>> the fed has such a difficult task ahead of them. they need to engineer a soft landing. >> i don't think the fed will end up accelerating policy noted to address the omicron variant. >> it's a better way to do it to take time through shrinking the balance sheet. >> this is "blumer surveillance." -- bloomberg surveillance." jonathan: good morning, good

morning. alongside tom keene and lisa abramowicz i'm jonathan ferro. your equity market down. i subtle shift overnight into this morning. we push away for the pcr test. tom: a reaction we are seeing this popping. that will balance things out. what i would really point out is how fluid the situation is where market participants you have to stay glued to the news today. out of hong kong, substantial adaptation out of singapore and now moving over to a bombshell announcement, action. >> they are banning flights from eight countries including the u.k. and the u.s.. let's go to america and the u.k.. they want to get people back to work prayed huge amount of

disruption from the omicron variant. much more contagious. cutting the isolation down from 10 days to five. as you know you can test positive on a pcr test for up to three months but no longer be contagious prayed that we are grappling with in the u.s. and the u.k.. tom: my answer is we are starting to talk more about science and less about politics and even in asia, the announcement out of singapore today were stunning for what we've seen. that's a sideshow worth watching today. >> the main event in america, the confusion for the cdc and the communication over last week. what we don't know is what we need to do after the five to get back to work because many

corporations do things differently. this to require a pcr test. >> part of it is because the communication had been so confusing from the cdc saying if you have a test, go ahead and take it after five days. by the way, i love whenever i cough, tom keene manages to bring it up again. this to me as one of the biggest issues of 2022. how do you deal with zero covid nation when everybody else living with it is already treating like it's end,. jonathan: jonathan -- tom has been doing that for 20 years. nasdaq 100 futures down. it's been the equity story for over the last couple of days. just a massive outperformance the financials and banks in the

underperformance, heading south again. >> the one thing that keeps coming back to the head fake idea for me is how much of the yield move have we seen that's been a tactical move rather than something fundamental. companies, countries, everybody selling data to lock in when everybody understands rates will probably rise. i think it a certain point how much is this in tandem with yields rise and bonds sell off versus meaningful rotation. >> 47.9 -- the forward look from the likes of credit suisse, 5200 year end on the s&p 500. joining us from credit suisse, a senior strategist. the upside you see on markets. many people thought that would be a challenged point of view through much of last year.

why do you still hold that optimism? >> 2022 we are looking for the year to finish under --. the two things which driver turns. we have an economic background were nominal gdp is expected at --. margins continue to be very -- for cyclical groups. this is not a multiple difference story so we think it's sustainable to move towards that look. tom: you have the highest marks for not only the way credit suisse developed the case but the intelligence of it to say do not abandon tech. can you abandon tech this year and still perform. >> on an absolute basis i think

tech is still up but it struggled throughout the year. there will probably be a bigger library. we just think on a relative basis. lisa: at 2:00 p.m. today we will get the fed minutes. how much of the game change will it be if the balance sheet becomes an issue and is a live one. >> i know a lot of people are focused on inflation and that's important because typically it --. the 10 year remains --.

that flattening of the curve will ultimately dictate where the call will be this year and that's what we are focused. i still think it's ok because we have a positive earnings background. it could be problematic and cause us to reevaluate. jonathan: i caught up with your colleague and he talked about the removal of the accommodation and a tightening of financial conditions. you are hearing from the equity board who will say this is just a removal of the accommodation. the bears were saying this is a tightening of policy. what's the difference between the two? a removal of accommodation and tightening of the federal reserve. >> to me it's acknowledging where we are in the economic cycle. we've moved past the trough and

are moving towards something sustainable. if you are talking about tightening, that's the point where we get the cycle we begin to see restrictions as policy becomes more --. we are not there as we look across the economic landscape. economic indicators point toward solid growth. it is much more of a story about accommodation removal then economic tightening. tom: when you look at the cross moments of the markets, the vix has driven profoundly under 17, can you predict a more subdued volatility? >> i think it is likely through the year we will see volatility below 15. what has really helped was the

fact this was normalized back towards this mid-level. that was a driver of equity upside. the vix is still going to fall. i don't think we get quite as far as we were in the high single digits, low double digits. i think it will move to the low to mid level and support further the upside. jonathan: patrick of credit suisse, thank you. 5200 at credit suisse. 5300 at bmo. those of the big bowls on the street going into the year ahead tom: i've been out of touch here little bit and i didn't realize we were out nicely to 5200, 5300 from some of the bull markets. i'm really interested off of the job support on friday tom: tom:.

-- on friday. tom: the difference between -- jonathan: the difference between morgan stanley and credit suisse, credit suisse is 5200, morgan stanley is 4400. you speak to credit suisse they say it's a removal of accommodation. morgan stanley's estate is tight. -- morgan stanley says tapering is tightening. lisa: rate hikes seems to be the commonplace idea. how much does the balance sheet throw a wrench in these. trying to look around the corners to all the bearish places we could go. this is what i keep hearing. balance sheet reduction changes the scenario. it's a less controlled impact on markets then say rate hikes. any discussion of that could be a risk scenario but i wonder

could perhaps be interpreted more as tightening. >> have we gotten more comfortable with the type line when there's a good indicate -- timeline. i mean the ordering of the sequencing as well for policy. chairman powell spoke about that in the last news conference. lisa: the key dove from minneapolis on the federal reserve is talking about two rate hikes and the balance of risk tilted towards inflation then perhaps undershooting highlights. jonathan: the cost of ending up in a high inflation regime. the fed dove sounding different. equity futures down seven on the s&p. i'm jonathan ferro, this is bloomberg surveillance. >> with the first word news, i'm

ritika gupta. north korea has appeared to launch another ballistic missile which traveled into waters off the nation's east coast. officials in tokyo say it landed in waters outside of japan's exclusive economic zone. this comes days after kim jong-un urge to stay to focus on easing food shortages and containing covid-19. asset management slumping on its return to trade. the debt manager has said it's taken returns with core business. their shares were suspended last april following a delay. bulgaria's new prime minister redoubled the government's commitment to adopt the euro in two years in the face of fragile supports before the pandemic.

the transition to the euro needs to be treated with care. >> yes we are fully committed so there is no doubt about that. we fully understand the economic benefit of it. >> the comments for the first explicit euro pledge made by him since he took office in december. global news 24 hours a day on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'm ritika gupta. this is bloomberg. ♪

>> zones we don't go too far,

the equity market can hold it there there's ample liquidity. the fear of missing out was a huge driver in 2021. people are worried. jonathan: the head of asset strategy at state street. from new york city, i'm jonathan ferro. your equity market down. a monster number from the adp. we were looking for for 410, what did we get? >> outliers get peoples attention. 807,000 jobs, almost doubled the forecast. the entire month revised down to 505. this is going to cause people to rethink what we are going to get on friday when the jobs numbers come out. of these 807,000 jobs, 669,000 were in service producing industries including 240 6000 in

leisure and hospitality. these are the jobs that have been missing so far from the economy. if there is some credibility. when you do adp you have a safe harbor statement. you could see a bigger number than wall street is anticipating right now. 384,000 for private sector jobs. so perhaps we have seen a turn and people are starting to get hired. >> that ranges massive. here's the move in the bond market. a little shift on the 10 year a single basis point. yields up by half a basis point. i know this has your attention in the commodity market pushing

81 on brent. >> i think it's underplayed and reconfirms -- over the first few days of 2022. i would talk about a global tone to the omicron being less of a problem, a pcr tests being cleared and you see it on a worldwide basis through brent crude 81. the shock would be unimaginable. >> i want to come back to you and get a decent playbook for the payrolls report even the disruption of the variant. with that fair disruption really kicked in. how are we thinking about those issues going into friday. >> adp went out of their way to mention their survey numbers for the whole month all sort of between when delta started to fade and when omicron came out. with the interregnum in which

women -- people got hired. at the beginning of the month just when omicron was getting started it probably didn't have much. they could be a strong december followed by an uncertain january. even if people wanted to keep hiring they may have put plans on hold to see what the impact would be. lisa: the asterisks on this jobs report will be dramatic makes me wonder what data point within the number is going to matter most. is it still going to be the participation rate most people will look to provide ash look to for guidance. >> the participation rate is something the fed is concerned about. that's good news from their perspective. it means the labor markets are healing. i wonder if this time we are not seeing wall street anticipated

different number being more important which is average hourly -- earnings over a year-to-year base. that would be a big drop and it would suggest the wage pressures we were seeing might have started to ease. i will caution one month is one data point. but that's the kind of thing the fed would be looking for in terms of inflation. tom: i have to go to the -- mike. everybody else is a last name at press conferences. you talk about wage spiral. are we anywhere near a wage spiral? >> not yet. a lot of analysts look at this in the don't see the relationship developing so far.

in part because it hasn't gone on long enough. it took a couple of years of that to push inflation in the 1970's in part because we don't have labor unions we used to have the could engage in pattern marketing where ford got a contract and everybody else had to match it. so at this point we have not seen that and the question is does it become entrenched and for that inflation would have to probably remain higher for longer. tom: i wished our listeners and viewers could see your desk where you holistically bring in all the current research of our 12 federal reserve banks. are the phd's at the fed studying the impact of the new employers, are they taking into account the new kind of labor we are seeing in online warehouses? >> that has become a significant

change in the labor force. we've seen department store employment go down, employment in traditional stores or retailers has changed a lot and a lot more people ended up in the warehousing and transportation areas. one more thing we may see in january ease seasonally we expect people to be laid off from those warehouse and transportation jobs after christmas and that may not happen this year. we may see a shift in the composition of the labor force in january that will make it harder to determine. jonathan: thank you. looking ahead to payroll friday. your point on wages, tom. the minneapolis fed president, within that, this is a well-rounded point of view and everyone should take a read on it. he talks about long-term wage

agreements and one company he spoke to said they would typically sign three to five year contract with a 3% annual wage increase. now that contract, of those negotiations center around 7% to 10% increases in that for him as a stark example of how even transitory high inflation could lead to a sustained increase. some insight into how the fed point of view is evolving in real time -- fed dove point of view is evolving in real time. tom: the way i would frame it is the minimum wage -- we discussed on bloomberg radio. you can hear that at 9:00. what we addressed is the minimum wage right now calculated from harry truman would be $24 an hour. how rapidly would we get there?

jonathan: that's what the earpieces for peer i'm just listening to bloomberg radio. paul sweeny making sense. from new york city, this is bloomberg. ♪

jonathan: live from new york city on tv and radio this is bloomberg surveillance alongside tom keene a lisa abramowicz. i'm jonathan ferro. your equity market down three points on the s&p. yields higher to 1.6631. a monster adp print. 807,000 against an estimate of 410,000. going into payrolls friday looking for 424,000 this friday for the payrolls number in america for the month of december. tom: let's stay on this. i think it is important to point out this makes the claim statistic tomorrow at 8:30 ever more important. adp is different from claims but the two combined set you up for friday. jonathan: i think they speak to

a similar story. claims looking at 195,000. it looks like we are getting back in a better way. if you lead through the piece from neel kashkari, he is still -- there is a belief we still need to have work to do and an acknowledgment this labor market is tight. demand is skyhigh. lisa has gone through the job openings in america million times. there a lot of them. it is the lack of supply that is the issue. tom: greg daco joins us now. thrilled you are with us on radio and tv. greg, i want to talk about a single phrase in your wonderful report, a sturdy labor market. is america ready for a sturdy labor market? what percentage of government america, corporate america, jon ferro america, what percentage

have ever seen a sturdy labor market? greg: i think we are headed towards a sturdier labor market as we move into 2022. we are seeing signs, including yesterday in the report that there is a strong member of job openings. hiring is strong. quits are strong. this is people quitting because they are finding better opportunities, more flexibility. overall this is a strong labor market. i think it will continue to strengthen as the health situation improves. over the first quarter we may see a lull given the omicron spread. into the spring and summer we will see strong growth. some of the underlying details in terms of claims come in terms of jolts, and this morning's adp report are favorable in pointing in that direction. tom: if we do not have the union

power that john mentioned a bit ago or they killed -- or the guild power in germany, what is the labor power of the individual in america. gregory: whether labor supply comes back online and how strongly it comes back online. we will get a delay in terms of that labor supply. i do not think the shortfall we are seeing is structural in nature. as labor market continues to improve we will see people back into the labor force. that is going to be the key element to watch over the coming months, not just in the december payrolls report but over the coming months as to how strongly the labor force participation rate increases. aside it continues to increase will act as a release valve and will be assigned we are not headed towards an environment

where there is increasing wage price inflation and the spiraling dynamic. i do not think we will get there. i think we are in an environment where in a sturdy labor market we will see stronger labor force participation. there is a bit more bargaining power for workers at this stage of the labor market recovery. that will gradually erode and over the course of the year head back towards labor market that is more similar to pre-covid that it is to what we've seen over the past few months. lisa: to build on tom's question and your response, there is a why underpinning these comments, why people have remained out of the labor force, is it worry about a health scare , a worry about what their life is going towards, or is it they have so much money in the bank they can afford to sit out? what do you think is the main driver we have seen so far? gregory: it is a mix of everything. we tend to want to put one

response on any problem. a lot of times is it a combination of factors. our lives are very different than they were two years ago. we have a health situation that is far from being resolved. the latest omicron spread is evidence of that. we have a schooling system that is not at all what it was before. childcare is not what it was before the covid crisis. we have an environment in which people do have some savings. we have people that have decided we have better opportunities in terms of work to do different things than they are doing before. your cigna burnout effect of this long covid environment weighing on people's desire to work. i am optimistic that as the health situation improves we will see people come back into the labor force. the schooling system, the childcare system will improve as

the health situation improves. the savings will not last forever. we have started to see people onto their savings. that will be another incentive to get people back to work. over the next couple of years we will see labor supply come back. i do not think we are in an environment where labor supply is structurally constrained. i think it will be constrained for a specific period of time. that will gradually alleviate as we move through the rest of the year. lisa: this goes to the idea, you are saying you do not believe in await spiral, neither does janet yellen. you are also facing increasing inflation when it comes to rent prices, supply chain disruptions that signs point to going on for a longer time due to the omicron variant. how do you dovetail the idea that wages need to keep up with consumer price inflation but not get ahead of it and create a spiral.

how close are we to the threshold of, i do not want to say stagflation, but something that looks more like a crimp on growth when it comes with higher consumer prices. gregory: i do not think we are in a stagflation environment, which would be no growth and low growth and high inflation. we are seeing inflation dynamics, i've use the term -- will be an environment in 2022 where that will be moderating. there will be much less fiscal impulse. the federal tight monetary policy. that will have a negative impact on demand. it is more likely than not we will see inflation back down. the question is how fast and what level. i do not see the u.s. economy settling into a higher inflation regime. we continue to see inflation high in the 5% range.

i think as we move through the rest of the year we will see cooler headline inflation. it will take time for inflation to come back down below 3%. we expect core pce inflation under 3%. we are not moving towards an environment where there is that settling of wage and inflation pushing themselves up on a continuous basis. instead what we are seeing is gradually growing inflation through the rest of the year and wage growth will continue to accelerate into the early part of this year. i would expect it to cool thereafter. tom: critically, with that scenario, are you optimistic corporations can adapt and adjust to a new inflation regime? gregory: i think they can. you are talking earlier about companies that are increasing

wages at a higher pace. if you look at the most recent conference board survey, they noted that businesses were planning higher wage increases for this year, the highest since 2008. this is nowhere near the types of wage increases we were seeing in the 1970's and the 1980's, which was a period of very strong inflation. jonathan: a bit of a technical disruption with greg daco wrapping up his thoughts on wage negotiations. had a brilliant question from a bloomberg subscriber, the best questions come from the audience. can you distinguish between a broken market and a tight labor market? let me ask that question. can you distinguish between a tight labor market and a broken one? lisa: i think you have to define what broken means. a lot of people have been looking at the numbers that have been coming out with incredible confusion. if you look right now at the

idea you have a record number of quits and yet you have companies filling positions faster than expected if you look at the openings and how many came down from where people were expecting, it is a churn that is incredibly difficult to understand. jonathan: payrolls just around the corner. just north of 400,000 the median estimate after an 800,000 print on the adp. if you're not listening to the wonderful paul sweeney on bloomberg radio, on bloomberg tv you can see erin browne of pimco alongside jay pelosky as we work through the big issues in labor markets and financial markets. the view from jay pelosky is this is the year of global synchronized growth at this is theory -- this is the year you want to be allocated to emerging markets. is this the year, given what we

saw in hong kong and china? tom: i have to agree with jay pelosky. i think it is way underestimated how corporations and nations will adapt this pandemic. they will make tweets here and there. one of the real issues as we go into the afternoon in paris, is for lisa come in the ninth arrandisemont, it is a no-brainer. you can walk there from where she is. jonathan: is that the sun coming up in paris, manhattan? lisa, get some rest. it is good to see you smiling. lisa abramowicz and tom keene slowly getting back into it in 2022 and eventually we get them back into the office. from new york, this is bloomberg. ritika: with the first word news, i am ritika gupta.

the chicago public school system has canceled classes after the teachers union voted to shift remote learning on tuesday. 73% of votes were in favor of the move. union officials say remote instruction will end when the covid surge subsides for mayor lori lightfoot steam approves conditions voted on and approved by the union. a record number of american quit their jobs in november. that pushed the quits rate up to 3%, matching the most in data going back to 2000. the unprecedented level of resignation suggests the struggle for employers to retain talent. with russia's formidable military presence at its border ukraine's armies are reported we not prepared for high intensity conflict. ukraine's military is stronger than 2014, but a lack of weapons and underspending at home have left troops without basic

supplies. the u.s. that it would supply weapons should russia attack. ford shares rose to a 20 year high. it is a sign electric vehicles could grow to 10% of the market this year. fortis to start taking orders for the plug-in truck after receiving 200,000 nonbinding reservations. global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. i am ritika gupta. this is bloomberg. ♪

>> i see a number of risks to growth in the u.s. whereby we will still be growing above

potential, but growth should look weaker, i think the slower china poses a risk for demand, not only for the u.s. but also emerging markets. tom: megan greene of harvard, we are thrilled she was with us yesterday with her wonderful perspective on the transatlantic view. lisa abramowicz in paris, tom keene in new york. we welcome all of you to bloomberg surveillance on television and radio. right now we will dovetail in the always interesting eurasia group risks with what we see. ian bremmer has known that the list gets rewritten by the moment. we will rewrite it at the moment. the expert at russia at eurasia group joins us now. how does vladimir putin respond to the upset in kazakhstan? >> i think he responds carefully at first. everybody watches to see how

these protests develop. that is true in the kremlin. they may have been caught by surprise. one thing prudent does not want to see -- one thing that abeer prudent -- one thing vladimir putin does not want to see is chaos. they will want to see if they can control the situation and they will take lessons in terms of what this means with popular uprisings connected, in particular to the raising of gas prices which was the cause of this particular situation. tom: when we look at this in study we harken back to our collective memories. that is a memory of the soviet union. address how much there is a change of the soviet union -- a tinge of the soviet union in your analysis of moscow? alex: certainly i think for putin there are linkages back to

the soviet past. he has expressed regret about the breakup of the soviet union. there is not a sense vladimir putin wants to go back to those days, that this is an ambition of his. i think in the general area, whether we are talking about kazakhstan or ukraine or the crisis in belarus, moscow continues to believe it has an important role to play in this region, that it is is its sphere of influence. that leads to tension between russia and the west we have been seeing over last couple of years. lisa: russia is always a problem spot when you look at these geopolitical maps of potential risk. here we have it at number five. it moved up significantly. it was not even on the list last year. what changed to make it a situation between the u.s. and russia at the edge of

precipitating some sort of international crisis now versus 12 months ago when it was just russia? alex: in 2022 we are looking at a few issues that could be the crisis. the u.s. russia relationship has been bad over the last several years. it is these specific problems. right now the focus is on ukraine and with vladimir putin's demand about a redrawing of the eastern european security border as well. that has led to major tensions over last couple of months. beyond that, if you look ahead, there is concerns about whether or not russian actors, whether state or nonstate actors will interfere in the u.s. midterm elections. that is a redline for president biden, he has made that clear. the trigger for some sort of u.s. response to that is fairly low. other issues of concern would be

in the cyber realm, a repeat of the colonial pipeline ransomware attack last year for the solar wind case, that would also be a concern. these problems have been mounting and there is a risk one of them turns into a crisis. lisa: going back to where we began the conversation with kazakhstan and the idea of higher gas prices igniting social unrest, how much has the nord stream 2 issue caused a fisher between europe and united states, with europe at a much more delicate position with such a strong geopolitical location with respect to gas prices and russia. alex: certainly the european reactions, and with the nord stream 2 pipeline, the biden administration struck a deal with the germans to allow the pipeline to go ahead with heavy

conditions. the instinct from washington has been to impose sanctions tried to stop the pipeline. the biden administration has resisted that because in the interest of trying to repair the relationship, especially with the german government, they want to be careful about how the u.s. response. it is a recognition that the german government and the regulatory authority over the pipeline is the biggest obstacle to nord stream 2 becoming operational. for russia, this is a big deal. vladimir putin wanta pipe line to become operational. that leads to tensions between russia and the eu as well, where there is still skepticism from many members, especially poland, about this pipeline and whether it should be operational at all. tom: thank you so much. i have more questions but we do not have the time.

alex brideau of the eurasia group on the top 10 risks in geopolitics from 2022. i want to focus back on the bond market. where in your mind is the next important level of the 10 year yield? is it too percent or is it before that? lisa: some people are saying it is before that. even if there are negative news points, there still can be a sustained selloff. i still keep going back to the technical aspect of the selloff, the fact that corporations have been selling debt at an incredible clip this year. you've seen italy selling 30 year bonds today. everyone is trying to get in while the going is good. how much is this affecting a market that still has not gotten fully up and running with people on the beach, but probably at home with a cough. tom: i agree with that. there is a tradition that the

year starts may be the wednesday after new year's. i would suggest five years ago, eight years ago that changed in the vicinity of january 15, when we are supposed to be in switzerland at the meetings of the world economic forum. i take the point that the year has not started and maybe it is mid-january. lisa: you mentioned davos, you mentioned europe. anyone watching who has not been following. i am not in paris. we are broadcasting remotely because of omicron. i am in new york city, just to set the record straight if someone thinks i am on on a long vacation and had them ship me equipment. tom: for those of you on radio, all she needs is a beret and she could be sitting in a cafe this morning. she has the paris looked down cold. what is even more amazing -- we

are going to continue on an important date as we roll into the job economy. edward morse in the credit -- in the 10:00 hour. this is bloomberg. good morning. ♪

jonathan: a big rotation we need to talk about. from new york city for our audience worldwide, good morning, good morning. down two.

the content of the open starts right now. -- the countdown to the open starts right now. >> everything you need to get set for the start of u.s. trading. this is "bloomberg: the open" with jonathan ferro. jonathan: from new york, we begin with the big issue. the approach to covid continues to splinter. >> what we have in china. every little case, immediate lockdown. >> it is a problem. >> massive growth problems for china. >> look what omicron is doing already in the united states. >> the u.s. is walking the line. >> it comes down to omicron. >> economic to be in china is more affected by lockdowns than another country. >>