CONTINUES TO RAMP UP ITS APPLICATIONS IN MEDIA, E-LEARNING. THE DIGITAL AVATARS MARKET IS GROWING FAST AND IS EXPECTED TO TOP $520 BILLION BY THE END OF THE DECADE. OUR COLLEAGUE AT BLOOMBERG SPOKE ABOUT THIS WITH HIS VERY OWN DIGITAL AVATAR. > > THEY CAN REVOLUTIONIZE INDUSTRIES SUCH AS ENTERTAINMENT, GAMING AND EDUCATION. AVATARS HAVE THE POWER TO ENHANCE USER EXPERIENCES, ENABLING IMMERSIVE INTERACTIONS WITH PERSONALIZED CONTENT. THEY CAN FACILITATE REMOTE COLLABORATION, TELEPRESENCE AND ASSIST WITH CUSTOMER SERVICE. ANNA: THIS IS A WHOLE LOT OF WEIRD BECAUSE THAT WAS TOM TALKING TO TOM. TOM JOINS US NOW IN LONDON ON THE SET. THIS IS THE REAL TOM, THE TOM MACKENZIE I PREFER. TELL US ABOUT THE PROCESS OF CREATING AN AI-POWERED AVATAR AND THEN TALKING TO YOURSELF. TOM: THERE IS A LOT OF THREADS TO THE STORY. ONE AREA WE WANTED TO UNDERSTAND BETTER IS DIGITAL TWINS. WE WORK WITH A COMPANY AT THE LEADING EDGE OF GENERATING THESE AVATARS. WE WENT INTO A STUDIO IN EAST LONDON. I RECORDED A LOT OF VOICE TRACKS. SOME OF THE LANGUAGE VERY STRANGE. AND DID MOVEMENTS IN FRONT OF THE CAMERA SO THEY COULD PUT DATA INTO THE AI ALGORITHM TO BUILD OUT THIS AVATAR. IT TOOK TIME TO PROCESS ALL OF IT BUT ONCE YOU HAVE GOT THIS AVATAR, YOU CAN GET IT TO SAVE WHATEVER YOU WANTED TO. WE USED CHATGPT FOR THESE ANSWERS. WE ASK QUESTIONS, PUT IT ON OF THE AVATAR AND THOSE ARE THE RESPONSES YOU ARE HEARING. THAT IS THE BACKGROUND BEHIND HOW WE PRODUCED THIS. KRITI: WHY WOULD SOMEONE ACTIVELY INVEST IN THIS? TOM: THE BUSINESS CASE IS, THE COMPANY WORKS WITH 15,000 CLIENTS INCLUDING THE LIKES OF WPP, OCADO, MCDONALD'S, AMAZON. THE CASE THEY HAVE IS A LOT OF THIS IS USED FOR INTERNAL COMMUNICATIONS. YOU CAN IMAGINE THE CEO OR AN EXECUTIVE WANTS TO PUT OUT A MESSAGE ACROSS THEIR GLOBAL TEAMS. THEY BUILD OUT AN AVATAR AND CAN GET THE AVATAR THEMSELVES TO GENERATE AND DELIVER THAT MESSAGE WHETHER IT IS IN SPAIN, CHINA OR BACK IN THE U.S. BECAUSE THEY HAVE 120 DIFFERENT LANGUAGES. THIS COULD BE A PARTICULAR SECTOR OF DIGITAL AVATARS WORTH ABOUT $530 BILLION JUST BY 2030. THEY SAY YOU DON'T HAVE TO SPEND MONEY ON CAMERA TEAMS AND ALL THE REST OF IT, EDITING, YOU DO IT ONCE IT COSTS $1000 AND YOU CAN REUSE YOUR AVATAR FOR DELIVERING INTERNAL COMMERCE MESSAGES BUT THE DOORS OPEN TO MUCH WIDER USE AS WELL. ANNA: I CAN SEE THE ATTRACTION. BUT YOU HAVE TO WONDER HOW THE MESSAGE LANDS IF YOU DON'T SEND THE CEO, YOU SEND THE CEOS AVATAR. WHAT ARE THE ETHICAL CONCERNS AND RISKS? TOM: THEY ARE NUMEROUS. I ACTUALLY PUT THAT QUESTION TO MY OWN DIGITAL TWIN ON THE ETHICAL CONCERNS. TAKE A LISTEN TO WHAT I, OR IT, HAD TO SAY. > > ETHICAL CONCERNS ARISE, INCLUDING ISSUES RELATED TO BIAS AND FAIRNESS IN AI ALGORITHMS, TRANSPARENCY, AND EXPLAINABILITY OF AI DECISION-MAKING, DATA PRIVACY AND SECURITY, AND THE POTENTIAL FOR AI TO PERPETUATE EXISTING SOCIAL INEQUALITIES. TOM: SOME EXAMPLES GIVEN BY MY OWN DIGITAL TWIN ABOUT SOME OF THE RISKS. TALKING ABOUT GENERATIVE AI IN GENERAL, AND ACROSS THE BOARD, AND CONCERNS ABOUT DATA WHETHER IT EMBEDS GENDER AND RACE BIASES, THE QUESTION OF FAIRNESS, THE FACT THAT CHATGPT AND OTHER PLATFORMS PRODUCE HALLUCINATIONS, BASICALLY GET THINGS WRONG. WHEN IT COMES TO CONCERNS ABOUT DEEPFAKES, YOU COULD GET A DIGITAL AVATAR OF THE U.S. PRESIDENT DELIVERING A MESSAGE SHE SHOULDN'T BE DELIVERING. I ASKED MYSELF WHETHER WE WOULD BE REPLACED AND THEY SAID, DON'T WORRY BECAUSE WE HAVE "CHARISMA." THAT WILL BE TRUE FOR YOU AND KRITI, BUT STILL A QUESTION MARK FOR ME. ANNA: TOM MACKENZIE WITH THE LATEST ON THOSE AI DEVELOPMENTS TALKING TO HIMSELF. COMING UP, THE COUNTDOWN TO THE U.S. JOBS REPORT. MORE ON WHAT WE EXPECT. MIKE MCKEE, HE BRINGS THE CHARISMA. THIS IS BLOOMBERG. KRITI: THIS IS "BLOOMBERG SURVEILLANCE: EARLY EDITION". I'M PRETTY COOKED UP IN NEW YORK WITH ANNA -- I'M KRITI GUPTA IN NEW YORK. WE GET THE JOBS REPORT AT 8:30 A.M. EASTERN TIME, THE DATA COULD SHOW A SLOWDOWN IN THE PACE OF HIRING. JOINING US NOW IS MICHAEL MCKEE, BLOOMBERG ECONOMICS INTERNATIONAL POLICY CORRESPONDENT. SLOWDOWN IS THE HOPE FROM THE MARKETS. > > IT IS RELATIVE BECAUSE WHEN WE ARE TALKING ABOUT 190 5000 JOBS IS THE FORECAST, THAT IS A SIGNIFICANT NUMBER, IT IS FAR ABOVE THE NUMBER YOU NEED TO FILL THE REPLACEMENTS OF ALL THE PEOPLE WHO COME INTO THE LABOR FORCE EACH MONTH. WHETHER WE GO DOWN OR NOT, ON A EXPECTED TO TICK UP. AND WE WILL BE WATCHING AVERAGE HOURLY EARNINGS BECAUSE THE FED WILL BE. IF YOU ARE A MOMENTUM TRADER AND YOU HAVE 13 UPDATES IN A ROW ON A STOCK, YOU MIGHT WANT TO BUY INTO IT. WE HAVE HAD 13 UP MONTHS ON NONFARM PAYROLLS, PAYROLLS HAVE COME IN HIGHER THAN THE BLOOMBERG CONSENSUS. AND SO, MAYBE YOU WANT TO THINK THAT IS A GOOD BET TODAY. THE WHISPER NUMBER ON WALL STREET ACCORDING TO BLOOMBERG'S WHISPER FUNCTION IS 226. SO WALL STREET LEANING TOWARDS THE IDEA THAT WE GET A 14TH MONTH IN A ROW. ANNA: INCREDIBLE RUN FOR THAT PAYROLLS NUMBER. HOW MUCH WEAKNESS DO WE NEED TO SEE ON THE JOBS MARKET? NOT THAT ANYBODY IN AN ABSTRACT SENSE WANTS TO SEE WEAKNESS, HOW MUCH IS THE FED THINKING WE NEED TO SEE TO WEIGH DOWN INFLATION? > > THEY LIKE TO SEE THE UNEMPLOYMENT RATE RISE, SUGGESTING THE LABOR MARKET IS COOLING AND HE WOULD LIKE TO SEE AVERAGE HOURLY EARNINGS GROWING MORE SLOWLY. THAT IS THEIR GOAL, RUNNING AT A 4.4% AVERAGE EACH MONTH, THEY WOULD LIKE TO GET THAT DOWN TO 3.5 PERCENT. BUT THE NUMBERS LATELY HAVE SHOWN US VERY STRONG LABOR MARKET REMAINS. WE HAD THAT JOLTS REPORT THAT THE FED RELIES ON COMING IN OVER 10 MILLION AGAIN, AND ADP THIS WEEK. EVEN THE ISM MANUFACTURING NUMBERS CAME IN STRONGER THAN EXPECTED SO IT LOOKS LIKE THE AUTHOR STILL STACKED AGAINST THE FED -- THE ODDS ARE STILL STACKED AGAINST THE FED. KRITI: WHICH BRINGS UP THE WHOLE IDEA OF A PAUSE OR SKIP, IS ONE DATA POINT GOING TO MAKE A DIFFERENCE? DOESN'T CHAIRMAN POWELL SAY ONE DATA POINT ISN'T ENOUGH TO MAKE A CALL? > > THE SPEAKERS WE HAVE HEARD FROM, INCLUDING THE PRESUMPTIVE VICE CHAIR, SUGGEST THAT THIS DATA POINT ISN'T GOING TO MATTER. BUT THEY STILL THINK THEY CAN DO AT LEAST A SKIP, NOT RAISE IN JUNE, THEN MAYBE DO IT IN JULY IF THEY NEED TO, BUT IF IT COMES IN VERY STRONG ESPECIALLY IF WAGES RISE, THAT COULD PUSH AGAINST THAT IDEA. THEN WE GET CPI THE DAY BEFORE THE FED DECISION. TODAY'S NUMBER AND THE CPI NUMBER WILL TELL US WHAT THE FED IS LIKELY TO DO. KRITI: CERTAINLY A LOT TO DIGEST. GOING TO BE THE MAJOR MACRO MOVER THIS MORNING. WE THANK YOU, AS ALWAYS. LET'S LOOK AT THE MICRO HERE. WE ARE WATCHING STOCKS IN THE PREMARKET. EARNINGS SEASON STILL TRICKLING OUT. LULULEMON, A HIGHER 15% IN THE PREMARKET, EARNINGS BEATING ESTIMATES A HIGHER INCOME CONSUMER STILL BUYING ATHLEISURE, FEEDING INTO THEIR BOTTOM LINE SO THAT IS GOOD NEWS THAT THAT COMPANY. LET'S GO TO THE TECH SECTOR. MONGODB SURGING ON THAT BOOST IN THEIR EPS FORECAST, HIGHER BY ABOUT 26%. YOU ARE SEEING THEM BEAT THEIR ESTIMATES AS WELL. BROADCOM IS GOING TO BE A INTERESTING STORY, ESPECIALLY WHEN WE ARE TALKING ABOUT THIS WIDER SLOWDOWN. THOSE GAINS OVERSHADOWED BY THE SALES SLOWDOWN YOU ARE SEEING DESPITE THEM COMING OUT WITH GOOD NUMBERS, THE SHARES TAKING A HIT DOWN ABOUT 2%. AND THEN DELL TECHNOLOGIES, ONE OF THOSE OLD GUARD TECH NAMES, THOSE RESULTS SUGGESTING PERHAPS THERE IS A BOTTOM IN PC SALES BUT THEY ARE NOT SEEING THAT BUSINESS INVESTMENT YOU WOULD EXPECT. THOSE SHARES DOWN ABOUT 3.7%. A LITTLE BIT OF PAIN IN A LITTLE BIT OF SECTORS. ANNA: INTERESTING TO WATCH HOW THE AI BOOM IS SPREADING AND PERHAPS LIMITED IN SOME PARTS OF THE TECH WORLD, SOME AREAS BENEFITING AND OTHERS YET TO BENEFIT BUT ALSO FEELING THE HEADWINDS FROM THE BROADER CHIP STORY. THAT WE'RE SEEING GLOBALLY AROUND CHINESE GROWTH PERHAPS. THAT IS IT FOR EARLY EDITION. SURVEILLANCE IS AHEAD. THEY WILL SPEAK WITH RANDY CROSON ARE OF THE UNIVERSITY OF CHICAGO AND JEFF ROSENBERG AT BLACKROCK ALL JOINING THE TEAM AS WE GET YOU READY FOR THE JOBS REPORT. LOOK FOR THAT LATER ON TODAY THEY WILL GET YOU THROUGH THOSE NUMBERS AND CONSIDER WHAT THE DATA MEANS FOR THE FED OF COURSE. THIS IS BLOOMBERG.

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