close the financial markets and telling the reverse of the spring, which is week celebration in the fourth quarter. >> there are issues affecting consumer demand. click save needs to act and do something. >> because things are so quiet. >> this is bloomberg surveillance with tom keene, jonathan ferro and lisa abramowicz. jonathan: what a week we have had of you. good morning. this is bloomberg surveillance, live. we are down 1.4%. the bond market -- it is all about ever grand. tom: it is all about ever grand. everybody is in the pool today.

instantly halfway from 20 or so. jonathan: the chairman picked up the mic and said i will be gone until november, jumped the mic and then walked away. tom: you nailed this last week. two meetings beyond this. jonathan: why would you make a decision this wednesday? lisa: there is a question of inflation weighing on sentiment. consumers are pushing up the expectations and how that affects reality. these are some of the concerns that they have to address. evolution because there is not necessarily any need. he said evolution.

what was i supposed to say? jonathan: 1.4%. let's whip through this section. the hang seng getting absolutely battered. the markets are hurting. down by 2.3% there. on the cusp of breaking. lisa: we could trying to get excited about that. the narrow ranges have been remarkable. is this the drawn down to buy they are seeing the potential. i am focused on inflation and how much that lays on sentiment. it has been around the lowest in 13 months.

the expectation is for it to continue this way. this, to me is an interesting theme. there will be traffic in the u.s., kicking off a gathering in new york. it will be interesting what the leaders will say about covid. getting together in person at a time where people are worried about potential transmission of the delta variant. holding a third day of crisis talks in the u.k., basically triple the last year. if prices are climbing this much, if it disrupts the food chain supply, how does this even the sentiment? what do you do in terms of monetary policy? jonathan: seeing people's faces when they remember what week this is -- the expressions are

all the same. the traffic -- that is the one that we really care about, the traffic in manhattan through this week. it is brutal. tom: you get out of lexington, get into a cab, you pay the driver and he walked a block. then you do it again. you and everyone else is an hourly for a speech. jonathan: -1.3%. tom: he said he would not come out unless it was elevated. the significance. what is it? >> the equivalent of a traffic jam. a lot of people looking to buy

protection at the same time. what we see in markets is some sense of boom and bust. just epic quiet, where the ability to finance has become intolerable to people. the s&p is running at 2.5 sharp ratio. that is unbelievably high. it is a difficult time because it is challenging when it is clear that uncertainty is building. >> what do you predict the hedge cost will be, forward? for our audience, this is a huge concern. >> i think it comes from the

feedback from markets. we almost had a year without a 5% drawdown. we are about three quarters of the way down. we have not seen a bunch of 1% moves in a long time. it comes down to day-to-day swaying. i would also say that it tends to be more of a reflection. it has been very costly. it tells you how expensive out of money options are. because those have been so expensive, what they are hedged for is more of a localized drawdown. nothing like the 20% that mike wilson is talking about. tom: on monday, we are kurtosis

free. lisa: are we going to see 4% to 5%? the idea of the expectation for a shallow drawdown. what is the tipping point? when do you take a step back? >> all of the things that we worry about, whether an external factor like china or delta, there are so many things on our list. if you look at q2 earnings, not only were they strong, but profits were high. the chief vulnerability is a decline in earnings that people cannot look past. another thing that is really up there is the fed and this idea

that as it enters into a less generous cycle, it becomes part of the problem, potentially. if we look at the last couple of risk off, it has always been there. they have taken on a new stance and it seems to be a trickier time for them. lisa: all of these are the sort of situation that people have been expecting for so long. at a certain point, isn't it likely to go higher versus the expectation? >> markets can get stretched one way or another, beyond what you think that the fundamentals can dictate. when i look at the big picture of asset prices, i see a world in which we pulled a lot of things forward. a lot of it is due to the low

interest rate environment that we live in. to me, a vulnerability is price itself. if we look at a couple of the declines, go all the way to the mid-70's. a two year period, where they lost a lot of percentage. not cataclysmic. , but you could tear through a lot of index points on the back of normalization. tom: you mention trying to make a big that. the idea of not betting big money but small amounts of money. is that what people are doing right now? >> it is hard to say. we all suffer from this hidden

correlation. we become more correlated when volatility is introduced to the market. we are all led to the same sorts of strategies. the ones that make money most of the time. to me, that is a worry. i we set up in a hedge fashion? are we diversified sufficiently? i think that is the dividing line, but the risk that we are mostly on hedge for is this rise in inflation. the evidence is piling up. this inflation is here to stay in many ways. a 1.3% 10 year. three point 5% inflation.

that is a tough deal to deal with. jonathan: it has been the number one risk for a lot of people through the years. it pulls the fed to the party, so to speak. high interest rates before they hit their employment goals. tom: the ambiguity is if you get higher inflation with stable or quite good gdp. it is a complete mystery. tom: a mystery -- jonathan: a mystery in evergreen. a bigger focus on china this week. going into a fed decision this wednesday. futures are a lot softer. equities in europe are not looking good at all. this is bloomberg.

ritika: new findings could clear the way to begin vaccinating kids within months. they say that their vaccine is safe and produced strong antibody responses in a large-scale trial. pressure to immunize kids has been on the rise. france is still angry over the submarine date -- submarine deal. he will speak with president biden in the coming days. calls to boost their own defense capabilities. justin trudeau and a close election today, but it may fall short. the liberal party is likely to

win 135 of the seats. spain, canary island, a volcano erupted over the weekend. in took place on the island. 100 houses have been destroyed, but there have been no injuries. global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. ♪

because there is always the possibility that we get delayed,

but the question is, i we going to work to get to our goal for september 27? yes. we are going to work hard to reach tackle. sometimes you have to stop the clock. we will do what is necessary to get there. jonathan: good morning. we pulled back worldwide. we have done it over to europe and the u.s. -1.3% for -- negative one point 34%. a defensive move. the dollar is stronger. crude is suffering a little bit as well. $70.55. tom: interesting dynamics. simply, s&p futures have yet to find a bid. we do not have a baby yet.

jonathan: how do you know the difference? i only say that they have a plan . they have a plan until they get punched in the face. i would not even call it a right hook. 1.35%. tom: there is a thing called set up. this is tear point. everybody in the street, whatever their time length, they have an individual and personal set up. are they being tested this morning? maybe. lisa: i always wonder what additional sports analogy there will be. they you go. tear point, pointing out to all those hedges do percent to 5%

drawdown. there is a tipping point that is important to watch. tom: right now we look at the hedge in washington with emily wilkins. emily, mr. cliburn in south carolina is the majority whip. i learned in the movie lincoln that the majority whip is a sporting effort to round up the votes. how does james clyburn round up the blue dogs? lisa: he has to worry about the blue dogs -- >> he has to worry about the blue dogs and more moderate. tom: how does he found up the moderates to oppose the speaker? this is good. >> this will be a big headache for speaker pelosi. the deadline that has been put out there -- right now it does

not look like they will be able to get that reconciliation package done in time. that means that progressives have said that they will not vote for that infrastructure if they cannot get the spending done. we are hearing that if the vote is not done on the 27th where if it fails on infrastructure, she will support -- not support reconciliation. there is a lot of posturing going on. they will come and be in the capital for the first time in weeks today. those personal conversations, that sausage making, trying to figure out if there is a way. this is the ultimate crunch time. lisa: it is so exhausting. they know it is going to be a

nailbiter and somebody will capitulate. should we care about the debt ceiling deadline this time around? >> to a point, you always have to care about it. it was laid out in an op-ed over the weekend. this would cause chaos for a lot of americans. it could lower stock prices and hurt the average american family. this is something that congress needs to take seriously and get done. they are playing politics with it. so far, both sides have not given in. the speaker, over the weekend said she expects republicans to come along and vote for it, but republicans want to be seen as that fiscally responsible party. they are saying absolutely not,

democrats will have to vote alone on this one. we have a looming october deadline to get this done, but we have to figure out what will happen with infrastructure, we have to figure out what is going on with the reconciliation bill and temporarily fund the government because october 1, we will potentially have a government shutdown in the middle of all of this. lisa: i remember what happened when the u.s. actually default it. people did not know what was going to happen. at this point, where are people's focus is? is it really on getting past this hurdle? >> if you look in terms of deadlines, the things that they are focused on now is passing

that short-term spending. figuring out what is going on between infrastructure and that social spending reconciliation plan because the 27th is coming up and they will need to have everyone on board before then or democrats will potentially suffer a humiliating loss for them and president joe biden. jonathan: thank you, as always. tom keene playing politics again. tom: there was a debt ceiling, but i will go back. i grew up in a house where there was complete panic every time the debt ceiling got up. i am more interested in the dynamics of 3.5 trillion down and what it means for tax increases, real and perceived by voters.

my working number, you ready? none hundred billion. jonathan: what gets you there? tom: history. i read every word of a report. i cannot cite it here. the indiana redistricting and the re-peopling of the hard left of west lafayette and the two-minute drill is redistricting. lisa: if you are on radio, you are missing jonathan ferro's face as he is processing this. jonathan: usually when he brings up indiana, it is because he is in trouble with our manager. tom: it is the new madison,

wisconsin. a liberal oasis in the midwest. jonathan: can we get back to this market? what does it mean? i have no idea. this is bloomberg.

jonathan: what a mess he started for the trading week. this is bloomberg surveillance. here is the action. spilling over to europe. down by 1.46%. we are down by 1.37. they are suffering around two percentage points. in the bond market, defensive, as you would expect. going into wednesday, a fed decision. here is the focus. it is ever grand. a couple issues coming up. some interest due on some bank

loans on thursday. here is one of them. take a look at the price. it is down and to the right, pretty aggressively. flat for most of the year or so. that interest comes through on thursday. tom: do something constructive. john has an absolutely brilliant chart moving. down to the lower corner, in the pricing, see if it works out around 21. they are there now. jonathan: did a lot of interesting work on this over the weekend. two thirds of that, property developers. when you are looking at

contagion risk, it is hard to see it outside of the benchmark because all you see is that it bleeds through property developers. that is very have to watch out. i we actually going to see some contagion? a lot of people talking about financial risks. property makes up what, a third of china's gdp active tom: you just --gdp. tom: that link is due. jonathan: we will get on top of this credit story. one of the bonds to watch. >> everything is tied to the concerns of ever grand.

financial contagion, not necessarily, but there is some concern when it comes to risk sentiment. a lot of those companies are weaker as well. of course, a lot of concerns about ever grand and the property sector. a big copper producer is lower here. all the other material, even albemarle is down. flip up the board because a lot of that risk sentiment has potential contagion weighing down. apple is lower, as well as facebook, nvidia, down in the morning. tesla is down as well.

some safety concerns about the self-driving of teachers on some of the tesla vehicles. keeping an ion pfizer. the big news was the fda not recommending the broad use of booster shots. they signed off on a more narrow version. down by about 1%. tom: an eventful day. this is perfectly timed. she went on to a sterling effort in foreign exchange, and it makes her -- i love that at the back of your research, you show the equity

sensitivity to interest rates of value and growth. the set of things that we do now, how does your economics world fold into the markets world? >> i think that is what we will see focused on the fed right now. around the world, yield curves are so flat. we are seeing more than a wobble out of china. it all reverberates. what does that mean? i think everybody has been sitting around waiting if we are going to get it. i think we will continue to see u.s. rates that are compressed lower. that is the paradox of what is going on. the fed is clearly edging towards the taper.

still solid but decelerating somewhat. everybody is wondering why u.s. equities are hanging in there. jonathan: you mentioned china a few times already. a lot of the growth scare is have been born in china. this might be the beginning of one. i have no idea. walk me through the likelihood. >> how much time do we have? right? you have got so many issues. we are a capitalist society. it gets really challenging when our financial systems are so linked and the philosophies behind them are so different. we somehow managed to get through the wealth reduction

that we have seen from this incredible downward correction in equity markets there. you have been waiting for all of this to reverberate. lisa: i do not mean to cut you off, but is this an economic issue? this time, we are talking about supply chain disruptions with ramifications. >> for so long, the idea of a strong u.s. economy to pool higher -- you have this two way street and china -- the entire region has not been able to get covid under control. we never got a full production reopening. now they look increasingly like weaknesses. tom: i'm going to go there

anyways. what is your dollar call, given your economics? are you looking at it with certitude or ambiguity? >> i am looking at it confidently. you are going to see emerging markets with risk off. you are seeing the u.s. still managing covid better than other developing countries. i do not think the dollar is very comes from right now. we are seeing the same thing in interest rates. there is just this calm in treasuries and the dollar. i do not think it is a catalyst. jonathan: the latest on this economy. i do not think we get the four minutes.

lisa is so rude sometimes, cutting people off. always interrupting, that is for sure. all right. the chief u.s. economist. what to watch for. is the risk purely financial or a bit of both coming at you? tom: auckland is shut down. you have the pfizer question out there. it is wrapped around medicine and a disaster. jonathan: how do you reconcile the goals with what is happening in the property market? is the solution at odds with the broader push from the chinese leader? that remains to be seen. lisa was clear that they wanted

to put the brakes on the property market. can you get a solution to one without harming the other? >> there is a quote in a story that just came out on bloomberg saying, even if they do not expect ever grand to collapse, the silence and lack of major action is making everyone panic. this is the key issue. how bad could this get? jonathan: someone much smarter than i brought up this to me. detail sales were massively disappointing. that person said to me, didn't you think it was interesting that the data got published? i sat down and said, you have a point. if it has been published at a time where many people sit there and say china did not publish the data -- maybe they are ok with it. tom: i am not going to guess

what is going on behind red doors. i would suggest that there is absolute certitude. i have heard this for 20 years. people in china invest in real estate. it is there only outlet. right now seems to be a substantial blowup and guess who is coming to the rescue. jonathan: that is what is strange about this week. we have been talking about this for how long now? lisa: it highlights how difference the chinese response is and that there could be ramifications beyond transmission. jonathan: coming up, a man who has sat at this federal reserve, staring down risks in china many times. we will catch up with him in the next hour. this is bloomberg.

ritika: the fate of president biden's economic agenda is in the hands of nancy pelosi. she has to find a way to keep the cats moderate and moving towards her goal. an agenda that includes the multitrillion dollar spending bill. she has to find a way to avert a shutdown. boris johnson is headed to the u.s. his relationship with president biden is at a critical juncture. johnson needs the president's support ahead of a summit. the general assembly returns to manhattan after a completely virtual last year. they are concerned it could lead to --

raising money through -- they plan to return all of the 10.5 billion dollars that it borrowed by the end of the year. we want to correct comments made . finance holding is part -- it was the former ceo of finance u.s. who step down, not finance holdings. we removed this clip from online. global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. ♪

christ it is essential that the relations between china and the

rest become functional. that impacts the capacity to solve many of the problems that we have in the world. jonathan: antonio guterres there. good morning. your equity market this monday morning is having a tough time. it is messy out there. it all started in hong kong. it is a very big week for ever grand. outside of that, equity futures are softer across the board. much worse smaller. tom: somebody asked me, what are you watching? the 30 year bond has given me a

186. we have a busy seven minutes and you need to stay with us. mr. wilson, quickly, what do you have? >> industrial shares. it is something that was pointed out. that group remains vulnerable here and it is understandable. go back to may of last year and the ratio it was at its lowest level in about two decades. now it has given back more than half the advance. it kind of looks like it there will be more of the same coming this group. tom: david wilson joined me with a pack to the opening futures.

good morning morning. i want you to explain to our international audience the disconnect or connect between hong kong and when he miles north of shenzhen. >> hong kong is pretty much ground zero. it is a question that everybody in hong kong is asking. how far will it spread in terms of what will happen and will it have an impact on the property sector as well? they have payments due this thursday and everybody is keeping and i out. so far, the government has said little, if anything at all about ever grand jonathan: that is the

issue. last week, it was expected to miss. can you walk me through the discussions on the solution so far? what do solutions sound like? >> we know that they have been local advisors appointed to this. we do not yet know or have clarity on what kind of solutions will be offered, but the appointment is clearly very firm. on the repayment this week, the question is whether or not that would count. there are those who argue that if they do not make the payments, it does not necessarily mean a deep hole.

the question becomes, at what point will be get a signal from the government in terms of how far or how deep they will let this go on? the first time we get some signals from the government, it will indicate where they are headed with this. lisa: the idea that they have let it go this far as long as they have, what is the signal in terms of their increased willingness to let there be defaults and property owners to suffered pretty big losses? >> the markets have already done the pricing. they have been taking set -- somewhat of a hawkish stance. at the same time, there are economists from the bank and investment houses saying, we

need a clear message on what is going on. we had some citigroup economists talking about the risk of policy error. we had a economists talking about a 30% probability of a hard landing. china is wanting to come down on debt but people are also asking, how far can they let this go? it is kind of a negative effect. lisa: is it an economic risk with respect to the housing market being a third of the economy or mostly a financial transmission risk? >> will economy is what people are looking for. there is a clear spillover.

the concern is what will happen to properties. does that depress broader property values? that is kind of having a depressing effect. then the feeling is, if that is happening in china's economy, the deflation will spillover as well. at the same time, tear point, a lot of analysts say they do not see the same linkages that we saw in 2008 and 2007, but nonetheless, clearly the markets have already priced in a pretty negative scenario.

jonathan: tom, up until very recently, this was confined to property developers in hong kong . it will be interesting to see if and how this spreads. tom: from idiosyncratic to the reality of contagion. the advantage here is to have the bloomberg terminal -- this is important. lisa's matrix is different. david wilson's matrix is an act of god. the contagion is there. jonathan: the big question, we started with it at the getting of the show. the main risk, even if you address the financial risk, do you end up needing an economic risk? lisa, i think most would agree

that you do. lisa: the property sector has been cooled dramatically. jonathan: session lows, we are down 71. -1.6%. this is bloomberg. ♪

in business, it's never just another day. it's the big sale, or the big presentation. the day where everything goes right. or the one where nothing does. with comcast business you get the network that can deliver gig speeds to the most businesses and advanced cybersecurity to protect every device on it— all backed by a dedicated team, 24/7. every day in business is a big day. we'll keep you ready for what's next. comcast business powering possibilities.

>> the little before the storm before the fed needs to act and do something. >> this is the perfect time because things are so quiet. >> we have very accommodative financial conditions now. they will probably still be confident in tapering. >> typically the fed hiking cycle does kill the value trade as well. >> they have reversed policy. this seems to be a trickier time for them. >> this is bloomberg

surveillance with to