>> they do not want to raise rates to soon and slow down the economy. >> we will get the realization the economy is not as good as we thought. >> i very much disagree with the phrase that the labor market is strong. >> we are seeing a slowdown of the economy. jonathan: winter is here. from new york city, for our audience worldwide, good morning, good morning. this is "bloomberg surveillance." alongside tom keene and lisa abramowitz. equity markets up. the s&p down one third. tom keene, that line on winter from mike wilson at morgan stanley. tom: goes across equity markets, fixed income and what we see of the tensions where is winter along and eastern front of eastern europe. we will dovetail all of the

politics in with the markets. i would suggest, so important is we are seeing the triangulation of the markets, gold up, dollar up, swiss franc up that is what you know about political tensions. jonathan: 10 year yields down three basis points. the team at morgan stanley and the head of the fed saying slowing growth is overtaking what the fed will or will not do. tom: i really want to see how the recalibration lays out from paul krugman's op-ed. you have elements of the 1947, the divide. it is extraordinary at the recalibration we are going to see this week. jonathan: what the week ahead. at the same time, we have a focus on secretary blinken meeting with the eu foreign minister. this is an important moment.

lisa: especially as it seems like russia is getting closer to invading ukraine, at least you could take a message from the u.s. withdrawn personnel from the ukrainian offices. you start the show on this gloomy note, winter is here. i am the gloom crew what you are starting out with winter is here. jonathan: just to be clear, i am quoting morgan stanley. not my words. lisa: there is this issue of whether slowing growth is overtaking concerns of the fed addressing a hot economy and is that the new winter we are approaching? jonathan: i am sorry, lisa. futures down 14 on the s&p. down .3% on the s&p 100. pick it up on the flattening of the yield curve, down three basis points. the distance between two and tens threatening to blake the

low 70. how much of this is just a continuation of the risk aversion we have seen the last couple of weeks, specifically in big tech and how much is it geopolitics bubbling away and things getting hotter over the weekend. tom: it is a stew. that is what we have to sort out with the guests that we have not only today but across the week. i'm using the vix as a litmus paper. it is 30.38. it is a very fragile time. jonathan: the european commission president sing a new financial assistance package for ukraine is being announced of $1.2 billion, doubling the ukraine assistance in grants. tom: we see a lot of that today and messaging to make clear to mr. putin the consequences of any action.

i'm taking for granted the viewers and listeners are aware of the news flow from the united kingdom and the biden administration, fragile monday here. jonathan: prude essentially unchanged, -.8%. -- crude essentially unchanged, negative .8%. lisa: it will be interesting putting notes of when rate expectations keep climbing. what next wall street firm will come out and call for more than four rate hikes which is currently priced in. this is what is driving the flattening of the yield curve, longer-term yields coming down and the front and staying hi good how much is this a bet that the fed won't be able to orchestrate a soft landing in the face of rapid inflation. ibm planning to report fourth-quarter earnings. you have seen ibm underperform

this year but outperform the nasdaq which had its worst week going back to march of 2020. the concern is how much is netflix a harbinger and how much is that an outlier and how much do we get from the cloud momentum. in general, this is messaging but president biden planning to discuss efforts to lower prices for working families for cabinet members. this is at a time when real wages are low, deeply negative, almost to what we saw in 2008. at what point is this color the entire narrative at a time and it is unclear what the administration can do to bring down prices. jonathan: looking forward to the coverage this morning. we will catch up with maria tadeo and annmarie hordern. we need to look to the federal reserve decision. we can do this with brian weinstein. can we start with the move in a

real yields specifically over the last week or so? what did you make of that. brian: overall we are doomed maybe. things of gone so negative. if the fed can't control inflation then there would be a move in real yields. real yields are moving higher because the fed raised rates and they will use quantitative tightening to control inflation. they may not get it perfectly right, but we are getting close to fed lift up and they can do something to help inflation a little bit and it is probably a more natural move away from super negative real yields. tom: what will you watch for and what would you guess the fed would watch for this week until the end of the month? brian: they are looking at fixed income. big moves in equity prices, fixed income very well behaved. you have high ois. tom: is that your dog convexity

barking? brian: that is my dog convexity barking. he is upset because equities are too much. fixed income is well behaved. lisa: i was going to say the same name. brian: the yield curve getting flatter is a warning sign. the whole idea is the fed is trying to make sure they fight inflation. lisa: brian, you talked about the fed balance sheet as a tool to steepen the curve. you think the curve is flat enough to force the fed's hand into shrinking its balance sheet sooner rather than later? brian: i think what they need to do is explain how they are thinking about it. i would never see someone try to shrink $3 trillion on a balance sheet in a couple years time. i think it is a tool they need to explain and instead of

focusing on daily hike is whether they can use the balance sheet as a tool to not flatten the yield curve and move rates further out as opposed to hiking blindly. lisa: is there a winter is here with respect to the yield curve? is it giving a sense that perhaps the fed won't be able to orchestrate a soft landing or is this a much more sanguine message that this is a classic move when the fed hikes rates? brian: it feels more normal to me. the market maybe using a normal playbook which it tends to do when this is not a normal time. i don't think it is anything more than that. i think we will find out more. the fed really does owe us an explanation as how they could use the spreadsheet. they have to turn this picket off of free money and continue to pump liquidity at this moment seems acrobat idea. jonathan: just quickly, are you

convinced that they have given up on the assets of transitory, even if they haven't given up on the word? brian: no, because the market tells them not to. breakevens are lower. it's not exactly an inflation problem. i don't think they have given up on it. they have seen the script before with some nuance. i think they are going to handle it like. normally do but the giant caveat is they have a balance sheet they can use have never seen them use. jonathan: i bring up the question because i think it is important going into this meeting there are we looking at a fed that is ready to break the back of inflation and do so aggressively are a fed just looking to reduce risk? tom: it is a fed that is data dependent maybe like it has

never been before. i thought it was great how it was laid out some of the labor dynamics out there right now, the employment of america. a lot of good research. this is a fed that will wait for the data and that is what they have done for centuries and there is no difference now. jonathan: just worth considering come with the likes of goldman and deutsche bank sang the fed has to do a lot more. lisa: the balance has been trying to curtail the tail risk, not necessarily being aggressive to get in front of it and it does not seem they have shifted on that based on the rhetoric. around the margins, a number of beneficial's sounding the alarm. -- a number of officials sounding the alarm. jonathan: looking forward to catching up with our correspondence in russell's and washington, d.c. as well. coming out the other side, a

report that the president considering deploying troops in eastern europe and in the baltics as well cared the washington post saying the u.s. is considering export controls. this had a real ramp-up. tom: for those watching football this weekend and not watching the political geography of ukraine, like what you say about export controls, but this is not normal export controls. i use this word nicely,? the and controls. jonathan: the chiefs, why did it go so late? tom: they are living in a time from years ago. they are wrong but boy are they doing better. lisa: whose fault is that? jonathan: i tuned in for brady. i was rooting for him. i love tom brady.

last week on the nasdaq was the worst week on the nasdaq going back to march 2020, but remember, it only had four days. it was the longest shortest week of all-time. futures in .2%. from new york, this is bloomberg. ♪ ritika: president biden reportedly may -- unrest in rain. the president is considering -- unleash on -- growing concern that russia will attack ukraine. boris johnson faces bracing for an outcome of an investigation into reports that he allow drink parties in downing street which broke pandemic rules. that could beat his colleagues to force him out.

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>> the purpose of those sanctions is to deter russian aggression. so if they are triggered now, you lose the deterrent effect. jonathan: u.s. secretary of state antony blinken. good morning. your equity market down about nine. nasdaq down .2%. nasdaq00 down one third of 1%. the nasdaq 100 down 7.5%. yields come in three basis points to one point 7263. -- 1.7263.

tom: it went on to handle would be stronger on the swiss franc. annmarie hordern joins us from washington on these affairs. maria tadeo is an brussels after being in geneva with blinken and lavrov. i want to go to the shocking note this morning where he steeled it down in eastern ukraine. this was a brutal note and here is how the ends it, put has to be prepared for heavy casualties which could lucian his shaking grip on russian public opinion. a bloody war could turn the russian people against him. maria tadeo, we are talking about the allies. germany out with headlines. how alone is vladimir putin on this monday? maria: to your point, one of the

things that has been very clear is that when you think that perhaps we could see a repeat of what we saw in afghanistan with armies not willing to put up a fight, this is a very different picture in ukraine. there is a strong sense in ukraine that if there is a war they will fight it out, whether or not your facilitate weapons is another question. in terms of how isolated the russians are in europe, we don't have a single voice coming out of europe. in particular when you look at germany, this was a weekend of health for the -- hell for the germans. there was a big scandal in the country and huge pressure on berlin to put something on the table that reviews -- removes

the ambiguity. tom: biden, what does he do? maria: he will get briefed by national security team. what is on the agenda today has nothing to do with russia or ukraine. he will talk to his administration on how to lower consumer prices in the united states. what is so frustrating for this administration is they wanted to shift to a domestic picture. we are going into the midterms and that is what they want to talk about and then you have the crisis between russia and ukraine and this takes all the oxygen out of the white house. lisa: how much of the stories interconnected? any idea that this is an effort to preserve the natural resources in the area, whether lithium or oil pipeline and to maintain the european allies? annmarie: even from my own reporting, it is obvious the

administration is quite concerned about energy. two things come to mind, higher energy prices when you have geopolitical concerns, a number of banks putting out notes saying geopolitical concerns could put oil up to 150. that would be terrible for this administration as they are trying to get gas lease -- gasoline prices down. and maria would know this well, the energy story is key in getting europe on board to the sanctions train and making sure they can stay steadfast in terms of harsh sanctions on russia, because europe 100% is enslaved to russian gas. that is what this comes down to. lisa: maria, what are the main friction points between the u.s. and the european union when it comes to the ukraine-russia situation? maria: look, lisa, if you go back to december, european leaders agreed they would match

the language coming out of the year -- the u.s., seeking sanctions if they were to invade ukraine. a month later we don't know what the sanctions could look like. another -- the other big focus is germany. when you look at what is happening, 10 years of political ambiguity when it comes to russia under angela merkel is coming to the boiling point. schulz will have to make decisions on whether or not germany would be ready to provide its own military if there was a war aired these are questions -- a war. these are questions that have been brewing for 10 years. tom: the note of the weekend, croft at capital markets laying off the german hydrocarbon story. 32% gas, 34% oil. a huge margin, no question about

that. maria i want to talk about the estonian headlines. it is miles and miles away. all of this was invented by a early gentlemen who basically invented modern geopolitics and geography. and he said never, ever, ever take your eyes off of eastern europe. how should the white house look from estonia down to kiev? maria: he is very right. if you look at the comments made by the prime minister, he said the best way to deter the russians in history have been an american flag. that is why we would be in favor of troops in the ground in the baltics and eastern europe. eastern european countries are very aligned with the united states. there is no friction on that front. they agree that they have to go big on sanctions and that

putin is aggressive and they do not want to connect eastern europe with russia. the other thing i would note is that going back to the point of weapons and military facilitating weapons going into ukraine, a lot of diplomacy going on between the u.s. and eastern european countries which are very aligned. jonathan: team coverage from both sides of the atlantic. you brought up the crude issue, in and around 85. use oil as a hedge for ukraine tensions and on the energy equity side of things, i will talk about that a little later, on the s&p 500, that sector of more than 12 percent, a massive run. tom: we didn't get out to 90, but 90 is not 89. jonathan: coming up the cio of

asset management. downplay 3% on the nasdaq 100. -- down by percent on the nasdaq 100. from new york on radio and tv, this is bloomberg. ♪

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jonathan: coming off the back loss owing back to the depths of the pandemic, march 2020, that was last week all four days. features down .4% on the s&p and the nasdaq 100 down .5%. brutal for the nasdaq 100. let's take a look at energy versus information technology relook at that performance gap in just three weeks. i.t. on the s&p 500 down more than 11%. energy equities of more than 12%. credit suisse coming insane on the geopolitical tensions between russia and -- coming in on the geopolitical tensions between russia and ukraine.

this interests me, can the top two risks will be inflation and the policy response to it? can they be our top two risks? if it is about the policy response to it than the concern is no longer inflation, because what we saw in breakevens speaks to something front. it is about higher interest rates. looking at twos, tens, 30's, down three basis points on 30's, the same amount at 2.04%. the other thing i will throw in, you go from inflation, the policy response and the next return is lower growth. the flatter curve threatening to break 70 basis points. tom: the essay this week from mike wilson's talk about this is all about the unwinding of the supply side story, the complete mystery of how, if, and when we

unwind the supply-side and what that means for the growth dynamic which then goes into inflation. jonathan: if lisa says you and i are too gloomy, we must be gloomy. from morgan stanley, winter is here. hibernate. tom: winter is here. right now, to help us get straightened out, eric freedman. what are they going to do with all the cash? how does corporate behavior and use of cash chains in this 2022? eric: we think it is going to be a continuation from last year, most notably m&a activity will still be robust and the other variable out there is cash to shareholders. markets have been consistent

over the last 12 to 18 months. i think that will be the nature of what you see. buybacks ironically have come back down a little bit. information technology has been one of those sectors that is seen less from the buyback. buyback is the word of the day for extra cash. tom: let's wax philosophical. you set up all sorts of horizons and what if's on the power game out there. how will corporate havey or change? -- corporate behavior change? eric: guides is likely to be murky for the next couple of quarters, and that is a function of omicron and the omicron hangover and also questions about how resilient consumers will be. within from a set up standpoint there are probably two quarters

of decline in terms of growth, but it won't be a massive decline. one of the challenges out there starting to percolate from balance sheets is how high will interest rates go? we don't think the fed will be overly aggressive. if you are a marginal company without a strong diversified set , perhaps you are more concerned with growth plans for the rest of the year. horizons are seeing number one the reopening, which we like cyclical's more here the second horizon long-term remains and economy -- cyclicals more. the second horizon long-term remains the economy. more of a calibration has to happen, but we think horizon one is cyclicals and number two is once we are more endemic is when we go back to health care technology. lisa: everyone is gloomy today.

you started the year with a half glass full and now you are not anymore and a half glass empty over the next three to six months. you think the fed is mostly job owning. do you think that is what we have priced in for the markets and calibrated to clients rather than a complete wholesale reaction to the four rate hikes currently priced into the market, at least on the bond side? eric: what is being priced in is a lack of edge. in the last let's call it year, most of the focus was on earnings and tepid and decent growth. now you get to an environment and tear great coverage on ukraine and what you are seeing from central banks, a lack of edge. you get into what may happen across borders or how stringent the fed might be, those are more difficult things to forecast.

i think it is fair to say this is winter. we need more communications from the fed about their intentions. we think over time the fed gets it. there is a productivity and demographic challenge. fed will likely remember it is the third mandate, which is stable long-term interest rates. the pendulum has swung too far for emergency policy. the pendulum can't swing too far to the other side which is a quick recalibration back in terms of hundreds of basis points. that would be too much for this economy to handle. more communication will be essential. lisa: you set a lack of edge, and i like that. how do you remain nimble? eric: for what we are doing, shrinking tracking error, getting close to the benchmarks for now. we have a bias in terms of our style with a little more risk

and more growth impulse. we are wanting to get back to that over time but now is not the time. staying nimble is not hunkering down but instead looking back closer to home and using opportunities, especially if we see more opportunities in the last couple of weeks with relative strength indicators in low 30's and upper 20's and that is generally a decent time to step in we are not in that camp but if we stay there we will likely get more aggressive. tom: what do you do with the so-called profit-making big tech? eric: a couple of things. you have things that are speculative and when the earnings will come back to you, but we think there has been a tendency to sell a little bit of everything. there are things we think are more interesting over time, like cybersecurity.

there are other speculative components of the markets we would be less aggressive with. but this is a time starting picking away and clement truly -- and clement only -- income incrementally. at current levels, we expect returns elsewhere, namely things would be mortgages, reinsurance, esoteric sectors you can't get access to. these are things you can own and we think they provide interesting exposures that have correlation to things happening elsewhere in the market. we prefer those areas versus cash right now. jonathan: it is good to hear from you. eric freedman of u.s. bank asset management.

the kremlin spokesperson saying the following, the kremlin sees a high risk of ukraine offensive. in the region southeastern part of ukraine, blaming the u.s. and nato for escalating tensions. they go on to say the fears that russia may cut the gas over sanctions is hysteria. this coming from the kremlin spokesperson moments ago. tom: 10 year yield breaks down. it is fractional and ever moving slightly but the first blush we see from the headlines. jonathan: how difficult is it to draw a distinction to separate what has been happening over the next couple of weeks in the markets worldwide, and what is happening in ukraine and russia at the moment? lisa: is a tale risk that seems to be percolating and overhangs the ceiling that commodities will have a huge bid from

oncoming demand with people trying to get over the pandemic. you have dual stories and pressure at a time when gas prices are feeling inflation in europe. it makes it that much more fraught and more so rather than creating at new narrative for the market. jonathan: we come back to this, in the near term come hunker down for a few more months of winter. we continue to favor value overgrowth with a defensive rather than cyclical bias. mike wilson concludes by saying hibernate until winter is over. this was published yesterday. tom: he must've been rooting for the chiefs. there are going to be a lot of opinions. our job is to bring the nuanced debate while we look at the litmus paper of the system. this is the great continental metric and you lived this and

the answer is we have come way down, strong swiss franc and breakthrough, not down to a window to handle but off of the russian headlines, a move down. jonathan: threatening to break one. what can they do about it and the answer is not much. policy rate is -75 basis points. tom: one level is a huge move. jonathan: we are almost there, 1.03. tom: i was talking about a goal for tottenham. jonathan: something they did and then it sold out. futures down .3%. from new york city with tom keene, lisa abramowicz, and jonathan ferro, this is bloomberg. ♪ ritika: i'm ritika gupta. the state department warning of

the continued threat of action in ukraine. an advisory says security conditions are unpredictable and can get worse with little notice. the new york times said president biden is considering deploying forces to eastern europe on the baltic. president biden's chief advisor said the outbreak is headed in the right direction. it said covid infections and hospitalizations peaking soon but the decline will not be uniform throughout the country. and brussels, police used water cannons to break up demonstrators opposed to pandemic restrictions. 50,000 people took part. a new survey shows u.s. inflation and job shortages and it found that 53% of the

companies responding do see prices in the fourth quarter at the highest in 40 years, they expect higher wage costs in the next three months. peloton's ceo to retire. shares up more than 80% from the all-time year ago. it is worried that the easing restrictions will hurt the company. global news 24 hours a day, online and at quicktake on bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. i'm ritika gupta. this is bloomberg. ♪

>> it is not about being past the peak, it is being close to

the bottom of the peak. if you bring people back to early, you suffer the risk of having a second surge of cases or plateauing at a higher level than you would if you would've just waited a little longer. signs are looking good but we still have to realize it we have height numbers of cases in most places. jonathan: that is in true -- that was andrew pekosz. don't third of 1% on the nasdaq 100. -- down one third of 1% on the nasdaq 100. yields down to basis points. the curve flatter. in the commodity market, 85 point 26, a renewed lift in crude, positive on the session. he thinks things are looking good here dr. fauci sang "things

are looking good. -- saying, "things are looking good." tom: our consensus across the three of us has been to talk to adult about this horrific pandemic. the message we have heard without question from the experts is not only is omicron going to get better but better fast. joshua sharfstein is at the door this morning. you guys were right, we have turned. it is the path of better cases, less cases, less hospitalization, is it a linear function you can extrapolate? dr. sharfstein: it depends where you live. some parts of the country are still in the upswing but we think it will go down quickly. i think others have said they expect to go down in a matter of

a few weeks, two or three weeks. the hospitalizations will probably like a little. but that is all generally good news. the question will be how long we last in a much better place. tom: i believe we had delta and we didn't see omicron coming. we have omicron, can we see what is next? dr. sharfstein: we are not sure what is next and what the virus will do. so many people got omicron that there is a hope that whatever comes next will be better prepared for. just like omicron was milder, in part because there are so many vaccinated and exposed people, we will have an even milder time with what happens to come next. that is the hope. the world health organization has also expressed that hope we can start to think about 2022 being different than 2021. lisa: when is the all clear

sounded, and we all have friends who where to n95 masks and don't want to give people hugs or stay indoors, how long can it be until they start to act normally? dr. sharfstein: normally has to be defined here, but the most likely if the cases come back down to the levels before the omicron surge, i think many more things will be possible. one of the challenges we have is finding the new normal, where people feel comfortable. you run the risk that you say, we are going to be fine doing a b, c, and half of the people think it is too restrictive and have think it is not restrictive enough and nobody's happy. art of the challenge is to say it is going to be ok and the risks are reasonable to do the following things for most people under certain circumstances you

want to take extra precautions. if you see seven didn't respond to the vaccine because of a -- if you see someone who didn't respond to the vaccine because of a condition, that is the time to break out the tests. lisa: where is the transmission, is it public transportation, airplanes, going out to eat? dr. sharfstein: when people aren't wearing masks and talking with each other indoors, that is when the virus spreads. people wearing masks on public transportation has turned out to be relatively safe. on the other hand, a pizza party with 20 people in your house which has happened to a number of students in different places, that turns out to be everybody gets covid if it is omicron. i think that we just have two keep an eye on even as -- we just have to keep an eye on the virus. lisa: some who happens to where

to n95 masks or has 20 people with a pizza party, it seems that these are the specific anecdotes that if caused higher for people -- ire for people. tom: let me cut to the discussion that only happens in new york city, can we go out to lunch, can we go out to dinner? dr. sharfstein: what i would say is you have a vaccine requirement to do that in new york, is that right? tom: i just don't know where this is going into the end of january into february. jonathan: in new york have to go out with my nexen card and passport to sit and have coffee. for people like tom and lisa, who had omicron recently, fully vaccinated including the booster, are the kind of indestructible right now to some

degree? dr. sharfstein: i think there risk is pretty low in the short term. i think especially in an environment where vaccinations are required for indoor dining, it will be reasonably safe for people recently infected. more generally, as the cases come down it will be reasonably safe for a lot more people. i think we can start to think of 202021 and we will have to find things we are comfortable with and we are doing things we hadn't done before in our house, but i am sure we will be doing more and even my parents. jonathan: dr. joshua sharfstein of the john's hopkins bloomberg school of health. i think we all want to know who lisa was talking about not behaving properly. tom: not of us speak to each

other at the moment the show is over. i just look at it on lisa as dr. sharfstein said that normal has to be defined. jonathan: it is a family member who has upset you and not hating "normally." lisa: i just put it out in a general sense. previous incarnations of the virus, it was a badge of shame and now it is a badge of honor. i have had omicron, you can give me a hug. jonathan: lisa is upset with someone. tom: i was given an afterthought booster and the a shout out to the volunteers of that effort. it is stunning to walk in to the cornell building and see on the wall the big fat cats on our show that give us perspective and how they have contributed to

the health care industry, the hospitals of new york. jonathan: totally agree. well said. your equity market down seven on the s&p. down .25% on the nasdaq. this is bloomberg. ♪

♪ >> the fed has been very clear that one way or another, they are going to bring inflation down. >> what they want to do is not raise rates too soon and slow down the economy. >> the economy is not quite as good as we thought. >> i very much agree that the labor market is tight. i very much disagree that the labor market is strong. >> we are seeing a slowing down in the economy. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. jonathan: another big week coming up. from new york city, for our audience worldwide, good morning. this is "bloomberg surveillance ," live on tv and radio. alongside tom keene and lisa abramowicz, i'm jonathan ferro. on the nasdaq, off 0.2 5%. the s&p down a little more than 0.1%. tom: a little more constructive an hour and a half ago