front and center in the workers cannot be left behind. >> do you feel like the balance has shifted? for so long the workers had less negotiating power. >> the international warehouse union that works across 29 ports is a strong democratic organization. >> the markets are caught between a rock and a hard place. x we are in a worse position than several weeks ago. >> there's a mismatch between fiscal stimulus and central banks for winding down. >> we don't think it is time to give up on equities. >> this is one of the most detrimental to equity. >> this is "bloomberg surveillance." kailey: good morning. this is "bloomberg surveillance ."

joining you now on tv and radio, we have been talking about this all morning, very different today than yesterday, but still there are many questions, including the omicron variant with headlines out of the u.k. in terms of its response. guy: yes, the chancellor of the exchequer has been under pressure to help the hospitality system and it was inevitable that something similar might happen in france. the u.k. treasury is up with a one billion pound support package for the business is being affected. the chancellor saying the government cannot rule out further covid curves. basically everybody playing their cards reasonably close to their chest in terms of what happens next. the emphasis appears to be on pushing things may be further out, maybe beyond christmas. don't want to cancel christmas

just yet. kailey: guy johnson says hopefully in the background. [laughter] in germany, we are expected to hear from olaf scholz about his response to regional leaders there and in the u.s., president biden speaking this afternoon will not be talking about restrictions or lockdowns. he will just be talking about vaccinations, more testing with help for hospitals. gina: and the important takeaways that that is what's embedded in asset prices as we generally consider strategies based on whether or not there will be locked down for the united states. certainly the prevailing view is that there will not be, therefore the u.s. row 38 can sustain and you can count on u.s. revenue growth being embedded in valuations in u.s. stocks, inordinately large. kailey: let's bring in the

senior strategist for ema markets at nyu melon. thinking about the potential impacts of the omicron variant coupled with the runoff of the supports on the fiscal and monetary sides, how worried are you? do you think the market is worried enough? >> the market needs to revisit policy errors at this point and that is pertinent. even before they started in august we work cautious on their ability to sustain rate hikes. on that note, the eurozone is in a pretty good place right now whereas in the u.s., u.k., other places, seems a bit stop start right now and in the immediate future is the more you announce short-term measures the more the businesses and markets and households will know that something is coming and it becomes more self-fulfilling.

kailey: so the actual policy decisions don't matter as much as the fear? geoffrey: it's always about certainty. as you said earlier in the program, between a rock and a hard place. if you signal to early, you don't know where the end date is. businesses without certainty about being open or closed regarding overhead, that will be a problem as well. right now many places across the world are caught in this halfway house here and there. anything announced by the chancellor is a drop in the ocean. hence i don't think this will improve things that much and on top of that, rates going up, if you've got a loan you have that to account for and i believe energy prices today reached a new high. so it all adds up.

guy: the consumer has provided a great deal of support. is that support going to continue into 2022? the demand picture that has been so strong for physical goods, does it in new into next year or does the consumer say -- my gas bill is going up, my petrol bill is going up, my rent bill is going up, it goes on and on. geoffrey: you have to look at it on a region by region basis. with savings rates, there was a sharp spike last year. understandably say -- so. all of that has pretty much been run down already with prevention consumption in the u.s. in u.k. where as in the euro zone the rates are actually holding above pre-pandemic levels. already there is a savings

bumper in germany and france with more room. finally, wage growth, there is real wage growth in the u.s. and it is accelerating in the eurozone. we have some nice effects for that as well. how much savings you have reserved as well as wage growth. guy: if we do see the big rounds in germany and elsewhere producing above inflation settlements, that looks likely at the moment. is that a concern for the ecb? if gas prices maintain the current upward trajectory that i appreciate will be hard, is that something that unnerves the ecb? at the moment there seems to be a view that the ecb will be dovish going forward. what could upset that? geoffrey: i generally wonder,

shouldn't we be welcoming that in europe? we have been crying for the longest time. so you finally see the consensus being broken as they mention whether inflation will be a bit more persistent. look at how long it took the fed to turn things around. the eu has resolutely stuck to that, so they should be welcoming it. why be unnerved by it? euro sterling is higher. these are trades we should be looking at. gina: pairing the two outlooks, looking at the screen of the world index on the terminal screen here, eastern european shares are up. middle east and africa, 20%. these are the leaders in the world equity markets partially because of the budding pressure

coming through on the equity markets. how do you see that changing or not changing into thousand 22? >> it really depends on if the underlying companies are able to pass on costs to the end consumer and this is where the u.s. continues to do well. central and eastern europe, you can actually pass on the wage costs. in europe that's more of a problem right now and we need to see what can be done. german ppi for example, can you pass on to the underlying consumer when you're only deep guide is that 5.2% with a gap between input and output really hitting the margins. on that note there is still some catch-up they have to do. if you can drive the wage settlements home, it will be a much better environment on the

currency impact. clearly the dollar has been on a tear relative to other local currencies. how does that impact out region going into the next year? geoffrey: clearly it supports the upside risk of inflation with the real effective strain -- exchange rate with differentials working on the chief currency and europe having a value with clients starting to realize that. what's interesting about that motivation vis-a-vis currency is the probably initial wave of investment being done on the basis of the fed hiking early with a yield cap and that is something i think that eurozone companies were quite all come. i don't have that knock on effect and it is a sweet spot that they are looking for.

i think you will see that go as far as inflation. guy: thank you for joining us, happy holidays to you and yours. i keep coming back to it they said over at bank of america where they were consistently on the areas spectrum. she has a year-end target year near where we trade this morning where the consistent siting is margin pressure in the un-appreciation of it. gina: and that's the big consensus view, u.s. margins in particular have been surprisingly strong in the face of these supply stream constraints and rising pressures and we may be on the cusp of that changing. many companies began to show downdrafts with the broad s&p 500 recording the downdraft for

the first time since 2018. we have started to see it impact the cuts -- companies across the index will that head into 2022 question mark a huge question. >> where are we relative to history? >> a lot of it is the transition into services industries with bigger margins rise, but there are weaknesses underneath that. kailey: well we will be looking at that as we move off the highs of the session right now. up 9/10 of 1% with a 10 year treasury yield. tv and radio, this is "bloomberg surveillance." ♪ laura: with first word news, i'm

laura wright. president biden unveiling the steps being taken against the researching pandemic with 500 million free tests taken to homes next month where the military can be sent to shore up hospitals and the president will deliver a stark warning. unvaccinated americans risk serious disease and death after the cdc said the omicron variant accounts for most new u.s. cases and bloomberg learned that talks between joe manchin and resident biden on the economic agenda could be revived as they spoke on sunday night hours after joe manchin said that he would not back the tax and spending plan. joe manchin has presented his own urgent of the plan that doesn't include an expansion of the child tax credit that the president would like to see. a warning from vladimir putin, who said he's right -- ready to use his military counter. russia is reportedly seriously

concerned about the presence of nato forces near the border, saying he cannot allow the alliance to deploy missiles. turkey swinging wildly after gaining 50% this week where investors are deciding if government measures to shore up the currency are sustainable. the lira fell by as much as 7% against the dollar, this after soaring 20%. global news 24 hours a day on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. ♪

>> it's pretty clear that inflation will be higher than

people think in 2022. i think that is the most important thing that we should structure for right now. it won't look like that in the next but remember, if we do shut down and covid is worse than we think, the supply disruption problems we have had get worse. kailey: president biden does not appear to be ready to discuss shutting down here in the u.s. as he goes to the podium to outline his market measures in the market doesn't look too worried today. yesterday was a different story, you saw deep losses but right now the s&p 500 futures are higher by 910%. broadly in that space today, we are seeing some selling pressure in the treasury market where we are just shy of the 1.5 level right now.

we are back up after two days of relatively steep losses but still prices now are higher than the earth is i'm last year. guy: is that going to encourage the people in the aviation industry to purchase more efficient aircraft? our aerospace correspondent joins us now. boeing has had a tough year in terms of not only equity market performance but also delivery and orders. we are still trying to figure out what's going to happen with the a7. which of these companies is better positioned? >> airbus is better positioned above boeing has the chance for being a better stock if they can overcome execution issues. guy: in terms of the key areas

that boeing needs to deliver on, how much of that backlog are they going to clear and when do you think we will get clarity? >> the max says they will clear half of their 370 in the next year. they may, they may not, but clearly deliveries are going to be going up. i think the chinese indication that they are going to certify max is a major plus. i know there is some skepticism around the deteriorating relationship with china and the chinese airlines have little choice in that they have about one third of the interesting max inventory that is for the chinese airlines and they have basically made down payments of about $2 billion. and they need the planes unless their economy goes south.

do we continue the shift from the narrowbody recovery to the wide-body recovery next year? and as it takes place, which aircraft are they going to outperform? it clearly looks like a market dominated by the 350 and the 787. airbus has already dropped. how ready -- how much of a problem is the triple seven going to be for boeing? >> i think that narrowbody is clearly going to continue to outperform. omicron has clearly put much more pressure on international travel, which is what wide-body demand depends on. i would say the 350 will continue to do well, demand wise.

the 777x should do better. remember, boeing is the leader in cargo aircraft. that has been strong though the passengers haven't. with the 74 seven basically ending, the 777x could do well and argo version is owing to be the next plane they will be doing. gina: it wasn't long ago that we were really focused on the balance sheet of these companies and clearly there has been a lot of repair in that space over the last couple of years and if we do see the inventory building, how much is that going to drag on the cash for these companies and take away the women of the capital into the markets at large -- the deployment of the capital into the markets at large and restrain these stocks? >> in the case of boeing, it's really the reverse. they have 370 max in inventory,

177's. -- 100 787's. next year it should start to come down nicely. guy: in terms of, the focus, it's often on the civil side of the market. certainly during the pandemic that has been a key area of interest. defense companies are obviously the winners given what the biden administration has done to the dod budget as it has been under a cloud. does that begin to lift year? >> i think it does. the threat with china, its deteriorating relationship and a strong adversary that has the edge on us, more importantly they have that objective of taking over taiwan and russia.

the key thing that people maybe haven't made a big enough deal about is that while biden asked for a budget that would be down 1%, it looks like congress will be adding 25 billion. in the dispute we are seeing between republican endemic that's overbuilt back better, what's lost is that both sides favor a stronger defense. kailey: somehow it always seems to come down to that washing area that -- question, guy johnson, when's the next time you will be getting on an airplane? guy: i was thinking january but the french clearly won't let me on. i can fly across the north

atlantic at the moment that i think that will continue to be very tricky and i think that next year, if we are seeing omicron doing what it's doing right now and that continuing for a while, i think people will be reticent to travel. the story in the states is much easier. in europe it's much more of a patchwork, really hard to understand what the local rules are. if i take my kids here, can i get into that? it's so much more difficult to navigate. kailey: a relative term. access to testing in the u.s. is difficult. i continue to see lines wrapped around the block here in new york today as people try to get there over test. president biden will probably say something about that at 2:30 p.m. eastern time as he outlines his plan. what do people do the meantime

during this holiday season and they try to go visit their families? we will talk about the impact with our economic research head at renaissance max row where the s&p five -- s&p futures are up. tv and radio, this is bloomberg. this is bloomberg. ♪

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kailey: this is "bloomberg surveillance" on television and radio. i have been talking about dip buying action and i got feedback that that was not the clearest term. what would others call this activity? gina: if you want specifics it is clear that the 100 day moving average has proven to be very strong support for the m decks over the course of the past year. anytime we get at or near that level there does seem to be a flow of capital that comes into the equity markets. for that, look at the day and that is your price. >> we are seeing a rebound after some pretty sweet losses. futures are in positive territory, one hour to go until the opening bell. the action in the bond market

really not all that notable, you are seeing selling pressure up three basis points but even with that move we are still sitting at 1.45 in the face of a near seven handle and a fed that might hike three times next year. guy: this is the argument, isn't it? is the fed really that hawkish? it has negative interest rates in the developed world right now. the fed, you can argue, you look at bid central banks and you can argue that the fed is more behind the curve than anybody else despite the fact that it is talking about hiking. that narrows it down to things that does not exist elsewhere. the fed has a plate -- a pretty chunky one to contend with. >> neil has a bit of an opinion on this, track this for me. you think the fed could move four times next year and at the same time you say do not call them hawkish, why?

neil: because i think they are following the data. one of the interesting things about the december fomc meeting is that they revised their expectations for growth and down their expectations for unemployment and up their expectations for inflation, what do you expect them to do? they will signal more interest rates increases. if you sort of plug all of that into a standard time -- kind of model, they are not indicating that they will hike more than that. it is about their so-called reaction function which we got in the june meeting. that is the one of -- that is one of the reasons why on the day itself the market took the news in stride. so, i would not characterize this as hawkish, this is a fed that has not signaled what they did, and they would look increasing offside relative to the data as it is coming in.

>> this is a fed that has accelerated tapering and that looks set to end in march. are we looking at march left off? neil: i certainly think it is a live meeting. one of the reasons they are accelerating is to make it a live meeting. and then think about what will happen between nine and -- now and then. it is likely that we will come back in the new year and get a strong december jobs numbers, but point number two, what is going to change on the inflation picture between now and then? we are being told by the usual suspects to keep waiting for this moderation in goods prices, it is like waiting for ghetto -- waiting for gaddot. wholesale prices are rising at a meaningful weight -- rate. meanwhile housing inventories have been pared back to the bone. you think they cannot go lower, you do. people are buying homes at

strong price is, and that will continue to keep the pressure on inflation. so, when you put these things together, you have strong jobs, and we know that additional jobless claims are declining and that job openings are strong. for me, that is the -- pre-staging another decline in the jobless rate. i think we will be back in march and the fed will be revising down their expectations for unemployment, potentially, revising growth, and maybe even taking the inflation up a little bit, and on the data into the first quarter will lead them to hike, and powell was clear. he is not signaling much discomfort with the limited space between the end of the tapering program and the first hike. i think markets will be ok with it because it is not the data. if you are in a strong nominal

growth environment that is an environment where companies who can trade on the s&p 500 is where they make profit. guy: we are seeing a very strong demand for stuffed toys in a fairly significant way. neil: absolutely. i mean you know, t.j. maxx this year. >> for the benefit of our radio audience, neil has canceled the bookshelf work from home shot and is surrounded by stuffed animals including a rather large minion from" despicable me." neil: someone has to take a stand against the standard bookshelf background littered with books with let's be honest, i do not know if i've actually ever read. guy: nope. normally i work my way across people's bookshelves trying to read into what they think is behind them and i am trying to do the same here. i have a minnie mouse, a minion,

a troll as well, it is a good selection. you talk about sequencing and what the market is afraid of. apparently the market is unafraid of a taper, unafraid of rate hikes. what about a rolling off of the balance sheet and qt? what do you think about what will, and what will spook investors? neil: if you go back to the most recent historical analogue, it is 2018, the fed is hiking and the balance sheet was contracting. 2018, the bad year, i mean gina can correct me. the s&p 500 fell about six to 7% over the year. but, if you go back to that period, what was the driver in the equities, the fed or the fact that the former president

was prosecuting a trade war? most of the big declines did not happen on days of new fed information, but days of trade tweets. pressing the heat on the chinese. the broader economy was fine, so you have a tail wind for the economies, a slight headwind from the fed, but that was driven by the trade war. unless president biden wants to prosecute increasing trade tensions with china, i think the markets will deal with it. also, 2022 is probably going to be a year of synchronized global economic activity as we exit the pandemic. one of the interesting data points that i have noticed lately, and you can take a look at our twitter is that mobility out of emerging asia, korea, thailand, indonesia and india is up and to the right meaning that

they are getting on with it, which suggest that they will turn the corner on supply chain issues. >> i am glad you gave me the window to talk about 2018, because the one part missing from the discussion was that was the year of margin compression perpetuated not only by the trade war, also by a necessity for spending by some of the big cap tech stocks in the name of facebook and google starting to spend more -- spend more on it can -- on internet security, pressing margins which led to the correction. when you talk about 2022 and maybe some of this margin risk clearing in 2022, what is the mechanism by which it clears? we are starting to see the reality come to the forefront that supply chains are somewhat constrained and many people are saying that will not clear until 2023 at the earliest and is there something else that you can see that creates a pathway for margin expansion to root --

to resume into the year ahead? neil: for the industrial sector, it is hard to argue that the supply chain issue will not improve. at some level, that will probably boost industrial sector margins, i do not think they will pass that on to consumers. that is a first point. secondly, i think that productivity is likely to pick up as well. remember, we have been investing a lot as it is, we are getting used to these new working arrangements, so we will probably see some rebound in productivity as well. neil: speaking -- gina: speaking to that productivity rebound, how do you see labor costs? there is concerned that labor cost will become embedded resolving -- resulting in inflation pressure. is that not something that you see as a risk? neil: it is absolutely a risk, but the issue is what is going to happen with -- right now you

have a lot of people quitting their jobs, chasing wages higher, particularly in certain industries like leisure, hospitality, and retail, it is not economy wide. as we exit the pandemic you should begin to see more labor supply freed up which might reduce the appetite for those currently quitting their jobs to keep doing so. and so, as that happens that should mitigate some of the pressure in wages, which should mitigate some of the pressure of labor costs that certain companies are seeing. it is not economy wide, but it is hard to deny what we see at the restaurants and in the restaurant industry and the retail industry. but i do think as labor supply gets released, those that are currently tempted to quit their jobs to do so. >> we have 30 seconds yet -- left and a viewer question coming through. why are not longer interest

rates higher due to higher inflation? neil: that is a great question. i think the long end of the treasury market, it is a we need to see it to believe it. back in 2016 to 2018, we are dealing with a lot of these questions but as the fed was hiking you could see the long end backing off in an environment of strengthening u.s. and global economic growth. but i also think that part of this is a function of what is going on across commercial banks who have been gobbling up treasury securities at a appreciable pace. >> thank you so much, looking forward to the day that we can pull you out of the stuffed animal pile and bring you back, and coming up later we will continue the conversation on a global market strategist.

>> president biden will unveil new matt -- measures aimed at fighting the coronavirus pandemic. the announcement comes after the cdc said the omicron variant accounts for the new -- the majority of new u.s. cases. the president will ship free testing kits. he is also dispatching the military to help out in overwhelmed hospitals and unvaccinated americans will be warned to stay safe this winter. boris johnson held off introducing stricter coronavirus rules for now, but he left open the prospects that they will be needed soon. the government is coming to the aid of the battered hospitality industry which has seen revenues plunged. >> we are announcing one billion pounds in financial grant support meaning eligible hospitality companies will be able to claim a cash grant. we are dealing with an enormous

amount of uncertainty at the moment and what the prime minister said is that we are reviewing the data day by day and hour-by-hour, keeping the situation under constant review but we cannot rule anything out. laura: 132 million dollars will be given to local governments. target is an early winner of the u.s. holiday shopping season according to -- which analyzes consumer transactions. it increased sales roughly 10% in november. it gave double the rate of its top rivals. 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. ♪

>> >> this is the moment where they need -- where they really need to give us clarity on how

they are going to manage what is absolutely going to be financial market volatility. it is not a question of if, a question of when. if they are going to be going to inflation, they need to prepare markets. >> lara speaking about the path forward and what the economic implications are. we will dig more with barry at red hold management. the radio audience listening to us i apologize that you cannot see this visually but two things you need to know. barry is wearing a festive sweater that is bright red, i do not know if it is ugly, but it is charming, but there seems to be a minion theme going on on the show because neil had a big yellow minion and barry has a pair of mutant minions. guy: people minions.

barry: those are just animal spirits. that is market sentiment. and that is why the regular minions, that is about 80% of the market. when he percent of the market they are bouncing off of the walls. and that is a good reminder. guy: and the force is strong, baby yoda, what does he signal about the markets. barry: nothing, i am just a fan and i am looking forward to the boba fett series starting. now that we are once again going to be canceling parties and concerts and plays, and dinners and what have you, it is back to this training -- streaming services for entertainment. >> are we going back to the past? barry: no market think so, look at the work from home stocks, look at what took place over the past few days with zoo and -- zoom and peleton and telehealth

dock, the run of things that did so well in 2020 and got shellacked on anticipation of a fuller reopening. the reason we are not getting the reopening is that one third of america is either grossly misinformed or willfully trying to tank the economy and i cannot tell you which. but the refusal of people to get vaccinated is why this pandemic is not ending. they are you tatian laboratories, and you can thank -- mutation laboratories and you can thank an unvaccinated person for omicron. gina: with all of this uncertainty, how are you not amending your investment strategy into the year ahead? talk to us about the u.s. equity market. where are you looking at opportunities and risks into 2022? barry: we literally had this conversation in the office with the entire staff, and if you go

back through market history and look at these big externalities, whether it is something like 9/11, the war in iraq, you know, the news will continue to get worse as time goes on, but its ability to shock and surprise us. my favorite example is the bombing of specific -- the accidental bombing of mosques during the beginning of the war. the first couple of times collateral damage occurred was tragic. the market had a terrible spasm in response to a great human tragedy. the third time the market shrugged it off. after that it had no effect. the expectations are, eventually get used to this, and we should be, it is almost two years now. we do not recommend making honey -- any wholesale changes to your portfolio because by the time you are at the breaking point and the news beat is as bad as

it has been, that is pretty much the time the move is over. guy: what still has the ability to shock markets next year, inflation, build back better not happening, where it is the shock come from? barry: that is a really interesting question. the inflation example is great because everybody was screaming that this is structural, not temporary or transitory. by the time that can saint -- became consensus it was clear that we were starting to round the corner and if you believe the bond market, the bond market seems to think that inflation is not going to be persistent and pernicious and long-lasting that this is specifically tied to reopening and it will fade sooner rather than later. i keep hearing the -- to answer the question what is the biggest surprise? i keep hearing people talk about how the market was driven by the fed and monetary policy and

people are completely ignoring the massive earnings growth that we have seen, not just this year, but look at the entire decade. that was the best decade for earnings growth since the 1800s. it is just an astonishing historical number, over 13% a year annual not market growth but earnings growth. so, i think that you always look at what has the greatest risk to supplies -- to surprise the most amount of people, earnings growth and a market surprise, a lot of people are in position for that. people are starting to take risk off the table and starting to shift from growth to value, and i always try and say where is the surprise coming from, what will upset the most amount of people, ongoing economic growth and increased revenues and earnings would shock people. >> we can talk about surprises, risks, and how much unknown there is, but what is the call

you are most confident in for 2022? barry: i always channel william goldman, nobody knows anything. and we are looking at outlooks and people's forecast and what they are expecting i have to remind people to go back a year ago, who in the beginning of 2020 had the forecast global viral pandemic crashing the market 34%, and then regaining the highs by may and in the broad market by august, and a screaming upside market for 2020 and 2021. nobody had that. i always look at these outlooks, and i hate to beat a party pooper. i ways look at these as a waste of time, and the risk from these outlooks is the tendency of investors to marry their perspectives, their portfolios to those predictions.

they would rather stick with it. there was a great book "do you want to be right or make money?" you do not have to worry about being right but see what the market is telling us. >> i would love to have both. thank you to very, and -- to barry, and to snoopy, baby note -- baby yoda, and the minions. i am sure victor's will be showing up on twitter. we will be back with you tomorrow for bloomberg surveillance. coming up on " the european close" it is the ceo of novavax, what is your number one question for him? guy: i want to know where his vaccine is going to fit into the programs that are currently running around the world. how does he slot this one in and make it stay? >> i am sure the market will be interested as it stays tune into every single on the front

headline at the moment. not much air present in the equity market, futures in positive territory with half an hour to go until the opening bell. futures right up at 46,000, up about .9%. on tv and radio, this is bloomberg. ♪

>> from new york city's, i am alix steel and for jonathan ferro, it feels like a reversal from monday.

we are seeing buy the dip. the russell 2000 up by 1%. 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. alix: we begin with the big issue, deja vu for investors facing another covid surge. >> the omicron variant. >> macron. >> short-term economic concerns are perking up. >> here we are at 2021 still dealing with a virus named after 2019. >> no doubt that it will slow down economic activity. >> there is some uncertainty. >> right now there is a little bit of a wildcard. >>