>> markets love this period of time. >> unfortunately, we will have to wait a little bit longer to see what the fundamentals really look like. >> i'm very nervous some of those jobs will disappear. >> this is bloomberg surveillance with tom keene, and lisa abramowicz. jonathan: good morning, good morning. this is "bloomberg surveillance." tom keene, one more day of rest. it has been a mild move lower in the equity market and the feds are starting to make a little more noise. lisa: let's not call them true bears.

increasing number of banks are coming up with underperform on u.s. equities. this is not a worldwide collapse. the idea is that people are so bullish sleep position, we will get -- bullish sleep -- bullishly positioned. >> there are a number of risk factors throughout the next six days. he also talked about policy risk and legislative risk. what is happening down at capitol hill, or what is not happening. now was not the time to be heavily advocated -- allocated. jonathan: the next two months carry an outside risk. lisa: i feel like i should start growling, the bears making some noise.

you want me to make -- get worked up about a bearish downtrend. i do not know what will trigger it. what economic outlook will send stocks down? you can see the tech stocks do even better. the question really is around taxes, corporate taxes, as well as an unexpected threat. citi is interesting by saying that any minor correction could be amplified due to the bolus positions out there. the key point is fragility. jonathan: we are down five on the s&p. let's work through it. we have been sounding off on treasuries. the fs markets, euro negative.

lisa: the reason why -- i have been too distracted trying to figure out the labor market. i have been trying to understand market moves that have been muted and not really interesting the last few weeks. the expectation is for a to remain around a record 10 million job openings. why are these positions not getting filled? the participation rate is still below where it was pre-pandemic. the unemployment rate is still much higher. here we are, all of these companies trying to hire and not being able to. we were talking about september, this was supposed to be the key month and everybody went back to school and went back to the

office. that has been delayed. when does the start to matter? the $120 billion of debt being sold this week, there will be $38 billion in 10-year notes. to me, the question is how much demand is there, especially with the fed tapering on the table. if you look at the real yields, negative real yields still steeply negative. people are giving up money for the privilege of going into the u.s. treasuries. how much is this determined by overseas buying? at 1:10 p.m., you will be talking about what is going on with the dallas fed. i am very curious to hear what

he is going to say. he is one of the top three at the federal reserve. what will he signal when it comes to tapering the feds balance sheet? jonathan: what time, lisa? lisa: 4:30 p.m. jonathan: 6:00 p.m. eastern time, dallas fed president holding a virtual town hall. this will probably be the most-watched virtual town hall from the fed president. kailey: it may be colored a bit by the stock trading and the amount of money he has made. i wanted to point to what you heard from jim bullard. forget about the weak jobs

report, he is still saying the fed should push ahead and taper in the near term. jonathan: dallas fed active buyer and seller of stocks last year. lisa: it was vetted by compliance. if anyone wants to point fingers at the fed -- point fingers, point at the fed policy. all of these people calling to audit the fed. there is skepticism around fed officials who have more power than ever. jonathan: not a situation you need. let's bring an wells fargo international economist. i want to start with morgan stanley. the argument we have made, it has been strengthened. do you agree? >> no, probably not.

it is too early to sound the all clear. when you look in to the fourth quarter of the year, even though various governments have not put widespread restrictions in place yet, we are seeing some uncertainty. it is not necessarily related directly to the health scare. feeling unsettled will be a drag on it. kailey: perhaps it is the fiscal rolloff, the idea that the enhanced unemployment benefits dried up this week. although this goes into a weaker consumer spending picture. how much are you tracking that? how much credence to give to that argument? >> i do not think it is dire in

any way, shape, or form. household disposable income was down in the second quarter in the case of the u.s. some other countries in the eurozone and canada, there is more of an upwards trajectory. retail sales are volatile. when you look at consumer finances -- lisa: how do you think the fed is looking at the health of the consumer in the labor market? what do you think? nick: that is an ongoing debate. the federal reserve moves in a very slow and steady fashion. you can see the transition.

we will pay attention to some of the soft data but the debate and the discussion is ongoing. we think it will happen by december and the tapering will start next year. there is some downside risk to the economy, but a policy is accommodative in the united states. jonathan: one man who has been talking is dallas fed president robert kaplan. what do you think of the controversy? a little bit hot water in the court of public opinion. does it undermine the communication from the fed? nick: i would agree with lisa

and terms that it was in line with the policy and vetted by the compliance and legal teams. i am sure it will be looked up from a policy point of view about what should be the rules regarding trading. not really my area of expertise. jonathan: thank you. lisa, not many people are going to want to touch this. the communication from the federal reserve will be undermined by things like this. lisa: albeit, that is controversial. the fed's policies prop up markets when they make their bold moves and given their hesitance to taper, even though

there is some pretty strong inflation data also supported of markets, what does that mean? they are betting on something -- jonathan: this is individuals and congress, too. -- this is individuals in congress, too. lisa: no one is cracking down on it. jonathan: regulatory capture of some sort. equity futures down five. i need to stay out of trouble. fx market, euro weaker going into the ecb tomorrow. on radio and tv, this wednesday morning, good morning to you all. this is bloomberg. ♪ >> in the u.k., parliament is

expected to vote for boris johnson's call for new taxes. they would go to improving social gaps. it will help trim budget deficits. president biden toward new york and new jersey after remnants of hurricane ida pummeled it. mexico, and historic -- it loosens limits on the procedure. in brazil, thousands of supporters and demonstrations. the march -- the approval rating

has plunged. it seems to be apple's next big thing isn't out. -- is in doubt. global news, 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. ♪

>> we have to listen to the

scientists and the economists, and the national security experts. they all say that this is code red. the nation and the world are in peril. that is not hyperbole. that is a fact. jonathan: the president on climate change speaking in new york. tom keene is back with us tomorrow. s&p futures down five. the bond market -- yields are in a couple of basis points. this is what i want to talk about briefly. there is a whole lot more through the day on bloomberg tv and radio. ever grand closing positive today by almost four percentage points. kailey: all the way down to 347,

after the second ratings downgrade. they had to cut the rating even further into junk. the question is not just about evergrande. this is a story that is not going to go anywhere anytime soon. jonathan: lisa, we can talk about the debt profile. a report suggesting that evergrande plans to suspend interest payments from two loans. lisa: just to add on, $300 billion liabilities to other borrowers, including shadow banks. to give you a sense of the potential ripples. the issue is not debt maturity. it is simple interest payments.

jonathan: let's talk about contagion risk. lisa: who has gone into china to buy securities? we saw how interconnected these banks were. these are the types of notes of contagions that we have to look out for. jonathan: joining us is emily wilkins. politico publishing talking about the senate bias of this administration. emily: you have to have the house pass legislation and to a certain extent, president biden is risking anchoring certain members of the house -- angering certain members of the house who feel like they do not have their say.

you saw chairman of the house transportation committee, he was very upset when the administration primarily worked with senators to get the infrastructure past. -- passed. lawmakers in the house vow that it will not be the case with the reconciliation package. members of the house are also elected officials. they want to make sure their ideas and policies are a part of the conversation and that this is not just a bill being developed between the democratic senators and president joe biden. lisa: i have not heard about joe manchin recently. emily: he came out with that big op-ed advocating for far less than the $3.5 trillion. i do not think the negotiations

are quite that tough. right now, you are sitting lawmakers working behind the scenes and putting together the details of this reconciliation package. each committee is working on their own peace right now. we are beginning to see some details. there are more detailed outlooks and what these policies will contain. the goal of getting this done by the end of the month. lisa: joe manchin does not want to spend any more than 1.5 trillion dollars on socially oriented programs. if we are looking at spending two fewer trillion dollars, what does that mean? emily: a lot of this comes down to what joe manchin wants versus what progressives want, striking the balance in between to make sure democrats remain on board. white house advisor said the white house is in conversation

with joe manchin and talking about what he wants to see in this bill. the other big question, we are looking at the top line number, but the other is how much of this bill wind up being paid for? what kind of taxes can they get in there. how much will offset the social programs? it is something that we have heard from other moderate democrats. that is something i will be keeping my eye on the next several weeks. does the bill being paid for allow moderates to feel more comfortable with a higher spending target? jonathan: thank you, bloomberg government reporter emily wilkins. we have been talking about the downgrade from morgan stanley. the next two months carrying an

outside risk of growth. lisa: the agenda is not just passing the plan. will they pass it with higher taxes? the conversation is going to represent that. people are looking at how they're going to crackdown. we have a headline rate that companies do not pay. you end up with a 25% corporate tax rate. that might have more of a drag than a benefit. jonathan: what do you make of that, kaylee? kailey: this is not just about the trillions of dollars in socially oriented spending. they will not pass the info structure package until there is an action on the social origins of spending. they are focused on things like climate and childcare and you

have to consider the economic implications in terms of having the harder infrastructure spending. it could mean that both things collapse. jonathan: lisa might lock you in a closet. lisa: i am just trying to figure out -- i am trying to understand what the negotiation tactics really are. you really want to wind me up today. you are trying everything you possibly can. joe manchin represents a number of moderates and they need to come on board with something that is palatable for their constituents. how do they make it palatable at a time when we still need some impulse? jonathan: i do miss tom a little bit.

lisa: a punching bag. jonathan: bond market, yields are lower by a couple of basis points. from new york on radio and tv, this is bloomberg surveillance. ♪

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jonathan: life from -- live from new york city. s&p done about five. the nasdaq 100 down by a 10th. the small caps had a real struggle in yesterday's session. underweight over at morgan stanley. maintaining a view on europe and japan. we are always focused on the shark closest to the boat. the shark is everything u.s. centric.

this talk is all over the place now. it is the bonds that you want to watch. that company will have to avoid the loan repayment on september 26. that is something to keep and i for. -- an eye out for. the question we have to ask, does it bleed elsewhere into the rest of the world? some signs look good. that is the focus. the bond market, a curious story . it was selling often not rallying. yields higher friday. this morning, lower. hard to get a read on this bond market this morning. a ton of supply on the sovereign side and a ton of supply on the credit side.

lisa: record number of issuers yesterday. you have to wonder why there is still so much demand. do you think the ecb is going to go there? jonathan: for the first time in a long time, i look forward to the ecb tomorrow. i get shut down by that news conference every time. his i am slightly embarrassed i have waited for so long. i hope tomorrow is going to be a little bit different. lisa: i want to go back to what you were talking about with morgan stanley, citigroup, and credit suisse downgrading their expectations for u.s. equities. they are not alone. they see a slower growth trajectory. is it a big brought downdraft or a specific selloff for specific stocks? someone with morgan stanley and credit suisse, hsbc -- you just

recently did get a little more cautious. can you give us a sense of what was behind your view and what triggered the change? >> if you look, you can see the delta variant has had an effect on growth. that will continue to play out in the coming months. you have seen the labor markets remain somewhat unglued in terms of the demand seems to be far out stripping the supply. there are factors that have to be taken into account. september is usually a tough month for equities. we think that will play out as well. the debt ceiling and what will happen to the 3.5 trillion dollars spending plan from the biden administration. all of those things will factor in.

the one thing we are more sanguine about that others is the story is going to flip in terms of profitability. rather than talking about slowing profitability and accelerating inflation, we think that story will begin to reverse of it. lisa: it sounds like you are getting a shopping list together. going right back into the riskier bets. am i correct? jose: we have increased in europe. we think there is soft side momentum. they still look very attractive. as global growth continues to improve, albeit slowly, european exporters look pretty good from our perspective. that was something we wanted to churn a bit for a few months at least. kailey: what is the thesis behind seeking more cyclicality

in europe? jose: part of it was the story of valuations. we think it resolves itself over the coming months and quarters. we think inflation is going to slow more precipitously. as you head toward the fourth quarter, the s&p has returned over 10%. 5.3% of that 10% has come in the fourth quarter. we also see a lot of volatility in the third and fourth quarters. we expect those returns to improve. we will be reversing that as we head toward year end. will we be facing a new tax regime next year? some of those questions need to be resolved. we think a lot of companies are going to push forward a lot of their investment plans and things that could help lift

markets as well in the u.s. lisa: what assumptions are you making about the bond market and the trajectory of yields when thinking about asset allocation? jose: it is such an important variable, obviously. $13 trillion worth of sovereign debt that is underwater. as a result, any take up in u.s. treasuries is met with some pretty good demand. that is one thing we are factoring in heavily, that we think there is an upper limit to what yields can do on a 10-year for the u.s. next year's deficit is probably going to be a third of what this year's is. we should see less issuance going forward relative to what we have been used two in the last 12-18 months. -- ussed to i had the last 12-18

months. lisa: china has been a hotspot for controversy in terms of the policy action as well as people's willingness to invest in the region. he recently moved to neutral -- you recently moved to neutral. when did you do that and what was the thinking? jose: long-term, the story in asia, there is short-term regulatory risk, no question about it. if you look at the fundamentals of asia being overwhelmingly possible -- positive in the near term and long-term. the pillar of growth in the global economy and the pillar of wealth creation and technological innovation. we are entering into a virtuous cycle of infrastructure spending , standards of education so more

workers can be trained in these technology sectors. lisa: you are not concerned by the crackdown on big tech companies? jose: that regulatory risk is something we have adjusted for. that is why we went to neutral. in terms of fundamentals, maybe not as pervasive as what we saw in the short term. the biden administration talking about a lot of issues protect companies as well. it is not unique to china. we feel like it is something that will pass and we can reevaluate our position.

longer-term, we think asia is a tremendous area to invest in. jonathan: good to hear from you. let's get a check of the markets for you. into the bond market, yields are lower by a couple of basis points. the euro is a little bit weaker. we are negative 2/10 of 1%. my friend manus cranny is standing by in cairo. look at that chair. if only they could see this on radio, the palatial manus cranny this morning.

>> we are --thank you for having us into your office. it is an interesting time in our region. within the context of the outer region. that issue will be a focus of the session. the transformation of this nature will have interesting

repercussions and we will wait to see what those repercussions are in terms of how the government will operate and the commitments we have made and how we can have the security and stability of the region. >> do you see this as a disengagement by the biden administration making this region more unstable? >> i do not think the u.s. is a superpower. or can disengage. i think we will continue to rely on its traditional relationships and partnerships as a strategic ally and will continue to extract its interest and provide the security and stability of the region.

>> there is a tectonic shift in discussions between the nations here in the middle east. would you describe that between yourself and turkey, the uae and turkey? there is a tectonic shift, do you agree? >> not necessarily. i agree that the region is undergoing a volatile situation. conditions have not been contributing to the security and the peace of the region. we have conflicts in yemen. the current situation in syria and lebanon. all of the issues that have to be addressed. it is in the best interest of the nations to expand communications and understanding

that can provide for the security and the stability. >> what does that mean -- when will you restore diplomatic ties? >> this is the second round of exploratory talks between egypt and turkey. we have been eager to find a resolution, to find the necessary formula for regaining the normal relations between the two countries. we still have to evaluate the outcome of the second round of discussions in the context of the bilateral relations and certain measures taken by turkey need to be somehow addressed and when we are satisfied that those

issues have been resolved, that will open the door for further progress. >> i have a lot to get through and time is a natural enemy. what do you need to see from the turks to move forward? >> we have provided turkey with our assessment and requirements. i think they comprehend them and can fulfill all of these issues, and i hope that they do so we can move forward. >> a very contentious issue and you have tried to arbitrate several times. are you prepared to take military action? >> the president has never indicated that he would take military action. for any country, all options are

always open. we have committed ourselves to a negotiating process. we have endorsed the negotiations and we have supported the negotiations. >> will you do everything to avoid conflict? >> definitely. we have been committed to a peaceful resolution of this issue based on best practice and we would seek that the agreement would be signed. >> the foreign minister for egypt joining me. it has been a great trip. when it comes to offices, sir, you are on a winning train.

good morning to new york. jonathan: great to hear from you, sir. they used to separate manus and i in the office. they would have us sitting in different locations. tom and i are also separated for good reason. lisa: there is literally a glass wall between you. jonathan: it is all about covid. this has nothing to do with lisa. it has to do with the man who usually sits in that chair. lisa, did you see the p iece?

covid travel still a mess, and it should not be. this has to be balanced against the progress we have made so far in managing covid. their conclusion in bloomberg opinion this morning. lisa: if you have those travel curbs, what are they accomplishing our people are in a nation? what are we accomplishing? jonathan: let's have that conversation right now. what are we achieving right now would some of the traveler sections worldwide? >> they are an essential public health strategy when it comes to mitigating the transmission of the virus. the challenge is we are a global community.

however, by going on airplanes, we have a small environment with multiple people, it is difficult to make sure all of those people are covid free. travel bans -- jonathan: do you think they are effective as they currently stand? for the europeans who cannot travel here, but if you are in turkey, you can or mexico, you can, it does not make sense. >> i also have skin in the game. it did make sense earlier in the pediment to give us time to prepare to identify strategies. i am not sure if it does make sense anymore, especially when

there is so much other travel happening around the world. lisa: we also have 75% of all americans who have received one vaccination. at what point we reach the threshold where we have to say, we are getting as close to the new normal as we are going to get, we have to start to respond appropriately? >> we talked about this on the show previously. it is not a zero-sum game. we have to minimize risk as much as possible. we cannot

i have a lot of skin invested in this particular issue. people are saying what is taking so long? it was supposed to be september. what is your view based on the data that they have? children look more and more exposed to a variant that is incredibly contagious. >> children have these incidences, inflammation of the heart that occur more likely in male children. when that happens, it is time to take a pause and to increase recruitment in those trials with children of different ethnicities and races and ages. it is appropriate that we are looking for more data and taking more time. how is it likely to impact children long-term prior to approving the vaccine? we want to minimize risk. schools, right now, do you have

strategies they have implemented to make school as safe as possible. >> a lot of offices are still not open. they are pushing back their return to office states. look at what happened in the last fall and winter period, is there any reason to expect that january will be any better? >> i think it is going to get better. i am an optimist when it comes to the virus right now. vaccination rates have gone up. people have adjusted fundamentally to the way they have lived their lives. by january, we will be in a different place. there is a cause for hope. >> i certainly hope that you are right. there is an ongoing conversation

about boosters. do you think the biden administration is coasting -- is pushing the booster effort to quickly? -- too quickly? >> i think the biden administration is pushing appropriately. however, if the purpose of vaccination is to decrease your chance of ending up in hospital with a critical illness, the data shows that you are less likely to get as sick compared to those who are unvaccinated. it depends on what the endpoints are. i would like a booster. i think they make a lot of sense. it is just about the timing. jonathan: i read a quote from morgan stanley. delta peaked in late august. do you believe that it did?

>> i think some states, there continues to be a rise as the summer ends. i think we will see a down trending of the virus very soon. jonathan: good to catch up. delta peaked in late august and makes a strong case for a pickup in jobs this month. lisa: this was what you are talking about in terms of the peak. let's hope they are right. jonathan: let's hope they are all right. we need to get the michael mckee take. let's do that right now. here is the headline from dow jones. michael: richard fisher, the

previous dallas fed president, also had millions of dollars in securities. it is not a good look, obviously, for people who do not like the fed. kaplan has a long history in the markets. he started at goldman sachs. he probably got all of the proper approvals. lisa: especially the types of stocks they are. 27 total stocks, holdings valued over a million dollars include apple, amazon, alphabet, facebook. these are the interest rate sensitive stocks. michael: we have been talking about this for several years. it is not unusual that someone would want to invest in them. i suppose you can make the

argument that the fed zero rate policy has not done that much for any particular category of stocks. zero rates have helped all stocks. he has the t's crossed and the i's dotted. jonathan: michael mckee. lisa: he has been one of the most vocal about warning against financial exits. perhaps for that reason, the fed is a flashpoint for a lot of criticism. jonathan: yields are coming in this morning. we are down two basis points on

10's. equity market unchanged. tom keene is back with us tomorrow. from beautiful new york city, this is bloomberg. ♪

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>> so far, it seems to be holding up strongly.

♪ >> when you see good value come into the market like we saw earlier this year, stefan and by -- step in and buy. >> i think we are going to have to wait a bit longer to see what the fundamentals look like. >> i'm very nervous that some of those jobs will disappear. >> have we seen anything in the last couple of weeks to suggest that september is going to be a lot better? no. announcer: this is bloomberg surveillance. >> good morning, good morning. this is bloomberg surveillance live on tv and radio. i'm jonathan ferro. tom keene back with us tomorrow. your equity markets, we're down those full points in the s&p 500. it is a no trauma wednesday morning. lisa: it feels like we are on

th