reestablish their credibility as inflation fighters. >> it will be a long time that the discussion of inflation is in the air. >> the withdrawal isn't going to be enough. >> i don't think the fed is trying to tighten financial conditions. announcer: this is bloomberg surveillance with john keene, jonathan ferro and lisa abramowicz. dani: good morning. all three are off today and what a monday morning they are missing. this, as the market faced with decreasing prospects of fiscal stimulus and increasing omicron coronavirus cases. anna: absolutely. the twin concerns of growth in the united states. we don't have the fiscal booster many had assumed was coming and if we do see the spread of the omicron variant, those are the concerns really leading the market. we spoke to any vanderbilt -- we spoke to eddie in the last hour

and he said i'm not really sure how much i am buying this morning. dani: the german economy may shrink this quarter due to covid. that is the headlines crossing. of course, this also comes after goldman and the team cut the u.s. growth forecast on the prospects of the bill back better plan not getting through. there is a huge growth question on both sides of the atlantic this morning. >> and you are absolutely seeing that in s&p 500 futures. that has proven to be a really solid source of support for the index over the course of the last several months, even going all the way back into early 2020. we're certainly going to boost through -- burst through. it is a critical question for this week. dani: you obviously are seeing futures lower this morning. while the bond market was getting a bit of a safe haven bid, you're seeing yields at

session highs. anna: i feel like we spend all of 2021 asking just how long can yields stay as low as they have been throughout this year. at various points throughout this year we talked about whether they are going to break through to percent on the 10 year. it just feels that as long as the market has this default worry to fall back on, and that is around the spread of covid-19, it is really difficult to get these any higher on yields. let's go through what we have got on the data. s&p futures down by 1.3%. the euro turning out to be a really interesting haven this morning. we don't see money going into the dollar that much. the euro is stronger by a quarter of 1%. a bit about light volume, a bit about expectations and who is going to get there first.

the 10 year yield, we talked about how difficult it is to make yields go higher. and crude, putting that in for you, down 3.6% because of course, omicron fears about growth and lack of fiscal stimulus. dani: and that is a huge question for the oil market this morning, what demand will actually look like as you see people may putting off travel, travel restrictions coming into place. a more stay-at-home environment seems to be coming in certain parts of the world. let's take a look at what is ahead today. it is a holiday week, so a little bit of light volume. anything could be a very large catalyst and we are seeing that playing out in the early action in the u.s. trading this morning. it is not the most consequential economic data point, again, and liquidity, you never know what the market is going to react to.

then, president biden is going to be meeting with members of the white house covid-19 response team. this conversation will probably be focused entirely on the omicron variant. dr. anthony fauci said he doesn't see the u.s. alone back into lockdown mode, but then what is going to be the policy response as we are seeing cases rapidly climbing in places like new york resell record high cases a few days ago? -- new york record record high cases a few days ago? of course, after the bell, we are going to get the earnings. this is going to be focused on the supply chain and the availability of products. we heard from nike last quarter talking at taking double the time to get a pair of sneakers from asia to the u.s., dealing with a lot of shipping issues, and a lot of factory closures in vietnam. and then micron is also going to be reporting. what kind of demand are they seeing for the memory chips? nike doing pretty well.

we will see if they can support that today. anna: we will see how they go, given that we are broadly speaking really risk-off. let's break into the conversation chris verrone. chris, really good to speak to you, thanks for joining us on a day when the stoxx 600 is down by 1.5%. u.s. futures down by 1.3%. 1.5% on nasdaq futures is this overdone? we had a guest in the last hour saying that if this is all about the threat of omicron and it is all about concerns are in fiscal stimulus, is a little like the selling we saw on the day after thanksgiving. chris: thanks for having me, great to be here. i think it is important to remember as the market response to this that if you go back 21 months ago to february, march, april, if you would have gotten the covid called correct, you likely would have gotten the market call wrong. and i don't want to forget that

here because there is certainly a lot of anxiety, maybe some panic around what this is. but if you were likely as bearish as you needed to be, you would have gone the next six months dead wrong. very importantly over the last week or so, i found it very curious that big growth stocks have actually led the market on the downside. those have been defensive all year. you typically don't get through this corrective things until the really big weight hits. i actually take some comfort that they are done selling all of the weaker players. dani: are we going to see more coming off the top of some of those more richly-valued equities? chris: when you look at the areas of froth, spacs are already down 50%, the ipo's are down 50%. the areas of really pronounced speculation earlier this year has been the areas that have really suffered the most.

not just over the last two or three weeks, but over the last six or seven months. it is very easy to blame covid for this, the liquidity drain i think has been priced in by these speculative stocks all year. i think the next question is do they get good investments? it has been the same names that have supported this all year. if those start to roll, i would actually argue that means you are closer to the end of this corrective phase than the beginning. >> how consequential are small caps the right now? we are back to testing those critical levels that have held a support in the small-cap index. can the market at large hold up if the index breaks down through critical support? chris: really great question and i think when you look at the small caps, let's not forget some perspective here. russell 2 is basically traded in the 15% range all year. i need that perspective just to put this into context.

when you look at what is going on under the surface, what is curious to us is the value trade has actually emerged you small-cap value has been dominant over small-cap growth. kind of in an usual development given lower yields, given risk aversion. there is something brewing here. a lot of the clues this year have come down caps. the fact that we are seeing small-cap value outperform here i think might be an early sign that we are setting ourselves up for a large cap value trade into '22. anna: i want to ask about the news flow over the last 24 hours about the bill back better program in the u.s. and the headwinds of that politically. does less fiscal mean more monetary in terms of the support that investors will be pricing in for assets? chris: that's a good question. i think in terms of the fed regaining some credibility, it would be difficult to change course from here given this renewed hawkish nist we have seen over -- hawkishness we have

seen over the last week or so. it is very well that may be the march meeting is live. if the march meeting is live, what are the things in the lead up to the first hike that typically work and don't work? something that really stands out for us, and i am very curious this morning, we have neural ust pretty firm. the dollar actually tends to peak as the fed begins to raise rates. i know that sounds so counterintuitive, the dollar should strengthen as rates also go up, but that has not been the cases directly. the dollar has tended to roll over as the fed begins to yield. dani: when is the peak dollar strength of? chris: i think we are in that -- strengthen. chris: i think we are in that zone right here. you have very one-cited dollar right now. people are about as bullish and

bearish as they have been in a long time and i find it very curious. you start to see some of these weak dollar names actually act better. these are not stocks that you would suspect would be working in the risk-off dollar environment and they have started to turn here. there is a message there. i think the market is offering if you clues. dani: thank you so much for joining us on this monday morning. i think it raises a really interesting question about where is the safety and the hedge against inflation's in this kind of environment? everybody seems to have a different answer. anna: absolutely. we see some really interesting moves. the dollar doesn't necessarily behave as you would expect as you go into that rate hiking cycle. a lot of really interesting things. i thought it was interesting what he was saying about how he thought the areas of peak speculation have really priced

in lower liquidity. dani: we are still talking hypotheticals and it is going to come down to how soon does that translate into a bond market. we will continue to keep an eye on the action in the bond market. the chairman and ceo of market feel asset management will be joining us. he still thinks the fed is behind the curve even with the announcement it made last week. i've got to say, that feels like it was already a year ago. everything is flying fast in the market these days. of course, we will have it all covered for you here on bloomberg surveillance. >> senator joe manchin has left democrats just two options for president biden's economic

agenda. the west virginia democrat blindsided the white house by rejecting the roughly $2 trillion package. that is essentially fatal in a 50-50 senate were republicans all oppose the plan. democrats oppose him on reneging of promises he made to the president. meanwhile, the decision is prompted goldman sachs to cut economic growth. golden lowers the gdp outlook to 2% in the first quarter, 3% in the second. the u.k. is refusing to rule out coronavirus restrictions by christmas. the nation's top health advisors are urging them to contain infections that they estimate are running in the hundreds of thousands per day. but prime minister boris johnson is pushing to avoid capital restrictions. the bank of montreal is spending billions in key euro growth markets.

that should add 1.8 million customers when the deal closes next year. they plan to return some of the cash to shareholders through a buyback. elon musk says he will pay more than $11 billion in taxes this year. that could be a record payment to the u.s. irs. global news 24 hours a day on air and on bloomberg quicktake. powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. ♪

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>> if i can go home and explain it to the people of west virginia, i can vote for it. and i cannot vote to continue with this piece of legislation. i just can't. this is a no on this legislation. dani: it is a no from democrat etc. joe manchin of west virginia saying he will refuse to vote for president biden's bill back better plan. of course, nearly $2 trillion in economic spending now in question and the equity market not taking well to that uncertainty, seeing futures down across the board. we are on session lows on s&p 500 futures. the slightest haven bid coming into the bond market on the 10 year yield is where we sit. it is the euro that is getting a bit stronger by about one quarter of 1%. and of course, oil taking it on the chin as demand is called into question. oh, what joe manchin can do. you also have to consider that the omicron variant is playing into this as well. let's get right down to the

politics in d.c.. as we speak of joe manchin being a no, on this legislation, his vote critical. so majority leader chuck schumer now out with a letter to his colleagues in the senate saying they will take a vote in early 2022 on bill back better. is he just calling manchin's bluff? annmarie: it is the same sentiment we also heard over the weekend from senator sanders speaking on cnn. he said we've been dealing with senator manchin months after months and he wants to vote no on something that bernie sanders is obviously very much for, but sanders saying that this is important for constituents in west virginia, that he should vote no one front of the entire world. he has been pushing for the senate to just bring this to a floor vote. so it does look like that is potentially the direction of travel into early next year according to the senate majority leader now, saying that they may bring build back better to a vote, which we already know

senator manchin said is a no. dani: if he does vote no, what is the path forward? could we see the measures within this larger bill passed on a piecemeal basis? annmarie: cigna global advisors had a note out immediately following the interview and subsequent statement about why he does not back build back better, and they are kind of thinking this is just pure posturing. what senator manchin wants to do is bring the level of that tax and spending plan lower, something closer to maybe 1.3 fully in dollars. when you heard him -- $1.3 trillion. when you heard him talk about them doing too much that can be paid for for 10 years, and potential path forward and picking a few next policy points and doing them well for longer. anna: good morning. here in london, there aren't many individual names that make the leap across the atlantic and

stay current in peoples' ,minds and it seems as if only one senator in the united states gets so much airtime, seems to have so much sway over the democratic party right now. what other senators have been saying that? i didn't like it either, but i was told to come supposed to. what are others saying? annmarie: it is incredible when you see individual politicians in america make global headline news. well, this is really at the heart of what the president's struggle was. i asked this question after the heart infrastructure past a line. he gave a press statement and took some questions. i said isn't it doomed on arrival? you need republican votes. the president needs every single center to back this. 50 sanders and then the vice president with a tie-breaking vote. and that has been the biggest struggle.

there's also the sigmund global advisors saying there is a potential senator manchin is eying a potential presidential bid. is this potentially his way of really drumming up that kind of showmanship to potentially have a path to potentially go to the white house? that is really at the heart of it. every senator vote matters, but right now, he is definitely on the naughty list for the democratic party. anna: and this, of course, with a president who all the way through the campaign was suggesting that he was someone who could really get deals done in washington. he has been in washington for so many decades. that was his key benefit, the fact that he could really pass policy. this must be a disappointment for him on that front. annmarie: this is why it is such a massive blow, and you really saw just how annoyed the white house was and also how taken

aback they were and surprised when we heard from press secretary jen psaki, basically saying that manchin has renegged on his actual word. but it is deeply personal for this president. this president is the most legislatively experience president the united states has ever seen. 36 years in the senate and he is talked about the fact that he can bring republicans and immigrants together. he did that with heart infrastructure, that was a success. but right now he is failing to bring the gap in the divide between his own party. dani: if we can take it back to those details and the discussion between the sender and the president earlier last week, what are the specific issues that he is calling out as inexplicable to his constituents, where he can't take them back, he can't vote for this because he can't explain it? what are those issues he can't explain? annmarie: it is a great question

because something like the child tax credit, the majority of left virginians are actually benefiting from that. potentially, that is an area we could see the senator lean into. but there's a number of issues. climate provisions have been one of them. other issues with other social benefits. it is really a mixed bag for this senator. but one of the key things he said in that fox news interview was the fact that the size and scope of it was just too large. having a new policy for a year or two is not enough. we should pick a few matters in fund them well. this really comes back to the crux of the issue for senator manchin. he also pointed out in a statement about inflation, geopolitics, and the variant that is spreading that he thinks now is not the time to be passing a massive social spending bill. dani: thank you so much. i think that is a really interesting point because of the same time this is all happening,

you're seeing omicron cases spiking in the u.s. we are in the middle of a wave, as they are in europe. and then the question becomes, is the u.s. economy actually going to need stimulus and if it doesn't come from the fiscal side, does that mean the fed is going to have to provide a booster longer? anna: a hard situation when it comes to omicron. you get a sense that things are spreading across the atlantic whether that is the virus itself, the mentality, the thinking about how you handle it. parts of europe introducing lockdown measures over the weekend. other parts not to be signed anthony fauci suggesting that the u.s. will not need to do that. >> fascinating, really, because you think about this program, so much of it was one-dated in terms of spending. it is surprising to hear it was going to have such a tremendous impact going into 2022. that certainly was not part of the forecast in terms of s&p 500 or anything. >> you wonder how much it has to do with the child tax credit as

it relates to consumption on the part of americans. goldman downgrading for the first, second and third quarter of 2022. of course, the equity market also getting downgraded to extend this morning. s&p 500 futures down. this is bloomberg.

>> two things you need to know. senator joe manchin is a no on bidens build back better plan. the second thing you need to know, coronavirus cases are going up here in the u.s. and substantially on the others the atlantic as they deal with rising cases of the omicron variant it equity futures down across the board. you're seeing it show up more in the small caps. the russell 2000 down 1.6%. what's interesting is you are saying tech down. you aren't seeing that much of a move in treasury yield. coming lower on the 10 year.

we are down less than two basis points. we are still south of 140 even in the face of a fed that may hike. down three basis points on the short end of the curve. oil down hard this morning. this is not the first day that has helped true. wti crude is down 19.5%. the question is will they proceed with hikes again in february. travel restrictions are going back into place. people may be moving toward work from home so demand may be going down and where does that leave

oil hanging in the balance? >> the opec cartel weren't even sure. they thought demand would be moving against them if they started the pump more. let's get back to what we were saying about the fed. i want to ask you about the fiscal side of things. we have heard about joe manchin's opposition to build back better. it's very hard for the biden administration to get this fiscal policy through now. we were talking about how a lot of that spending would be longer-term in nature. does it have as much of a near-term impact if we don't see build back better going through? >> some 35 million households

receiving several hundred dollars a month pending on the age and number of children. a lot of these are working class households so there will be an immediate impact from the loss of the child tax credit. i saw goldman's forecast is down to half a percentage point as a whole and that seems right in terms of magnitude. there is still a lot of savings on the sideline. there's still an accommodative bed that can calibrate according to the situation. it's not going to derail the u.s. economy but it definitely cools it down in a notable way and there is a near-term hit from that child tax credit. >> what does calibrate accordingly mean?

what with the fed have to consider in its policy decisions if we don't see such support on the fiscal side? >> we know that 2022 was -- sorry, 2021 was all about the higher than anticipated inflation and we knew the dynamic would be substantially different because of the fading fiscal impulse. the fed needed to single -- signal its central bank credibility. it was becoming too prominent in near-term psychology and they worried we might be starting to see inflation expectations become more deeply embedded. they told us they are possibly going to raise rates three times. the earliest would have been march and may be more likely june. that gives the fed a lot of time to see how something like the failure of build back better

impacts the economy as well as the other global dynamics and calibrate interest rates accordingly. while they recalibrated to confirm that central banks do still respond to inflation that's higher and longer lasting, they can also recalibrate towards an easier path. >> i'm curious to get your take on the market signals. if gotta bond market that's barely doing anything. we've had a bond market that keeps rallying or at least holding in pretty steady. >> the near-term reaction from the bond market may seem muted but partly because the bond market curve had already really flattened.

hunger term rates are really low for what the fed is envisioning. it certainly doesn't seem like a scenario the bond market is pricing in. or at a minimum there is great comfort on the part of investors that near-term inflation will fade materially over coming years. i think we are seeing a certain amount of flight to safety in the u.s. assets and certainly in the bond market and a lot of caution reflects a lot of risk factors that have come the near-term to the front werner. and of course global central bank tightening is another one and now we have maybe more of that faster fade in the u.s. fiscal impulse which has been quite an important driver of the global economy.

add that to the pile of risks that the market is digesting good >> we are already starting to see forecasts for growth come down. how much will you start to think about this becoming a bigger drag on growth or at least not adding to growth in 2022. do you see build better as a material driver of growth we need to consider? >> it's definitely important input into 2022. at macro policy perspectives we always publish our year ahead outlook at the beginning of january instead of ahead of the holidays because it tends to be the case that a lot of things happen in december and early january and so i'm happy with that decision this morning. we will certainly be needing to factor in the loss of the child tax credit into the q1 forecast.

you still have a lot of momentum in the u.s. economy, a lot of strong demand for jobs that should power hiring forward. the risk of omicron hitting travel and social spending in the loss of the child tax credit probably means a substantial slowing in q1 even if the u.s. economy maintains its underlying base of momentum. >> we are talking about a slowing economy. by the end of the first quarter we will have seen the fed wrapping up its tapering. the meeting and theory could be live. do you think the risk of a policy mistake is higher on this monday morning? >> you would have to say the risks are somewhat higher.

because the fed has brought so much flexibility still even though they have sped up tapering its not going to end until march. march is quite a ways away. we will have a lot of data on exactly how much these developments hit q1 growth before they have to make that decision. we do know that this is a fed that is focused and if there are indications like we have from the oil market this morning, energy prices might fall even more than previously expect it. that cools off the inflation impulse. if we see signs that demand is going even faster than they don't need to raise rates. it's not a promise, it's not locked in. i don't expect them to make a policy mistake. they are not going to just plow

ahead. we've been hearing they are data-dependent. that's why they recalibrated. they had to recalibrate. and now vice versa. >> julia coronado, great perspective this morning. we are still awaiting president biden's decision on the remaining fed seats. chile has elected the leftist candidate as president. he was leftist. you expected that to translate into a weaker currency. the chilean peso weaker against the dollar. it does look like that is a record low.

>> no surprise the markets are made a little worse by that. age 35 one of the world's youngest leaders. >> we think currency is one of the biggest risks. to see those moves. correct we also have to talk about the lira and what's going on over -- >> we also have to talk about the lira and what's going on over in turkey. does she think that we are underestimating the risk factor here? this is bloomberg. >> president joe biden has to quickly rewrite his policy

agenda in a crucial election year after jay mentioned -- joe manchin stunned his fellow democrats. losing his support is essentially fatal. republicans uniformly oppose the plan. chuck schumer -- president biden's chuck -- top medical advisor doesn't think lockdown will be necessary again. infections have hit pandemic high records in some states including new york. president erdogan pledged to continue cutting interest rates. the lira has lost almost half its value. in china -- more monetary

support to an economy showing strain. the low rate has been set at 3.8%. the new spider-man movie set a pandemic era record in its north american debut. international theaters brought in another $334 million. global news 24 hours a day on air and on bloomberg quicktake powered by more than 2700 journalists and analysts in over 120 countries. i'm laura wright. this is bloomberg. ♪

>> i don't foresee the kind of lock downs we see before but i

certainly see the potential for stress on a hospital system. >> dr. anthony fauci doesn't think we are headed toward any kind of lockdown. >> another linens headed into lockdown over the weekend. all of that was really to deal with the delta wave. germany deciding whether they will have vaccine mandates. limiting the fun that people can have on new year's eve. >> i don't think this is the holiday season any of us were anticipating. the markets leaving something to be desired this morning. right now we are at 45 53.

down just about 1.5 basis points. let's get to those cases with senior scholar at the john hopkins center for health security. i'm just going to speak in a totally here. i know people who are vaccinated who currently have covid-19. are we just going to see this ripped through the population and a matter of weeks? where does that leave us on the other site? >> for people who are vaccinated and boosted, we are hopeful this is going to be a mild thing. we can't say that for sure for the unvaccinated. transmission is really high but we are risking our health care system being overwhelmed even

more than it already is. >> when we think about what the lethality is like for unvaccinated individuals, with that also leaf people who are immunized via vaccines at such a high level that we actually reach some kind of herd immunity? >> i hope so, but it might be too much to ask. herd immunity was a ways an elusive goal that was going to leave a lot of people very sick or worse. all pandemics and at some point. this one well, too. we have many more months to go with this and potentially new variants down the way. we need to do what we can to shore up our health system to deal with these urges. >> where are the weaknesses most

profound? where are we seeing the greatest crunch? >> geographically it's in the big cities. i have seen reports that suburban hospitals outside of houston are also seeing searches. we are seeing a critical shortage of nursing care and that is going to continue. we've been in this for many months now and short-term searches are very possible. we are really into a long-term situation. >> in terms of preventative measures we are talking about the lack of fat home testing kit and the lines to get boosters.

are you seeing something similar and the rest of the united states as well? >> the crunch on testing is really unfortunate. a lot of the stops were opened up so that we could have more tests available but the demand is exceeding that. we do need more testing. we have to make sure we have that available for the long-term future. we are hoping for the pfizer drug that will be more available in the coming months. i could really do such a great job of restoring people's ability to go to the emergency room for other things besides covid and being able to have health care system there for you.

>> on the subject of that pfizer drug, some people in the industry have been disappointed that the amount of drug that is going to be produced and the ability to make a sizable difference to the omicron wave. is this something for omicron or for a wave that lies ahead? >> we don't have long. it's transmitting very fast. south africa the peak is over. it could be that this drug may be more relevant for some other letters that are in the future. the fact that we can talk about this is an indicator that this is going to be with us. we need to incorporate some of these things into our daily lives. make sure you have well ventilated spaces in your homes. there are things you can do to

improve circulation. so that you are not necessarily infecting your household. >> you are really testing my knowledge of the greek alphabet. if we could just leave it at omicron i think that would be a good thing. the moderna increases antibodies. that might not have been a surprise to people following this very closely. the key question, if you have been boosted how long does that protection last and i suppose that is a big unknown right now. >> i think we are more hopeful that this will help because it's not only increasing the amount of antibodies you can produce but the quality of them. it's a hope that this will last longer but moderna is also

working on an omicron specific booster. this is something that's available to us here. it's the global population that set risk so being able to boost that supply is something we have not done a great job for. >> thank you for your insight as we deal with the omicron headlines. davos looks like it has been canceled. that world economic forum annual meeting was supposed to happen in davos switzerland. it looks like that will not be happening due to the virus. >> it wouldn't have looked good to the world of business and finance when we are still seeing hospital and medical systems under great pressure.

we will have to see how things pan out with omicron. >> we will get a read on omicron with ceo of -- asset management. he will be joining us coming up next. this is bloomberg.

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>> we need to believe that we have a fed that is awake at the wheel. >> they are trying to reestablish their credibility as inflation fighters. >> the token withdrawal isn't going to be enough. >> i don't think the fed is trying to tighten financial conditions. >> this is bloomberg surveillance. >> from new york city and london, good morning. this is bloomberg surveillance. kailey leinz, gina martin adams and guy johnson in. he thought it was going to be a sleepy holiday week. joe manchin is now a no unbilled that better. the