>> we do have that with the last round of stimulus checks. >> equities respond generally positive until it hits a certain level. >> markets become more challenge going forward. >> don't miss out on the bigger picture. >> this is "bloomberg surveillance." tom: good morning everyone. bloomberg surveillance, our studios in new york on radio and television lisa, he has a framework to discuss. lisa: we are going to your about the framework perhaps they have agreed upon. what this means to me is the question, does the framework get to the vote for the bipartisan infrastructure plan?

to me, that is the biggest question because it is the most concrete thing that could get done in near-term. tom: that is a concrete thing, no pun intended. lisa: ba dum bum. tom: thank you. ferro wouldn't have done that. we get to the meeting in one hour, the idea of a monetary structure that screams rates higher. lisa: rates higher in the front end. the idea of rate hikes sooner because inflation has been so high. to me, the big question of the week, how do you deal with rising inflation in a slowing growth backdrop? how do the central banks address that when the source of inflation is different depending on what country you are talking about? is it demand driven more in the u.s. than in europe, where they are dealing with something very much more supply chain driven? tom: lisa, what is the narrative right now? we will get to greg peters any moment. greg peters of pgim.

but i am absolutely baffled by the narrative out there that la garde will need to address at 8:30. lisa: the question of how much she will push back, how much kenji? i would argue -- how much can she? i would argue much of what we are seeing is synchronized trading. so how much can she pull back and move the euro away from that dynamic that really has gone global echo -- has gone global? tom: i want to look at caterpillar here. people in the bond market talk, it is a transitory caterpillar, but i wonder to what. kailey: i think they see a lot of these pressures easing up a bit. for caterpillar, they talk about everything for labor to material costs to freight costs, and yet

they were able to report profit 20% above what analysts are expecting. this isn't just a story we have seen with caterpillar. by and large, companies are beating to the upside. they are retaining margin. the average margin expansion is 40 basis points from the earnings propping of this equity market. tom: it does fold into china slowdown. kailey: absolutely. but i think you are also seeing that companies so far, and especially in europe, we were talking to katrina dudley about the luxury sector. tom: look for that out on bloomberg digital. she was wonderful on the persistency of free cash flow. i'm going to start with foreign exchange. a little bit of dollar weakness here. euro-dollar into the lagarde statement, ecb here and 42 minutes, and then onto the press conference. euro-dollar, $1.1607, very much rain bound over the last days.

and bonds, all you need to know, massive flattening. we are now at 98 basis under a 1% difference between the two-year and the 10 year. two-year year yield higher, 10 year yield lower, and futures up 14 this morning as well. i need to be briefed. so do you, lisa abramowicz. lisa: we have been talking about it all morning. the ecb will plan to deliver their rate decision. at 8:30, we get words from christine lagarde. how do central banks address inflation rates that have reached the highest going back to 2008, when in europe, it is met with a labor market that is weaker than here in the united states? at 8:30 am, we will get a read on what we are seeing in the united states. initial jobless claims expect it to come in at a new low of 188,000. how much does this give people confidence going into that first look at the q3 readings, the idea of gdp that was likely to slow?

the expectation is it might slow much more than people think. the expectation is 2.6%. the atlanta fed gdp put out a report yesterday saying it might just come in as low as 0.2%, which is a marked shift downwards. aftermarket, we get earnings from apple and amazon. we will talk about supply chain disruptions come how much buzz had -- disruptions for apple, how much has been priced in. for amazon, how difficult is it for them to phil 100,000 warehouse jobs they have open? how difficult is it when they are competing with other companies raising wages? how much more do they have to hike those wages in order to get people in? tom: lisa took a photo on 3rd avenue yesterday, as i was walking there to be cut and chiseled like ferro, and the stretch of amazon boxes and the rest was literally half a block long. lisa: the company is crushing

it. can they keep crushing it at a time when, frankly, their margins are going to be squeezed potentially more than other companies, and they've got to raise their wages? they have been leading the charge. does it get it done? tom: are you done? lisa: yeah, got. tom: ok, thank you so much. greg peters joins us now. let us start right now with what the symbolism is of this new hawkish curve and a substantially declined real yield. what does it simple to you? -- what does it symbol to you? greg: i think a policy mistake, frankly. there has been a real shift across the globe that seems to demonstrate that central bankers are imperatively -- are inherently hawkish. what the bond market is telling me at least is that there's too much hawkish this price -- too much hawkishness priced into the

curve, and they are trying to control exhaustion is factors such as -- control exit genus factors -- control exogenous factors. lisa: so a central bank policy mistake. we have seen this priced into every central bank around the world come together in tandem with the disruption we have seen into year yields globally. you think that central banks are on the precipice of an accident, or do you think that markets are getting roiled trying to close out positions? greg: i think it is a little bit of both. i have been astounded by the sudden shift in rhetoric out of the various central banks. i go back to bank of canada yesterday. that was a not too subtle shift in rhetoric. same as the fed. to me, i do think it is overblown personally, but it is hard to fight the trend here.

what i think we are very close, if not already there, to the peak in where the front end can go. i really don't see much more scope for two year yields to move much higher here because it is already pricing in a pretty aggressive that policy here in the u.s., and soon. to me, that doesn't really add up. i think we are close to the end of this bout here, but ultimately, what is driving the market place at the front end is driving the market at the back end. so the most important measure to me is focusing on the two-year yield. lisa: just quickly here than, there is this idea of what you do with that. do you buy two year yields at this point if you think it might be slightly overblown rick rieder of black -- slightly overblown? rick rieder yesterday saying he was selling tips because that

might be overblown. greg: i think it is close. we have been short the two-year for quite some time. we have looked at it as the market was pricing the other side to aggressively. so i think we are really close. but it is also important to remember that a taper is upon us as well, and the history of taper, while there is not a tremendous amount of data behind it, does seem to point to lower yields, not higher yields in the belly and the backend. so we are equally focused on that part of the curve as well. so i think the market has moved a lot. liquidity in the market place kind of exacerbates the move, so it does seem a little overdone in the front end. i would throw in breakeven tips as well. tom: greg, thank you so much. new slope is just extraordinary. really thrilled we could get mr. peters with us with pgim.

moments ago, steve major publishers out of hong kong with hsbc. he says we are in a game of chicken, and he says our view has not changed, much like the pro greg peters. mr. major saying this is about where we are going to be. lisa: and you are seeing increasing pushback to the sea change we are seeing in the front end. basically, traders expect and the fed to hike, expect in the ecb to follow shortly thereafter, and people like steve major say whatever they do, they are dealing with the same environment, which is low growth, low inflation, and we are going to get those bond yields back down. he has been a bond bull. he's been right. tom: this is so important. if you get a peters fixed income market, if you get the equivalent steve major market, it says equities up. what do we do about q4 earnings for equities in january of next year? kailey: it is a good question the -- good question. the bulls will tell you that

equities continue to drive the story. i actually caught up with stephen major earlier because yes, he raised his target for 2021 on the 10 year. yes, early in the morning, late for the day him and hong kong, but he went to 1.5 percent for 2021. he is still back down at an percent in 2022. tom: quickly comment on greg peters saying this is it for the two-year. lisa: that is what we are hearing from a growing number of traders. the idea that rick rieder came out yesterday and said he is actually selling tips, selling the inflation story, he thinks it has gotten over its skis. tom: no word on if they are reading steve major in frankfurt, germany. we've got the ecb announcement. what we will really see is a press conference as lagarde manages the empty seat at the bundesbank and managing the message between dovish and hawkish tones in europe. futures up 16, dow futures up 91.

the vix, 16.53. stay with us. on radio, on television, this is bloomberg. ♪ laura: with the first word news, i'm laura wright. president biden heads to the capitol today to brief democrats in his social spending agenda hours before he heads to europe. the president wanted to have an agreement when he arrived in rome for a g20 summit, but house and senate democrats can't agree on how the increased taxes pay for the measure. in taiwan, president tsai ing-wen has said the u.s. would come to the island's defense if china tried to invade. tsai said the threat from china is increasing every day, and cnn says there are fewer than three dozen american servicemembers there. the price of european natural gas and power fell today after signals from resident vladimir putin that russia will send more

gas to the continent next month. putin has told gas pumps to start refilling at european gas facilities on november 8. one of the founders of palantir technologies has started a furious debate on twitter about parental leave. the venture capitalist tweeted that any prominent man who takes six months off with his newborn is "a loser." the tweet came in response to one about u.s. transportation secretary steve buttigieg, who took time off to care for his child -- secretary pete buttigieg, who took time off to care for his child. 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 laura wright. this is bloomberg. ♪

>> everybody in this country that has been blessed and prospered should pay a patriotic

tax. if you are to the point to where you are able to use all of the tax forms that you can to your advantage and you end up with a zero tax liability, but have had a very good life and you had a lot of opportunities, there should be a 50% patriotic tax. tom: the senator from west virginia. a lot of attention paid not only to him, but election -- but a selection of others, in this battle the president will address at -- will address as he manages the message on to rome. maria tadeo will be in rome. is it the g20 comedy seven? -- the g20, g7? lisa: it is the g20. tom: i am distracted by lagarde and the ecb in 20 minutes. right now, this is josh wingrove, bloomberg white house correspondent. we are thrilled he could join us this morning on this framework that we have. greg valliere comes out and says

it is happy talk. i know the republicans will say it is happy talk. are there democrats who say that this framework is happy talk? josh: i expect that we are moments away from democratic senators or house numbers coming out of the woodwork and saying actually, or await, we are not sure about x. this is, generously speaking, from the at adminstration's perspective, they have some sort of framework that biden hopes to announce an detail, that they expect presumably democrats will get behind. but they are quite notably not saying it is a final deal. they are notably not saying that everyone has signed off, in particular joe manchin and alexandria ocasio-cortez. whether this is a slight turn of the screw, and even slighter turn of the screw, or a big breakthrough is unknown -- a big

breakthrough is unknown, but he will want something before he leaves on that trip to europe. tom: my eighth grade history teacher actually said to me history could be fun. there was a great civics class. is any of this that you are living right now civics 101? josh: i hope you didn't just give away a password for a banking login. that feels like a good one, favorite teacher. [laughter] yes, they are going to be to and fro on this, and they have been for months, and there are really core issues here. that includes taxation, medicare, paid family leave, which looks to bite the bullet in fallout last night, but progressives are pushing for particularly the care economy of this, and women in particular would benefit from that. there are so many moving parts on this. joe biden is trying to force it into one pile on a plate, but we just don't know.

it is an evolving one. kailey: and there is a question of who the president is speaking to. is he really talking to lawmakers? is he talking to the domestic population, saying don't worry, i am doing what i promised i would do during the campaign? or is he talking to the g20 and the conference of the parties as well when we look forward to cup 26? -- to cop-26? josh: i think it is all of the above. it is possible he could specify those in particular so that he can go overseas on this trip and show that the u.s. is serious about doing something on climate as he once to do. the american public, i think he definitely wants to give a sign of progress. remember, those virginia elections are coming next week, and there's a fear that biden's popularity is sinking and might drag terry mcauliffe down with him. third, it feels like almost a heavy hand type of approach might be tempting to him here, where he goes up to announce the deal and boxes and democrats a little bit or tries to, to sort

of get on board one way or another with the commander-in-chief. that hasn't really worked so far. so whether this will go far enough to make that work now, we will see. but it is a sort of multipronged audience. what would he be speaking today if you weren't leaving for europe? hard to say. lisa: hard to say, or no. this is the issue, all of these false deadlines that have been created. kailey brought up the progressive wing. does it at the senate, does it get the house to a vote on bipartisan infrastructure, which really a lot of people say is the main goal heading into year end right now? josh: and heading into this weekend, where funding measures are set to expire if there is no deal on infrastructure. at last count, no. progressive has said they will not take they will take a framework or deal in lieu of an actual vote, and they are not going to let the house bill go

forward on that interceptor bill until they do, so right now, these two are locked in tandem. whether they both get off the ground remains unclear, but biden will try to give it a boost today. lisa: to dovetail this into the question of the audience president biden is speaking to, there is the domestic audience and the international audience as well heading into g20. is the united states united? how much does this put the united states at a disadvantage diplomatically heading into these discussions? josh: i think they would argue that no one sees no progress here, but everyone abroad knows this is a divided congress. i am sure joe biden, just like donald trump before him, would love to have the power that a lot of prime ministers in the g7 do to sort of ram stuff through parliament without much fuss. they don't have that power here. but joe biden has said, look, autocracies are watching to

see if democracies can do big stuff fast and well in the 21st century, the time when we need to do it, and he has expressed real doubt about that. that is part of the reason he is pushing for a deal, and looks set to announce that they are close. the backdrop here is the more stuff that falls off of this deal, do progressives just say this isn't worth it? this is to water down -- this is too watered down. buyer we bothering? -- why are we bothering? tom: our correspondent josh wingrove, he is in washington. there will be some interesting tones there as well. right now, let us begin really and in-depth coverage of ecb. holger schmieding coming up is outstanding. he's the one guy i wanted to talk with about this, of berenberg bank.

inflation over there is totally different than the angst over here. lisa: it isn't being driven as much by the demand side. we go back to rebecca patterson of bridgewater esther day, saying that in the united states, there has been so much cash put into savings accounts, and people are deploying that cash. how much do we see this in europe, the idea that it has been driven by supply chain disruptions without the labor market in the united states? this is a huge dilemma for the ecb. tom: everyone hanging on the words of madame lagarde as she tiptoes around her interpretation of their split interpretation on price change, and of course, with all of the historical legacy across the ecb as well. we do want to remind you, this afternoon as well, apple and amazon. how do you digest apple and amazon? kailey: with amazon, it is going to be for the cloud. with apple, how much do supply chain issues weigh on the

third quarter? how much is that going to be a problem in the guidance as well, looking for to the holidays? tom: ben laidler reaffirms today, there is a massive underestimation of revenue growth. coming up, holger schmieding, as we look to the ecb in 20 minutes. stay with us. ♪ ♪

♪ tom: good morning, everyone. futures advance. that is what you need to know. s&p futures now up 14. dow futures up a sprightly 72 points. we are not on 36,000 much, but there is. nasdaq up 0.6%. even small caps rebounding after a really difficult final hour yesterday. the two-year yield, a solid 0.55%. we will dive into that in a moment. 30 year bond well under 2%, 1.93%. oil with that $86 level on brent crude comes back, down 1.8%. foreign exchange, i can't figure it out on the screen. my eyes are glazing over.

get saved by kailey leinz. kailey: this is what i am here for. i am keeping it really simple this morning, earnings winners and losers. ford really blew it out of the water. analysts pointing to a number of surprises. they raise their profit forecast. they are weathering the chip shortage ok, better than other automakers in the third quarter. that stock is up about 9.3% before the bell. a couple of semi companies also beat. it will speed is up -- will speed is up. labor, materials, freight costs, that is true, but they had really strong sales that offset that, and profits beat by 20% higher than what analysts were expecting, so that is up about 1.5%. some companies not so lucky. a number actually missed expectations, one of the be in twilio. -- one of those being twilio.

ebay, this is kind of an interesting one. i know you probably were on ebay bidding for antique guitars or first edition books or whatever it is. tom: bowties. kailey: bowties, of course. maybe you were doing that during the pandemic, but may be doing less of it now that the world is opening back up and you can go into thrift stores or antique stores or wherever one finds bowties these days. tom: interesting. kailey: ebay is seeing active customers go down, and as a result, holiday forecasters coming up short. that stock is down 5.7% before the bell. tom: kailey leinz, thank you so much. at 7:32 wall street time, we are on our way in less than 15 minutes to an ecb meeting. he was a senior economic advisor at the international monetary fund, and in a phd dissertation, try to piece together his europe. we are thrilled to bring you this morning holger schmieding, chief economist at berenberg bank. i was lectured once long ago

that american economists do not do the medium term. we do short-term, long-term, and leave the medium term to fancy people like you in europe. how does christine lagarde navigate the short, the long, and more importantly, the medium-term in her press conference today? holger: well, what is good for her is that she will most lightly not have to announce any serious decisions, so she can focus on setting the record straight a bit. for now, that means that the ecb with regard to the medium-term inflation outlook is not very concerned. the ecb on the guidance it provided in september, this looks for further upside to inflation near-term, but for significant easing of those pressures again at just 1.5% inflation in 2023.

as a result, the ecb guidance is not implied anything like the rate hike for late 2022, which markets have started to price in , and near-term, inflation is even a bit more. but our medium-term outlook has not changed materially. tom: a delicate question, but i know you can give perspective. is christine lagarde advantaged or disadvantaged here by not being an economist? holger: well, she presides over what probably is one of the biggest and among the best collections of economists at the european central banks, one of the best we have in the entire world. so she can, and her job, her skills of bringing different views together, of amalgamating them, are quite useful. and all in all, we have to say

that so far, the ecb under lagarde has been a somewhat steady shop, and that all in all is not bad. i think she will find roughly the right words to explain that inflation is an issue, but that markets have been a bit ahead of themselves and inflation is less of an issue in the euro zone than probably in the u.s. lisa: this is the issue. you said there is a whiff of stagflation in the euro zone. why is it so much more intense than here in the united states? holger: one basic reason, namely that the euro is more dependent on industry, on industrial exports, on manufacturing, and as a result, the supply shortages that are crippling parts of industry in many parts of the world matter more for the euro zone than they do for the u.s. also, consumer demand which is

fairly good in the euro zone is even stronger in the u.s. because the government has helped improve private household balance sheets over the last number of years, so there is not as much consumer demand in the euro zone as there is in the u.s. lisa: this is the confusion when i take a look at the euro that has been gaining versus the dollar over the past couple of sessions. shouldn't it be falling out of bed if the ecb is going to remain on hold far longer than any other developed market central-bank out there? holger: in a way, yes, but this is not exactly news that the ecb faces an inflation problem and that it will stay with the current rate for longer. the dollar is to some extent risk on, risk off currency. in a risk off environment where markets seem to be looking ahead to some extent to the easing of shortages in 2022, it is a bit

more like a risk on environment. the dollar typically it's up some of its safe haven gains. so i would not say this is much. kailey: there was a time when the euro was one of the biggest concerns for the ecb. we are now passed that. it is the bond market that may be causes most of christine lagarde headaches. you think she's going to have to try really hard to talk it down today as she has in the past? holger: i think she will try to talk it down, especially the short end move, starting to price in ecb rate hikes for late 2022, which, according to ecb guidance, are highly unlikely. as to the overall financing costs, it will probably warned that the ecb wouldn't go against moves which it deems excessive, but probably not say that the current level of yield is higher than the ecb would think it should be, and thus will probably not announce that the ecb is going to lean against

what has already happened. just probably try to slow down further rises to the yield. kailey: this will be one of the two final meeting for jens weidmann as he is stepping down as head of the bundesbank. does that mean he is going to make more of a hawkish push before his exit? what is the impact of that? holger: i think that he will very likely have made today and in december his case, which is basically we ought to stop the emergency purchases comparatively fast, and we ought to start thinking about the long run outlook with the need to raise rates eventually. but he has made those points in the past, and because he is a bit of an outside many of these ecb debates, i don't think that his intervention over the last two sessions will have made a

crucial difference relative to what it did in the past. it always influenced decisions, but only a bit. we have to look forward to what his successor will do, which i think may be a bit less hawkish, but they resonate -- but may resonate better with the ecb. tom: thank you so much. greatly appreciate it. chief economist at berenberg. this goes back to john authers' tour-de-force out there right now, talking about the hawkish don. lisa: how do you decipher near-term versus longer-term structural shifts in inflation dynamics? it has to come from the labor market. tom: exactly. lisa: there is such a bigger dynamic, and you have talked about this so much, the idea of automation. don't understand some of the shifts and the transformations of the labor market. how do you gain this out -- how do you game this out? tom: many ways to go with that

good observation, but the bottom line here is everybody that i respect is saying you've got to look at the labor dynamic in europe, and frankly over here as well, and in the corporate earnings announcements, i just don't see the labor inflation entrenched. 80 parts of it. lisa: -- maybe parts of it. lisa: i am wondering if the zeitgeist is shifting among the population seeing the inflationary pushes. if all of a suddenly tolerance was very dovish, very dovish ecb policy as people see what they are paying at the grocery store or for the car, that is a shift we have to see christine lagarde push against perhaps to keep with the same kind of rhetoric we have heard from her. tom: we go down in flames, folks. we tried to stay away for three hours this morning. lisa: from what? tom: from the dreaded t word, transitory. kailey leinz, transitory. at the end of the day, it is

still there. kailey: i thought it got canceled. i thought we were over the transitory narrative. [laughter] at least, the market canceled transitory. that is what the market is telling you, that they are no longer buying into that narrative. but that is one that come a time and again, christine lagarde has tried to push. bd inflation dynamics are truly that different in europe, but i would imagine we are going to hear the word transitory, or some variation of it, coming. lisa: short-term versus long-term. tom: i think doug kass was on fire yesterday on bloomberg radio in the nana clock hour. you buttress that up -- the 9:00 hour. you but just -- you buttress that up against what we see from greg peters, and it is a constructive "surveillance" narrative. kailey: a framework. tom: yes, a framework from lagarde. [laughter] this is bloomberg. ♪ laura: with the first word news, i'm laura wright. one thing that won't be canceled is an image of tom keene with a

caterpillar tattoo. but in the u.s., president biden is set to announce an agreement on his economic agenda. bloomberg has learned the president will announce the democrats have agreed on a framework of tax and spending proposals that he is optimistic congress can pass. he will go to capitol hill and brief house democrats on the deal that negotiators work out with him. later, the president will speak at the white house. post-brexit tensions between the u.k. and france over fishing rights keep rising. the british government hit back at france over its proposed red hill at tori measures -- proposed retaliatory measures. french authorities say they may disrupt the flow of trade to the island due to a lack of fishing licenses given to french boats. shell responded to external pressure setting a more ambitious target for cutting greenhouse gas emissions from its operations. the announcement came hours after words that activist investor dan loeb had taken a

$750 million take and shall -- investor dan loeb has taken a $750 million share in shell and is pushing for a reorg. -- made more than $154 million last year, most of it in stock awards. his new compensation would be a little more than $62,000. last week, activision failed to convince a california court to temporarily halt a sexual harassment and discrimination case. 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 laura wright. this is bloomberg. ♪

>> you are still going to have inflation accelerating. i think a lot of people will

look at a decelerating growth picture, both earnings and gdp, so next year is going to be a tricky time for the market. tom: we focus on the u.s. markets and decelerating growth. gdp really a frontline statistic. right now, it is the ecb, and what is so important here within the headlines that come out is the euro pretty much solid, $1.1611. i see barely any change there at all. we will let them stream by on television. what you need to know on radio is it is a serious managing of the message by the ecb. what i don't see out there is one of those hallmark draghi-like headlines talking about 2022 or 2023 or 2024. lisa: do you think christine lagarde wants to make headlines today or keep things the way they are? right now she can give them

maximum sex ability. she wants to make no headlines. this is a good start. they are not changing anything. really, it depends on 8:30. tom: a lot of adverbs here as well. moderately, inflation may moderately succeed -- moderately exceed the gold for a transitory period. kailey: there is. [laughter] we knew it was coming, right? it has been the message of the ecb, one that i am sure christine lagarde will reiterate. to lisa's point about not wanting to make any headlines, does that mean christine lagarde doesn't feel the need to push back on the market and the pulling forward of expectations, or will she push back and say we are not actually going to hike by 20 basis points by the end of 2022? tom: the range of euro very tight, $1.1613, fractionally elevated out to four digits as well. right now, mark mccormack joins us. he has been absolutely brilliant on dollar resiliency, the global

head of fx strategy at td. we'll talk about euro and the rest dollar, the president at 11:30 talking about fiscal america. but what i want to talk to mark mccormick about is the fun and joy when the facts change, i change. yesterday, you got a love note from the bank of canada that the facts had changed. what is it like on the td desk when the facts change, as you saw from the bank of canada? mark: the edger sting -- the interesting bit is most of us aren't on the floor anymore, so what you saw from the market is what i think people are really focused on, what the bank of england and the bank of canada has done, is that they are pulling things forward. i think what the market is will he focused on is what is the terminal rate. how to these cycles evolve over the next year and a half versus who moves first and who moves fastest? what right now -- what we know

right now is the norges bank, the bank of england, the bank of canada our first, and they are primary. the pack of america basically said yesterday april is a live meeting. what i think matters for the fx market is really how does the right cycle evolve over the next year, so i think that is a big dynamic, especially if we look at the bank of england. we price them in the fastest over the last six weeks or so, but are you going to see much more than two or three hikes in a year? we have already priced that in. that is a big element of whether these moves are sustainable for some of these other currencies. lisa: let's just go through what has been priced in. the bank of england moves first. bank of canada follows. then the federal reserve, ecb coming in dead last. if that priced into currency markets? mark: absolutely. when you think about it as well, the first one and here was the norges bank. what you have to think about in the context of this is we've got central banks, what we call the

hikers. we've got growth divergence, the miners, and we've also got positioning of valuations. those four factors is what is driving fx. if you've got a negative view on the trade stock, which was bad for asia and bad for europe, and a rotation outside of that where we don't get another jump in oil prices in the fourth quarter, then norway is really vulnerable to the environment, given how much excess has been priced in. the euro, positioning is short, but should be trading around one dollar 14 cents on our high-frequency model. you should have a rebound -- a rally reversing some of that, and sterling coming off the lows because the bank of england has been fully priced in. we are actually long dollar-cad because we don't think the bank of canada changes some of those other forces in terms of growth divergence, terms of trade, and

was currently priced in. lisa: so the short term who hikes first, the come addition where you kind of had that horse race going on. longer-term, it is a much harder story, and it is difficult to see one economy diverge inning fully from another when it comes to growth and inflation. how much is the idea of a flattening yield curve indicating a global policy error that is going to affect the ecb, that is going to affect the euro region, even if they hike last? that one central bank cannot escape the other, and the currencies are toggling around this reality? mark: it is a great point because we have the three inflation seems, stagflation, reflation, and the word no one wants to talk about, deflation. but there's an element here that could suggest that monetary policy around the world, two-year front end rates, u.s. or non-us, versus what we have seen in a non-us average emerging market g10, has ripped about 50 basis points in the

last month or so higher. u.s. yields are finally following, up about 15, 20 basis points. but there is an element here that the worry is bearish flattening is indicative of we getting growth -- of weakening growth. tom: this is too important. we are going to go mathier. are you suggesting that with the 10-year ex-u.s. yield, it leaves to -- it leads to a persistently negative real yield? mark: if we think about it, in fair value terms, maybe 20, 25 basis points to move higher. but if we go back to the taper tantrum, we had a one basis point move because we had the three standard to be asian mispricing on real rates. tom: -- the three standard deviation mispricing on real rates. tom: this is critical. answer the question then with a

three standard to be asian move. how does this filter through the american financial system? mark: i guess -- standard deviation move. how does this filter through the american financial system? mark: i guess if you look at it, global version of financial conditions weighted by global gdp is still the most accommodative it has been in the last 15 years. so the plumbing of the financial system, while we are talking about how money central bank's have hiked rates and where we are removing stimulus, we are still in emergency stimulus measures and real rates are still very accommodative for reflation, which is a theme i think should still probably do quite well in the first part of next year, especially since we are not looking for a fed hike until 2023, which would keep real rates at bay as we see short-term inflation rising, but essentially decelerating into 2022. tom: mark, thank you so much. mark mccormick here with us

today. lisa, we need to sum up some of those thoughts of mr. mccormick that we heard here. we are 30 minutes away from a set of announcements. claims, the first look at third-quarter american gdp, and lagarde from frankfurt. stay with us. ♪

>> these expectations for rate hikes for the fed, they are pretty seriously overcooked. >> it does seem like the economic cycle is moving at warp speed. >> it is either going to be higher inflation for longer than what is priced in or it is going to be a fed that has to catch up. >> bottom line is, you can't expect to turn off the global economy and then just ramp back up overnight. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. lisa: the uncertain passed to a new normal. good morning. this is "bloomberg surveillance"