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Speaker 1: Good morning.

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Speaker 2: I'm Nathan Hager and I'm Karen Moscow. Here are the

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Speaker 2: stories we're following today.

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Speaker 1: Karen, we begin with the biggest banks on Wall Street

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Speaker 1: rallying this morning. This comes after they pass the Federal

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Speaker 1: Reserves annual stress tests. Let's get the details from Bloomberg's

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Speaker 1: John Tucker in New York. Good morning, John and Nathan.

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Speaker 3: After the collapse of three US banks this year's stress tests,

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Speaker 3: they carried extra weight passing grade on the annual exam

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Speaker 3: for the twenty three lenders, means they can probably go

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Speaker 3: ahead and pay billions of dollars in dividends to shareholders.

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Speaker 3: The results determine how much capital banks need to set

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Speaker 3: aside as a cush Alason Williams is the senior bank

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Speaker 3: analyst for Bloomberg Intelligence.

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Speaker 4: The good news is that the capital requirements are basically

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Speaker 4: headed lower as a result of this test.

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Speaker 3: Well less of a required cushion means more for shareholders.

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Speaker 3: JP Morgan, Chase, Morgan, Stanley, Goldman, Sachs, Wells Fargo. Their

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Speaker 3: balance sheets showed improved resiliency. A city group citizens financial

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Speaker 3: and capital, and we're less resilient. I'm looking at shares

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Speaker 3: trading of the pre market right now, you have JP

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Speaker 3: Morgan Chase, that's a one point two percent. Bank of

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Speaker 3: America is up one percent in New York. I'm John

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Speaker 3: Tucker Bloomberg day Break.

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Speaker 2: All right, John, thank you. Let me turned to the

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Speaker 2: broader economy now and hawksh talk from central bankers. For

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Speaker 2: the second day in a row. J Powell is signaling

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Speaker 2: more rate hikes are on the way. The FED chair

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Speaker 2: spoke this morning at a Bank of Spain conference in Madrid.

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Speaker 5: As noted in the fmc's summary of Economic projections, a

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Speaker 5: strong majority of Committee participants expect that it will be

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Speaker 5: appropriate to raise interest rates two or more times by

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Speaker 5: the end of this year.

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Speaker 2: And J. Powell says the Fed still has a long

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Speaker 2: way to go to get inflation back down to two percent.

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Speaker 1: All rates do appear headed higher. Caaren, a former FED official,

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Speaker 1: says the central bank could take a u turn as

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Speaker 1: soon as next year. We caught up with former Federal

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Speaker 1: Reserve Vice Chair Richard Clarina.

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Speaker 6: The feds rationale is that if they succeed and inflation

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Speaker 6: starts to fall, they can cut rates basically to keep

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Speaker 6: real rates unchanged. So I do think their baseline probably

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Speaker 6: does have some cuts, does have cuts for next year,

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Speaker 6: certainly in the baseline. The question is markets I think

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Speaker 6: have priced in more than the FED seas right now.

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Speaker 1: Former FED Vice Chair Richard claire To says he can

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Speaker 1: see inflation falling below three percent next year.

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Speaker 2: Well, Nathan, as inflation and rates remain front and center.

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Speaker 2: US China relations are also and focused. This morning, Treasury

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Speaker 2: Secretary Janet Yellen says she hopes her upcoming trip to

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Speaker 2: China will lead to better ties between the world's two

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Speaker 2: largest economies.

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Speaker 7: We really welcome and want to have a healthy economic relationship,

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Speaker 7: and we think it's generally beneficial. We have disagreements. My

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Speaker 7: hope in traveling to China is to re establish contact.

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Speaker 7: They're a new group of leaders. We need to get

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Speaker 7: to know one another.

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Speaker 2: And Secretary Yellen made the comments in an interview with MSNBC.

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Speaker 1: President Biden is staying laser focused on the economy care

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Speaker 1: and it has emerged as a major theme in the

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Speaker 1: president's reelection campaign. In Chicago yesterday, the President said Bidenomics

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Speaker 1: is working man. The trickle down approach from Republicans has

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Speaker 1: failed the middle class.

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Speaker 8: Under trickle down economics, it didn't matter whether you made

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Speaker 8: things as long as you help the company's bottom line.

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Speaker 8: Eight of that meant seeing jobs and industries go overseas

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Speaker 8: for cheaper labor, supply chains and key products moved overseas

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Speaker 8: like China and much of Asia.

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Speaker 1: And then President Biden says the billions spent under the

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Speaker 1: chips in science and inflation reduction acts will grow the

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Speaker 1: middle class and promote competition to cut costs.

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Speaker 2: Meantime, Nathan, we're learning more about the sleeping habits of

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Speaker 2: the President. It's been disclosed that mister Biden now uses

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Speaker 2: a seapat machine at night. Bloombergs Amy Morris has more

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Speaker 2: from Washington.

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Speaker 4: President Biden first disclosed his sleep apnea during the campaign

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Speaker 4: in two thousand and eight. It's a common condition in

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Speaker 4: which your airway becomes obstructed while you were asleep, and

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Speaker 4: that can restrict airflow. The President's medical report also shows

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Speaker 4: he's dealt with restricted airways for most of his life.

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Speaker 4: He has asthma and carries an inhaler so the White

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Speaker 4: House says the apnea isn't new, but the use of

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Speaker 4: the machine is. The CPAP machine helps improve sleep quality

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Speaker 4: and reduce snoring. President Biden is the oldest president in

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Speaker 4: US history, polls show his age and fitness, or his

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Speaker 4: biggest liabilities as he seeks re election in Washington. I'm

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Speaker 4: Mamy Morris, Bloomberg Daybreak.

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Speaker 1: Thank you, Amy. Turning back to market shares of Micron Technology.

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Speaker 1: You're up three and a half percent in early training

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Speaker 1: after an upbeat forecast from the chip maker. We get

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Speaker 1: more from Bloomberg's Charlie Pellett.

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Speaker 9: Micron is the largest American chip maker, and the quarter

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Speaker 9: indicates that an industry glut is easing, even as the

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Speaker 9: chip maker continues to face challenges in China. Like many

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Speaker 9: of its peers, Micron Who's suffered a collapse in orders

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Speaker 9: for its products after sluggish demand for smartphones and personal

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Speaker 9: computers led to a build up of inventory in New York.

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Speaker 9: Charlie Pellett Bloomberg Daybreak.

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Speaker 2: Ll right, Charlie, thank you.

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Speaker 10: Well.

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Speaker 2: Elsewhere on Wall Street, we're learning Fidelity Investments plans to

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Speaker 2: convert six more of its mutual funds into exchange traded funds.

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Speaker 2: According to a cord filing, the Acid manager will turn

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Speaker 2: these six actively managed mutual funds into ETFs in November.

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Speaker 2: Those Fidelity funds collectively manage assets worth roughly thirteen billion dollars.

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Speaker 1: Time now to take a look at some of the

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Speaker 1: other stories making news in New York and around the world,

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Speaker 1: with Bloomberg's Michael bar Good morning, Michael.

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Speaker 10: Good morning Nathan. In air quality emergency from the Canadian

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Speaker 10: wildfires is growing in the US. At least twenty states

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Speaker 10: and several major cities from Chicago to Detroit to Pittsburg

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Speaker 10: are affected. New York City will see SMAG today emergency

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Speaker 10: room physician doctor dry and Sutton.

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Speaker 11: The chemicals inside that bloom are what danger is. And

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Speaker 11: I'm talking not just about the soot that you might

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Speaker 11: see on the ground. I'm talking about microscopic chemicals, things

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Speaker 11: like nitrogen dioxide, sulfur dioxide, carbon monoxide.

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Speaker 10: Doctor Sutton spoke to ABE ahead of Fourth of July

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Speaker 10: travel this weekend. Airlines are playing catch up after widespread

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Speaker 10: flight delays blamed on weather and staffing issues. Passengers in

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Speaker 10: the New York area have been frustrated, as well as

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Speaker 10: these passengers in San Francisco.

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Speaker 1: I've got my wife who hasn't slept in like thirty

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Speaker 1: six hours. I've got two kids. They are just absolutely.

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Speaker 10: Spend Experts say the FAA needs more air traffic controllers.

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Speaker 10: The investigation into the implosion of the Titan submersible is

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Speaker 10: expected focus in part on the carbon composite construction. Bloomberg's

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Speaker 10: Dan Schwartzmann reports recovery efforts continue for the wreckage of

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Speaker 10: the sub.

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Speaker 12: Nearly one week after the conclusion of the search for

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Speaker 12: the Titan submersible, vehicle to brief from the craft was

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Speaker 12: hauled back to shore near Newfoundland in Canada. Five people

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Speaker 12: were killed after the Titan suffered a catastrophic implosion. As

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Speaker 12: a descendant on the wreckage of the Titanic, the pieces

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Speaker 12: of the craft are covered include some of the hull

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Speaker 12: as well as a circular portal window. Human remains have

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Speaker 12: also been found, with official saying medical professionals will study

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Speaker 12: an air them for clues. The debris will be examined

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Speaker 12: as investigators look for a cause as to what led

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Speaker 12: to the deadly implosion in New York. I'm Dan Schwartzman

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Speaker 12: Bloomberg Daybreak.

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Speaker 10: New details about the Wagner rebellion in Russia. According to

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Speaker 10: ABC AS, senior US official says that the leader of

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Speaker 10: the Mercenary group of Guinea progosion contacted top Russian leaders

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Speaker 10: in Moscow before the mutiny, possibly to seek their help

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Speaker 10: in the uprising. Kremlin officials call that gossip. Madonna spent

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Speaker 10: several days in the ICU because of a bacterial infection

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Speaker 10: that has postponed her twenty twenty three celebration tour that

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Speaker 10: was supposed to start July fifteenth in Vancouver. Her manager

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Speaker 10: says she is expected to make a full recovery. Global

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Speaker 10: News twenty four hours a day, powered by more than

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Speaker 10: twenty seven hundred journalists and analysts and over one hundred

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Speaker 10: twenty countries. I'm Michael Barren. This is Bloomberg. Nathan.

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Speaker 1: Okay, Michael, thanks time now for the Bloomberg Sports update.

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Speaker 1: After a perfect night, here's John Stashower. Yeah right, Nathan

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Speaker 1: Domno Herman.

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Speaker 13: He's at his ups and downs as a Yankee, really

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Speaker 13: more down than up since he was an eighteen game

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Speaker 13: winner back in twenty nineteen. Injuries at a long suspension

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Speaker 13: for domestic violence, a recent suspension for using an illegal

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Speaker 13: substance on.

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Speaker 1: His pitching hand.

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Speaker 13: Herman took the mound in Oakland, having allowed fifteen earned

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Speaker 13: runs in his last two stars, to before a crowd

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Speaker 13: of only twelve thousand. Perfection twenty seven Up twenty seven down.

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Speaker 13: The Yankees meet the A's eleven to nothing, with Herman

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Speaker 13: throwing the twenty fourth perfect game in MLB history. The

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Speaker 13: fourth player Yankee. Herman joins David Wells, David Conan, Don Larsen.

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Speaker 13: His of course, came in the nineteen fifty six World Series.

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Speaker 13: He struck out nine got helping the fifth inning on

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Speaker 13: a diving stop by Anthony Bizzo. As for the Mets,

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Speaker 13: five to two loss at City Field to Milwaukee, so

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Speaker 13: the Mets record of the last twenty three games six

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Speaker 13: and seventeen. Their owner Steve cohenell they rare press conference

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Speaker 13: before the game, was asked about making changes.

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Speaker 14: I'm a patient guy.

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Speaker 8: Okay.

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Speaker 15: Now everybody wants and you know, a headline everybody says,

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Speaker 15: fire this person, fire that person. But I don't see

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Speaker 15: that as a way to operate. If you want to

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Speaker 15: track good people to this organization, the worst thing you

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Speaker 15: can do is being pulsel.

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Speaker 13: Cohen said he wants to hire a president of Baseball

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Speaker 13: Operations to oversee GM Billy Eppler, but he hasn't found

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Speaker 13: the right person. They held the NHL Draft in Nashville,

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Speaker 13: first pick to Chicago, taking seventeen year old phenom Connor

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Speaker 13: Madready scores seventy one goals and fifty one games in

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Speaker 13: the Western Hockey League. Rangers in the first round drafted

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Speaker 13: Gabrielle Perrot. His father had a long NHL career. The Devils,

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Speaker 13: who acquired Timo Meyer from San Jose have given him

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Speaker 13: an eight year extension.

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Speaker 1: John Stashewer Bloomberg.

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Speaker 16: Sports from coast to coast, from New York to San Francisco,

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Speaker 16: Boston to Washington, d C. Nationwide on Syrias exam the

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Speaker 16: Bloomberg Business Appen Bloomberg dot Com.

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Speaker 1: This is Bloomberg Daybreak. Good morning. I'm Nathan Hager. Could J.

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Speaker 1: Powell really ratchet down rates? It's possible, depending on where

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Speaker 1: inflation goes over the next several months. In a conversation

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Speaker 1: with Bloomberg's Matt Miller and Katie Greifeld, PIMCO Global Economic

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Speaker 1: advisor and former FED Vice chair Richard Clarita used those

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Speaker 1: exact words ratchet down to describe the Fed's rate hike path.

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Speaker 1: He also offered his outlook for recession in the US.

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Speaker 1: Let's listen into that conversation now.

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Speaker 6: I think at the last press conference man he indicated

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Speaker 6: it maybe several years before they project inflation getting down

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Speaker 6: all the way to two percent. But the SEP projections

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Speaker 6: themselves actually do have rate cuts in for next year.

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Speaker 6: The feds rationale is that if they succeed and inflation

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Speaker 6: starts to fall, they can cut rates basically to keep

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Speaker 6: real rates unchanged. And so I do think their baseline

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Speaker 6: probably does have some cuts, does have cuts for next year,

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Speaker 6: certainly in the baseline. The question is markets I think

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Speaker 6: have priced in more than the Fed seas right now,

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Speaker 6: and in.

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Speaker 17: Looking through the headlines of what we heard this call

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Speaker 17: my eye sort of on this topic that policies us

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Speaker 17: getting two percent core inflation by twenty twenty five. And

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Speaker 17: to your point that if you look at the dot plot,

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Speaker 17: you actually see some cuts penciled in next year. Is

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Speaker 17: there a situation where okay, we're not at two percent yet,

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Speaker 17: but the Fed see something and is willing to cut

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Speaker 17: even though we're not back to target.

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Speaker 6: Oh yes, In fact, that's that's really our baseline view

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Speaker 6: at PEMCO. It's what we sometimes call the two points

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Speaker 6: something a destination, that is, we could see them under

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Speaker 6: their outlook, we could see inflation next year falling below three.

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Speaker 6: That's obviously is not two, but in that context inflation

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Speaker 6: will have fallen substantially, and we do think the FED

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Speaker 6: can ratchet down and would ratchet down rates in those circumstances,

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Speaker 6: and so so yes, obviously, you know the FED will

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Speaker 6: be like the ECB and other central banks, will be

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Speaker 6: especially data dependent. But you know, we could see cuts

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Speaker 6: next year even if inflation remains somewhat above two percent.

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Speaker 17: On June fifteenth, after the FED meeting on Bloomberg Television,

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Speaker 17: I believe it was you made the point that I

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Speaker 17: really think that for the first time in a long

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Speaker 17: time that the FED is data dependent. Does that imply

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Speaker 17: that up until this point, perhaps they hadn't been. What

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Speaker 17: has changed that now they are definitely data dependent?

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Speaker 6: Well quite frankly, the FED really risk falling behind the

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Speaker 6: curve last year. You know, they only began to hike

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Speaker 6: rates at the March of twenty twenty two meeting, and

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Speaker 6: then under Jay's Palace leadership, and I think he showed

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Speaker 6: excellent leadership. He unified the committee to a very very

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Speaker 6: aggressive steep lift off path. And I actually thought really

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Speaker 6: for most of last year the focus was on getting

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Speaker 6: rates into restrictive territory, and they were going to do

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Speaker 6: that for a pretty wide range of data. I think

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Speaker 6: they now agree and I would we would agree that

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Speaker 6: rates are in restrictive territory. They have to keep them

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Speaker 6: there for a while. And I really do you think

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Speaker 6: for the first time in this cycle there is some

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Speaker 6: data dependence. You know, for example, they did skip or

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Speaker 6: pause at the last meeting, and the chair did not

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Speaker 6: want to rule out that they could pause at future meetings,

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Speaker 6: but he also didn't want to rule out they could

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Speaker 6: go at the next two meetings. So more optionality now

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Speaker 6: for the palfed than I think that we've seen in

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Speaker 6: some time.

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Speaker 18: Obviously, there's going to be a recesion at some point.

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Speaker 18: The question is when. On the one hand, we're seeing

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Speaker 18: strong economic surprises to the upside. If you look at

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Speaker 18: the Bloomberg Economic Surprise Indicator, it's really spiked over the

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Speaker 18: past few weeks. And on the other hand, we're seeing

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Speaker 18: things like delinquencies on car loans starting to ratchet higher,

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Speaker 18: right savings and a bank balances starting to come down.

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Speaker 18: What's your take on a recession and when we're going

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Speaker 18: to get it?

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Speaker 6: I think you phrased the question well, Matt, there will

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Speaker 6: at some point be a recession we've not banished the

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Speaker 6: business cycle. Economists are not good on a lot of things,

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Speaker 6: and one of things we're not good at is is

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Speaker 6: forecasting recessions. If we do get a recession, say later

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Speaker 6: this year or early next year, it'll probably be one

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Speaker 6: of the most anticipated or forecasted recessions in my professional career.

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Speaker 6: Our baseline view is, you know, monetary policy does operate

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Speaker 6: with a lag. We've seen a tightening and lending standards

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Speaker 6: by banks. The leading indicators are a negative territory. The

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Speaker 6: curve is inverted, so all the classic signals are flashing

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Speaker 6: a recession either later this year or next year. The

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Speaker 6: labor market traditionally is a lagging indicator. It's certainly lagging

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Speaker 6: in this cycle. It would be great if we could

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Speaker 6: get a soft or softish landing. So we're not putting

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Speaker 6: a zero probability on that, but we do think that

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Speaker 6: all together that a recession is more likely than not.

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