Bloomberg Surveillance TV: May 18th, 2026

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Under surveillance this morning, the president's nuclear red line. The only thing that matters when I'm talking about Iran, they can't have a nuclear weapon. I don't think about American's financial situation. I don't think about anybody. I think about one thing. We cannot let Iran have a nuclear weapon. That's all. So here's the latest this morning.

President Trump issuing a warning to Iran, saying the, quote, clock is ticking for Tehran to make a deal. To build on this, Terry Haint of Panjia policy. Terry, welcome back to the program. Let's set the stage. You're a Republican in a tight race facing down a midterm election. What are you thinking about the messaging coming from the president?

I think the quote's unfortunate, of course, but the context can be built on if I'm that person. The president's ultimate point here is that kind of tightly bound around the quote in question, is that you can't let Iran have a nuclear weapon. Republicans are four-square behind the president in that. And so I think you can make that case and push with voters, number one, Number two, there's only, you know, a handful of races, a dozen or more that are genuinely competitive. So the vast majority of those Republicans may see this as an irritant, but not as some sort

of an existential setback in their own political futures. Terry, though, are they potentially at risk of making the same mistakes that Biden administration made? Oh, sure, always. I think it's much less likely that they make that sort of, they make those sorts of errors principally because they understand better than the Biden people did, that they're going to need to make the economic case, number one, and it's linked to geopolitics. And number two, that people by and large aren't convinced.

The Biden people, you know, kind of like to concude themselves and talk about how, you know, as other administrations did, too, in the past, that if only, you know, people understood a little bit better and sure they will and all the rest and kind of relying on faith. These folks aren't going to rely on faith. I think that's a bit of a difference. Terry, how are they doing geopolitically? The Treasury Secretary is at the G7 Finance Ministers meeting, and he came out and he said that they call upon G7 and all their allies and the rest of the world to follow sanctions regimes. At the same time, when the president left Beijing, he said he was going to consider lifting sanctions on Chinese firms that are buying Iranian crude. Which is it?

You know, I'm a big believer in Emerson's consistency is the hobgoblin of little minds when it comes to politics. And in this case, I think it might be a little bit of both. Of course, what the president's doing is carrot and stick, whereas what Scott Bessent is doing is a little bit more stick to try to get the allies to stick together. How important is it that the U.S. clarifies its stance on Taiwan after the president said that he might think about delaying some of the sales that the U.S. has promised to the nation, the region? You know, I think Taiwan's right to be nervous, but I think Taiwan's right to be nervous, at least since Biden pulled the United States out of Afghanistan, frankly, because that led to perceptions of a power vacuum in the Asia-Pacific region that are still with us today. So I'm not blaming Biden. Like, I'm not what aboutism here. I'm just saying this goes back years.

This isn't a situation the president is creating. So I think Taiwan's entirely right to be nervous. At the same time, I think the president's a little bit less, a little bit more ambiguous, frankly, rather than a less. Because you've got a situation here where there's no change to the bottom line. And number one, number two, what the president's doing is saying what people already knew to be true, that he's considering particular arm sales. So we'll see where this goes. But I point out that there's a linkage here between what goes on in the Strait of Hormuz, China's a business. to tell its client state Iran, look, you better cool it and open the straight and exactly

how things proceed, whether it be on Taiwan or trade and tech, for that matter. Do you have a sense who within the cabinet of President Trump is the guiding light right now in all of this? Or is it really President Trump? I mean, does anyone have an edge in what the overall goal is or the overall strategy? I look to best economically. I look to Marco Rubio as far as the diplomacy goes. But, you know, but this is very much, very much the president, you know, with those particular whispers on board and kind of helping to guide. Terry, what did we get out of the China summit? I spoke to Ambassador Greer there. He said he gives China a passing grade when it comes to where Earths, but still admitted to what I

said we hear from companies, which is that China continues to drag its feet. What did the United States actually walk away with? You know, I think what they want, I think we, I think we don't know yet. And that's why I say that markets need to watch the straight, really, because for trade and tech as much as for oil, China has made much in the past three to four weeks about saying that they think the strait should be open. Iran is China's client state. You can't put too fine a point on that. And as a result, what you end up with is a situation where either China could tell Iran that it needs to come to some sort of an understanding or not, and that's going to be a directional signal for the entire China, United States competitive relationship,

whether it be geopolitically or frankly in terms of whether the summit result is some sort of a continuation of a colder truce that's existed for more than a year or whether we're going to get to something that's a little more directionally positive. Terry, are you suggesting there might be an agreement here that's just not been talked about, publicly yet? Oh, sure, yeah. I'm suggesting saying that absolutely out loud. You know, you get a lot of people on your air, other air, you know, from past administrations, kind of, you know, John, I'll speak English, English for a minute, kind of boffins who, you know, work in trade or somewhere saying, well, you know, it's not like the old days where there used to be agreements or whatever else before the leaders met. Well, that's true. But, but what's happening,

I think is a world where the lack of agreements, the lack of progress over periods of years, over trade deals, for example, led to the kind of difficulties geopolitically and geopolitically that we see today. Leaders of all stripes want to speed that up. And because they speed that up, you know, it's kind of a situation where, you know, their behavior at the summits and agreements at the summits dictate future performance in the markets. rather than the other way around. Stay with us. More Bloomberg surveillance coming up after this.

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Let's talk about Ryanair shares rising after posting a record full year profit, the budget carrier warning of rising costs this year from guess what higher fuel prices. Joining us now, legend of the industry, the Ryanair boss, Michael O'Leary. Michael, good to see you. Come, we've been friends for a while. You're a legend. How would you describe yourself? Old fart, I think, yes.

I think it's fantastic. Ageing dinosaur. You've seen it all, sir. Have you seen something like this before, the situation of the energy market? Five years ago, the Russians invaded Ukraine. 20 years ago, the second Gulf War, the first Gulf War, 9-11. This happens regularly within our industry. That's why in Ryanair, we typically hedge 80% of our fuel.

We're 80% hedged out to March, $27, $67 bucks a barrel. We're in great shape. Apart from the fact our share prices tanked in the last two weeks because they're an airline. Oh, they're an airline. Oh, got to help. We've just reported record full year results. 208 million passengers, 2.26 billion euros. Profit after tax spitting off cash to shareholders, share buybacks.

And with a bit of luck, if this continues, although, we can all have a debate how long we think this will continue in the Middle East and with the Straits-Formuz. Some of the flaky competitors in Europe will get taken out in carrier baskets by about September, October, because they're not hedged on oil and they're borrowed up to their eyeballs in net debt. Are you ready to buy? We are certainly ready to buy cheap aircraft. If I've got any cheap aircraft, I'm really excited. We are about to get the first 10 of our max 10 aircraft, first 15 of our max 10 aircraft from Boeing in the spring of 2027.

20% more seats per plane burns 20% less oil the technological efficiency of the new engines is remarkable and we will take we've ordered 300 of those from Boeing we've priced them during COVID so we've basically stolen them

and they will transform even our operating economics in Europe for the next decade So are you interested though in buying a carrier in its entirety aside from just their aircraft? There is nothing in Europe you would want to buy it's all crap. You know, it will go bust

in the not too distant future. Europe is inexorably, you know, moving the same direction the US did 20 years ago. Three large connecting carriers, B.A, Luftanzah, Air France, KLM. They are making out like bandits at the moment because all the long haul connecting traffic

has switched off the Gulf carriers and is going on those legacy guys. Short hole, Ryanair will continue to dominate the short hole space in Europe because we have much lower fares and much lower costs. We're the only really low-fair, low-cost carry in Europe. There's a few other low-fair, not so low-cost carriers in Europe, but they're all good, they're all going to go the same way as Spirit and Frontier in the States.

That's what I wanted to ask. It seems like the model in the US is really struggling. We had Spirit go bankrupt. There's talk of mass consolidation among some of the other low-cost carriers, and this idea that every consumer is expecting higher quality and that that is what's generating a lot of the revenues. How does Ryanair succeed in that environment, in that demand backdrop? I mean, the problem for the last 20 years in the States is there's really been no low-cost carriers anymore.

I mean, we copied out this formula originally from Southwest back in the late 1980s when Herb Keller would in his pomp. You know, Southwest were charging $10 fairs. Now South West's average fare last year was $140 bucks. It's not a low-fair carrier anymore. If you had a real low-fair carrier here in the States, as Ryanair is in the US, our average fare last year was $40. There would still be very strong demand because the main airlines here, I mean, they've had control of supply in the market for the last 20 years, and they've been pricing up. The cost of air travel in the States is incredibly high, particularly given that you don't pay for ATC.

Could you expand into the US? No, absolutely not. We're too busy expanding in Europe, and then those countries around Europe, there is so much growth available to us in Europe. You look at it in last year, we grew 4%. We're the biggest airline in Europe. We grew 4% to 208 million passengers. This year I'd grow another 4% 260 million pastors. And in the next decade, with these max 10 aircraft,

I'm going to go to 300 million passengers, all in Europe. I mean, Europe is the best playground for low-cost airline that you could possibly imagine. A couple of big, useless legacy airlines charging more, you know, charging annual salaries for their long haul travel, but nobody able to do the low-cost stuff. We do the low-cost stuff well. We're cheap Irish guys, you know, and so we do it well with the bat,

and with an order for 300 really fantastic aircraft coming from Boeing. It used to be so mean back in. the 90s. It used to be so mean. It was brutal. Do you remember that? Well, we were never bruised. We were cheap and mean. Now we're just cheap and cheerful. New aircraft, on-time flights.

Last year, we were record customer service metrics. Customer service satisfaction we had up from 86 to 89%. I never thought I'd see the day when I got more than 50% customer satisfaction. But hey, who knew? Can I ask you, where are Europeans traveling to this summer for vacation? Do they want to come to America anymore?

No, I mean, sorry, that's not true. Yes, they do. But the problem is that the cost of long haul travel has got very expensive. So, you know, there isn't much competition across the Atlantic between the European legacies and the US majors. The Gulf carriers were the real disruptors for the last 20 years. And they have, you know, their capacity's been halved in recent months. So a huge amount of Europeans will holiday at home in Europe this year in Portugal, in Spain, in Italy, in Greece. A lot of Americans are still coming to Europe, you know, for the quality. for the sunshine, the culture and the alcohol, and Longamé they continue to travel. But I think there's a real sea change this year of people who would historically have gone to the Middle East or using the Middle East carriers to connect to Longhall, probably going to stay at home in Europe this summer. When will Europe run out of fuel? It won't. It won't.

There was a real concern, I think, back in April, you know, there was real worries over the jet supply. The jet supply has now, and we've met with all of our fuel suppliers in Paris last week, There's no issues over jet fuel supply right now through to the end of September. There's one issue in the UK, Kuwait, which is the subsidiary of the state of Kuwait, have about 30% market shares, some of the airports in the UK. Even they now are resourcing that supply. Most of Europe's Jet A1 supply comes from West Africa, the America is Norway,

and the lifting of Russian sanctions has also eased to supply Jet 1 into Eastern European countries. So you don't seem concerned with what's going on right now with the conflict in Iran? I'm very concerned about the price of oil. but I don't believe the conflict in Iran will have any disruption on European jet supplies the question for us is how long will the streets of Hormuz remain closed? I mean, you know, we gave guidance this morning

if it remains closed till March 2027 our unit, because of our unhedged 20% our unit costs might rise, you know, mid-single digits this year. Nobody believes. What are you hedged down to? Can you just explain your current hedging strategy? What do you hedge now too?

We have bought 80% of our jet fuel requirements, John, out to March 27 at $67 a barrel. So we're sitting, you know, we're in great shape. Great position. Great position. But nobody really believes that the straight form wasn't going to stay closed until March of next year. It's just we don't know when they're going to reopen. Iran is going to starve if they don't get it ready.

You know, the straight form was reopened in the next couple of months. The midterm election season kicks off in Memorial Day at the end of May. You know, Trump is going to lose the House and the Senate if he doesn't get this resolved and reopened. But the timing is, none of us know when the timing will be. But, you know, I hope it's sooner around. than later. But if it becomes later, say it's, you know, for something happens that none of us expect, the straight stay closed to September, October, November, then we are looking at our unit costs will be up about 5%. But you'll be looking at kind of airlines failing all over Europe.

Like who's failing? Well, I can't really name them, but, you know, some of our low fare, but not so low-cost competitors. EasyJet, Whiz? I don't think EasyJet will fail. I mean, I don't think they'll make any money this year. Whiz could well be a kind of. for failure, Air Baltic, which was recently bailed out by the Latvian government gave it a 30 million loan to get them from June through to August, but they have to repay the loan in August. I mean, good luck

with the Latvians trying to get that repaid at the end of August. So, I think there will be casualties, but again, a lot depends on how, I mean, you know more about this tonight, how long the streets from will remain closed, when can Trump declare a victory and, you know, kick off the midterms, and I suspect it's probably

going to be the end of May, maybe early June, but what the hell, I mean, if I was any, if If my prediction is really good, I wouldn't be working in the airline business. I'd be working in a proper functioning business like Bloomberg. I'll get it right this time. With your rock star salaries. I'll get it right this time. Stay with us.

More Bloomberg surveillance coming up after this. Support for the show comes from public.com. If you're actively involved in your portfolio, you probably catch yourself repeating the same actions. Buying the dip, manually sweeping idle cash, putting on a hedge. On public, you... can now create AI agents that handle all these tasks on your behalf. Just describe what you want to do in plain English. Like if the VIX hits 25, buy a put option on the S&P 500. Or if my cash balance goes above $20,000, move the excess into my direct index. You approve the workflow

and your agent handles the risk. Monitoring the market, watching for your conditions, and executing your strategies exactly as defined. An investing platform driven by your intent, not just your clicks. You can also get full read and write access to your account via the public API. Go to public.com slash market and fund your account in five minutes or less. That's public.com slash market. Paid for by public investing. Brokred services by Open to the Public Investing Inc. Member FINRA and SIPC. Advisory services by Public Advisors LLC, SEC registered advisor. Complete disclosures available at public.com slash disclosures.

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Can this Fed cut rates? Not once, not twice, but maybe three times this year. Veronica Clark of City thinks so. Gradual weakening in demand will lead to a rising unemployment rate in the summer months. Veronica joins us now for more. Veronica, good morning. Good morning. Each passing day, this sounds more and more contrarian.

Just lay out your argument for us. No, definitely, you know, to get 75 basis points to get any cuts at all, it does have to start with the labor market data, right? And right now, yeah, nothing really looks like it's breaking in the labor market. We even had a stronger jobs report last month. I would take the payroll numbers with a bit of caution. They are very volatile now. And I'm not really encouraged by what you see in the unemployment rate.

We've had this big slowing in labor supply. Labor force participation rate has come down. And the unemployment rate is still stuck at 4.3, 4.4%. That means that demand got worse. And that's ahead of the summer months when you usually hire a lot of people, when you get students entering the labor force, new graduates. And it's been the summer when we've seen the unemployment rate rise the last couple years. There's a reason the Fed has cut in September for the last two years.

It's when we see the summer data. You've got unemployment going up then? Yeah. Where have you got inflation? It needs to look better, right? So the inflation focused right now, it's still uncomfortable, right? So even the May data, I think, will look uncomfortably strong. But I think if we see monthly inflation readings for June, July, August,

data that we'll have before that September meeting, if those monthly reports look better, annual inflation will still be high. But you do need inflation, at least on a monthly basis, slowing for the Fed to be comfortable cutting. What would you have to see to change your view? Stickier inflation for longer, not seeing the seasonality in the labor market data, really within the next couple weeks, that seasonality starts to first play out in initial jobless claims. Once you get around the start of the summer, Memorial Day holiday, a real mid-May, certainly by June, you do see claims starting to trend, So that's the first thing I'm watching for.

If that doesn't happen within the next month or two, then, okay, maybe the labor market has durably gotten better. Isn't there a bit of a stress on this entire equation because it might not be as hinged to the labor market as it has been in the past, that inflation could be stickier, even without the participation of the labor economy, just based on all the spending coming from hyperscalers?

Yeah, I mean, I'm certainly worried about that AI-related inflation. That actually does get a big part, a big weight, core PCE, some of those computer software-related components. So yeah, we are getting inflation there. But the demand-driven, tight labor market kind of inflation that the Fed would be most reactive to, that's what we really don't see. And I do wonder if having the dual mandate kind of forces them into caring about that kind of inflation. Even last week, we got an update for the Atlanta Fed wage tracker. That's like the monthly proxy for an ECI, Fed's preferred wage measure. It's very low again. It fell a lot. So you definitely don't see that labor market

tightness kind of inflation. Do you think that this Fed is going to have to tacitly accept 3% inflation in order to continue on the path that you see? Yeah. I mean, on an annual basis, CorePC is going to look more like three for most of this year, right? I think most officials will be really cautious on that for now. But it was interesting to hear, you know, new incoming chair wars talk about other measures of inflation, right? The trimmed mean PCE. Even CPI is running softer than Core PCE right now. Maybe they can, you know, adjust a little bit in what they're

caring about. The president thinks potentially you need to wait until there's the proper figures, look at them after the war is over, almost signaling that he will give Kevin Warsh's Whitmore of breathing space. So when would these three cuts actually happen? Yeah, well, it would happen

later in the year after, if we see, if we see the weaker labor market data. But yeah, for right now, I don't expect that he can be particularly dovish going into that June meeting, especially if markets perceive that we're not taking inflation seriously, then it's, you know, we get yields higher. John has brought up a lot that this is the man who said in his Senate hearing, inflation is a choice.

So how hawkish do you think verbally he's going to be? Yeah, I don't know. It's really tricky. You know, he's definitely been more hawkish when it comes to things like the balance sheet and trying to offset that with sounding more dovish on policy rates. But it is really hard to know what his views are going to be coming in. He is more traditionally hawkish. Is there going to be, you know, 180?

I don't think so. But yeah, we'll have to see. Initially, inflation is a choice, sounded hawkish. And then in the actual hearing, it started to sound increasingly dovish because you get to choose your index. Yeah, exactly. Yeah, we don't really know where this is going to go. Yeah, we have not heard.

The optics aren't great, are they? They've missed their target for five years, and they're talking about changing their preferred index. I don't think they will. Time is not good. Yeah, I don't think other Fed officials are going to be comfortable with that. But, I mean, it is an interesting signal that, you know, what you are supposed to care about is the strongest of the biggest of

core inflation measures right now. I was reading some research from BMP Paribar, and they've got a different view on things for the path ahead. Everyone's entitled to their own forecast, of course. They think on the hike and the way you discuss the potential for one is to start reflecting on the insurance cuts you took a year ago and the year before and emphasize that they were just insurance cuts and talk about taking them back. Yeah. What would you think of that kind of move? I mean, the market's already done that a little bit, right? And I think most fed officials will still see that rates are on the restrictive side of a neutral range. So if you do start to see any wobbles in the labor market, then suddenly you don't need rates even more restrictive,

of course, right? And I would kind of agree with that restrictive assessment just because of what we see in all the wage growth slowing home prices that are pretty weak. How messy is the CEP going to be next month? Yeah, pretty messy. Maybe at some point we even get some changes to it, right? You know, Kevin Warsh was talking about scaling back some communications, but potentially. Maybe that's an easy out, right? You just say very little in June. This is the Bloomberg surveillance podcast, bringing you the best in markets, economics, and geopolitics. You can watch the show live on Bloomberg TV, weekday mornings from 6 a.m. to 9 a.m. Eastern. Subscribe to the podcast on Apple, Spotify or anywhere else you listen. And as always, on the Bloomberg Terminal and the Bloomberg Business app.

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