>> this market has been a waste to rest and overdue for a pullback. >> 100 days from now we are worried we have a condition. >> how much you want to be aggressive? >> this will persist for a while and eventually the fed will have to normalize it. >> the fed has been giving us a good indication of where it has been and where it is going. >> this is "bloomberg surveillance" with tom keene, jonathan ferro and lisa abramowicz. jonathan: for our audience worldwide, good morning. this is "bloomberg surveillance" live on tv and radio. lisa back tomorrow. futures up 22 on the s&p. it's a little bit of a bounce back, but as we have seen a lot over the last week, the best of the day comes early in the day

and then it gets faded. tom: on the worry and thanks about china. this 47 flavors of what to worry about with china. to me this morning it is simply the chinese growth engine, will it continue. jonathan: i'm watching and we will keep watching. tom: he is going to avoid being sent away. i think you will see a real domestic tinge as governor brainard listens to the press conference this morning. everything said, it's not just about evergrande. china is more than just one real estate transaction blown up. jonathan: we talked about the interest payments for june. we've heard about one and we said you gave me the kind of earlier. kailey: that offshore dollar bond is in question after they

said they reached some kind of agreement in some kind of private resolution for the onshore bond overnight. a very open question there and awaiting more direct action. we obviously got action from the pboc injecting 120 million yuan. this is a story with evergrande that has sparked results paid are we going to see more precise direct action? jonathan: year end we talked about this earlier, a 600 69 million pounds of interest -- pounds of interest due. tom: bloomberg's bond people have been leaning on this. the bar chart today fills out a couple of years. anyone with experience with that chart says it's not that i happen. scott looking for chinese authorities to come in. george published moments ago and he says add to china to the list of worries and i love what he

says about the marginal growth component that china is to global growth, he says the turbochargers over. jonathan: another brick in a wall of worry. up 22 on the s&p. about a half of 1% on the s&p 500. into the bond market yields higher by a single basis point foreign-exchange not much going on. euro-dollar positive by about a 10th of 1%. 71 .55 on wti. kailey: a nice rebound in the commodity complex. a lot of it comes down to supply and demand. that applies to the housing market because at 10:00 a.m. we will get home sales expecting to moderate month on month because there is not a lot of inventory out there. prices are also high and that may deter some buyers.

for oil specifically we will get that crude inventory report. american petroleum institute put out data yesterday showing a massive drawdown and if the eia echoes that, the impact this had on production in the gulf coast. at 2:00 p.m. if the event of the day, the fed will make a decision, language on tapering and socioeconomic projections. specifically relating to inflation. not just when he talks about the tapering issue versus rate hike lift off but also the debt ceiling and we will get questions about trading. jonathan: you will have tom keene singing dancing queen in no time. tom: i never got abba. jonathan: i didn't either. what was the movie they did recently? mama mia. weren't people fired up about

that? tom: kaylee sought 14 times. kailey: twice. broadway is back. jonathan: i don't like broadway either. tom: this is more important. abba couldn't tie "pitch perfect's" shoelaces. jonathan: you were back -- you reckon sebastian still on the line? he woke up this morning and the first thing he heard was tom keene singing abba. >> i'm on my way to work and i turned bloomberg on and it's tom keene singing abba. it was unexpected to say the least. jonathan: can we talk about markets sir. china, the fed, of the debt ceiling, take your pick.

is it uncomfortable being long equity markets now? >> it is uncomfortable but over time you have to stay invested in diversified. right now we have under weighted our portfolio slightly on equities by about 1%. you were talking earlier about the wall of worries, i will give you three 3 -- big bricks. i don't think evergrande is a big brick on the wall of worry. the big bricks in the wall of worry our valuations, sentiments and then proceeding liquidity. on valuations you can look at it two ways. stockmarket pe is really close to an all-time high. but you think stocks are expensive, bonds are even more expensive. relative to bonds, valuations in

terms of absolute versus relative sentiment runs high in the liquidity is receding and that's why they are paying attention to the fed. tom: in any given week of reading there's one sentence or analyst that sticks out. given first rate rise, use a 17 out of 18 times the market lifts and its stunning up 15%. our audience does not believe that. discuss. >> everybody is worried about the first fed hike. we had a committee meeting last friday and i asked one of our analysts can you go back to 1979 and look at every time the fed started hiking and add the taper of 2013 which was pulling back on qe. that's nine events going back to 1979. i said just look at stock returns another asset class returns 12 months before the first hike and then 12 months after the first hike starts.

that gives you 18 data points. you are absolutely right. the average stock return was 15% in stocks make money 17 out of 18 times. because the fed does not start hikes during a recession. right now your any recovery, then stock started do well. it puts perspective over this succession of separating qe from the highs and when they will start. the fed is usually comfortable hiking rates. kailey: the end result of that is higher treasury yields. is it possible some parts of the s&p markets do not do well even if the equity market more broadly does. >> we are long value stocks relative to growth stocks.

you would expect value stocks generally speaking especially financials to do better when rates start to rise. we also let that bond returns. where you want to be short durations is when the first hike starts. and we are short duration in our portfolios as well. you could say we pulled back on stocks overall, but we are relative valuations are attractive. look at the 10 year chart on your bloomberg, you will see it's as cheap as it's been. the recovery might get slower. liquidity is getting pulled back. if things get bad in china you could get a credit impulse into 2022. no recession risk insight, you could be long-term recovery trade, take advantage of relative valuations. ultimately we are diversifying investors. jonathan: fantastic to catch up

with you once again. sebastian, global multi-asset had, it so difficult looking out next year to gauge economic outcomes. >> i think that's tremendous at the moment. >> dovetailing with what sebastian just said. you go back to fundamentals which has been the way for decades. how do you calculate earnings of spx into all the macro blather we are talking about. jonathan: there is a risk of overthinking it, pretty pronounced right now. tom: this is a disease and the real pros, and his definitive book on diversification, these

people think about it but don't over think it's like you and i do. >> there's a lot to think about. kailey: coming back to the earnings story, a huge question around margins because we still have these persistent supply-side issues. a lot of those constraints have not gone away. if they lose their ability to pass those on to the customers, what does that mean when they're talking about earnings. >> feel the beat from the tambourine, oh yeah. jonathan: i thought you were saying something smart. tom: the dancing queen. jonathan: are you calling chairman powell the dancing queen? [laughter] jonathan: 22 on the s&p. from new york city, this is bloomberg. >> with the first word news, the

u.k. government is set to provide limited financial support for first-line production in a bid to ease the shortage of carbon dioxide crucial to the food industry. they halted this because of natural gas costs. the government met with domestic gas and power suppliers and several stock new customers. the u.k. is said to be looking at joining the usmca free-trade agreement between the u.s., mexico and canada. the administration won't start work on a bilateral deal anytime soon. prime minister boris johnson downplayed progress. president joe biden will call for 70% of the world to be vaccinated by this time next year during a virtual vaccine summit. the president will pledge 500 million doses of the pfizer vaccine, pushing the total

american donations above 1.1 million -- 1.1 billion doses. bitcoin is rallying after dropping briefly below 40,000 for the first time since august. the mood in global markets common market fears over evergrande. 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 are not seeking a new cold war or a world divided into

rigid blocks. the united states is ready to work with any nation that steps up and pursues peaceful resolution to shared challenges. >> the president of the united states at the u.n. general assembly. here is your price action on this fed decision. equity futures green. yields aren't doing much paid up about a basis point. euro-dollar not doing much either. that fed decision just around the corner. tom: i would also look at the real yield, a lesser negative number. that will be interesting to see. i know you got in late, i was in. jonathan: i can check this. tom: mike does every day. jonathan: what i remember cop -- tom: i sent you the real yield

chart. jonathan: for me, 4:31. tom: you beat me by 60 seconds. in way before us, annmarie hordern. i want to go to jeff stein of the washington post who channels right into your work. zandi at moody's, everybody respects dr. zandi. this is 6 million jobs we are talking about with a debt ceiling issue. talk about the cost of washington the day the debt ceiling issue happens. >> its politics in washington. i don't even know if they are thinking about the fact -- they think about it, but in these moments they are thinking about every single second they are wasting money. what's happening now is politics. republican said if you link these bills we will not vote for the debt ceiling.

right now these two bills are linked in the debt ceiling suspension and a stopgap funding measure to make sure we can keep the government september 30. tom: somebody mentioned the dade calendar, there will be progressive congresspeople attending meetings. they'll be the blue dogs attending meetings, which meeting are you focused on with joe biden today? >> this will be speaker pelosi and senator schumer how are they going to get this done? you and i had a conversation about the debt ceiling in the stopgap funding measure. this is the build back better agenda and that is having a bipartisan version of that on monday. i did want to mention to the

administration potentially the financial community triple b maybe not the best thing. i said that in the east room and somebody said please don't call bloomberg on us. monday, as of temer 27th is when speaker pelosi promised to bring the bipartisan infrastructure to the floor. the moderates need that in the house. the problem is progressives say they will tank it if reconciliation is not done and it's not. jonathan: what does the international story look like now? >> immense pressure building internationally. he sat -- you heard the speech yesterday paid the real key line was about this is not a cold war that's because the u.n. secretary general painted a picture of a dysfunctional relationship calling it a cold war or leading into that between united states and beijing.

australia in their back yard is going to have a nuclear submarine technology patrolling on the south china sea. the international community, joe biden has promised america is back and we will take it by bilateral approach with friends and allies. afghanistan, france in terms of australia and u.k. alliance with america. they feel they are on the back foot and left behind. we are still waiting on the phone call between president macron and president biden. we should note there is a french election coming up in seven months. marine le pen is rising in the polls. a lot of this has to do with what's going on. >> the president has issues with her adversaries and our allies. the democratic party can't seem to get it together. what's going right for the biden administration? >> i would also mention front

page of the paper this morning in texas on the southern border of texas, thousands of haitian immigrants, he is getting huge backlash. the head of the naacp talking about this a bit more aggressively if this is the trump administration. there's a number of things building up for biden. he will have a summit on covid if america wants a boost, how many vaccines they will give to the developing world. that's one area he can get something back from the international community. tom: you are the only one qualified to answer. a good question on twitter today. the basic idea is has jonathan ferro gone full yankee. did you ever go full bridge while in london? >> i did not. tom: after the first week the long island accent goes away. >> i think it comes back.

i sometimes wonder if he has gone full yankee. jonathan: can we address this? someone out there is very disappointed. someone's been calling the australian prime minister the australian president. they've accused me of going full yankee. what is that? jonathan: where you can -- tom: where you complain about your taxes. jonathan: then i have. i went a long time ago. you seem to be becoming more british, tom. tom: mrs. kane had a little bit to do with that. jonathan: when i first started a bloomberg you could see when people were taking vacation, going into tom keene's diary it would be like four days of the whole year, for five days max.

tom: and migrated a little bit. jonathan: the chairman of the federal reserve coming up later. the news conference at 2:30 eastern time. kaylee will be joining us. lisa abramowicz taking a couple of days off. here's the set up this wednesday. futures positive up 22. into the bond market, yields higher by about a basis point. a lot of thanks around the company evergrande. overnight we got a hint, one payment on one bond tomorrow in one way or another. what happens with the interest payment on a dollar bond due tomorrow. >> it was not something you see out of u.s. treasuries. jonathan: i have no idea if this sticks. we are advancing one half of 1%.

a lot to get through this week including the news conference. seeing us out tom keene. tom: i am saving it. you are the dancing queen. ♪

jonathan: good morning. here is the price action, four days of losses into wednesday. futures bounced back on the s&p. up a third on the russell. the small caps up about 14 points. setting the tone this morning once again, switch up the board again. we have a talk about debt, the interest payments for the two. they missed the bank payments, the interest due on those bank loans on monday. do you on thursday, tomorrow, two payments. one of the local bonds and the other on the dollar bonds.

there is still an $83.5 million payment due on this one. this is expecting to be trading at about $.26 on the dollar. that's the issue here. we still have $669 million of interest payments due through year end. jonathan: -- tom: what i would watch to the general counsel and a lot of things that own this. jonathan: evergrande seems to be shaping everything at the moment. here's your bond market going into the fed. tense up about a basis point. 30's up about a basis point. you have to go into the news conference and reflected some kind of consensus to the federal reserve. it may well not exist. then you've got to go into the

news conference and say there's a big gap between qe and a decision on rates. there are two big issues for the chairman. how do you do all of those without causing a little bit of trouble. tom: i know romain will have that on the close. jonathan: i amp up -- i am pumped up for that. >> let's take it at some of the individual movers. fedex one of the most notable. it came out with earnings after the bell pay the revenue was good. labor costs higher paid a lot of costs relating to having to hire third-party contractors. there's a lot of networking and logistics. that caused the company to revise lower its outlook.

the revenue side is great. roughly about a 10% growth. even higher growth and even higher at the express unit. those costs ranging here. we are not going to get those results until the end of next month. it will be interesting to see how they keep those costs under control here is the holiday theme starts to ramp up. they pretty much knocked it out of the park here. most of the sell side analysts are saying investors aren't expecting too much. the biggest concern is about the sustainable growth in revenue that had been telegraphed by the company.

this expectations they could dip that into next year. a lot of drama with regards to disney. the shares plunge at about 6%. the ceo was talking eddie goldman sachs conference and gave an outlook on the streaming service. that seemed to disappoint investors. how that might actually be having an effect on his production of some of the content. 17 episodic television shows. that sent the shares lower. up about 1% getting close down. keep an eye on these. releasing data from its latest trial. you are seeing those shares

higher by about 1.5%. biogen down in the premarket. they get fda approval on that breakthrough approval back in early june. it was not without controversy. only about 100 patients have actually been infused with this. that would be below the company guidance if that were the case. only saying they are seeing decent patient uptake on this. they did not talk about those numbers. tom: the close off the fed meeting this afternoon. what's so important here is the idea, we know the measurement of you going full yankee. we need to british to go full yankee in america and our next guest has done that. jonathan: you want to have this

discussion with a wonderful fund manager. you want to do that now? >> she is an example of an international. >> i think i've lost them a little bit. i'm trying to keep them. jonathan: great to catch up with you. blackrock head of global fixed income strategy. something we mentioned through the morning. how difficult it will be to -- when the dot plot is going to be in the mix as well. >> i think they've done a relatively good job when they try to decouple tapering qe with a rise in interest rates. it has done a relatively good

job. the market is expecting to may be here a little bit more around tapering. the market i think, of the consensus is tapering will start at some point for the end of this year. most market -- will be keeping a keen eye on. may be an adjustment to 2022. that the moment and looked like they will be suggesting three rate hikes in 2023. so far they've done a good job of tapering qe and interest rate separated. tom: you do a world-class job of synthesizing all you read in fixed income dynamics, what do

you anticipate the real yield will do? >> if you look at the behavior of the u.s. real yield, the european rates, you are seeing in relative terms it take a little bit higher. we do start to see, it depends, the messaging taking way and if we do get further guidance on tapering towards the end of the year, maybe the dots as well. if you perceive to be a bit more dovish we will start to see the dollar tick down. at the moment i think we would expect to see real yields continue to cut a bit more. if we get them signaling they will continue with tapering before the end of this year, the pace will be important as well. kailey: i doubt the debt ceiling

will have any real bearing for the fed. for the bond market, is there a real fear around the potential of that suspension not being extended? >> it's another layer of uncertainty to enter the mix and it's another risk. i think -- not to be fully discounting it, because it is a risk, but on the base scenario it is something will be agreed, i think if you add that to covid, you added to the news around growth generally in china and elsewhere as well. it is just another factor will maybe contribute more at the moment. perhaps more in the equity market. it is definitely a risk and i think it is to a certain extent being priced in. at the moment the general

consensus is there will be some sort of agreement. jonathan: thank you. blackrock head of global fundamental fixed income strategy. china will deal with it. tom: you make a really important distinction. equities are amorphous, there is some actual transaction. possibly could be cleaner for the chinese government, by no means only experts on this. they were off to bring buildings down like dramatic videos we saw, will they have to clear out banks and merge and consolidate >>. >>do we have to assume a lower growth rate with those issues? do we rethink some of the core calls. people getting comfortable with the european long.

do we need to rethink those positions? >> what they need to do these keep net exports strong and that maintains a relationship for those boats coming across the pacific. jonathan: on any given morning i hear a lot of people who want to get into europe. they take on that cyclical risk. kailey: that also was the call coming into 2021. it changed a little bit in the middle part of the year. they are turning an eye towards the other side of the atlantic. jonathan: it is fed decision day. full coverage later. tom keene, kailey leinz and myself, lisa back with us tomorrow. she skipped the fed. what's that about? coming up later, the world bank

president, from new york, this is bloomberg. ♪ >> european central bank will discuss boosting once the pandemic era emergency stimulus ends. any increases uncertain. while the euro area covering should allow the ecb to end its pandemic bond buying program in march, they are said to discuss how to avoid -- when the support is pulled back. president xi jinping told the u.n. general assembly his country plan to stop building coal-fired power plants. the latest statement came after president biden announced a plan to double financial aid to poor nations so those countries could switch to cleaner energy. declining confidence with growing concern it is driven by

politics. the marquette university poll found nationwide approval was down. the poll shows 39% view the court is deciding cases mainly on politics. disney ceo is warning streaming growth will be slowed. production delays are also dragging and slowing disney plus subscriptions in india and latin america. 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. ♪

>> >> david will -- david is up to it. >> it's all about the strategist. i am more concerned about the high yield bond market. credit is one way he showed that was to look at the vix relative to the yield gap on high-yield bonds. when you run those numbers on the bloomberg terminal you find out the vix was it a four to start this week.

you still haven't seen any -- >> high-yield doesn't show the haste >>. > there is concern there is more risk if something happening in the high-yield market simply because you don't see the risk there to the same extent. >> you could argue the fed has been backstopping the stock market to some extent. there is no doubt it's part of a mix in the sense you could argue yields are artificially low and so investors have to go wherever they can to find yield in a lot of cases it's been the high-yield market which explains why the spreads between the securities and treasuries are small as they are. but whatever the source of it is, you see lower rated debt actually doing better at this point. it shows you people are not

exactly that focused on the riskiness of the bonds they are buying, they are more focused on things like yields. kailey: the appetite has been there and good thing because we have gotten a lot of issue with a lot of companies taking advantage. >> that is aptly -- that is absolutely the case. especially when you have the potential for the fed to pack away and for yields to rise because of that. you can understand why it is. if you look at where we are now, more than $400 billion of bonds sold in the u.s. high-yield market, you go back at 20, 25 years, you cannot find over the time period we had this year anything comparable. tom: we have to do just one more. what are you watching into earnings season? we start the derby with a bang. what are you setting up for? >> it's a matter of how well

companies can sustain their earnings growth in light of what they are seeing on the plus side. fedex a perfect example from late yesterday. labor issues hurting their results. how many more companies will we see that with, whether it is labor or materials or shipping and to what extent can they raise prices? tom: we have any number of topics, you are focused on the future of chairman powell. jonathan: did you hear what senator toomey had to say? i think he's tolerated a politicization of the fed wandering into the social and cultural areas with the fed does not belong. a curious one from the republican senator. a time when we don't know the chairman's future. anticipating something from the administration and the next month or so given that this term expires next year. tom: i'm going to signal a meeting, many months ago at the

chicago fed. social policy, how original. jonathan: jim is going to talk about this at 8:00 eastern in about 10 minutes time. chairman powell version 2.0 is very different to chairman powell versus 1.0. what happened through 2018 and the federal reserve was hiking and shut down high-yield market in december? the chairman who came out of that was radically different. it predates the pandemic. there was a recognition at the federal reserve they made a mistake, they raised interest rates to quickly. there was much more slack in the labor market and they have been conditioned by the experience of the previous cycle and are applying those lessons to this cycle. is this cycle different to what we experienced over the last 10 years? tom: dead on and let's bring it to the research and observations

from julia and andrew over at citigroup. they are both using the same language of a hawkish risk this afternoon. jonathan: if you ask people on wall street, ask the economist, is this a tight labor market or a loose labor market? it's a difficult question to answer and you will find a lot of people in different camps. some people think there's a lot of slack still. some people think we are very tight. it's not the debate you want to be having going into next year. there's no real consensus on whether we have a tight labor market or a loose one with a lot of slack. >> the dots are a shade of a mystery of q4 gdp, not so much a single statistic, but q4 gdp, better or worse? jonathan: when this federal reserve wanted to communicate rates would be low for a long time. that was a perfect method --

mechanism to do that. now they all must have the opposite problem with the dots because it might read the other. tom: i would rather the chairman communicate that any speech to the economic club of new york. the chairman can communicate that by speech rather than dots. jonathan: tom and i go to the economic club in new york and listen to the chairman periodically. you sit in the back behind the chairman. i sit in the cheap seats in the back end of the room. what were you eating up there? tom: something you threw at me. jonathan: equity market up 23. up a basis point on the 10 years at 1.334 five. it is fed decision day.

this story with evergrande evergrande -- that story with evergrande still moving. from new york city on radio and to, this is bloomberg. ♪

>> this market has been way stretched, and way overdue for a pullback of any kind. >> this could be choppy but 100 days from now we will be in a better position. >> the question is how much you want to be aggressive? >> this will persist for a while and the flood will have to normalize. >> the fed has given us a good indication of where it has been and where it's going. >> this is bloomberg surveillance with tom keene, jonathan ferro, and lisa abramowicz. tom: good morn