>> economists and everyone, companies, are having a really difficult time keeping up with how fast fundamentals are improving. >> in the u.s., we are seeing a rapid rebound in demand, and supply is taking time to adjust. >> if the economy stays this strong, fueled by the stimulus, we get inflation. >> a decent amount of risk for inflation to keep rising and staying higher for longer. >> have to focus on ambiguity. >> this is "bloomberg surveillance." jonathan: from new york city and to our audience worldwide, good morning. this is "bloomberg surveillance." alongside tom keene and lisa abramowicz, i am jonathan ferro. we advanced 20 points on the s&p 500. we begin with the most bizarre

story, yet incredibly serious. the u.s. calling for the immediate release of a journalist arrested after the forced grounding of a ryanair flight in belarus under what is widely considered now to be under false pretenses. tom: we did not consider this friday, ryanair 3340 -- jon, i know you have taken this numerous times from cyprus up to finland, and it has gone over belarus airspace, now on the border of latvia and estonia, where it will land. we are looking at the airspaces of ukraine to the north, belarus. jonathan: and there is a summit kicking off later this afternoon tom: the summit is a key deal, but i think back to what we did with the former prime minister of sweden, i want to know the reaction of moscow as much as i want to know the reaction of minsk.

jonathan: how do you punish the government without isolating the people and pushing the country further towards russia? lisa: who is going to have the center of power? carl bildt was saying russia will have the center of power most likely with their key meeting today at 3:00 p.m. i also want to know, what is the collaboration between the u.s. and europe? how closely are they aligned as president biden tries to reestablish ties? jonathan: and things changed over the weekend. tom: they ramifications are profound. we are looking at the airlines. you have to believe they are waiting would you say it is a pre-summit? jonathan: pre-summit, and there is a dinner later. this is according to our correspondent out of brussels that i rely on. tom: as carl bildt mentioned, it is every nation for itself or is it -- for itself or is it

working together or is it about brussels? jonathan: that is the political story. right now, price action shaping up as follows. s&p advancing about 20 points, a lift after we were crushed last week. up about .5% on the s&p. yields unchanged, 1.6165 percent on the 10-year. a stronger euro. lisa: we have been having pretty muted price action within the major indexes but not so much in the bitcoin world. you can see this crypto asset class and the action based on what is going on in china and with the guidance. this will be the subject of a crypto asset conference held today in this week. the fed governor will be speaking at 9:00 a.m., and ray dalio of bridgewater speaking

today. there is increasing concern that some of the frost in that world is coming up with more companies opting not to raise money through that vehicle. the house financial services committee will hold a hearing on bats and direct listings, investor protection, at a time where people are worried some normalization of fed policy could lead to disruptions in these markets. and today, the u.s. commerce secretary will be heading to macron technology in virginia, talking about the chip shortage. how quickly can the u.s. act to shore up chip supply at a time when the amount of the lag time between when you get it is at a record? jonathan: thank you. two-your nose come tomorrow from the treasury, five-year notes shortly after, a day later -- two-year notes come tomorrow.

there seems to be some weakness, which we have seen again and again over the last several months. not sure why. lisa: not sure anyone totally understands why. it has to do with a bunch of issues, but it has been a key marker of just how much pushback there can be. vigilantes, something like that. jonathan: back in the bond market. our vigilantes making a comeback? tom: the iron ore vigilantes are out in force. jonathan: matt horn bok with us -- matthew hornbach with us now. morgan stanley's head of global microstrategy. good to catch up with you, sir. can you start every day with the same story in a becomes boring -- is there information in that as a market participant? >> thanks for having me. i have been speaking with bond

market vigilantes since the start of my career in tokyo, japan. i think the same news story has been filtering through my feed since june of 2000, which is when i started at morgan stanley. no, i do not think it offers much value to keep focusing on the same thing over and over again. really need to try to analyze what is new about the situation, how it might change the future. tom: matthew hornbach, good morning, tom keene in new york. why should we do today? we have money to spend. we are not going to enjoy the equity market. what is the application you would do today in the bond space, as they say? >> yeah, thanks, tom. when you have money to put to work in the bond market, the question is always, am i going to be investing this money right ahead of a 25 basis point move higher in the yield? because, obviously, if that is coming to you, then you want to

wait. unfortunately, we just have not had that type of move of late. but we are advising clients to do is to take the money they haven't put it to work in the highest value -- take the money they have and put it to work in the highest value areas. and that five, 6, 7-year sector, you're joking about the seven-year auction coming up, that is a good place to put some money today. ultimately, time is your friend here. you want to take advantage of that by putting the money to work in those sectors that offer the highest rolldown. lisa: i want to go back to you saying you have been talking to bond vigilantes for decades now, and perhaps they have not been right, the generous way of putting it. is there a feeling all these people calling for inflation are misguided and should take a lesson from history, yet,

history is tolerating more inflation. but you also have the fiscal impulse, fiscal spending. what do you say to investors who present that reality to you and say, look, this time is different? >> yeah, lisa, it is true, this time is different. we have a completely different monetary policy environment, completely different fiscal policy and environment than we're used to. as a result, prices are going to go out more over the next year then we have seen in quite some time. i do not think there's any doubt whatsoever about that reality. the question for the bond market is, what about the years beyond that? can we really be confident that we're going to have the same fiscal policy environment, the same monetary policy environment? bear in mind that at the end of 2022, we have a consequential midterm election that contains

politics in the country, and we also have a situation at the beginning of the year a situation where the fed chair and vice chair have terms that are expiring. it is not clear what the biden is going to do in that regard. not that that will completely change monetary policy from the fed, of course, but there certainly is room for them to make adjustments on the market, and that is going to have a different effect on the market. jonathan: let's get straight to the issue after five minutes, right now your 10-year is at 1.61162 percent, and you have a central forecast moving towards 1.80%. a bearish view and a bullish view down towards 1.50% on the 10-year yield. i get the sense you think the inflation story as fully priced and the balance and risk is going towards the bull case and treasuries. what about the bull case

versus the bear? case -- the bear case? >> we are not ready to capitulate on that paired we still thing interest rates are moving higher, gradually. the base case from archie global and u.s. economists is that -- from our chief global and u.s. economists is that the environment will be conditioned to hiring going forward. but there are risks to that base case that are not yet in the price. so to the extent those risks materialize in the next six to 12 months, then, yes, we probably will have lower interest rates than what we are currently forecasting. we are not ready yet to go there, but at some point, maybe in the three to six month, we will go there. jonathan: i can feel the tension. after being on the same page for 12 months, deciding to come back

with a little bit of a vengeance. just a little bit. tom: that is what he says to me all the time. jonathan: matthew hornbach of morgan stanley. it is normal for a research team to have different views are they get together and have a base case. as things materials -- materialize coming you wonder if we go back the other way? when you start every day talking about the same thing and it is no longer surprising to people, as some point you have to ask yourself, ok, if it is boring, is that because it is in the price? is the boat too loaded on the one side? tom: so much of it is the game of, is that in the price, is it not? we react to the news. you look at the futures today, nasdaq leading the way, up .6%, people are beginning to frame a better economy in the third quarter. jonathan: you said we react to the news, but it is how react --

how we react to the news paired what if we stop reacting to the same news? tom: then it will be the pendulum of zombies. jonathan: we will continue this. coming up, gene tannuzzo, columbia threat nido -- thread needle, looking forward to that. 4171 on the s&p. yields sunshine just desk yields unchanged -- yields unchanged. after a beautiful weekend in new york city, this is bloomberg. >> with first word news, i'm pretty good cooped up -- ritika gupta flights being redirected as the government and mixed -- minsk force a ryanair plane to land and arrested a journalist on board. there isn't a meeting in brussels tonight -- there is a meeting in brussels tonight. there is talks of suspending

flights over belarus and keeping the airline from letting at eu airports. shares of virgin galactic soaring premarket trading today after the company founded by richard branson conducted a test flight to space for the first time and they more than two years. the vss unity flight from new mexico is seen as a critical step in its path towards commercial service. it put virgin galactic back on track on plans to fly to suborbital space as early as this summer. in the u.k., prime minister johnson's plan to unlock the economy appears to be on track. data shows covid vaccines are affected against a new variant first identified in india. 72% of adults have received a first dose of the shots. the goal is to fully remove all restrictions by june 21. golfer phil mickelson won the pga championship, making him the oldest player ever to win a

major tournament. he turns 51 next month and got his sixth major title. overall, he won his first major at the age of 23 -- 43 in 2004. i am ritika gupta. this is bloomberg. ♪

>> the real question is whether the republicans will meet the effort that the president is

showing, a sincere effort to move this country forward in the president has been clear that inaction is not a problem. jonathan: a white house adviser speaking to cnn over the weekend. from new york city, good morning. alongside tom keene lisa abramowicz, i'm jonathan ferro. s&p 500 advancing 18 points, up by .5%. bond market, 1.6182 on 10-year. euro above up .2%, a stronger euro, reclaiming the 1.22 handle. wti crude up about 1.7%. negotiations in washington, d.c., this from the senator from maine, republican, senator collins saying negotiations should continue, but it is important to know there are fundamental differences here.

infrastructure. i mentioned this, what is infrastructure? we have been asking that question over the last several months. if we do not have the answer, have we made progress? tom: the major difference is it is may and not april, february, or march. time is moving on. we will get to that in moment. i have to jump in here, because six hours outcome it is 1:00 p.m. on continental europe, and they're getting towards two hours from now we may see announcements. jonathan: 3:00 p.m., i imagine we will get comments from individual leaders in europe at the eu summit you are alluding to. later this evening, there will be a dinner. we want to know where each country stance on what to do, whether every country wants to do something, and then it is the decision of what to do. is it a package of big broad-based actions are

individual here or there? i think it will come down to a lot of people, you have to do something about the airspace around belarus. can you travel through it or not? tom: i went back and forth with guy johnson, and you have klm, air france, will that plane fly or another one from germany, will that plane fly? will the infrastructure plane fly in the united states? our bloomberg infrastructure expert joins us. to me, emily, the arch issue is the calendar. may is done. june is upon us. now what in this debate? emily: you are right to point out the calendar here. in the house, we expected to see a mark up on some legislation dealing with infrastructure this week. and then last week, we got news that that will be delayed until the end of june. meantime, congress has other

stuff getting on their calendar. and i think that white house -- a white house official sums it up well when he said biden wants to do this in a bipartisan manner, but they are willing to go it alone. democrats have been waiting for the signal from president biden on whether they should just start putting together a bill that can try and pass through that budget reconciliation process. tom: what will be the catalyst this week to get that done? they're going away for, what, a three-week fact-finding tour with their districts, whatever you make of it? they have to get home to their constituents. but what happens this week to advance a process? emily: i think we will be looking at the senate republicans who biden has been negotiating with to see if there's any way they can move forward with that term to down $1.7 trillion bill biden came back with on friday. but that did not get a warm reception from senate republicans. they were not excited that moore had been cut, saying there is

still plenty of stuff in this bill that is not infrastructure -- they were not excited that more had been cut. at the same time, the progressive wing of the democratic party has been putting increasing pressure on president biden saying, look, republicans want to cut all this stuff, we want to deliver it to the taxpayers and have the votes to do so, we need to move now. democrats are also very conscientious of what happened back in 2009 with the affordable care act debate where they waited and waited and waited for bipartisanship until it was so late and that wound up sort of costing them, even though they had to go it alone. these two talk about what is actually getting done -- lisa: let's talk about what is actually getting done, highways, bridges, tunnels, and investing a plan to finance these areas of infrastructure in the near term. how quickly could we see that being done, and how much is the headline number here? emily: we are seeing the senate move ahead with a bipartisan bill on highways, something that

needs to be reauthorized by the end of september. unclear on how this legislation might wind up working into a larger package. lisa, one of the sticking points right now is exactly how to pay for this package, because you are seeing president biden's tax plan come to congress and seeing the rubber meet the road. bloomberg reporters speaking to those on the house ways and means committees, the tax committee, say staffers are already starting to train back the president's plan and making further adjustments to make sure democrats can get on board. moderate democrats know they have a tough reelection in 2022. they see these giant tax hikes president biden is proposing, and they are saying, wait a second, if these past, are we going to lose the election? jonathan: back to the story of the grounded flight, the ryan jet grounded in belarus.

there is the following said, sanctions on belarus have never been effective. they have coverage from russia and lukashenko that have been sanctioned for decades. goes on to say eu sanctions have fallen short as they require unanimity from the member nations. in this situation, it might help that so they can do something with perhaps more strength. tom: it is a strength, but it is the linkage to russia. it comes to the united states in the discussion. what pressure can we plan russia to be a distinctive force with a dictator? emily: president biden is going to be meeting soon with russian president putin. they will have discussions. i think a lot of what pressure they might apply might depend on what comes out of the european leaders meeting today, on what direction they go in. you have seen the top democrat on the senate foreign relations committee call for a ban on all

flights in and out of belarus until an investigation can be done. i expect this is a story you will see a lot more politicians in the u.s. weighing on today as they wake up and get there monday started. jonathan: emily wilkins, getting your monday started early, thank you. what on earth is happening in the belarus? tom, finding unanimity at the european level is sometimes tough. given what happened over the weekend, they have to move. if they don't, they open the door for this kind of thing to happen again. reports coming out of europe suggest maybe it will not just be the air links that are shut down, and might be the ground links. air and ground, that would be something. tom: particularly with commercial viability in the belarus. jonathan: coming up, neil shearing of capital economics group, looking forward to that. good morning. alongside tom keene, lisa

abramowicz, i am jonathan ferro. s&p 500 up 18 points, advancing .4%. euro is unchanged. heard on bloomberg radio, seen on bloomberg tv. this monday morning, this is "bloomberg surveillance." ♪

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♪ jonathan: from new york city, live, this is bloomberg surveillance. usually you interrupt 20 seconds and. two weeks of losses on the s&p 500 which is marginal. a bounce back on the s&p 500. tom sounds board so maybe there is value on that. you hear about the same thing every single day so what does that mean? the guy to watch is at morgan

stanley. a lot of this may already be in the price. the risk is shifting and when you listen to morgan stanley, the case of one hundred 50 is more. let's finish on this, let's get to the surprise index in the united states for the u.s. economy. this is from bloomberg. it is the data relative to expectations. there was a series of upsides of rises and you see this ripped to the upside and you saw that in the back half of last year. data kept delivering positive surprise and that story has flipped over the last month or

so. economists are less surprised to the upside and more surprised to the downside. are the expectations to side --too high? are we getting too bored with the same thing we talk about every day? are the economist to exuberant about the future? what does it mean for the market? tom: i will project out into q3 and q4 especially what the use of cash is. futures are up 17. watching the vix at the 20 level and david nixon joins us right now with the individual securities moving today. >> we made as well start with virgin galactic. it's still up 18 .5 percent in early trading. this is after a saturday flight into space from new mexico.

it's the first time virgin galactic has a plane into orbit in more than two years so that's put the company closer to a couple of goals. billionaire richard branson is --will get into suborbital space sometime this summer. the other part of it is being able to sell seats to paying passengers. that is the business ultimately virgin galactic so they have to make those sales. tom: what else do you have? >> cabin oil and gas. tom: too little companies. >> a 7.3 billion dollar all stock deal where the cabin shares are being combining with simerex each company's investors will have half the stock and the cabinet ceo will be the chairman of the combined

company and cimarex will take on the ceo role. it looks more like a merger than your typical deal which they described as a merger of equals. tom: thank you so much. lisa is all over this story. jonathan: parents across the city and the state are listening. the new york mayor saying all students will be back in school in september. there will be no remote option for learning for public schools in september. he says parents and students can visit schools in june and schools will not offer a remote option to students. the schools will return. it will be one hundred percent capacity this fall. lisa: when you have a remote option, the kids who decide to go to school sit there in front of their zoom at school and listen to the teacher there. you need to provide both

platform so this has been a highly disruptive year. things will return to normal attic kids with --at a time when kids 14 and 15 can get vaccinated and that's a big step. jonathan: i think this is important, as we get deeper through the summer and to september, it becomes an important point [no audio] it's also when you get a full return to school including new york city. what does that mean for the labor market? can we meet the demand for labor? tom: i hate to push the pendulum of cynicism. lisa, is this about the teachers union saying we will come back? lissa: i'm not going to weigh in on this as far as the fact that

people can get vaccinated. there are plenty of vaccine so if teachers are concerns about their health and well-being, they can get protection. i think that has been one of the key measures. also the idea that students can have the option of vaccination in this raises the question of people below the age of 12 and when they will be eligible. jonathan: it's important to say where the headlines of come from. the mayor was on msnbc this morning. i find that bizarre that he has chosen a national broadcaster to break the news and specific to new york city. tom: this is a huge, sensitive issue. it is the collapse of local media. jonathan: either that of the -- where the ego of new york city's mayor. tom: the mayor of miami, the mayor of new york, the mayor of dallas, if they want to get the word out, you go on surveillance or morning joe or cnn, that's

what you do. that's the new reality. lisa: i would argue that many local policies are national now. jonathan: a press release in a series of interviews after that. tom: let's go with capital economics. how have you changed your spreadsheet on output in the last week or so? what is the nuance you have amended? >> we have not changed our spreadsheet. what has happened is we have become a bit nervous. we pegged to six .5% wrote in the u.s. this year. two weeks ago, number of people said 8%. we were slightly nervous we might undershooting. the consensus has shifted back

to six point 5% which is still strong. it would make the u.s. the leader in economies. i think the u.s. is back to us --to its pre-pandemic growth. it's probably not as strong as some people were expecting a couple of years ago. jonathan: what do you make of the calls for tapering from the federal reserve? >> at the moment, i would say stay the course. there are several aspects of this that we just don't know how they will shake out. when is the strength of demand. it's really about the supply side of the economy we don't

have much information at the moment. in particular, the extent to which the pandemic has temporarily damaged the economy. parents are staying at home because the kids have to stay at home most of may be some people have taken an extended break from the market. and all of the inflation data has been distorted by the endemic itself. you wonder what the danger is here. you take stock at the end of the year and then take a position. lisa: what would the fed have to see if you move toward a might -- toward a tighter monetary policy? >> may may want to look at the cyclicals.

i think the key thing is you look at the labor market and how quickly it's tightening. we will start to see wage pressures holding. wage growth is faster in the u.s. than other developed markets. it's pretty healthy but it's not inconsistent with the target. there may be shortages that could be protracted. i think you need evidence of that before you see any sort of tapering or tightening. jonathan: always good to catch up, thank you. here are some headlines -- russia's foreign minister calling for cooler heads in the jet incident, the grounded air flight in belarus.

he is speaking with his greek counterpart. european leaders are set to meet this afternoon and to the night. tom: beneath that is another headline and this is what everybody presumed the flight captain was in action above minx --minsk. that's a side story right down but at the same time important. jonathan: it is important. these are not decisions we want airlines to make. if you are an airline and operating a jet and you were told about a potential terrorist threat and other jets escort you to ground a plan, what do you do? you probably ground the plane. lisa: you don't want this to become a precedent. rhetoric coming out of europe in certain parts of the united states. jonathan: it underlines the need

for a severe response. coming up, the allianz is looking forward to equity futures. the yields are up almost one basis point. on radio, tv, this is bloomberg surveillance. ♪ rikit europeana leaders: will discuss possible sanctions after belarus leaders ordered a plane to land and arrested a journalist on board. it was a violation of european air travel protocol and drew condemnation nationwide. worldwide. they could have possible flight bands. three times this year, major pieces of u.s. infrastructure have failed.

it was the texas power grid and then the east coast main gasoline pipeline and then a freeway bridge over the mississippi river. it cost billions and left more than one hundred 50 people dead. president biden's one point seven billion dollar infrastructure package wouldn't necessarily have prevented any of that. experts say these incidents highlight a flaw in the way the u.s. thinks about and pays for infrastructure. the company focuses more on building new things rather than maintaining what it has. china is accusing the u.s. of promoting theories that the coronavirus escape from a high-security lab in wuhan. china responded to a new report about sick workers at the facility. the lab has denied the claims including a u.s. state department report that some researchers became ill as early as the fall of 2019. china calls the claims conspiracy theories to divert attention from the u.s. governments on the handling of the coronavirus.

global news, 24 hours a day, powered by more than 2700 journalists and analysts. this is bloomberg. ♪

♪ >> rising income in asia will be the key source of growth over

the next 10 or 20 years. i think that's why you are seeing businesses pivoting toward those and they won't go away anytime soon. jonathan: that was the j.p. morgan asset manager in europe. good morning, i am jonathan ferro. equity futures are up 18 and we advanced 4/10 of 1%. that's why the bond market yields are up about half a basis point. a stronger euro-dollar. tom: it's a churn of the market nevertheless, a lift in equities. it is extremely fluid at this moment. jonathan: very much so with any

european summit, we have to understand whether there is agreement to do something. it seems like there is. the something is what will be debated and we hope there is unity on that front. it comes down to basic things. most people in the last 24 hours , the consensus view has had to be that we have to do something about the airspace of belarus. tom: mr. mccraw is meeting in some form with lithuania. our team nailed it with the comment you heard from mr. bell of jp morgan about the growth of asia. we review this important statement.

there is permanence of growth in asia. it really is leaping out from the rest of the global economy. >> i think it has been the standard performer through the pandemic because of the early control of the coronavirus that has allowed the economy in east asia to get motoring again quickly. the export story is going gangbusters as well. there is no doubt the intention is there. there is that demographic challenge. we had census figures out of china and south korea and we are reminded of the challenges with the aging workforce. tom: what are the limits you observed in the pacific rim of the governments against free market pricing and capitalism? >> we are seeing a good example

of that at the moment. china came out with tough comments in terms of where the commodity prices are headed. what exactly can the chinese government to about it? of course, they can perhaps try to keep a lid on speculation in the futures market in china but what can they do about the price of commodities mined and traded outside of china and reflect global demand? it shows you that china continues to have suspicions about the market. there is a big run-up in commodity prices. they clearly want to take whatever steps they can. lisa: in the past, china was the main driver for these comedic -- commodities due to infrastructure spending and now you -- and now they are reducing

some of their credit impulse by reining in the cost of these projects and facing areas that have already been built up stop

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