>> we are in a tricky situation. >> we saw a pretty dramatic shift in hedging. >> pent up demand will drive the economy forward next year. >> the fed will have to make a decision based on data that is not perfect. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. tom: good morning. a simulcast, bloomberg radio, bloomberg television. we do economics, finance investment, virology, and we will do it in this hour.

peter hotez will join us in a bit. we will have science questions before we get to the president of the united states at 11:45 this morning. we are all on the virology watch. jonathan: and i think we need to get away from layering speculation on top of speculation here. as jan hatzius of goldman put it, and i keep going back to that research note, the range of medical outcomes and economic outcomes is incredibly wide. it is our job to sit here and say we've got to wait before you draw any conclusions whatsoever. tom: we will take a measured response to what we see here. we are on measured alert. the measured alert to me is we really haven't seen adjustments by strategists off the shock of front-end. jonathan: and they can't before we know a couple of things. if this is more easily transmitted to other people.

is it more severe? are the symptoms more severe? ultimately, can the vaccine still target it well enough? they are the three things we have got to work out through the next couple of days, the next couple of weeks. it could take two to three weeks to find out. i think they are stuck between a rock and a hard place at the fed. tom: i am going to be rude and stay with jon ferro for a moment. this headline is stunning, and it is a cultural headline which you reported on many times from frankfurt. 6% inflation in germany is not 6% inflation in america. jonathan: 50 basis points north of the median estimate going into an ecb meeting december 16. you've got the fed on the 15th, the ecb on the 16th. we are having a very different conversation. in the federal reserve, we are having a conversation about accelerating paring back asset purchases. at the ecb, we are having a conversation about how much flex ability gets taken from the emmert asked how much flexibility gets taken -- about

how much flexibility gets taken from the bond buying program to the ecb. tom: kailey, you are in for the 5:00 a.m. show as well. what is the piece that gave you clarity? kailey: there's been a number of them. many of them, there haven't actually been that many changes in terms of what the implications are going to be of this variant because we just don't know yet. what does a day like friday even mean? was it really just a selloff based on covid-19, or as peter tchir has pointed out, was it something else? tom: let's get to the data. i am going to mention euro, $1.1281. it did not get to a $1.11 handle. jonathan: you wonder what the front of the newspaper will look like coming off the back of that print. yields have a lift. crude has a lift. euro-dollar on the back foot.

there the move in crude, $71.45. on crude we have had a lift come on brent and wti. yields higher to 1.5449%. the move on friday was so much more than just about a new variant. we've got so much more to grapple with here. credit spreads or near the white of the year. not quite there, but approaching them. that is something to get your attention. i've heard a lot of people talking about the back end of 2018. that was a very different scenario, but credit is the place you need to keep focused on at the moment, not just this equity market after a vicious move on friday. tom: for global wall street, the s&p 500, four point six standard deviation move from the enthusiasm down to the shock of friday. right now, this is an immense joy off the morgan stanley desk. vishy tirupattur is in the

morgan stanley debate. it is the idea of a 3.6 percent of american unemployment rate, and you say the fed won't raise rates to that wonderfully low unemployment rate. how does that happen? vishwanath: i think the fed will look at two things. they will look at the twin managing inflation, as well as getting to full employment. we will begin to pick up the part as a patient rate somewhat and inch closer to where we were before the pandemic, and we think we get to that point of a lift off in early 2023 which is

somewhat out of consensus. jonathan: just pair that up with your view on credit, that patient view on the federal reserve's your view on credit. vishwanath: two things here. one is when you think about credit, the linkage between economic growth and the default picture remains very constructive, given that the defaults are at such low levels today, we might see a slight pickup in performance, but overall, we have a pretty benign outcome for defaults. defaults will remain below the long-term average of what we had been expecting what you have seen over the longer time. we are staying well below the long-term average. jonathan: as you know, the credit story is expensive. vishwanath: the markets are

anticipatory. markets know all of this, and love the good news is already priced. it is looking at where is the increment two opportunity and the credit markets. it is more in the high-yield sector as opposed to the investment sector, and was in the high-yield sector, our reasoning is straightforward. this is the time we think it is to take default risk because it remains below the long-term average. the better opportunity is taking spread risk. even though a low last few days we have seen some widening, we think the best strategy for credit is to take default risk. within high-yield, it points us

towards loans as the best way of taking default risk. kailey: how do your expectations of how much supply there will be in 2022 factor into this? vishy: it does. we take all of these factors into account. we have gone through a pretty robust supply in the last month. we do take supply into account. we take into account what we expect to be the effective taper in the market, and all of those things we are electing in our forecast. kailey: if the fed doubles the pace of pulling back on stimulus, if it doubles or accelerates the way it tapers, what is the implication of that? vishy: i think a doubling of the

pace, before thanksgiving i would have said more of that is being priced into the market. certainly this new information on friday of the omicron variant, a lot of those questions at the beginning were really unknown. so without a faster withdrawal of accommodation, that would be readily met it of for the rates markets. so again, a bet on defaults and not spreads. jonathan: great to catch up. i have really enjoyed the outlooks out of morgan stanley over the past couple of weeks. good to see you. the march towards payrolls friday, let's be clear, i've got no idea how sensitive this

market will be to incoming economic data, given how much we don't know about this variant. do we respond more to a softer print then an explosive, really strong jobs print? i'm not sure. tom: by the time we get to friday, and frankly to tomorrow, will we see the first cases dr. fauci talks about of omicron? jonathan: and should we respond to that? most people believe it is already here. what matters is not if we have a couple of cases in america. we were going to have those headlines. a case found here, a case found there. what we need to know, is it more contagious, is it more severe, and does it escape vaccine protection? tom: this is the headline off "morning joe" this morning. there's many cross purposes in messaging within u.s. health. this is from the national institute of health, the leadership at nih. "omicron probably highly

contagious." i see two adverbs there -- i see two adverbs there. that is as unfit for -- unspecific as you can get. jonathan: you got to work out, does it escape vaccine protection? ultimately it does not mean it is worse, if the symptoms are less severe. that is approaching what a lot of people have been looking for for a while which is the type of stuff that is more contagious, but ultimately less fear -- less severe, and we are working with that. that is the issue. they can't give you any conclusion because there's not enough data to draw the conclusions right now. for all the hyperbole you have seen in the media over the weekend, i think it is tremendously unhelpful. we have taken some criticism for

it. we don't know. why can't people just say we don't know? tom: probably highly, we don't know. jonathan: it is probably not very have what this point. jennifer, senior economist at bmo capital markets asked jennifer lee, -- jennifer lee, senior economist at bmo capital markets, is going to go nuts later. this is bloomberg -- going to join us later. this is bloomberg. ♪ ritika: the world health organization says a new variant could lead to surges of the coronavirus with severe consequent its. the variant was first detected in south africa. airlines, passengers, and businesses had to respond to a daily of news over the weekend. measures will make travel more

expensive and less convenient. opec and allies will discuss the impact of the omicron variant at a meeting this week, according to russian deputy prime minister. it is another sign that the coalition made consider its planned production increase in january. in sweden, the parliament has once again voted to make -- the prime minister. she resigned when her junior partner in the government quit following a defeat over the budget. 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.

>> i think it is time for change in policy at the fed. i was of the view that this may

be easier with someone who has not repeated over and over again that inflation is transitory, don't worry about it, it is going away. inflation is not transitory. it is really important for the fed to realize this. jonathan: mohamed el-erian speaking over the weekend to fox news on sunday. hopefully hearing from him a little later this week on bloomberg. this is "bloomberg surveillance ." alongside tom keene, i'm jonathan ferro, together with kailey leinz. lisa abramowicz back later this week. equity market tilts higher by 36 on the s&p, up by 0.8%. yields higher by seven basis points to 1.54 66%. euro-dollar is negative. the dollar making a comeback against the single currency. crewed up by $3.40, up by 5%. tom: $76 on brent crude. the jp morgan note this morning off their london desk a bit of a

shock. one thing we will do is probably look at the data this week. we have the right guest for that. jennifer lee joines, senior economist at bmo capital markets, who probably always looks at the economic data. what matters this week, jennifer kailey: -- jennifer? jennifer: good morning. as always, the jobs data is the highlight almost every month. i'm going to point to the ism surveys as to surveys i think they're going to be far more interesting than payrolls because that is where you get all of those little comments and an inside look at what purchasing managers are facing these days. we know that the supply chain problems can't last forever, and i think these two surveys are probably going to be the first place you can glean that things are hopefully getting a little easier. i was hoping to see that last month, but we do not see it, so we will see with the respondents

are seeing for november. i will say that last month, a couple of them were mentioning some workarounds because, well, you don't have x, we will take y. so businesses are adapting and figuring out ways to get around the supply chain issues. tom: if the economy is humming into year end, and certainly that is the report we have received, will you engage what the first quarter of next year looks like? jennifer: right now we have a 3.5 percent annualized gain for the first quarter, and this will be a little bit slower than what we are probably going to see for the fourth quarter. but again, it is all within the trend. it will still be about 4% above euro levels, so this will continue as we see some easing of the supply pressures as the year begins jonathan: disease forecast -- the year begins. jonathan: do these forecasts have a huge asterisk next to

them now? jennifer: everything i think has an asterisk around it, but i think, even the weekend, i was trying to figure out how to pronounce it, but i think we have to figure out still, there are some money -- there are so many unknowns of this new variant. i think that is the big question. as well, this is the big difference from last time around , that we got around 70% roughly of the population vaccinated, and that is a huge difference. it definitely helps bar some of those effects, i would think. jonathan: ut up the ism, i would say a really important week for economic data. for many market participants right now, i wonder how sensitive they will be to that oncoming data more broadly about

covid. when you speak to people in the market, how receptive are they to this moment? they are focusing on something else. jennifer: i still think we have to focus on this data. a lot of it is fear with covid, and it is understandable why we are fearful of a big unknown. i think the data still matter. as we see price pressures rising continuously, we are going to expect a rate hike in the third quarter of 2022. kailey: speaking of fear and price pressures, we have seen consumer confidence waning at the same time you are not seeing it translate into consumer spending more consumption. they are still out in the economy, may be stored up savings in order to make purchases of items that are more expensive than they were six months ago. when do you expect the consumer to start feeling these inflationary forces more? jennifer: i think they are

already facing it. that is why we are seeing some wavering on the consumer confidence front. it also depends on the time of day and what day of the week they are being asked this question. at the end of the day, it is about savings and incomes. we saw last week a very solid increase in wages and salaries, and having a nice nest egg put aside for a rainy day. i am sure he will have a few of those in the coming months. i think it what matters most for consumer confidence. i think that is the bottom line on that. kailey: what do you expect we will see from the wage data? jennifer: we are looking for an increase of about zero corporate -- of about 0.4% on earnings, so that is basically in line with steady increases to help pad

everyone's wireless -- everyone's wallets and savings accounts. who knows what will happen with this new variant, if it is going to put pressure on people to perhaps not go back to the workforce as quickly as they were thinking about, so then you're going to see higher wages coming from the business is to help tide them over. jonathan: always good to hear from you. thanks for being with us. the ism's coming on wednesday. then onto friday, it is payrolls friday. this jobs market through the whole of this year has been incredibly unpredictable. we have talked about the wide range of estimates every month when we get the payrolls report. 800,000 at the high-end. the low end, 375k. we've got no clarity on this. tom: maybe president will address it today in his

comments. you've got a whole herb of americans simply not participating. what i find in the pandemic and before the pandemic is essential-weighted that is accentuated -- is accentuated inequalities. jonathan: we are still throwing darts. when we hear from bmo and they say we have a tight labor market, i can find someone just as educated, just as sharp, with just as more saying the opposite -- just as many saying the opposite thing. tom: i am going to go back to the technology overlay here. the amazon, target, all the rest of them booming, warehouses booming, and in fully employed america, you can't get labor. jonathan: 800,000 at the high-end, 375,000 at the low end. kailey: forecasting has been impossible in the pandemic economy.

it seems true for every jobs report we have gotten for months. jonathan: remember that when we get the federal reserve on december 15. what are those forecasts worth ? tom: the dots. jonathan: the dots a few weeks away. from new york, this is bloomberg. ♪

jonathan: it is a turnaround monday, and unconvincing one for some of you. equity futures bouncing back. on friday the biggest one-day laws back to february of this year. this monday morning up appointed percent. on 10 year yields we were down 16 points on friday come this morning we are up two. a little but of a bounce on a two year yield. wti was down 13%. this morning it is up 5.3%. $71.75. an idea of the turnaround we are having this morning in the context of the drawdown on friday. a lot of people looking at this saying i'm not so convinced. tom: it is correlated

turnaround. it is there. i am watching the vix, 24.77. it got worse in the last two hour and as come back. jonathan: i want to bring up hertz. stocks up in the free market -- in the premarket. tom: 1.2% equity weight, all of a sudden they come out with the share buyback, came out at $29, now down to $23. they are doing this with the fiction of a financial statement. i did not have any strong belief other than -- jonathan: are you comfortable using the word fiction? tom: i am looking at the bloomberg. eva top, -- massive going along.

free cash flow which will flip in the next 12 months. jonathan: stocks up in the premarket 8.7%. tom: surging. let's look at the market. i want to look at the summation of equity markets. michael o'rourke is good at moving from the 30 -- moving from the theory to what do you do now. we are thrilled michael o'rourke could join us. i look at all of this and it is simple. forget buy the dip, it is buy the fear. michael: may be the fear is the best way to describe it. it is still question about the equity market. on monday we hit all-time highs for the s&p 500 but simultaneously we had at 1000 new lows on u.s. exchanges and then another thousand new lows

on tuesday. i wonder if some of friday's action was actually just as latent week this in the equity market or a tired bull market, whereas on the flip side, energy, bonds, those are all moves i would take the other side of on fridays action. i'm not sure if there was week on friday or the value space in favor of growth. i would 5 -- i would buy that value space and sell the growth space. i would take the other side on fridays action. tom: was it a correction on friday? can you have a one day correction? michael: that is exactly what i think is the issue. you're talking about all-time highs on monday. 2.5% selloff on friday. it will take more time than that. the closest we've ever had to that was a level of new lows reached so close to all-time

highs back in december of 2014. for the next three to six months we saw a lot of volatility without the accident be 500 making much meeting -- without the s&p 500 making much meaningful progress. tom: it was a correction of 2.3%. jonathan: still close to all-time highs. what does this they about market conditions when we can switch so easily from one extreme to the other? we have gone from inflation is too high to we are facing the lockdown. that is what people were talking about on friday. one extreme to the other. michael: i think it is a lack of confidence. people are unsure what will play out in 2022 and that is for good reason. we are looking at a changed regime. we are looking at a fed facing real inflation for the first time in 30 years. for the past 13 years, every time we had a dip in markets the fed stepped in.

we had a luxury of the benign inflation environment. that environment does not exist now. it brings a lot of caution and a tentative nature to the market. that is why we are seeing that underlying weakness in equities. the momentum names support the index, but beyond that you are seeing weakness elsewhere. jonathan: you've picked up on something so important. peter tchir brought it up, jim bianco earlier on this morning on this program. with this backdrop, the fed put is less durable, and with that in mind should we get used to more episodes like what we saw on what a comment was that just about the mutation that got in everyone's radar, or does it tell you something about the market conditions we are likely

to experience over the next the robots? -- over the next several months. michael: i think it is the latter. there'll be more volatility, the path is not so clear. the fed does have its hands tied. nobody in the market believes that. any stepped back from the current policy path is going to be scrutinized. i think they will have a challenge there. for the time being, and chariman powell says the fed is not supposed to react to moves in the stock market. we will see him on capitol hill tomorrow and wednesday, how he talks about inflation and things like that. it is the different environment than the one we'd experienced the past two years, and 10 years before that. we will see how 2022 plays out but it should have more volatility. kailey: does that mean it is

time to start buying protection? michael: when volatility is low it is generally a good time to buy protection, especially with the combination of prices being high. i would bet on the more defensive sides of taper. i am pushing the value trade. i think value is attractive versus both -- versus growth. we are testing the lows last year in the fall. that is one way to play it. i like the banks, i like them for the recovery. i like them for energy policy. energy policy this country has shifted to we do not want to drill here, so the guys who are drilling here will benefit because they'll have a competitive advantage. it is these structural shifts you have to identified in the market. more broadly speaking, the major

indexes are driven by mega caps that have had incredible runs and you may want protection against weakness or consolidation among them. kailey: footed that mean weakness for the broader market given how much weight they pull? michael: 100%. that is why you want protection for the big names that drive the major industries. jonathan: is the christmas tree up at the o'rourke household? michael: it is not up but we picked it up yesterday. jonathan: is it fake or real? michael: it is real. jonathan: tom keene is proud of that. tom: the real issue is you have to understand you have white lights like you have, the perfect little white lights. you have to have big ugly colored lights where a number of them are out. jonathan: that is tradition. that is what i had as a kid. tom: you have too many orange

lights and not enough white bulbs. jonathan: we have the multicolor that would go out and then you had to replace them. tom: back when we had a 14 foot tree i would plug them in staten island. it has changed now. we are going with the smaller year -- a smaller tree this year. jonathan: michael o'rourke, thank you. good to hear from you. coming up on "the open," greg peters. tom: kailey's tree is all orange lights. jonathan: you all had a go it be a couple of weeks ago for getting the tree up, but now there is a scramble. tom: i will take a cactus and move it over and say this is that. jonathan: there is a multiple scramble. i was going to leave and they played the music too early.

we have one minute and 40 seconds to burn. tom: at 9:00 you will drive forward the story. jonathan: we have to talk about credit with greg peters. there is more going on than the obsession with the variant. i think it is important to work out the questions. it is import direct dies we do not have the answers to the questions. is it more contagious, is it more severe? it will take a couple of weeks to find that out. what we saw in credit and the issues around it were a continuation of the story until last month. there is worry about the fed needed to pull back more quickly. jonathan: you sell peter's, can i sell peter hotess? tom: he had the privilege of being at the invention of mrna and all the theoretical virology stuff. he is such an authority.

jonathan: and we have to work out the right sources to go to over the next couple of weeks when you hear from the vaccine providers say things like it looks like we will need to change things up to address this particular mutation, there is a degree of skepticism around vaccine providers who have skin in the game. tom: the providers is one thing. we have 59% and they will say what does it take to get to 69% total vaccination? maybe this is the event that does it. jonathan: you can play the music now. kailey: [laughter] tom: -- jonathan: did you design this music? is this your fault? tom: i did not design the music. jonathan: from new york, this is bloomberg. ritika: the world health

organization warns the new a micron variant could fuel coronavirus surges with consequences. the agency calls the risk extremely high. scientists in south africa say it appears spread more easily. nations have now imposed restrictions to try to contain the virus expansion. moderna says it could have a new vaccine to fight the micron variant by early next year. meanwhile biontech is trying to adapt its covid vaccine to handle a micron. it put plans into place months ago to ensure a new version of a shot could ship within 100 days. president biden meets with ceos of companies to discuss supply-chain bottlenecks and the ministrations efforts to combat inflation. executives from best buy, mattel, kroger, and samsung are tempted to attend in person.

ceos of walmart will attend virtually. hertz has announced a stock buyback program. it went public after -- the company has thousands of locations. the most high-profile black feature in luxury fashion has died. lvmh is start desire -- start -- lvmh's star designer battle cancer for several years. he was 41. he was known for success in sneakers and helping revitalize louis vuitton. global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. i am ritika gupta. this is bloomberg. ♪

>> this variant has a number of concerning mutations that resemble some of the other

variants we have had. none of the variants escape the vaccine, none of them were like our worst nightmare. we have to go through the process of studying the variant while we continue to be vigilant. tom: joshua sharfstein on the domestic story of a micron and all we have heard about since for -- of all micron and all we have -- of omicron and all we have heard about since friday. kailey leinz and i with our conversation of the day, it is with a gentleman, dean of the national school of tropical medicine at baylor college, but far more than that someone who has fought the virology and virus wars for decades. the difference is peter hotez understands the tropical medicine of africa, the geography of southern africa we do not understand.

to me the mystery is how a great we are about what needs to be done -- how a current we are up -- how ignorant we are about what needs to be done in south africa. it is larger than american on a geographic basis. peter: you're right. if you would superimpose a map of the united states and the african continent, it would barely register. the african continent is vast. one lesson we have learned about the first -- the worst variance as they arise out of long unvaccinated populations. delta arose out of an unvaccinated population in india in 2021. what did people think was going to happen along the african continent to go unvaccinated? tom: this is not a hookworm and you've been leading on this for decades. you did your phd on horrific

tropical diseases. what holds the rich guys back from helping the poor guys? is it economic constraint, financial constraint, or a moral constraint? dr. hotez: the way i see it, it was a science policy failure. the g7 countries were so fixed on speed and innovation that they all ran like a little kid soccer game on the ball goes in one direction. it was all about mrna technology and new and exciting shiny new toys, that no one ever gave a thought, as any first engineering student will tell you, that when you have to rely exclusively on a brand-new technology, there is a learning curve before you go from zero to 9 billion doses, 9 billion anything whether it is widgets or mrna vaccines.

there is a learning curve. there was never the situational awareness to say we also need to balance the portfolio with older technology we know we can scale in places like india and bangladesh and indonesia. we have developed this vaccine. it has been licensed with no patents, no strings attached to vaccine developers in india, indonesia, bangladesh, and knowledge to sub-saharan africa, and we are doing it and we are making it. we had a fraction of the help moderna and pfizer had gotten the g7 countries we might have had the world vaccinated. you talk about pollock -- kailey: you talked about policy failures. his imposing travel bans a policy failure? jonathan: i think -- dr. hotez: i think it is. remember in february 2020

everyone was so focused on travel bans from china, meantime the virus had already entered into new york city from southern europe to ignite that horrific epidemic across new york city. we know this virus has already spread around the world. that is not because there's anything unique to omicron. that has been true of every variant we have seen so far. by the time we identify a variant, it has gone global. a lot of this is based on optics , where especially in the eu they want to show they are doing something. unfortunately it is self-defeating and impairs our ability to fight the pandemic and punishes african countries and hurts the economy because it spreads unnecessary panic among investors. it is a policy failure on all accounts. kailey: we did see that panic in

the markets on friday. this monday morning we are getting a lift as people understand we have very little information at this point. what information is most critical to ascertain first? dr. hotez: three things we need to know. one about the severity of the illness. so far it does not look like this variant is producing anything unusual in terms of severity of illness, but we will know more. second, we need to know if our current vaccines will cross protect against the oma cron variant. that is what we are doing in our laboratories. the way you do that is you look at antibody responses to your vaccines and ensure that it neutralizes the omicron variant. there is a good possibility with 30 minutes eight and in the boost, you get it -- with third

immunizations and the boost, you get enough antibodies. then we need to understand the transmissibility's. we do not know that. tom: i look to the vaccination trends this morning. what will hear from the president is we need to get from 59% vaccinated 69% vaccinated. how quickly is that doable? dr. hotez: 69% will not cut it. we'd 85% of the population vaccinated. -- we need 85% of the population vaccinated. we have the situation where since june 1, 2021 150,000 americans refuse vaccinations needlessly perished from covid-19. 150,000. antiscience is now a leading killer of young americans in the united states. as long as we have that defiance it will be hard to see how we get to that 85% level. tom: peter hotez, thank you for

joining us, particular your perspective on southern africa. kailey, a lift to the market. a little bit of an authority. dow futures up 360. spx futures up 15. the vix comes in. kailey: wti now up better than 7%. we are back to $72.67 a barrel, about half of friday's loss is being gained back. that is true when you look at equity futures. maybe the bounce is becoming more convincing. more gusto as we approach the opening bell. tom: stay with us on bloomberg radio and bloomberg television as we work towards the president's address to the nation. 11:45 is the schedule for that from nantucket. lots more coming up on

economics, finance, and investment, and virology. the chairman and chief executive officer of pfizer coming up. this is bloomberg. good morning. ♪

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jonathan: looking for a bounce back this monday morning. your equity markets up a little more than 1% on the s&p.

"the countdown to the open" starts right now. >> everything you need to get set for the start of u.s. trading. this is "bloomberg: the open" with jonathan ferro. jonathan: we begin with the big issue. the fed stuck between a rock and a hard place. >> there's a lot we do not know about the oma cron variant. >> what we do know does not necessarily derail things. >> the scenario now the fed has to taper right away. the fed will be raising rates by june or july. i think that scenario is less likely. >> there is some risk some of the market implied hikes will need to come out. >>