>> the market is near oversold territory. >> even as we are in a pandemic, we are still seeing an extraordinarily strong picture. >> i think multiples matter a lot. balanced against that, growth matters a lot. >> it is going to be a market where people have to have a slightly long-term view and rise through. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. tom: good morning, everyone. markets on the move, evermore so

as we begin the 8:00 hour. all of the tensions in europe showing up in equities, and bonds, currencies and commodities. jonathan: the s&p 500 down 0.7%. you've heard the calls coming from goldman, from deutsche bank, and citi wanting them this morning. the risk the fed has to do more, that is the risk for people going into wednesday. tom: d significance profound on weaker ruble and stronger swiss franc, and it shows a new strong u.s. dollar. it seems like the market may be doing some of the fed's work. jonathan: classic haven flows going into the swiss franc, and the underperformance pretty clear. the dax down more than 2%. we've got detention over higher real rates in the united states into this morning, and we got detention with russia and ukraine really weighing on european equities more. . tom: if you are just joining us,

we are hearing leaders speak. boris johnson commenting with some very strong language out of london. we await comments from president biden. lisa: he's going to talk later about not only the omicron variant, but more about the fact that you have to see prices go up in real wages come down. what do you do with that? are we seeing a longer-term expectation for growth slowing because of inflation, or because this is just something that is done? looking at inflation itself leading into the margin pressures people are seeing in the forecast. tom: that is the economic standpoint. i'm looking at the growth. later in this hour, our conversation with the ambassador of france to the united states. it has been germany over the

last three days. you wonder how france fits into eastern european calculus. jonathan: how united all of those european embers of nato? that is going to be an important conversation later this hour. tom: futures -33. i'm going to print up a 31 vix trade we have basically moved from 21 to 31 in good order, showing the fear of the market. what do you see this morning? jonathan: curve flatter, down to basis points on tends this morning. mastech futures lower by more than 1%. this has moved really quick a. we have gone from this conversation about the fears and risks around higher inflation, now talking about the policy response to it, and some people are worried about a slowdown in economic growth. think about how we closed out last year, talking for present real gdp growth in america for this year, know the conversation has gone from inflation to a fed response to it to slower growth and a fed hiking into weakness. that is how things have moved. i can't keep up.

i am still not totally convinced that fed leadership has got away from the essence of transitory, even if they have got away from the word itself. i still think the chairman believes that by the middle of this year, inflation fades. for all of this risk of the fed doing more, i hear it. i see that is the consensus now. it is a really important meeting for this chairman. it is a chairman about to break the back of inflation or a chairman who believes the inflation story from q1 on is going to fade? yes, they have to tighten, but maybe in his mind, they won't have to do much. tom: i think they are data-dependent. to your point, we are at a tendency for 4% gross, double-digit china like growth. we don't know where that growth is right now, and certainly don't have enough to do the terminal value. jonathan: you can see where the tension is going to come from

for the next three months into q1. from there, going into spring and into summer, the base effect get that much harder. probably going to get some abuse for this, but it is an argument that inflation should fade from q1 onwards. tom: before we get to david riley and move on, an important headline from the back of russia. they spend foreign-exchange purchases to reduce ruble volatility. it seems that point you mentioned a lot -- you mentioned is awfully important. jonathan: hasn't been sustainable. we are very close to that level again. tom: we are thrilled to bring you david riley, chief investment strategist at bluebay asset management. he got out from under the desk to join us this morning. what you doing right now given the cacophony of economics and international relations? david: right now i think it

makes sense to be reducing risk. that is something we have been doing across several of our strategies over the last two or three weeks. the way we have been doing that to some extent is booking some gains we've made on shirt u.s. duration positions. we see the level of credibility in our credit strategies increasing some of the holdings of cash that we have. this isn't because we are fundamentally bearish, and light of the discussion you've just been having in terms of the economic outlook, but we do think there has been this kind of disconnect between the messaging and the expectations of fed policy and financial conditions. i think we see financial conditions starting to catch up with the bond market in terms of the outlook for the fed. jonathan: when you hear the likes of goldman, citi, talking

about balance sheet reduction, the risk of doing more on top of that, do you start to think about leaning the other way? david: i think there is a risk the fed does more than is currently priced. the fed was behind the inflation curve, and therefore it wants to catch up, and we are looking for at least four rate hikes this year. if you add in the quantitative tightening, which i don't think the market has yet fully priced in, that could be another 10 to 20 basis points of tightening this year alone. so i think the point where you start to lean the other way, certainly if we saw concerns around russia, volatility was and risk markets, i would

actually want to reengage and go to that level once again. lisa: going forward, the fed is talking both about the balance sheet reduction as well as the rate hikes. you expect to $.5 trillion more or less of reduction this year and next year. how should that be priced? i am not just talking about inequities, but also in credit. david: it is a good point. one of the issues and concerns that i have is with this disconnect between financial conditions, which are still stored nearly easy, and the path of fed rate hikes, 20 tightening -- quantitative tightening, and the impact that will have on real yields as well. in order for financial conditions to tighten, you've got to see some repricing to some extent in terms of equities , particularly the longer duration really old sensitive

equities, but also within credit as well. i think the fed is more lucky to be responsive to credit conditions than they are to the s&p 500. so i am pretty skeptical that there's a fed put on the s&p. i think there is a fed put on credit, but that does not mean that credit spreads can't widen quite meaningfully from here before the fed starts to take down its rhetoric or adjust the path of policy tightening. jonathan: thank you, as always. speaking of credit spreads, i think we are still trading inside the lines associated with omicron at the start of december. lisa: the point we were hearing earlier, basically this supports some of the resilience. i would flip this on its head. why would the fed get concerned about market reaction if the credit impulse was not

disrupted? are they really worried at a time when it does not seem there's a lack of liquidity or something actually breaking in markets, or is this just normal turbulence that comes along with a policy shift? jonathan: there's a difference between market functioning and market prices, and you're getting to the point about concerns over market functioning. i don't see anything like that happening right now. market pricing, we are still trading inside a couple of months ago. they are not going to be too concerned about that. that is the pricing and markets at the moment. i would say keep an eye on the data as well. eurozone pmi's today, this came from the chief business economist at ihs markit, perceived prospects have added to the brightening outlook. is a supply about to kick in and the other way in the months to come? tom: the essay lave this outcome of the dynamics of demand and the dynamics of supply. if and when you get the supply

bottlenecks straightened out, what does that fold over to demand? have you bought all the things you have to buy to front run your worries of supply into 2022? what does the demand look like in august? jonathan: i'm ready to go, tom. i have done all my purchases. do you know who is coming up next? p are fair get -- p are farragut. looking forward to that. 29 on the s&p, down 0.7%. yields in a couple of basis points to 1.74% on tens. crude, 84 dollars $.78 on wti. her young -- $84.78 on wti. heard on radio, seen on tv, this is bloomberg. ritika: president biden reportedly may drop the restraint stance on ukraine. the president is considering

deploying warships, aircraft, and several thousand troops to nato allies in eastern europe and the baltics. there is growing concern that russia will attack ukraine. british prime minister boris johnson faces his most crucial week in office. johnson is bracing for the outcome of an investigation into reports he allowed drinks parties in downing street which broke pandemic rules. the results of that probe could lead his conservative party colleagues to force him out. -- real estate trust has agreed to a deal valued at $3.7 billion. the deal gives blackstone a portfolio of apartment communities in 13 states. shares of department store chain kohl's are surging from bids from two potential buyers. it is unclear how much the private equity firm is willing to pay.

another value offered $9 billion to kohl's. an activist investor is adding to pressure on unilever's ceo. knutsen felts has built up a stake in unilever. -- nelson peltz has built up a stake in unilever. he has a history of putting pressure on companies. 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. ♪

>> i think infections have become somewhat slow after not seeing any pullback to these magnitudes. we are starting to see the market approach oversold territory and we start thinking about buying those dips. jonathan: nadia lavelle of ubs likes this correction and seemingly wants to buy it. from new york city, with tom keene and lisa abramowicz, i'm jonathan ferro. down another one point 3%, session lows are get on the s&p, we are down 0.8%. the losses billed in the last 30 minutes to one hour. yields come in three basis points on tens. crude rolling over now, down 0.9% to $84.37.

apple shaping up as follows. on the year, we are down 8% or so, down another 1.55% in the premarket. for those of you the follow apple, you know there are 37 buys, eight holds, and only two sells. tom: it is such a lonely call, peter. how does the worry of product and product count fold back to the financial statement that gets you to sell? peter: yes, of course, always a bit lonely to have a negative view on apple.

our view is really predicated on 2022 and the fact that we expect a very weak iphone cycle. you have, like, 250 million iphone users in one year. that means from next year, you have a very low number who are up for renewal. in terms of how it impacts numbers, the iphone is still more than half the revenues of apple, so it has a very significant correction on very weak demand on the iphone. apple sells less units, so it impact revenues. they have to push stronger with more marketing, so very often,

you have an impact on margins, and when you expect iphones to be below expectations, you will probably have an earnings drain for the full year as well, so 1% for 1%-revenues and earnings. lisa: what is the best pushback you get from all of the bulls out there to this bear case, when lot of people have already moved away from the stock and it still has some support? peter: before giving you the best, i'm going to give you the worst one. the worst i hear is there are one billion iphone users, so it is still 750 million who do not.

the one thing the street struggles to do well is the fact that half of iphone users buy a refurbished phone get a phone from their parents, something like that. so the actual people who are buying a new phone is half a billion, so that is a pullback. in terms of good pushback, what makes me feel like we could be wrong on this one is this very infliction every environment that does not come out of nowhere. it is because there's a lot of liquidity around. and that liquidity, we see higher end consumer spending, affluent consumer spending that benefits a lot of brands, and it does benefit apple a lot.

my concern would be even if you don't have that many people up for an upgrade for the iphone, all of these people will spend money. tom: pierre ferragu with us with a very difficult call on apple, hugely controversial. just in the span of this conversation, markets deteriorate further. jonathan: we are down another 1.3% on the nasdaq 100. yields come in two or three basis points. just the underperformance of big tech on some of these indices has been quite remarkable. tom: we are up almost three big figures on vix. the vix has really not been part of the angst to that is out there. it is doing its part this morning to catch up, 31 point

55. 20 nine was mike lance early in the morning, and we are pounding right through that. jonathan: this is what happens when real rate go back to november, now it is -64 basis points, with some people's adjusting we can gravitate back towards zero overtime, may be defined by a few weeks. if it is a few weeks, more pain to come. tom: what is interesting to me, and this was brought up earlier in the show, is not all parts of this market are corrected or bear market. there's a huge body of their marketne -- of bear marketness to this. jonathan: some single names have been absolutely battered, but certain parts of the market are still doing ok. the banks have held up. certain names have done really well. the energy names have done

tremendously well, up by more than 10% on the s&p 500 energy industry sector. that has been the story through much of last year. the index level held up through much of that. this year has been different. lisa: this has not been a wholesale selling of risks. this has been nuanced. but what keeps coming out to me, we are talking about the nasdaq underperforming so significantly yet again. it is not being driven by yields. frankly, real rates aren't rising so much today. it is almost as if the bond market and the stock market is slightly out of step, and it is hard to get a united message from both fronts. jonathan: that tension building coming into the fed. coming up shortly, neil dutta of renaissance macro with a lot to say about that reseller rating growth rate call. we will get into that with him in just a moment. crude is lower by 1.2% on wti. $84 10 cents.

euro-dollar, -0.3% at 1.13. apple earnings on thursday. fed decision on wednesday. alongside tom keene and lisa abramowicz, i'm jonathan ferro. on tv and radio, this is bloomberg. ♪

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jonathan: new lows on the nasdaq 100. down 1.46% on the nasdaq. on the s&p down almost 1%. last week was rough, it gets uglier again. more weight off the nasdaq. the bond market yields are lowered to 172.27. the commodity market, crude is lower. this quote from morgan stanley's mike wilson over the weekend into a new trading week. "the end of secular stagnation and financial regression has arrived but it will not be a smooth ride. in the near term hunkering down for a few more months of winter as slowing growth overtakes the fed as the primary concern." two used to make a market.

there is one. tom: winter is here as well and a lot of people arguing about this kind of slow down versus how we came out of world war ii, how we come out of the pandemic. a lot of big new thinking going on. the vix, 32.03. just one market indicator. when in doubt parachute in an optimist. there are number of optimists, and no other optimist as optimistic as neil dutta. the pessimists have gone after him throughout this pandemic. you need a theoretical construct to be in the market, and the way to be in the market was to read neil dutta. he joins us this morning. has your optimism weekend? neil: we have to focus on the fundamentals and ultimately

healthy fundamentals can turn the market. for all of the talk on how this is a fed driven slow down, where's the flight to safety in the dollar? is an interesting period for the financial markets. on this idea that growth is decelerating, like so many things potential sightings, like ufo, potential sightings, not actually confirmed. the housing market is accelerating. there is a lot of construction activity in the pipeline. unexpected motor vehicle production to also be it -- i would expect motor vehicle production to also be accelerating. two asia's largest economies taking steps to support growth this year. with the omicron variant beginning to fade, that will provide a positive demand shock to the service sector. tom: this is critical and goes to krugman's essay this weekend

, partitioning demand side with supply-side. what you are suggesting is within the gloom demand will remain resilient? neil: i believe so. take a look at mortgage purchase applications. even though interest rates have been backing up, purchase applications have been strengthening. this tells you it is not only about interest rates but price expectations. the user costs for housing remain low because price expectations also remain firm. people will be much more willing to finance an asset they think will go up in value and that is underpinning demand. you are at a situation where the builders are throttling sales. this is not a demand issue. the deceleration call, yes, growth will decelerate. that does not take a rocket scientist to figure out.

we are growing rapidly off of the lows in the pandemic. the deceleration is priced in. quarterly growth expected to grow from 6% in the fourth quarter this year down to 2.5% in 2022. it is about what is priced into the market and consensus expectations on what is the likely outcome relative to those expectations. my sense is the inflationary boom is continuing. lisa: if the inflationary boom is continuing, what about the risk people were worried about about the fed hiking rates too quickly? do you think that is an overreaction in the fed will react cautiously and move slowly so they do not disrupt anything? neil: i think the market's right to pricing tightening but i thick we are getting over our skis. the eurodollar futures market is priced in for a coin flip for a 50 basis point move in march. if recent history is any guide, basically from the 1990's on,

the fed is more likely to end the tightening cycle at 50 basis points then start. i think the odds of them going 50 in march is basically zero. four hikes in a runoff this year, i think that is a reasonable baseline. i think where the market is getting over it skis is pricing in five hikes, six hikes potentially. those hikes shift more into 2023. the market's right to pricing a little bit more of an aggressive fed, but let's be honest about this. is the fed really hawkish? other central banks are already hiking. maybe that is one of the reasons why even though the kitchen sink has been thrown come the dollar has been threatening out over the last few months. lisa: two concerns. the inflation side, which you endorse. you think inflation will be sticky are, and how much does that crimp consumer demand, and then the idea of the fed responding to this.

possibly a reason why you have seen such a huge drop down in the nasdaq. on the first point, how much can you dismiss the retail sales data, the peripheral sentiment data that suggests consumers are paring back on what they are buying because their purchasing power has gone down so much? neil: if you look at average hourly earnings, that gives you an incomplete picture of how strong the consumer is. it looks at aggregate wages and salaries. that is the product of jobs, the workweek, and hourly earnings. that is running double digits. that is true in december as well. it is running well above the pace of inflation. the aggregate is growing. at the same time we have not had a household credit cycle. if you look at revolving credit like things like disposable in, core consumer spending, it

remains below normal. households have not taken on credit appetite. are we going to worry about consumer spending when people are putting on down payments for homes? you're worried about whether they will be buying cashmere sweaters during the winter if they are buying houses? and that is durable goods. those are durable goods. that has tentacles into other areas of consumer spending. tom: you delay the fed rate moves into 2023. doug kass just published he is buying -- you step up to the sound of cannons and start buying into the market. the underpinning of that is framing the fed call. let's be clear. how many rate rises do see in 2022. are you in the camp with steven englander of standard chartered that we will see a lot but -- a lot less movement by the fed than expected? neil: i think there's a decent

amount of dispersion with the fed. when minneapolis fed president neel kashkari is telling you he is penciling in two rate hikes, i think there is a reasonable baseline for how much they will do as a bare minimum. probably something where they go in march and june at a minimum. then they will do runoff. if inflation is sticky, i think you can penciling hikes in september and december. the wall street journal was talking about how the fed may go at every meeting. it tells you about how much hawkish in us already priced into the market and how little the fed has to do to surprise in a dovish direction. i think you'll see the yield curve going in or immediately following the meeting. we think the front end has room to rally. lisa: the front end has room to rally. you're telling your clients to buy short dated bonds?

neil: portrayed. coin flip for 50 basis point in march. the odds are zero. lisa: ok. who is worried about the cashmere sweaters? jonathan: not neil dutta. i think the point he is making is important. it is about probability, and the probably -- and the probability has shifted so aggressively in one direction. it is like this outside trying to out pop each other. we have gone -- out hawk each other. if we can settle the balance sheet reduction line longer, we are not just talking about a balance sheet. we are talking about $1.5 trillion of balance sheet reduction in 18 months. then we are having this side conversation about the risk of doing more. what neil is getting at is for a trade, lean the other way. tom: i thought the side

conversation was the tots offense. jonathan: you are like -- you are right to bring that up. tom: we all get credit. we are talking the dialogue, and we are doing it with the future skepticism of waiting for the data. what you saw with neil dutta, he goes to the bloomberg estimate function, and if you had real gdp and inflation, this year 8.5%. china life. it ramps down 12 months from now. jonathan:'s bond market yields associated with that. i spoke to heavyweights in fixed income. they keep going back to the balance sheet. every single question you asked about markets, they keep returning to the balance sheet. we have no idea how big this will be and how big it will be and the effect it will have. if it is $1.5 trillion in 18

months together with rate hikes -- this is the point neil dutta is making. the more you pricing for the fed there is always the risk they will do last. this has been true over last 10 years. the more you price in the less likely it is they will actually do it. we have to work out is whether this is different or not because of the inflation dynamic. tom: i will read ira jersey on that and listen to fixed income balance sheets as well. i think ira jersey is fairly optimistic they can unwind the original experiment. jonathan: we will see. that word you used is so important -- experiment. that is what you have did -- that is what it has been. tom keene, jonathan ferro, lisa abramowicz. i'm sitting too close to lisa this morning. lisa: because you are gloomy? tom: you want me here in the room? i would get fresh tang. jonathan: are you trying to entice me into the room with

vintage tang? on radio and tv, this is bloomberg. ritika: the u.s. state department is now warning of what it calls a continued threat of russian military action in ukraine. it ordered family members at the embassy in key have to leave the country -- in kyiv to leave the country. advisors to security conditions could get worse with the notice. the new york times says president biden instance ring deploying forces to eastern europe and the baltics. president biden's chief medical officer says the emma: now bake is headed in the right direction. dr. fauci told abc news it will peak soon but the decline will not be uniform throughout the country. in china a city has lifted a

month-long locked down after a coronavirus outbreak was stamped out. shops, supermarkets, and restaurants can resume business. there will still be capacity limits and family dinners will be capped at 10 people. tesla now runs the most productive auto factory in america. last year the tesla plant produced an average of 8550 cars a week. more than the toyota factory in kentucky. the plant in south carolina or the truck plant in michigan. elon musk says he plans to increase production at his california and shanghai facilities by 50%. 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. ♪

>> the next step is a membership action plan. it has been many years.

i believe the is husband is fair and that is what is needed right now. you do whatever you want. we have our own agenda and ukraine is doing whatever they like. tom: amid the international relations of her fractious europe, another voice, ukraine's ambassador to the united kingdom. one of many voices we have heard , including from prime minister johnson. lisa abramowicz and tom keene on radio and television. this is our conversation of the day on what we observe and try to figure out forward in ukraine. angela merkel is retired, so if you were to say who has the most expertise among western diplomats on the fractious nature of eastern europe down to ukraine and the balance of nato, many would suggest the french

ambassador -- emmanuel macron of france. the french ambassador to the u.s., with his knowledge of eastern european languages. ambassador, honored to have you with us. what does the zeitgeist in the west get wrong on ukraine? >> for the moment, first, thank you for having me. for the moment we face a very serious crisis. everybody is very worried about the risks of this major crisis in the heart of europe. we must combine firmness and obviously keep the channels up. we are doing this as france with france having the presidency of the council of the european union. we have foreign ministers meeting again.

we are very keen to keep very close consultation with the united states between all of the formats engaged. we see the eu and nato and the united states, and also to continue our work together with germany and the so-called normative format, to work with ukraine and with russia to continue our work to find a solution to the crisis in eastern ukraine. tom: you are experienced at moving french citizens out of a crisis in georgia. georgia part of the soviet union. you had tangible experience. what should be the presentation for mr. pruden to have him find the stability instead of an invasion of ukraine? what is the distinction you believe will change vladimir putin's tone and rhetoric and

action? amb. etienne: first, we must do this -- we must deter him from aggression by indicating aggression would have as a consequence serious consequences. then, as i said, we must also as the u.s. and europeans are doing , keep the channel open to discuss how we have the possibility, using instruments of diplomacy, to solve this crisis, also in view of a longer-term basis. to rebuild the instruments of europe's insecurity. 70 treaties have been abandoned. -- so many treaties have been abandoned. lisa: how much daylight is there between the french approach and the u.s. approach? amb. etienne: the french

approach is not to deal with diplomacy only. it is also a clear indication on the european side that we will take the measures to answer any aggression. it is a dual approach where i do not see differences between the europeans and the americans. lisa: going forward, there is also a lot of tension in the eu because of the bifurcated economic recoveries after the pandemic. how much of this has been a discussion as france has enjoyed a faster recovery than many other european regions? amb. etienne: france has regained its position its economy had before the pandemic. our economic scientists predict 4% growth next year. as economist paul krugman wrote

in a recent column, the labor market has not been disrupted. we have taken measures, not only in france but in europe, but in particular in france, are economically -- our economy remains attractive. the investors, including 11 american companies, have committed to investing $4.5 billion in the french economy and to create 10,000 jobs, which means the attractiveness of our economy is quite strong. tom: what does the french image in europe mean in terms of military hardware sales to ukraine? germany seem so reticent, and not on a simplistic nature but with airbus expertise and jet engineering expertise, as everyone understands is world-class. we will avoid submarines, with

great respect. tell me what france can signal by selling french engineering to the people of ukraine. amb. etienne: it is not new we have a strong economic relationship with ukraine. we intend to continue to support ukraine come as we have been doing until now. tom: one question on covid. there has been such an uproar within the united kingdom over omicron. lisa abramowicz wants an update on paris in april in terms of omicron. how are you doing? lisa: the omicron -- amb. etienne: the omicron variant had a strong surge recently, and we hope it is now having its peak. as a consequence in terms of

intensive care units, the consequences were not that serious as before. people mentioned it a lot and the new vaccination past is coming into force today. there was a strong policy in france to have everybody vaccinated and i think it worked quite well. tom: because of time and the market we must move on. thank you very much. ambassador of france to the united states. i had to get that in there as we plan out the surveillance trip to france for the election. lisa: hopefully we can do a road trip. there's been such a patchwork of recovery in the european union and a patchwork of potential response to the potential cutting off of the gas supply if that becomes an issue. tom: please stay with us this morning on radio and television. markets on the move. the vix well above 32.

nasdaq, -1.5% this morning. please stay with us on radio and television. this is bloomberg. ♪

jonathan: another ugly open on the cards. your equity market is much lower .

s&p down more than 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. jonathan: from new york we begin with the big issue. gearing up for a big week ahead. >> this week is jampacked. >> q4 earnings report. >> geopolitics. >> conflicting events taking place. >> the fed will have to move. >> so many of people have been put to the drug of cheap money. >> the pendulum has swung too far. >> softer earnings. it will be the employment costs people will watching.