>> i never want to see a down market, but i do think this is a natural part of the process. >> i think it does matter, the tightness you are seeing in product markets, if it continues for a period of time. >> the risk we are mostly on edge for is this rising inflation. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. jonathan: this week is getting interesting. from new york city, for our audience worldwide, good morning. "bloomberg surveillance this is, -- this is "bloomberg surveillance." this is your bounce back, up by

0.9% of the back of yesterday's slide. this week is far from over. tom: big recovery at the very end yesterday. as you mentioned in the last hour, the correlations here are really absolutely critical. the idea of what bonds will do, what curves will do, and particularly watching the real yield, now under -1.00%, a negative lesser statistic. it will be interesting to see how that performs in a better stockmarket. tom: i'm looking -- jonathan: i am looking forward to hearing you frame the debate in greenwich, connecticut. tom: the lineup here is very good. i've got the governor of connecticut, front and center on tax policy. but what i am really interested in is the interdependency given the credit markets we are in. then ray dalio, catherine burton

has done phenomenal reporting of bridgewater for bloomberg. we will talk to ray dalio about underperformance. we will talk to him about the struggle of the zero bound. jonathan: no doubt we will find some time for a little bit on china as well. how many times have we heard it is not lehman? kailey: our colleague did a story count on lehman. it will be interesting, whether we see china intervene ahead of that thursday deadline for china ever grand -- china evergrande. will this have ripple throughout the property sector in china? is the rest of the world going to feel it? jonathan: certainly on the economic front. on the financial front, most likely, too. barclays says, "is this a lehman

moment? not even close." it is a market that is fascinating right now. the economy at some kind of inflection point, and evergrande really up against the wall. yields higher to 1.32 77%. this is what a little but of relief looks like. euro-dollar positive by about 0.1%, euro-dollar, $1.1734. kailey: we are still at 1.32 percent on the 10-year gilts. we have been within this range for a very long time. i wonder if tomorrow's fed decision is going to be one of the last catalysts to break out of that range in 2021. maybe we will get a catalyst in terms of economic data. we will get housing starts and building permits for the month of august. i expect supply issues from

labor to raw materials. so maybe august was the worst of it yet we will have to see what the data tells us. later on this morning, it is you in week in new york. -- is un week here in new york. president biden will speak at 10:00 eastern. i expect he will talk about the vaccination effort, especially now that the u.s. has opened its borders to vaccinated tourists. finally, watching fedex earnings after the bell after the company said they will hike their prices the most in a decade. higher costs just feeds into that inflationary kind of story. jonathan: thank you. a couple of things to watch this morning. tom, what has changed? mike wilson of morgan stanley, "price is the most import determinant of people's behavior.

price gets you to focus on the things right in front of you all along. it is priced its changed, and price since the narrative." tom: at the other side, the bulls look at technology. what was was an opportunity yesterday, but you've got to pull a trigger given the fear. i failed. i couldn't pull the trigger. tom: you couldn't get out of jonathan: -- jonathan: jonathan: jonathan: you couldn't get out of cash. let's see what jason draw hope -- jason draho has to say, ubs head of america's asset allocation. how long this will take? jason: it might be along the line of four to six weeks. we have to get through the evergrande situation. we have to get through the fomc tomorrow to see is the fed going to be a little more hawkish, or

do they toe the line. we get to the debt ceiling. over the next two weeks, we see a lot of potential headline risks to get through. until we come clear of those hurdles, i think people get more comfortable that the underlying fundamentals haven't really changed. may the summer slowdown is over if that is the case -- maybe the summer slowdown is over. if that is the case, i think it gives people comfort that ultimately the fundamentals r.o.k., that sets us up for -- fundamentals are ok, and that sets us up a good year end. tom: how do you actually tactically do it? jason: it depends on exactly what your baseline allocation

is. you were talking about you couldn't pull the trigger and buy yesterday. for us, it is a situation where we don't want to pull the trigger and sell. should you be adding more risk? where do you want to add the marginal dollar? we think there's more in these stories. it is probably a bit overpriced in the market, leading us to more value stocks that can still do well. if you want to put a dollar to work, that is where i would go over the next 100 days. the next four weeks could be choppy, but 100 days for now -- 100 days from now, we are worried about positions. kailey: do think whatever is coming out of china is going to stay contained? jason: the concern is not so much the contagion risk on the banking system. the bulk of evergrande debt is

owned by the state government. we will not see lehman. the markets right now are having a slowdown in group -- in growth because people are less confident and you don't see enough chinese stimulus to offset that. from a global growth perspective , you may have to downgrade china's growth. there's more risk to that rather than a systemic situation. jonathan: how uncomfortable do you think those longs are in europe now, with everything you have to set? -- you have just said? jason: europe has become more constructive. as we go into the fall, i think there's a little more confidence that perhaps we won't get another big delta wave as we go into year end. that said, european equities are more sensitive as opposed to the

defensive tilt in the u.s., so you will have to balance those which just why we like european equities versus the u.s. tom: what is the most effective way to reflect a commodity strategy? if i am tactically allocating, how do i play commodities? direct stock ownership, etf's, or do i buy gold bars? jason: i wouldn't necessarily buy gold bars. i think etf's are a good way to play it. what part of commodities do you like? does energy, building materials, precious metals. different funds have different ways they weight it. it is not like buying a fund that is going to track all of the s&p 500. you have to look at what funds can give you better exposure.

how does it best expressed the view commodity space overall? that is the exercise we go through. jonathan: gold and crude positive this morning. jason draho there, ubs america's head of tech to allocation. thank you. -- head of tactical asset allocation. thank you. tom: i think it speaks to the press conference. you may get a recalibration on how dovish dovish is, but you are right, we have never done an into fed meeting this style and -- this silent. jonathan: communication, or down to events? kailey: i think it may be down to events. we have already downgraded the importance of the september 22

meeting given that jobs report. so already, the fed this week seemed like it was going to be less of a market event the navy had been anticipated previously. then you layer all the risk on china on top of that, and it may be downgrades the importance even more. jonathan: coming up, tom sitting down with the head of roubini macro associates, then the head of bridgewater, ray dalio. i thought we were always joking. i did not know that it was spiked with your beverage of choice everson will morning. futures this morning, good morning. i will stay in control of my words for the rest of the show. the s&p inventing 0.8%. the race towards a fed decision

tomorrow. full coverage on tv and radio. this is bloomberg. ♪ ritika: with the first word news, i'm ritika gupta. new data suggests a booster dose of johnson & johnson's vaccine increases the potency of. the one-time shot. the booster was -- potency of the one-time shot. the booster was 100% effective. the shot led to a 12 fold increase in production of antibodies when it was given six months after the first one. in canada, prime minister justin trudeau won the election, but fell short of a parliament tree majority. boris johnson says president biden has too many domestic priorities to find time to negotiate a trade deal with the u.k. the two leaders meet today in washington.

johnson says he would rather have a good deal than a quick one. uber may be about to report it's pursed -- it's first profit. the company said adjusted earnings in the fourth quarter could range from flat to $100 million. 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. i'm ritika gupta. this is bloomberg. ♪

>> the federal reserve certainly understands that china is an

important player in the global economy. if it has a hard landing, that would have very serious consequences for the united states. i think it is mature to reach that conclusion -- it is premature to reach that conclusion. jonathan: here's the price action in this important moment. we bounce back in the equity market, up 34 on the s&p, bouncing back 0.8%. yields higher by a basis point. on the hard landing, we have spent some time discussing that. far less constructive on years gdp. for anyone in this market cross asset, worldwide, you've got to start plugging that in. what does lower growth for china mean for your investments?

tom: this goes back to the landmark work of jonathan anderson at ubs 15 years ago. there is something about moving below 15% gdp in china where everyone assumes that the calculus changes. that is the tension right now away from the finance of ever grande. -- of ever grande -- of evergrande. jonathan: is the main risk through the financial channel contagion, or the real economy? i think the focus has got to be on the real economy at the moment. tom: it is going to be the real economy, and it also comes to shipping their exports to the united states. that is something we watch very carefully. that is part of the washington dialogue. annmarie hordern visiting in new york today. i want to go how the washington post this morning

says, credit options are diminishing. they are narrowing down. in the next couple of days, how critical is it for speaker pelosi, majority leader schumer, and the others to find options to choose from? annmarie: it is incredibly critical. we should make note that there are different paths of legislation happening right now in congress. first and foremost, what matters for the health of the country, and that is the debt suspension of the debt ceiling, as well as the stopgap funding to keep the government opening and operational. what we saw yesterday, the democrats linking the bills. that sets up a risky fight because republicans say they will not vote for it, so democrats potentially will have to find another way of doing this themselves, which is going

to take much more time to get to their 3.5 trillion dollar reconciliation package. tom: what is the power of senator mcconnell of kentucky? annmarie: he was able to round up 46 republican senators. four could potentially still vote for this. one, senator kennedy of louisiana, wants to see what is included in this measure so he could potentially vote yes on a debt limit suspension because his heart hit louisiana from hurricane ida needs that aid. but mcconnell has made it very clear, not just to the speaker into the leadership, but to treasury secretary janet yellen, that republicans by and large will not vote to increase the debt spending. kailey: is he just at the mercy of congress for the next week, 10 days? annmarie: absolutely, and that

he is relying on his partners in congress to get this done. at the same time, republicans are the ones that are saying they will not vote in favor of the stopgap funding measure, so potentially that could harm them as well. what messages is he trying to send? annmarie: the three major topics are going to be china, about competition, not conflict. i doubt he will name china by name, as you saw with the recent submarine deal. but we all know what the point of those nuclear some marines -- nuclear submarines in the south china sea will be. the second will be covered. the biden administration is

pushing one billion vaccines to the developing world. got short of that. and then climate change. climate change is going to be huge to address, but right know we are going into glasgow very unsure about what they can actually deliver. tom: i can see you up here in the shores of greenwich. it is great. breakfast is 100 $42. i am looking at greenwich harbor in the sun. taste the salt tax. [laughter] the guy up on the hill has so much money, he doesn't care about the salt tax. an update on governor lamont's salt tax. annmarie: it is nice to see you in greenwich, but you really went to far links today to avoid me on my home coming to new york. they promised they will do something with it, something meaningful. it is still being worked out.

that is the update. but moderates in the house and senate say they will not vote for reconciliation if salt is not addressed. jonathan: thank you. great work. our washington correspondent here in new york city for the next couple of days. we took this beautiful shot of a lonely older gentleman sitting alone with an empty seat. i asked you all to make some contributions. this is the winter. tom has a special relationship with a man called harry. he's 28 years old. he plays for a club called tottenham hospice. that is a beautiful picture. stephen newton, shout out on twitter. you win this morning. this is beautiful. tom: it brings a tear to my eye. harry is breast appropriately -- is dressed appropriately casual in greenwich.

it would be nice if you could put the org in the net sometime in the month of september. i think he's already distracted. he's got to feed out the door. there's no equivalent in professional sports in america. jonathan: there's not, but i imagine you have seen this play out a few times in your lifetime. tom: harry has got a boat here. larry several steam -- larry silverstein has 180 feet over here. jonathan: i can't wait to hear what you've got to say to the governor of connecticut on taxes , given that lead up. tom: i want to talk about the speeding ticket i got in 1978 on the merritt parkway. jonathan: on the s&p, we advanced by 0.8%.

yields higher by a basis point. nouriel roubini, 8:00 eastern time. tom keene in greenwich connecticut. here in new york city this morning, good morning. this is bloomberg. ♪

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♪ jonathan: deep breath. it is only tuesday. good morning to you. we are positive by 0.75 percent on the s&p, up about 33 points. the nasdaq up 0.7%. on the russell, the small caps advancing a little more than 1%. the focus still on evergrande. get to the china dashboard. the conversation goes a little bit something like this. is it lehman? no. i think we've got to be. far more nuanced than that. . . will we see contagion through the financial channel? will we see contagion through the economy?

they come in 2.6% for next year. have a look at two places. i see it in the aussie. i see it in copper. copper positive by 0.2%. copper up a little more than 0.1%. but that's the focus for me here. it is not just about financials and all of that. we've got to talk about the real economy. for the real economy, it is pretty clear to me what the channel is. tom: to me, what is so important here is when do we see government response? it is tuesday night in beijing. they are trying to get to friday and the weekend, where they can control the messaging. can they do that? do they have that amount of time? jonathan: we go on to thursday, and we've got a few on those bonds. that is what the commit occasion will look like a day after that said decision.

switch up the board and get to bonds. 10 year yield, we are lower yesterday, higher this morning by a basis point. curve steeper, but to 1.86 -- back to 1.8 670%. the two day meeting begins today, and we have hardly discussed it. our eyes are looking somewhere else. that is the story cross asset. let's get you some movers. here's romaine bostick. romaine: yesterday's individual movers were all about that story. today, uber, the unprofitable rideshare company, saying it could reach profitability by the current quarter. it previously said it could do that by the end of the year. it is giving a pretty wide swath for profitability, saying it's adjusted ebitda could be a loss

of $25 million or profitability of 20 $5 million. -- of $25 million. j&j shares up fractionally on the day, releasing some of that phase 3 data on the efficacy of its booster shot. lennar provided third-quarter deliveries that came in less than what the street was looking for, and provided fourth-quarter guidance that was also a little weak. but the demand pipeline still seems to be pretty robust, so maybe this will work itself out in the end. it yesterday, we did get news out of conocophillips that the u.s. oil companies agreed to by the u.s.-based permian assets from royal dutch shell in a $9.5 billion deal. most of that money, about $7

billion going right back to investors through a special dividend. american airlines up for a second straight day. this was the one bright spot yesterday, the u.s. releasing some of those restrictions on foreign travelers. lucid motors up for the second straight day on the back of that news last week of certification of the longest range tv vehicle to come to market. tom: valuable. i missed the conocophillips story. at the greenwich economic forum, they are in recovery after a difficult pandemic year. over 200 true industry leaders will be here today. the basic theme is what do we do with the zero bound, and how does it rebound back to central banks worldwide, and particularly to jerome powell tomorrow in washington. we start now with mickey levy of berenberg, someone who has

always watched inflation dynamics. we are thrilled that dr. levy could start us off strong. i want to talk about the transmission where we have no inflation or less inflation, or sort of inflation, over to one big asset bubble. do you by the idea -- do you buy the idea that all of the minute the elation of the last 12 or 13 years has done nothing move inflation over to the true proxy, which is an asset bubble? dr. levy: not really. let's think this through. financial crisis, post financial crisis qe, they did not generate stronger economic activity. they did loon asset prices, so you didn't -- they did balloon

asset prices, so you didn't get the higher inflation because you had higher demand. it is clear that this this go stimulus has boosted aggregate demand at the same time you have supply shortages, so you wind up with inflation. the fed has redefined the term temporary. this has lasted much longer than anybody thought. so here we get a combination of asset prices have increased because of a strong economy and a strong rebound in profits, and via a sustained low. the big issue going forward is this inflation is going to persist for a while, individually the fed is going to have to normalize. then it will be very interesting to see, as the fed tapers and eventually as it normalizes interest rates, how will bond markets and the stock market

respond. jonathan: can i pick up on that word, normalize? what does that mean anymore? dr. levy: when we think about monetary policy, the federal reserve, it's estimate of a normal federal funds rate is about 0.5% real, and then 2% inflation, so two point 5%. right now, the fed has increased its balance sheet to about $8.5 trillion, but more importantly, it has kept interest rates at zero. so the fed is going to eventually, after it tapers, it is going to have to raise bond yields, normalize them to that rate which is consistent with its long-range objectives. that is stable low inflation and sustained economic oath. that is the real dilemma the fed faces. kailey: when the fed tapers,

what friends doesn't make when $120 billion a month -- what difference does it make when $120 billion a month becomes $100 billion? ? or $80 billion -- billion or $80 billion? dr. levy: it doesn't make a difference at all. what is the difference to the economy or financial markets if it slows down to $105 billion a month? it has no impact on the economy. in fact, it is quite striking that fed chair powell has said several times when we begin tapering, it has no implications at all for when we hike great. so the market is focusing on this tapering, which doesn't really have any impact at all. you could have an announcement that bond yields will go up, but

they are already ridiculously low, so it shouldn't have much of an impact at all. jonathan: mickey, appreciate the conversation. berenberg apple markets chief economist. the worry is that -- berenberg capital markets chief economist. the debate has picked up a lot in the last six months. tom: that is so true, and it is something nouriel roubini is expert at. there's been some other instances in central-bank history, but it all comes down to we are visiting wrench and the grinch economic forum at the zero bound. you can define that anyway you want, but that is going to be my focus. governor lamont doesn't want to talk about the zero bound, but

he does want to talk about the fiscal shocks that it brings on. jonathan:? i'm sure he would like the borrowing costs. what are these governors going to do to get people to come back to their states -- jonathan: i'm sure he would like the borrowing costs. what are these governors going to do to get people to come back to their states daca tom: it is going to be the question. jonathan: just on the zero bound , what is the focus? at? 8:30 what are you looking to get out of ray? tom: with ray dalio, it is about the tangible performance of what he has done at arguably the most prestigious hedge fund manager in the world, and acclaimed author, and bridgewater has had a really tough go of it. you nailed this with bob prince in davos.

they've got to recalibrate their core theories, given the duration that we are at zero bound. it has been a mess during the pandemic. jonathan: before we get there, we can hear from us in a beschloss -- from afsaneh beschloss, the rock creek ceo. the bounce back is fading just a little bit, up now 0.7%. positive 0.67% on the s&p, 29 points. in the bond market, yields are higher, but only by a basis point to 1.3209%. counting you down to that fed decision, special coverage coming live on bloomberg tv and radio tomorrow afternoon. from new york city this morning, good morning. this is bloomberg. . ♪

ritika: in canada, prime and the prospect of another fragmented parliament. trudeau -- prime minister justin trudeau faces the prospect of another fragmented parliament. trudeau won a third term, but fell short of a parliament or majority. a potentially risky showdown with republicans. democrats will include raising the debt ceiling in a bill that could lead to a government shutdown at the end of the month. investors of shell are getting an unexpected $7 billion payout. the cash pledge comes less than two months after shall raised its dividend by almost 40% and started to billion dollars a share buybacks.

that explains to raise delivery rates your by the most in at least a decade. the average package delivery will increase 5.9%. some freight rates will increase almost 8%. transportation costs have been rising because of strong demand, combined with high wages for drivers and warehouse workers. shares of universal music group sword 543% in their stockmarket debut today. the debut was spun off of french media group vivendi. 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. i'm ritika gupta. this is bloomberg. ♪

>> we remain one of six

countries that have been broadly supportive of the process, but we haven't signed up for the aspect of -- for the concept of some aspects of it. jonathan: the prime minister of ireland this morning. alongside kailey leinz and tom keene, and jonathan ferro. lisa will be back with us tomorrow. your equity market advancing 0.7 5%. yields a little but higher by a basis point to 1.3226%. it is not much of a release? ? bounce, is it -- a relief bounce, is it? tom: is this one massive by the debt -- massive buy the dip?

jonathan: i have no idea what to call it. tom: a bumpy ride for the next few months. right now, she gave us so much perspective on afghanistan, looking west to iran. i sent a beschloss -- afsaneh beschloss of rock creek joins us now. thank you so much for joining us. there is a nostalgia right now of moving from the chaos of the powell fed, making it up as we go, back to the cadence of arthur burns, of alan greenspan. can we go back? and if not, how do we move forward out of this crisis? afsaneh: what is really interesting is i don't think it has been so chaotic get the fed

has been giving us a pretty good indication of where it has been and where it is going. obviously the times of the pandemic, which killed more than even in 1918, is something the federal reserve with alan greenspan or arthur burns or jay powell thread very easily. but no question, the meeting tomorrow is going to be very critical. people will be listening very carefully about the way they used to listen to alan talk, not just what he said, but how loud he was. tom: i want to speak to you about the famed greenspan granularity, the way the gentleman look at every data. do you have a confidence that we can shift to a service sector prosperity with this technology

overlay we are all talking about? afsaneh: the interesting thing is that he does these daily forecasts. he was a forecaster before he was a fed chair. he has continued doing that. interestingly, with the huge problems we have with the supply chain right now, the kind of was doing on railways and accounting for railways and trucks and cars, looking at the minute on the supply side, have become incredibly valuable. but because the text may not get well measured in some of his estimates, the supply chain problems we are facing are very traditional economics 101. kailey: obviously we've had a lot of those leading to inflation.

also saying supportive and fiscal monetary policy needs to stay in place. is that going to mean inflation runs too hot for too long? afsaneh: i believe we are looking at inflation being more of a short to medium-term issue. there is no sin that if you throw in so much liquidity that it will slowly start being taken out of the economy if you have the kind of disruptions we have, even as we are speaking. there are ports that are getting closed down because of sick people with covid. so while that is going on, there's no question we are going to have disruptions, and that will be pushing up inflation. i think as we get into 2022, 2023, if the assumption is covid is endemic and stays on in a smaller way, that will be a different scenario. kailey: if that continues, i

think that as a whole other issue. bigger problems than inflation. -- different scenario. if that continues, i think that as a whole other issue. bigger problems than inflation. kailey: obviously, evergrande is front and center. how worried about china are you when you think about the global economy right now? afsaneh: it has been a problem, evergrande, that has been known in the market for some time. the growth rate in china has been a percent to 10%. people don't realize that that kind of growth rate is not going to stay forever. if you assume a more normalized growth rate in china, goes down closer to 4%, 5%, 6%, i think we will be in a very different situation in china.

obviously they have major problems with an aging population. the aging population and the fact that you will have a slower growth rate i think are the bigger issues that are getting forgotten as we get concentrated on evergrande. i think the government will not bailout, but they will manage it , and sort of let it go out and down slowly in a managed way, probably. jonathan: there's a lot of faith they will be able to do that. i've sent a beschloss -- absent a beschloss, rock group ceo. tom: it falls into this commodity rally. dr. beschloss is truly the nation's expert on natural gas dynamics at the international level. talking to her about her trip to

the khyber pass and her last visit was extraordinary. you really wonder what the oil do come up the metals do. jonathan: if china is not at the center of it, what's that look like? tom: when you see francisco blanch at $100 in oil and the knock on to the rest of the economy, you wonder if they are may be more optimistic than the media is. jonathan: i would love to speak of francisco blanch and fold in the china story. wti, $71, up around 1%. going into the opening bell a couple of hours away, equity market stateside, futures up 32 on the s&p. we bounce by 0.7%. tom: it is unbelievable.

three herons fly in, and in walks nora roubini. there's been a roubini citing. i'm sorry, i'm lonely. jonathan: i can tell. this is bloomberg. ♪ ♪

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♪ >> we are an iraqi period -- in a rocky period. >> the risk that we are mostly unhedged for is this rise in inflation. >> we have a lot of supply bottlenecks due to the fact that the world is not being vaccinated enough. >> this is "bloomberg surveillance" with tom keene, jonathan fro