the last month points to them getting more serious on inflation. >> we might see core inflation at 6.5% in february. >> they're going to start the journey to normal, and we are going to help them on that path. >> this is "bloomberg surveillance." jonathan: this market is all over the place. good morning, good morning. this is "bloomberg surveillance" live. your equity market advancing 7/10 of 1%. tom: yesterday we had a vix of 32 and then we come into a level of 28.17. that is i guess is an improving take, but do you trust this market? jonathan: goldman for june, bank

of america for june, deutsche bank for june, morgan stanley for no hike in 2022. going into next year looking a little lonely. tom: you know what, i really don't care about the calls because everyone is guessing, including the chairman. to the chairman's credit, two days of testimony, he made it clear they're waiting for the data and we get data at 8:30. jonathan: initial jobless claims, then payrolls tomorrow. lisa: the reason it has been so harsh, the commentary from jay powell, is it is emphasizing inflation more than in the past. i wonder how important the labor market report will be tomorrow, it is a drumbeat for tomorrow, right? is it all inflation that they are seeing and fighting at this point? jonathan: we have seen inflation be more persistent, we've seen

the factors causing higher inflation to be more persistent in the words of chairman powell. policy has adapted and will continue to adapt. that's a strong signal there's is more to come. lisa: do you think christine lagarde will still say transitory given her peers are abandoning her? jonathan: in italy if they try to pull with the federal reserve has pooled it will be different than the 3%, 4% move we have seen on u.s. equities. lisa: it is a credibility issue for them if they keep trying to hammer home it will be transitory when everyone else says not so much. jonathan: in america, financial conditions are very loose. it is not lift off, it is what you need to do after liftoff given how deeply negative real rates are in america. tom: the macro is there, but the micro also. i'm sorry, they are pretty good, but apple out with the stuff

about iphones. they are pretty good. yeah, but. everyone is grasping at straws. macro, micro, it is all the same. jonathan: would you buy an iphone if someone told you you had to wait a month to get it? tom: i would suggest a huge body of it is that you would go to the store and actually get what you want. jonathan: let's call it up 29 on the s&p, 6% on the s&p 500. will it stick? the 30-year yields are year the lows of the year. two year yields are near the highs of the year. do the math and you can guess where the yield curve is. lisa: it is flatter. i wonder how much it signifies flowing economics trajectories for the united states, the world. when does it concern market participants and the federal reserve?

a: 30 a.m. we get u.s. initial jobless claims. the last read was at the lowest level of new jobless claims going back to 1969. this likely distorted the expectation today up from last week's. how much of this can sustain some of the push we are seeing and give the fed confidence that they can fight inflation while continuing to support the economy? opec-plus is wrapping up two days of talks about whether or not to increase their supply next month. here is the conundrum. we are dealing with this new variant of the virus. how much does it slow travel? how much are they trying to cater to president biden? oil prices have tumbled 20% since the end of october. do they want to see this continue? do they want to support this while they can? president biden is expected to speak on the latest steps his administration is taking to

fight covid-19. he's expected to talk about new masking rules, going into the winter months with everyone breathing on each other and getting each other sick. this is a tough time as republicans threatened to shut down the government over vaccine mandates. how do they message to people get vaccinated when so many people are sick of the pandemic and want to move on. jonathan: what a terrible description of the holiday period. we breathe on each other and get each other sick. we have a great time getting together. describing the holiday period as getting together, breathing on each other, and getting each other sick. tom: i remember when there was majesty towards christmas. there were excesses along the way. it is not about covid. it slipped away over the last 10 years. jonathan: let's get it back. the christmas spirit with our

global allocation portfolio fund at -- we think any backup and long-term rates will be contained given a still insatiable appetite for yield. how much of what we are seeing is that and how much is worried about the future of this economy? >> good morning. i think what you are seeing now is the unexpected uncertainty over the virus. we thought, we hope this was behind us. that's not the case. that is why you are seeing the modest fallback in yields. it is worth highlighting that even a few weeks back when inflation was pushing against 30 year highs and nominal gdp was pushing against multi-decade highs come the 10 year was at 1.65, not something that would have made sense to were three years ago. a lot of it comes back to the longer-term secular trend that has nothing to do with that

near-term inflation outlook or the virus. it is about the fact that we are in a low yield world for decades. we have an aging population. people need income. when you see the backup in yields, it is incredible how quickly jump on that and injure the fray. that is likely to continue in the current environment -- and inter-the fray -- enter the fray. that is likely to continue in the current environment. tom: into the new year versus the individual security call? russ: i think the sector call will be important. where you are in the sector always matters, but if you think about the last year you see days where the market is flat. if you are in the right sectors or the right style has made a huge difference. you have to get the stock right, but you have to think about what is the regime we are in?

those will influence if we continue to see technology dominate. if we go back to the value-cyclical trade. i think that it will matter a great deal, particularly in an environment where the economy is very strong and growing above trend is almost certain to decelerate in 2022. lisa: we are giving narrative to macro themes and it's not clear if this narrative is playing out in markets and people saying that it is positioning, cashing out out of positions if they were long equity your long risk. what are you doing over the next couple of weeks into 2022 given the uncertainty and the lack of conviction of what next year will bring? russ: the short answer is that we are sticking to our positions. we have a portfolio for most of the year, nearly all of the year , that has been overweight equities. we will continue with that because we think that there is

an environment above trend growth is positive equities. we are underweight duration. we aren't changing that. we are sticking to what i would call a barbell approach on the equity side. i don't think that this is the time to chase steep value, to go all in on early growth. it is a matter of having high quality cyclicals that will benefit from this recovery and sticking with some of the longer-term themes in technology, communications, and health care that we think will work into next year. lisa: why do you think the dollar will strengthen if rate hikes have been priced in? russ: i will frame this slightly differently. i think that the dollar has become one of the last hedges that are really working in this environment. we know that the correlation between stocks and bonds has shifted. it has been a problem this year. it has traded with risk and not against risk. what happened with the dollar is

that it has become negatively correlated with stocks. it is important. when you get these days of the market getting hit, which has happened more in the last six to eight months, the dollar is generally a hedge. we have been maintaining and overweight in the dollar and will continue that into 2022. jonathan: fantastic to see you. thank you, sir. the headlines, this is from india, two cases of the omicron variant is detected in the country. it's hard to remain open-minded. you will see headlines like this. we saw one in the united states yesterday. going back to how transmissible, severe is the virus? how effective is the vaccines to stand up to the virus? the data to answer those questions isn't fully available and it will take a few more weeks to work it out. tom: you have the market

position come you take the surveillance map and you wake up to a new world based on what -- based on not one silly headline, but one about the spread of omicron. i can wax optimistic, but what does it matter? we don't know within a probability distribution. jonathan: it is inevitable it will be in america, india, and everywhere else. what we need to understand is what we don't know. it is to get the data to answer the three questions that i asked. lisa: i love the descriptions. we want to hang over the shoulders of the epidemiologists in labs trying to understand when they release the information. we don't know. jonathan: that is the problem with markets. you itch for something to trade on. futures are up 31 on the s&p was that we have a bounce, will it stick? coming up, later socgen on the rates market.

from new york, this is bloomberg. ♪ >> apple has a problem it wasn't expected with the iphone 13. the company told suppliers that demand for its newest device has gotten weaker, a signal that some consumers decided against trying to get the hard-to-find item. apple cut its production because of a lack. president biden declared the u.s. is on the verge of defeating the coronavirus and now it is threatening to research. the omicron variant has been detected. the president will lay out his latest plan to quell the pandemic that has dogged his time in office that will include stricter testing for travelers from abroad and mask mandates. she is open to scaling back the central bank's asset purchases at a faster rate. that would allow the fed to

raise interest rates a couple of times next year if needed. the federal is set to phase out its asset purchase program in the middle of next year. trading near record lows after president erdogan fired the country's finance minister. there has been an ongoing fight over monetary policy in turkey. erdogan once lower interest rates. that led to inflation to surge. global news, 24 hours a day on-air and on quicktake, powered by more than 2,700 journalists and analysts in more than 120 countries. this is bloomberg. ♪

>> this is a worldwide

challenge. a natural byproduct of the world economy shut down by the pandemic as it comes back to life. prices are still out of sync as the world comes back. this new variant is a cause of concern, not a cause for panic. we will fight this variant with science and speed, not chaos and confusion. jonathan: good morning. your equity market is up 27, a bounce in the equity market once again. for your 10-year treasury yield all over the place to last week or so, yields up by three basis points to 143.75. the cleveland fed president speaking to kathleen hays yesterday, making the taper faster is buying insurance and optionality. there is a difference between baking in flexibility and charting a clear, direct path towards a rate hike.

perhaps that is what separates the call from morgan stanley and goldman sachs. this comes down to your forecast. your forecast on inflation. does inflation fade in the middle of next year? that will decide if this fed needs to make a move. tom: they are a legit, pro-mathematician. everyone has an angle in the fed. master is the real deal on mathematics. when she says optionality, that carries a weight. this is degrees of freedom. any central bank in the future has a set of choices. the central bank of turkey doesn't have much optionality. jonathan: no, because the central bank governor of turkey is not the central bank governor of turkey. do we see the emphasis on flexibility? tom: yes, yes, yes.

that is what he is trying to achieve probably with the vice president talking into his ear quietly, keep the options open and wait for the data to make a choice. that is always the game. it is a time of year where people retire. jeff fitzpatrick studying the candidates knows that the gentleman from oregon and the governor from massachusetts -- jack, this is interesting to see he does have some health issues at 74 to retire, but the stunning announcement that charlie baker will step aside as the governor of massachusetts. what do you read into the retirement tone and what we will see in coming days? jack: the charlie baker one is hard to read where the defazio news fits into the trend of a growing number of house

democrats retiring. defazio fits into the category that we've seen. he led the infrastructure work as chairman of transportation. you see tears and people who look at this as their last big chance -- chairs and people who look at this as their last big chance to do something significant before republicans probably win the house. a lot of the mainstream longer-term house democrats are leaving right now. tom: what is it safe for the republican party? really talking about the disarray in the republican party. how does senator schumer, pelosi, and others adapt to the republican disarray? russ: there is personal disarray and the republican party. you look at house members feuding with each other. democrats, it is unclear if

democrats can take advantage of that because so many of their challenges pertained to their own vote count and struggles to keep a 50 votes in the senate. that may color the democrats strategy heading into the 2022 midterm, seeing if the more extreme members in the republican party can become the face of their party. someone like senator schumer, speaker pelosi are much more concerned with circling the wagons among their own members and trying to get their own votes. campaign season will be campaign season soon enough. lisa: what you are describing is profoundly dysfunctional. there is the question if we end up with a government shut down. as republicans threatened to do so to strip away vaccine mandates that we've seen on federal workers and larger companies. can you talk about how much republicans are coalescing around this particular talking point?

jack: i wouldn't say they are coalescing around the strategy, but it will be an interesting test to see how the talking point and politics of vaccine mandates sort of act as a preview for what we could see on the campaign trail. at this point it is looking more likely like we will have a short government shut down because of a small number of republican senators. a larger number of republican senators are fine with the stopgap measure. a smaller measure, marshall, ted cruz, mike lee, are looking to slow things down in the senate and we are close enough to the friday deadline they could cause at least a weekend shutdown. really, maybe more significant part is that this is the fight they have chosen to pick. this may be a very significant thing with the rest of the pandemic, the issue of vaccine mandates. lisa: a shutdown is different than a default. is a default on the table or off

the table? we are talking about more political theater when it comes to a shut down? jack: right now the political theater is on the shutdown separate from the debt limit issue. the debt limit issue is a significant one that is something to watch over the next couple of weeks. the effective deadline that lawmakers are considering even though it's hazy is about december 15. the process that republicans are trying to force democrats to take may be a slower process with some procedural hurdles. democrats think it could take about two weeks. yesterday was the beginning of december so they need to start the process now and come up with a plan. the latest is that democrats don't really have a plan that they've laid out. the fact that they are not getting started now could definitely mean trouble in a couple of weeks when a deadline gets closer for the debt limit. jonathan: there is some work to do before christmas for sure. jack fitzpatrick in d.c.. futures up 26, up .6%.

jp morgan, marco at the investment bank making the point in the last 24 hours than omicron could be a catalyst for steepening not flattening the yield curve. log down beneficiaries and rallying our reopening the mes. until we get the data, and it's possible that it is more transmissible but less severe. that is the kind of endgame scenario we've been looking for. tom: every house and ebbs and flows. the research combine is on fire. we will have a co-write on oil. it is a brilliant 32-page piece and you see them over all of their doing, including marco saying "calm down." jonathan: i believe they are at 50-50 on the s&p 500. lisa: they are looking for a number of gains. i wonder how much it is due to

omicron and how much is due to the fact that valuations are high and people are taking down risk dealing with inflationary threats and the potential of a more hawkish thread. -- hawkish fed. jonathan: we have been talking about it, it's important. futures up .6%. this is bloomberg. ♪

jonathan: the market is higher for now. futures up 27. 6/10 of 1% on the s&p 500. the russell up by more than one full percentage point. we are still trying to work out how severe this virus is. how transmissible this variant is and whether these vaccines stand up to it. for the moment, we do have some calls coming through. a ton of calls on the fed this week because of chairman powell. in his testimony on capitol hill , here's the spread for you. the bond market on wall street right now, goldman in june, jp

morgan september, all the way back to the backend of 2023. tom: i don't want to interrupt here but frankly i think you're onto something where you say ferro has no idea what is going on. does jerome powell have any idea what is going on? this is really important. we are going to the year-end, we are all blind. i will go with the ferro call from a few years ago. jonathan: it will start in march. from that it will become a meme, i cannot blame you. tom: what is a meme? jonathan: you will see what happens on twitter. we all have no idea. anyone pretending they have conviction about the future right now is doing just that, pretending.

tom: do you want to get rid of jobless claims? jonathan: you could stick with jobless claims. the dollar lire movement more than one percentage point. apparently that was a message, let him go overnight. 30-40, more weakness for the turkish lira. tom: it is not idiosyncratic. there is something going on here and deserves our attention. looking at the american economy, andrew hollander joins us right now from citigroup. what have you tweaked on the spreadsheet in the last 24 hours? what is the mystery across the citigroup view of the american economy? andrew: the biggest mystery we need to address is what is going

on with inflation. that's exactly what jonathan is talking about. the flexibility they have set themselves up to have. we thought they were going to accelerate the taper. that idea really endorsed by chair powell this week. that puts these earlier rate hike scenarios on the table. it will depend on the data. the risk around inflation mean the risks will choose the hockey side. tom: we are really focused on oil today. a small bacon on oil could go -- a small bank announced oil could go over $100. how does this impact your fed call? andrew: they have been great on the oil call. of course, we had a few people

noting chair powell more hawkish at the moment when oil hits its peak and comes off. this is about more than oil. headline inflation matters. matter. we have seen shelter prices rising. wages are increasing. we are seeing in the data that has been passed through. the inflationary pressures which maybe isn't specific to energy, it just looks a lot broader right now. jonathan: we could run another banner on tv that says chair powell has no idea what is going on. that is what he told us this week. i believe his baseline has changed. i believe he buried it. said ok, baseline is still this but ultimately we don't know. will that be the meeting on

december 15? andrew: to some extent it will be. we don't know but we are seeing those risks where we are in the economic cycle. you want to keep options open if you have a growth concern or more hawkish if you have an inflation concern. a scenario where flexibility is all about downside risk. also higher inflation. accelerating purchases, that is in the discussion. that will be the discussion it will tell them whether the fed needs to be moving. jonathan: inevitably that is the

conversation we are having at the moment this week. bank of america's in june, deutsche bank is in june, jp morgan in september, there is a big group of you now. everybody is there with the exception of morgan stanley and citibank. from here it, the more conversation is how steep the rate pass is from there? where we going and what kind of rate could we tolerate? give us an idea of what that conversation sounds like. andrew: it is somewhat of a conundrum for us. you look at what's happened as the market has pulled these rate hikes earlier in the market has moved towards earlier rate hikes you have short-term interest rates moving higher. if you look at the 10 year real yield at -100 basis points,

equity rates on omicron, not what the feds have been doing are still historical highs. there has been no meaningful tightening of financial conditions. it is not clear that the fed wants to tighten financial conditions yet. they are worried about these correlated upside instances to the forecast. if that is the story in 2022 there is inflation concern. that means expectations for where does this get to in the cycle? where is the long-term 10 year yield expectations? i think we will watch the data and see if we get there. maybe not such a positive scenario. lisa: part of the confusion right now is we don't understand

what caused the sudden pivot of jay powell. it was a transitory to optionality could raise rates sooner. you have a sense of what triggered this change in demand? andrew: the accumulation of data coming up, communication challenges. it puts in place a lot of hurdles to moving more hawkish. there was a whole discussion about a slow taper. then you want to think about rate hikes. it was only two months ago that we were not even thinking about more hawkish policy. the data had already moved. it was already very apparent. maybe you could look at the second definition of transitory in the dictionary.

this is chair powell, the situation where they could catch up with where the data are. you can respond if you need to. do need to? tom: you are arguably the boys -- voice of the los angeles school, ucla. ucla owns a humility over uncertainty which goes back to the professor in his classic paper on evolution and economic theory. the uncertainty we all face right now based on ucla's academic ability. andrew: uncertainty is certainly much higher than it typically is. we are talking about the dispersion of what the fed might do.

the fed raising rates, all of that is possible. that dispersion is just much greater. look at what happens with inflation. if you look at the forecast alone, multiple percentage points there. the fact that to your point is it is very high here and we need to be flexible. jonathan: have to stay open-minded. that has been the challenge of the last 18 months or so. speaking about the data payrolls have been a theme of this year. the low estimates, 375, median is 545. once again, all over the place. tom: so many different voices from the different policies. we created 5 billion plus jobs. someday we will get there, who knows when.

the answer is there is really to america's going on right now. the other day, nebraska under 2% unemployment rate. i think that is fully employed. jonathan: a lot of people suggesting there is still work to do. will the data support the patients of this federal reserve and claiming the data is testing that patients? lisa: how good will that have to be for them to be focusing on inflation, which is what they are doing versus a focus to a more holistic labor market. tom: abramowitz knows exactly what is going on. abramowitz nails it. jonathan: every single time. lisa: the sarcasm in your voices. jonathan: i mean it. lisa: i don't know that i am right. jonathan: let me clarify that. up 26 on the s&p, 6/10 of 1%. from new york, this is

bloomberg. ritika: the opec-plus alliance meets today to decide whether to go ahead with increases in oil production. prices have dropped 20% since late october. opec-plus is forecasting there will be a surplus of oil in the first quarter. the u.k. has ordered 140 more million doses of the coronavirus vaccine. it is a big win for moderna. more than three times the total of the contract with the u.k. in the u.s., restrictions from travel because of the omicron variant will be temporary.

health officials identify the first u.s. case of the variant. it will give authorities some time to prepare. democrats could have a powerful campaign tool for 2022 if the supreme court rolls back abortion rights. that could be a major shift wednesday -- it could further voters from turning out while taking votes away from republicans. powered by more than 25 hundred journalists and analysts in 120 countries, i'm ritika gupta, this is bloomberg. ♪

♪ >> there are some additional mutations. i think we really have to wait

on the data. i don't expect that there is a significant drop. if there is a significant drop than pfizer has the label to develop a new vaccine. jonathan: that was the pfizer bp, there is some data between how pfizer communicated this week and how moderna and the leader of modernity shows to communicate this week. tom: i don't disagree with that. both of them are treading lightly here. the waiting is the key thing here. jonathan: we keep waiting for that data. tom keene, lisa abramowicz, jonathan ferro from new york. yields bounce back three basis points at 1.43.

it's covid-19 antibody treatment looks to be effective against the new omicron variant in early testing. going against something we heard from regeneron. it has been decent news in the last 24 hours. jonathan: if you want -- tom: if you want to speak about south africa and the fears we face, we will speak to be professor at johns hopkins university. christopher is one of the great international students of these horrific pandemic diseases we see. when you heard about omicron and you dovetail it with the phrase south africa, how did you respond? >> we were very concerned because the area where the omicron virus spread most, where johannesburg and victoria art and the surrounding provinces just got through a very severe wave of delta.

they had a delta surge from july until september this past year. you would expect this is a highly immune population. more than 70% of adults had covid during the surge. tom: i take issue with the non-science media that think this is an episode of er. where everything will get wrapped up at the end of the hour. that is not the case. it is about serious, serious science. you mentioned in our early -- opening discussion the mutations of the virus, the study of anti-bodies. particularly the serum dilution. explain what is going on in the lab to help us. what we are looking at -- dr. beyrer: what we are looking at is people who have good

anti-bodies. people who have been immunized. if there serum is able to neutralize this omicron variant, we are trying to understand the level of vaccine protection that we may have. the strong suggestion really is that there may be a diminution in immune response. that is why the message coming out is important to boosting that immune response back up to protected levels. right now we have an advisory for everybody who is eligible for the united states to get boosted. that is the most prudent thing to do. lisa: that is exactly where i wanted to go. before the omicron variant there was a lot of disagreement as to who should get the booster. how important it was to boost immunity. it is one of the basic measures. how much of the science has changed to try and throw everything we've got to prevent another wave? dr. beyrer: there was not a

scientific consensus and there is now. a pretty strong one. what has changed is first of all , the reality that this virus is circulating in the population that is highly immune. it is also the case that south africa has been using pfizer, mrna vaccines. this virus is spreading. the good news is at least for the preliminary data we have seen so far, which south africa has been great about sharing, people who are fully immunized appear not to be going to the hospital. it is early. we will have to follow that mc. as we have all seen over the last year and a half, the wave of hospitalization and severe disease in the timeline for where this start circulating. the jury is somewhat out. it looks like vaccine protection is holding and boosting as a way

to bump it up. given the fact that vaccine is preventing some severe illness, putting into place vaccine mandates, angela merkel of germany saying the lockdown for the unvaccinated number of nations. do you have any sense scientifically of whether this increases resistance or gets more of the population and ocular to? dr. beyrer: the evidence is pretty clear that vaccines work. one part of that is behavioral. when the decision is sort of off somebody's chest, the resistance in some people does decline. we also know vaccine mandates are constitutional in the united states. since jacobson versus massachusetts. vaccine mandates i think have a very important role. tom: one final question from new

york, the people at william and smith want to know if the cold of geneva, new york will kill covid? what do you think? dr. beyrer: cold weather drives people indoors. when we have seen consistently is rising rates. that is what europe is in the middle of their fourth rate. it felt like going to college in the ice age. tom: thank you so much. jonathan ferro, i could tell you that hamilton, new york and geneva, new york i saw a puck break in at two in hamilton, new york ones. jonathan: it is winter, it is cold outside. tom: dr. knows, he is one of the giants at william smith. jonathan: just gets in your

bones and it is not nice. it is a different kind of cold. lisa: give me a break, 30 degrees below zero. [laughter] jonathan: it is still early. it is still early. tom: lisa is right, it is colder in fargo. jonathan: lisa got frustrated with tom keene early in this program. futures up 28, up 6/10 of 1%. i will try to stir the pot as we go. we are setting up the jobless claims at 8:30 eastern time and we have payrolls tomorrow. i said in the rearview mirror in the last 24 hours, it was pretty decent. lisa: we didn't see that many super serious complaints about the instructions. jonathan: more to come on that and on this bond market. we will catch up with the head of u.s. rates strategy. looking forward to doing that in just a moment.

the spread on wall street starts to come in a little bit for june, july, may of next year. you have these outliers for people willing to wait. the morgan stanley's, setting up the scene for 2022. lisa says for now. from new york, this is bloomberg. ♪

♪ >> the fed is already behind. >> everything points to them getting much more serious on inflation. >> we might see core inflation at 6.5% potentially in february. >> they are going to start that journey to normal and we are going to help them on that path. >> the market has positioned itself for a little more normalization. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. jonathan: we are getting an avalanche of rate hike calls this week. 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. your equity market advancing 0.6% on the s&p 500. rate hikes for 2022. tom: we went through it. i've been waiting for the data to come in. i'm looking at the wall of

information