dani: china is going to crater.

we are talking about global oil demand that is anything but outstanding. i know we've got francisco on later. oil demand is likely 1970's. that's an extraordinary state.

jonathan: in the bottom right of that graphic, tom: a lot of other people on board. i go back to deutsche bank from a million years ago. you've got to go to the micro economics of global oil. what everyone is looking at is demand and not supply. jonathan: i think tom brings up a good point. how much of this is demand driven. how much of it is the that supplies are constrained. we are looking at a d carbonization of economies. how quickly will people bring oil supplies back online to meet the demand given how low the inventory is.

jonathan: -41, the s&p is down 0.9%. take your pick on the curve. tom: which yield matters? jonathan: that's where the rate hike is playing out. tom: the belly of the curve has potential. jonathan: one a move we've seen. lisa: the front end on the two-year option, that is a little bit messier. we've got the ecb president giving an introductory speech. the federal reserve is hawkish. with respect to moving away from pandemic era policies, how much

they start to feel the pressure of a global shift. we will hear from jay powell and janet yellen. they will testify to the banking committee. we continue to accelerate. front and center will be the politics of the federal reserve right now after the resignation of the members who were involved in trading activity. how much does this help jay powell get reappointed by president biden? another bond auction, this is usually messy. the u.s. is selling $52 billion of this. the five-year note, yields are the highest going back before the peak of the pandemic. you see people expect rate

hikes. jonathan: let's get straight to eric friedman. eric, let's start here. what's changed? >> as you talked about, the biggest change has been the yield. this market was trying to decide what it wanted to do. we were stuck between reflation or stagflation. right now, we see a market edging toward reflation. that is true in the bond market. you have to

hold up. lisa: earnings are front and center. how much can they absorb some of the supply chain disruptions?

the call with downgrading them because they will pay their wages more. are they a tech company? jonathan: they are still very bullish. that is happening at 10:00. the resignations, does that take the heat off the chairman today. tom: you're going to pin me down on this. jonathan: do you think the people asking questions are in a position to ask these question? tom: the lights are brighter on powell. jonathan: thank you for the answer. futures are down 41. from your city, good morning. this is bloomberg. ♪

>> going into predictions that china will need -- doubling the size of its global fleet. it this is bloomberg. ♪

>> employment is a bit short of the mark on what i consider to

be substantial progress. progress continues and i hope it will meet that mark. jonathan: from newark city this morning, good morning. your price action looks like this. we are down 42 on the s&p. we are down 1%. the bond market yields are higher. real yield is 152. what a turnaround from the last couple of months. in the commodity market, look how francisco -- the bank of america strategist is joining us. looking for triple digit crude. tom: $3.18 per gallon, there is some room to move up to gasoline pain. right now, we utilize the

washington correspondent. here members when tip o'neill was the house majority whip. this was a few years ago, back when the red sox won. steny hoyer has to do the early work for the speaker of the house. he has got to go out and whip progressives, liberals and to some form of legislation. is the process now when tip o'neill was whip? >> it is in terms of one office. nancy pelosi is the one who is whipping votes right now. as we wake up to the sound of sonny and cher like groundhog day this morning, we could replay the same script we used a week ago today. the fact of the matter is nothing has changed in the last week. we knew the debt ceiling was not going to be acknowledged by

republicans. we knew this bill would fail. here we are on tuesday morning. tom: i like that a lot. seriously, we've got to look at the liberals coming over to save face. how do they orchestrate that? >> this is the delicate dance. in june, nancy pelosi said there isn't going to be a bipartisan bill in us we have a reconciliation bill. she held a meeting with the democratic caucus. they closed the doors. there is not going to be a reconciliation bill in time for thursday. she has to pay off that promise to moderates. they aren't going to touch reconciliation. what can emerge? what can they show progressives? what kind of framework, what

price tag will it be? to convince them that something real is there to vote on so they can vote for infrastructure on thursday. lisa: how much time do the democrats have? it will take two weeks to get this process going. >> as much time as they might need. we are told somewhere in the middle of october, it takes 2-3 weeks to get a reconciliation done. we could be dancing on the cliff at that point. tom: did you see how he gets that plug in their? jonathan: that's the appearance fee. we were going to do that anyway. lisa: the fed is front and

center after the resident nations -- resignations yesterday. how much heat is this takeoff jay powell? put more heat on him today. >> of chair powell. that is another decision joe biden needs to make. we are talking about the good faith, whether the treasury can pay its debt. the last thing joe biden needs to be worried about. when you consider the schedule this president is looking at, he is going to chicago to talk about covid mandates after getting shot on tv, while reporters were asking him about reconciliation. he didn't blink when he -- they stuck the needle in his arm. tom: we are -- were talking

about beer. the moderate drinking youngling beer. joe: are you calling for a beer summit? tom: plain as day, had they simply overreached, putting at risk their majority in washington? joe: a lot of people would say they have. if nancy pelosi pulls a rabbit out of her hats, maybe that maintains the democratic majority. >> a lot of people can go home and take credit. one doesn't happen without the other and the stare down we talked about a week ago is only intensifying as chair powell prepares to testify. jonathan: thank you very much.

the midterms, let's talk about them. do you think getting something done increases the chance or decreases. for many people who put a vote in a particular column and the advantage of this resident, many people wanted him to go moderate? do you think he is? tom: the ask has been way out. it is important that it has been down from 3.5 trillion dollars to $1.5 trillion. that is how rapidly this is moving to the moderate. jonathan: all the way down to a one handle. lisa: how much is it going to be and how much will the midterm election hinge on things like oil prices? tom: that is important. lisa: how much does that shift

the narrative? jonathan: we are staring down the barrel of triple dredge it crude -- triple digit crude. tom: i mentioned to the team in london and they laughed at me we are at $3.18 a gallon for regular, $3.58 is where we are going. if they exceed over that, there will be some problems. jonathan: there are some problems in your already. the global chief economist, don't miss that conversation. the price action, we are negative .8%, down 37. yields are high by three basis points. it is the outperformance of the small caps that get your attention, two percentage points plus. tom: that is the rate move

folding into the duration. you will see more of that. jonathan: on radio and tv, this is bloomberg. ♪

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jonathan: how quickly price reshaped narrative. from new york city, on radio and tv. prices negative. down by 1.5%. two percentage points plus of outperformance on the russell versus nasdaq. you see the relative performance was small caps down seven or eight points by .3%. all this felt like february and march. the s&p 500 yesterday, 3.4% for a fifth day of the gains, five days of gains. later on, and the next hour we

will catch up with francisco blanch on the way to 100. does he bring that forward? what does it mean for the bond market question mark treasuries, twos, tents, 30's, -- tens, 30's. we were in the low 60's on fives. on twos, we have gone from 10 to 15 basis points, double that with 331. the question we have been asking yesterday, today, how loose the tightening be. that's the debate we can have. tom: huge debates going on. this american economy, she calls it transitory and fragile. frances donald joins us.

how tough is it right now to gain q4 and q1 of next year? frances: tougher than many years. i knew look at 2022, looks as though growth and inflation. a host of uncertainties. will we see policy miscommunications and when will those supply chains. all of the risks seem a lot better priced than they were six months ago. that is why we were struggling level looking not so great with the expectations not aligned for them and we could get a reprieve and the next three to four months until we had a more

difficult 2022. tom: how do you respond to the pendulum of the stagflation? frances: we were going to see upsides and inflation and downsize in growth. the challenge is we have yet to see or we didn't see the narrative that high prices were far less about inflation than they were about what they were going to do to the economy. lake erie pressures are about how the slope -- inflationary pressures are about the slope. with the u.s. housing draghi on growth in the second quarter, we could see stronger -- house dragging on growth in the second quarter. just because the downside risk is coming from the supply side it doesn't matter but they do. jonathan: how do they matter to the bond market?

frances: the issue is that there has been a lot of misunderstanding that when we have high inflation the fed will respond to it. the fed cannot and in my opinion will not. it can hike all it wants but it is not going to materialize in the semiconductors out of taiwan. the fed cannot response -- respond to this. if you want to get the fed call right i am focusing on the type of inflation they would respond to, inflationary pressures are that will be much more important. that is why we ended up with a 10 year at 1.3. 1.5 seems disjointed but it is not. it is about the type of inflation. jonathan: people want to get the market call right. fold the debate into the markets, treasuries. you said repeatedly you have seen the height on the yield and 10 year.

what is the framework for the bond market? frances: i still leave we likely have seen the peak in this cycle, though we may go back. a lot of that will have to do with what communications we get from the fed. powell was hawkish last week. he didn't reiterate 2022 was so far off here but the challenge is how do we see a fed hike when we will see pce inflation go sub 2% and growth decelerating. not the least of which is we have this giant fiscal whole at the end of 2022 and beginning of 2023. we are looking at the term premium. really getting a sense of the drivers will be tough. i think we will get 1.4 to 1.6. some days will be uncomfortable. lisa: in terms of the risk on

move, you say you do think the supply chain disruptions have been priced in. is that enough? frances: reflation generally means growth and inflation are moving positively. what we do expect is that inflation data does command below expectation and growth can now start supplies to the upside. that typically looks gold he locks but it is full throttle not we have a lot of underlying challenges. sometimes i use the term goldilocks and the three bears, which means be conscious of the fact that you want to be defensively positioned and make sure you are ready for in the event of escalator up, elevator down. lisa: how are you preparing for that? jonathan: there are a range

--frances: there are a range of ways. watch the fed speak and supply chains and watching china. those are the three main factors on whether we can continue the goldilocks narrative or would you have to prepare for something more uncomfortable and more stagnation. tom: do you have an entrenched terminal vector to potential gdp ? do you have an arrow sliding down over quarters and quarters and years and years to the vicinity of 2.0%? frances: 1.9% is where we have growth coming in 2026. a long wait to get there and a lot can change. through covid we expected and were hoping for fiscal that would extend over an extended period of time. a lot of productivity growth. all of those things were

supposed to lift the long-term gdp, but it has not happened to the same extent. 1.9% is my peak. jonathan: chairman powell talking later with secretary yellen. i won't ask you to weigh in on the politics but i do want your understanding on what you expect next year of the federal reserve. are you expecting big changes at all? frances: know, with the regional banks, we will probably see even the hawks pivot in 2022 as they start to realize that a hike in 2022 is going to be really problematic. regardless, whoever is in will, you will see a bit of a pivot around q2 of next year. lisa: just to finish up, i am wondering what you think the ramifications will be of the turmoil we have seen in the

fomc, six officials will be pointed -- appointed in the upcoming year. how much does it shift the fed's becoming dove -- uber dovish? frances: we do not know who will be at the head. and what is the general type of mood at the fomc. when you have that level of uncertainty, any acknowledgment of a risk management tool, but try to pivot yourself to what the data will show you. our expectation is that the deceleration in growth, even the hardened hocks will have to recognize it is challenging and will have to start tightening in 2022. jonathan: thank you. to hawkish dots. lisa: i love the idea of chief dove you were saying.

chief dove, the bar is getting higher and higher. that is what i wonder, how much is this administration going to pressure any new fed appointees to be ultimate dovish or how much will some of the inflation data push their hand and the key issue in 2022. jonathan: i thought he gave a different view, if you that right now was needed. i think we have a spectrum of dolls from super dog to go, and we need a little bit and have -- super dove to go, and we need to have a little bit to have that conversation. tom: he is someone who essentially writes nonstop. he has written phenomenal leadership books. he was cut from a different cloth and that cloth fit perfectly with the entrepreneurial heritage of the dallas fed. it is the only fed where he

would have fit in and he did a great job representing the capitalism and the trade and border tensions of that very important regional bank. jonathan: i have no idea of the resignations of yesterday taking the heat off of the chairman. i would say the chairman of the federal reserve will have questions asked of him. what has been going on with the chair of the boston fed? tom: i would say has to do with the white outs. it goes back. there will be nuances forward we can't perceive it right now. it is going to be the president in the oval office making the decision. jonathan: tom keene, jonathan ferro, and lisa abramovitz. yield keep on climbing come up for basis points to 152. from new york, this is bloomberg. ♪ ritika: senate republicans have

blocked a bill that would suspend the debt ceiling and would have kept the government operating past the end of the fiscal year later this week. that increases the pressure on democrats to find a way to raise the debt ceiling. they may have to use a budget procedure that could take nearly two weeks. treasury secretary janet yellen refused to return calls from the head of the imf. withholding support is beyond its public statement. -- accused of properly intervening in a report in her prior job. a new number one in the ratings, -- at the top of the survey. norway fell when it had the

worst outbreak in the world period delta variant has left the u.s. reeling to number 28. ford making the biggest investment in its history. the automator will spend $11.4 billion to build factories in tennessee and kentucky. the project will create sites to produce electric f-150 pickup trucks. they will employ 11,000 people. global news 24 hours a day, online and at quicktake on bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. i'm ritika gupta. this is bloomberg. ♪

>> about 22% heaven gotten any shots -- haven't gotten any

shots and that is causing an awful lot of damage for the rest of the country. this is a pandemic of the unvaccinated. that is why i am moving forward with vaccination requirements wherever i can. jonathan: good morning. -34 on the equity market. we are -.8%. into the bond market, yields are high. 150, 270 on tens. have gone from 112 to 150 so quickly in the last month. in the fx market, dollar strength, down by a 10th of 1%. $76 and $.20 a barrel. -- $76.20 a barrel. new york state now facing a health care worker shortage and

new york governor calling it a disaster, a state of disaster emergency amid the shortage. that is the problem going forward. tom: it is region to region and city to city. there are stories just like this. what are they going to do? the national guard is going to come in and clean bed pans? jonathan: no idea. that is ultimately the plan. tom: pfizer, formal eua submission in coming weeks and on and on. i noticed with children, one in five cases deemed to be children. what happens to this nation when we finally get five to 12-year-olds vaccinated? >> i think what you will see is

the virus will have a hard time infecting children. what it also will do is allow children to get their lives back because we know their lives have been on hold, even though they tend to be spared from severe disease. it can be difficult to have these activities without covid-19. having five to 11-year-olds being vaccinated allows them to have a normal childhood and protects them against destruction from covid-19 and allows schools to be having policies. tom: it dovetails into your observation on what the governor is having to deal with today. jonathan: just how bad are things in new york city and elsewhere. what kind of shortages could we face? dr. adalja: the anti-back health care workers, especially nurses. you will see hospitals worried about how they will continue.

in the long run is better to get these people out of health care if they are not going to be accepting of data and these are people you don't want working for you. it is going to be difficult because there will be staff shortages and it will be difficult for some of these places to cope. in my home town outside of pittsburgh, they are having the same problem and that is why they are reticent to mandate the vaccines because they don't think they can run the hospital without the unvaccinated working. i think it is disgusting that health care workers don't want to get vaccinated and they hold the hospital hostage because of that. it speaks to the lack of scientific literacy. 96% plus, it is not the physicians that aren't getting vaccinated. it is a call if you are a hospital administrator to think about how you are going to cope, especially if you have covid patients and other things going on. if you think about a vaccinated

workforce, all nurses being vaccinated will minimize the disruptions that covid-19 has. to me it is a no-brainer and it is unfortunate but i don't know what the solution but there will be short pain. jonathan: i know there is not one single answer for this question, but i will ask it. what is holding them back? let's talk about outreach within health care community. what is holding them back? dr. adalja: i think each nurse or health care worker who is not vaccinated has their own reason. most of these will be myths that they have absorbed. even though they are health-care workers they are not immune from picking up these things on facebook about microchips or fertility issues. or that it's not tested enough or they have heard something from somebody that this certain side effect happened. it is all of this kind of mythology out there that they

have ingested. you can sit down with some of them and make efforts to try and meet them where they are and that sometimes works, but sometimes they are beyond the reach. we had this with the flu shot every year. tom: lisa, i am right about the fertility issue. lisa: i will let you worry about that and not comment. it is not just health-care workers, it is also the schools. the issue of new york city saying school workers who have not gotten vaccinated are not allowed to come into the building after friday. have we moved beyond the carrot phase of vaccination and is only a stick approach as we try to push the reticent? dr. adalja: i do think the stick approach is going to be more and more prominent amongst organizations trying to get the workforce vaccinated and make the workplace safer. we have seen it work with the flu vaccine and companies because people need to work. employers have the right to set the conditions for employment.

it is something that just doesn't make sense why these people are -- the vaccine. higher vaccination rate the much better we will be. i have to go to work and it will be unvaccinated covid patients. the unvaccinated people are not just harming themselves but crushing their community hospitals. it is not as if they get sick but they show up and we have to take care of them. that takes up a bed and room that other people with heart attacks and strokes don't have any more. i think we have to show people exactly what damage they are doing by getting infected with covid and impinging on the health-care system which we all have to rely upon. jonathan: thank you for your time this morning. dr. amesh adalja there. are the sticks working when we talk about a staff care shortage? lisa: not just health care but

school shortage potentially for the new york city department of education. it is too early to tell. at what point will it push people to get jobs and is this a reason the companies haven't taken a harder stance with employees because there already is this labor shortage and don't exacerbate it with pushing people away. i don't know the answer. jonathan: we have a labor market issue. tom: i am with the doctor on this. let's get everybody vaccinated. if you don't want to be vaccinated, that is great pic you don't get to play. the airlines, same thing. jonathan: the airlines aren't doing it, are they? it is the federal government. tom: let's go. lisa: it is fair to say that, but i will point out that at the end of the day, companies need to be staffed and this is a delicate consideration for them. i got that. jonathan: equity market down 38. your bond market yields higher.

up for basis points. -- up four basis points. later today we will hear from jay powell and secretary yellen. this is bloomberg. ♪

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>> a lot of things are changing right now that are leading to higher yields. >> it hasn't been a breakdown in diversification. >> the fed has said it is going to let inflation run, but inflation is running at a pretty serious clip. >> if we were to have a real debt crisis and default crisis, the fed has options. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. jonathan: what a morning. from new york city, for our audience worldwide, good morning. this is "bloomberg surveillance, " live on tv and radio. alongside tom keene and lisa abramowicz, i'm jonathan ferro. you equity market lower, down by 0.9%. yields breaking out in the last week. tom: it's deteriorating in the last hour as well. the dynamic of the last 60