driver seat. >> the big fear is the fed will be more aggressive. >> the economy and strong earnings should be able to shine through. > this is bloomberg surveillance. jonathan: good riddance, january, from new york city, good morning, this is newburgh surveillance live on tv and radio alongside tom keene and lisa hymowitz. your equity market is down one third of 1%. tom: every once in a while, it has to go to down but it didn't go down as a correction in a general statement. it didn't go down as much as we but but it was just an adjustment stop we are focusing on equities at the top of each hour. jonathan: big adjustment in the

treasury market. it is a guessing game right now. tom: everyone is adjusting. i know you saw the goldman sachs note and it's a portland that suddenly the boom economy map is gone. jonathan: 3.2% on the gdp consensus and you wonder how many people start to follow. lisa: they might downshift their gdp estimates but latent estimates tell where they are. the estimates are all over the place for what the actual path the fed members take. jonathan: have you kept up the fed speak? lisa: i have watched it all. it's interesting because there is a paradox underlying what they are talking about.

they want to slow the economy and not torpedo it, how to they do it? this is an uncomfortable place to be which is the reason the turbulence we saw in january, good riddance but there will be more of the same. jonathan: morgan stanley says the safety net is gone stop i think a lot of people agree with that. tom: i think there will be a fed adjustment but i don't know what it will be. you wonder if it comes down to three or four rate hikes. jonathan: five hikes seems to be the consensus. the s&p 500 is slightly negative. on the nasdaq, down 8.5% but could have been worse for last month. yields come in a couple of bases points in the move has been

huge. lisa: it's been the five rate hike expectation. i'm wondering how fed officials deal with what we are seeing in the yield curve. at 8:30 a.m., philadelphia fed president will join us along with michael mckee. head of a view that the rate hikes have translated into lower long-term bond yields and lower inflation expectations? how do they justify this. at 10 :00 a.m., we get a slew of data from the month of december and i'm here is to see how much this comes down. i'm wondering how much that is affecting the labor market. we will look at ism manufacturing as well and that's supposed to decelerate step how do you factor in the omicron variant when you talk about gdp

at the same time inflation remains high? alphabetic supporting -- is reporting earnings. amazon on thursday and year to date performance is very different for a lot of these big tech firms. how much will we see the differentiation be the hallmark of this year and can -- and what can earnings justified in terms of valuations. jonathan: we are looking forward to that information a little later stop lisa calls it corruption of the yield curve. lisa: i marched him back over here and i didn't say the fed was corrupt but it has been corrupted by fed policy. this will be a fun interview. jonathan: ben great piece on

valuation -- still above the five and 10 year averages as they should be. what do you mean as they should be? >> the companies have never in this profitable. yields are extraordinarily low by historical standards and i think they are very structural. by historical standards, the 10 year comparison, i think we will be more profitable and bond yields will be lower. valuations are less than 20 times on the s&p 500. it's an advantage the market now has. tom: we get the earnings report from ups. it's not sexy but i am stunned

at the forward optimism of ups. they hold margins, raise the dividend and most of porton plea, they pour on the capex to a new level stop what does it signal when a logistical backbone of america shows earnings like that? >> just right all the angst, this will be a year in developed markets where growth will be close to long-term average levels. next year it will be above trend. growth is very good and these big companies can enjoy that and whether the inflation pressures as they see them. those are the ingredients for this record high profitability we are seeing. you have strong top lines and resilient profit. that justifies high valuations.

tom: the bow market christmas eve of 2018 at 18.1% per year. lisa: what year were you in all cash all the way? tom: i've been an all-cash all the way. lisa: you were talking about valuations and how you expect to he sustained and because bond yields will remain low. how low do they have to remain to fortify this call of yours? >> i think bond yields are going up and valuations will go down and we are in this new regime. i think you need to be focused on the cheaper bits of the market, the sectors which are cheaper. i am looking for earnings. they are the offset valuations.

the valuations remain the risk. i take some comfort in the fact that corporate's are delivering stuff i think these are great numbers. jonathan: there were a couple of surprises last month but anna g graphic basis, on a sector basis, the on performance of the banks. energy did fantastic with tanks did not to anything last month. what happened with the financials. >> the 10 year stalled out a little.

that's not great for banks. i think we are beginning to see loan growth again and people have gone through their pandemic savings. the fed is not going to want to see a flat yield curve and they have the tools to do something about that. it's as much the risk as the return. i take a lot of comfort that the guest insurance policy for valuations coming down is banks. the gives you protection on the downside. jonathan: it still outperformed the benchmark but seeing the banks unchanged on month like last month with the move we saw in rates with the fed rate hike,

i just expected more. tom: i totally take your point. the ups announcement this morning is a bombshell. it's stunning. they pull forward their view a year early and that will change the dialogue at every wall street firm. jonathan: the boost is 49% over the previous year. tom: it's important and it's a cardinal rule. you do the same thing in europe with dhl. in the conference call, they have done things within all the gloom that's out there to get things done. jonathan: special word is

corporations adapt. can they play the same just the same story as they played last year? tom: it's not that they will do it again, it will be a different script. the medical people are telling us that omicron ends quickly. i don't have an opinion but maybe they are beginning to adapt to that step jonathan: that's the hope. lisa: the oxygen is getting real thin at this valuation. given the fact that something has to give. earnings have to slow down. am i wrong? jonathan: you to make me laugh sometimes. the bond market is down to basis points. i don't know when i had to become the sensible one.

from new york, this is bloomberg. ♪ ritika: more high-level talks on ukraine set for today, antony blinken will speak by phone with his washington counterpart sergey lavrov. they have yet to respond how to de-escalate tensions. congress is talking about sanctions if moscow invades ukraine. north korea's leader conducted more missile test then he did all of last year. it might be a signal that he's preparing to fire a long-range missile that could reach the u.s. north korea wants sanctions lifted while u.s. once in and to their nuclear program.

they want to avoid disrupting the u.s., me. kansas city fed president said you always want to go gradually in this economy. cvs as a read -- has new efficiency targets. it will buy back as much as millions of shares this year. global news, 24 hours a day and on bloombergquint take, powered by more than 2700 journalists and analysts. this is bloomberg. ♪

>> with russia continuing its tilde, around ukraine, we are ready no matter what happens. jonathan: the words of the president of the united states. secretary like and holding phone call with secretary sergei lavrov. your equity market is down two/10 of 1% on the s&p. an ugly start to the year for the month of january, down 5% on the s&p 500. it could have been worse without that to date rally.

the big m and a story, it started as a love story apparently. a software engineer rockland new is partner loved word game so he created a guessing game for the two of them. he named it word up. most people fear it will go to the dogs. tom: he's killing it. january 3 article, we are looking at the same article. i guess we will not get the board but they are just killing it. jonathan: in the low seven figures. i am happy for them.

you know the game from here on out will just get bigger. lisa: it will cost money. they are going to charge you to play a word -- a daily word game. lisa: once people get on a particular word game, people will pay for that. jonathan: it's a love story, it's just beautiful. would you make a game for miss is keen? tom: what is this guy worth to another company? let's go to washington. emily wilkins is with us. i don't know if the president will play wordle today. we've got sanctions and maybe against the prudent inner

circle. what will we do in terms of moods on the ground in ukraine? emily: i already one wordle today. in terms of boots on the ground, the u.s. is sending troops over there. it really is around sanctions today. senators hope to finalize a bill this week that would put sanctions on russia and russian officials not just when they invade ukraine but even before that. we are hearing from senators that they already consider what prudent has done to be worthy of sanctions and we are definitely going to be waiting to hear headlines later today from that conversation between anthony blinken and sergei lavrov, their second one in the last week most . tom: what does this this what

has this administration learned to get ukraine right again about boots on the ground? emily: that was a huge piece in the atlantic will step it goes into detail about the withdrawal and you think about president biden and we talk about his low approval numbers. the withdrawal from afghanistan has been key but it shows the american people are cognizant of what's happening overseas right now. that's something to keep in mind when you see how resident biden will be addressing and maneuvering his relationship with russia and what will happen next. one things just one thing american said is they want to get out of afghanistan here is the potential for americans to get caught up in a conflict in a different part of the world. the administration wants to

focus on beijing and china so this could pose really big headaches for the biden administration depending what prudent does. lisa: the signals are unclear as to what direction these talks are going in and unclear to the proposal for de-escalation and there was in order to withdraw some of the american nationals in belarus because of what's going on with ukraine. is there any consistency to whether this is escalating or de-escalating? emily: you can point to some of the diplomatic discussions. there are channels open. really sharp words from the u.s. and russia, investors going after each other in a way you don't see in these public forums. they have already had a withdrawal from you crane.

you are seeing a lot of mixed messages and the u.s. is trying to send a strong and aggressive tone and trying to show they are willing to move quickly. should russia in fate ukraine. how much of this is posturing and how much is because of serious concerns? if prudent move, it would be in february and here we are. lisa: there is one person who makes decisions and russia. emily: that's an excellent point. putin spoke with other world leaders including the hungarian leader. there seems to be that level of communication. at the end of the day, everyone

is watching for what putin will be doing. jonathan: have you played the bloomberg news quiz, tom? lisa: yes, of course. jonathan: every single week, katie comes up. they do a global break 10 as well. alex wanted last week step it's a firm rank so you know the part . should we take this public? tom: it's fascinating to me. it was a joke these guys could get to 2 million subscriptions and now they are measuring to get to 10 million subscribers. jonathan: games make it

stickier? lisa: that's right and we will compete. jonathan: futures down 2/10, this is bloomberg. ♪

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>> this chip shortage were likely move through this year. will it get worse before it gets likely? >> i don't know that it will get worse that there is no reason to believe it will get meaningfully better any soon. the commerce department show that there is a real shortage and demand is 20% higher than it was a couple of years of go. there is a huge mismatch in supply and demand. prices are higher. what has to happen is we need more ships. -- more chips.

♪ jonathan: a few hours away from the opening bell -- a few moments away from the opening bell. futures down a quarter of 1% on the s&p 500. it's been the worst month since 2020. even with the move in the bond market and the resilience of the u.s. dollar, slightly negative year to date. it's an important one to watch, let's figure -- finish up in the

bond market. back down to 159 .91. the rate height -- the rate hike guessing game continues. the first move is a 50 basis point hike. it could happen in march. lisa: one analyst explained why 50 point basis point -- basis point rate hike is unlikely. jonathan: i've got no idea what happens this year, it's a guessing game. the safety net of forward guidance is gone.

it's a big change. tom: the arch question is how do you raise rates into a slowing economy? when you see the inflation numbers go up from where they are currently, that's the worry but this federal reserve will not hold your hand like they did over the last 10 years or so . tom: we will have to see. it is an appropriate time to speak to the global head of strategy at rbc. the idea of raising rates into a slowing he connie whether it's goldman sachs well under 2%,

what does the dollar tell you? there is the basic idea that we are raising rights -- rates into a slowing economy. >> despite the volatility in other asset classes whether it's rates are equities, prices have been relatively well behaved. investors are very mindful but not massively worried. the indices are trading well within the range. tom: is there a debt within the max of flows of big money and the relative story, is there a bet where the street is overplaying foreign-exchange? >> part of the problem for fx

volatility is currencies are not massively misaligned relative to longer-term measures. this is an where you had incredibly cheap currencies. currency markets are telling us that you don't have that same level of concern. lisa: how much is this driven by the commodities boom, the dia that many of these nations will do very well in the face of that? >> that's a big part of it. the other is pure valuation. it's the ones that have done so well in the last few years.

now you are seeing some payback stuff lisa: we've been talking about a correction in the nasdaq and many people are buying the dip we saw. you are talking about a lack of fear in the foreign exchange market. do you think this is slightly misguided regarding the tightening cycle we are in? >> you summed it up earlier, saying we have lost forward guidance. we didn't use to. this is only a couple of your phenomenon when the fed has held her hand. the fact that markets are not reacting is we still have a fair degree of central bank forward guidance.

we will be hiking rhetoric from central banks. the fear is not there right now so there are not many things that can provoke a but it looks like central bank heightening. tom: we have not focused on the ecb and the incredible political challenges that christine lagarde has. how his/her political challenges changed with higher inflation which makes many such as germany a feared? >> if you look at christine's job over the last few years and before that mario draghi, they benefited from low interest and now you look at inflation very high and there are no inflation -- there are some inflation pressures that would sustain that.

we think the market is getting a little bit ahead of itself. tom: is the market ahead of itself in america? i am taken back at the equity optimism at rbc capital. is the fed game ahead of itself? does -- to the stocks go up because the fed slows down? >> there is a lot of uncertainty out there. when you have a call of seven or eight hikes, suddenly it's not outside the realm of possibility. the 50 basis points in march is unlikely. this doesn't look like a fed that will hike that much. is the market getting ahead of itself? i think it's quite reasonably priced. we will see how that shapes up. lisa: boris johnson is facing

more pressure today and what are the chances he will remain prime minister rue may? just through may? from your perspective, what is the price consequence in the pound that you expect should he be evicted from his seat? >> if you were to go back a year, it might have been more clear cut post up part of the reason investors are trying to go there is they are fed up but also the outcome is not so clear when it comes to the pound. from the sterling perspective, we really don't have clear guidance how this would affect the pound.

the market is getting a little ahead of itself. jonathan: wonderful as always, thank you. the central bank and the ecb and the bank of england this coming thursday. how low is the bar for the ecb this year? tom: it's a different story than the federal reserve and it's the politics of the story. i am old on this. it's a third rail in germany to see inflation like this. i can't wait to talk about the germanic thrust on inflation. jonathan: let's talk about rents in america. how important is that story? tom: it's a huge story and this is the read of the day.

are you aware that new york is one of the cities where rents haven't moved? jonathan: i was not aware of that. i thought they had gone up in manhattan. tom: all i know is that it's a must read. would you agree it's 5% plus? lisa: that's the prediction. there are differentials within the country. new york only saw a 1% increase in rent but it's different whether it's a doorman building so that might be why there are questions. tom: i live in a walk-up. jonathan: it's tough, isn't it? tom: when the elevators break twice a year, the walk down can kill you.

jonathan: he had to walk down about 50 floors. tom: my legs hurt for five days. jonathan: ups up a little more than 5%. tom: it is giving away a little bit. every single buy jonathan: the stock market up 5.34% stop just a bit soft to kick up february. good morning to you. this is bloomberg. ♪ ritika: in the u.k., prime mr. boris johnson is under fire from members of his own conservative party about partying in 10

downing street during lot down. -- during lot down. he said he will get back on track but many are not convinced he can turn things around. police are still conducting their investigation. the winter olympics in china may be more about drag on the beijing regional economy than a boost. it's weighing on industrial activity. there won't be the usual bump up and tourism because of covid. in texas, governor reg abbott faces a crucial test whether he and republican lawmakers have done enough to shore up the power grid. this is weeks before his party's primary vote. temperatures are expected to plummet wednesday with sleet and snow in part -- in some parts of the state. a year ago, a snow forced

millions of texans out of heat four days. ups benefited from the high prices and rising holiday deliveries. their profit beat estimates. it also came out with an outlook for the year that was better than expected. the boosted their quarterly dividend by 49% stop the federal trade commission will handle the review of the billion-dollar activision purchase by microsoft. the ftc has promised more aggressive policing of the deal. this is bloomberg. ♪

>> the national mood will start to change. we will see covid start to fade

a little bit more into the background. i don't think we will have as much disruption in our lives in 2022 barring the emergence of something we have not anticipated which could still happen. jonathan: johns hopkins there. waking up to february and leaving behind an ugly month. futures are down one quarter of 1%. on the nasdaq 100, 2/10 of 1% down. tom: let's take two seconds to talk about brent crude at 89.17. that is the shock of january. jonathan: strange things happen

when crude guest of these levels. when you go back eight years in late 2014, a month later, the market share had strange things happen when you breach $100 per barrel. tom: now we will focus on beijing. you have been a critic of the chinese policy on the pandemic. how does that nation dovetailed its stated policy with people, thousands of people descending on beijing? >> it's a contradiction. it's inevitable they will get covid cases and the omicron variant.

it's going to be something that the world will see that this was not a sustainable approach to a virus that was destined to become a pandemic. tom: if you advise olympic authorities, what would be your advice to olympic management? >> my advice would be to expect you will get cases and use the tools we have and make sure people are vaccinated and pushback on chinese policy that are premised around the idea of covid zero and not accept any kind of authoritarian measures that were put into place in that setting. this is not the way you handle a pandemic respiratory virus with

all of these tools. lisa: let's look at south africa which removed self-isolation with those with asymptomatic cases. is that appropriate? >> eventually, we will manage covid 19 like other respiratory infections where we have the honor system and we tell people to isolate and i think we are heading that way and that will be one of the things that happens when we manage seasonal respiratory viruses. it's hard to do that now because we still have too many people unvaccinated in the united states we want people to make sure they are not contagious. the rapid test is negative and you can think about rightsizing people. eventually, i think people will be able to go about covid-19 the way they do with other

respiratory viruses. lisa: it seems that there some lingering effects of covid that are different than what we've seen in other common colds. how does the health system deal with this? will this be a significant strain that's being underplayed? >> everything is getting grouped into one category and i think we need more science to understand what is true related to covid-19 and then understand why this happens. health systems are trying to meet the demand by setting up long-haul covid clinics to understand these individuals and see how the symptoms change. all of that be part of the post-pandemic phase. this is something that came from

the first wave of infection and now it's happening because people are not vaccinated. jonathan: thank you so much. some interesting comments coming from george soros on china. there is an event at stanford university and he said given the strong opposition within the commonest party, the carefully korea -- choreographed elevation may not occur and he blamed it on a range of things. tom: the risk here is that it will be taken as 891-year-old live better -- liberal -- as a 91-year-old liberal. unfortunately, there is a

theoretical foundation with centers off the wonderful work of the council. they have been out front for three years and questioning the might of president xi. lisa: it's coming at a time when you have to imagine people are not pleased at additional lockdowns in order to reduce the spread of covid. the rest of the world was starting to treat it as endemic. how do they deal with the fact that before and after the olympics, there will be all surge of curbs on public activity and you are seeing those downgrades already. how does he come out of it looking strong? jonathan: will you watch the olympics? lisa: that's a loaded question. probably parts of it step are you going to boycott them? you think there is a question of why more athletes have not boycotted or why the international olympics committee has been so quiet about some of

the contra urschel aspects. -- the controversial aspects. jonathan: these are important questions we should discuss. many other people are surprised that these winter olympics are even happening with a whole range of issues. tom: i agree. there was the whole nbc thing where you can watch it without being surprised, good luck with that. i want to segue into something important. the german two year yield has gone up to new highs back to 2016. the germany two year yield is a huge deal. jonathan: i was saving that for later. it's trading inside the depot rate for the first time.

we will talk about it in about five minutes or so. tom: i can see it through the window. jonathan: that works. this is bloomberg. ♪

>> believe the fed -- hopefully the fed gets this right. i think the chances of that are fairly low. >> people are going to get a little bit nervous about strong data because obviously the big fear is the fed is going to be more aggressive. >> even with more fortified rate hikes, the economy should be able to strong through. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. jonathan: hello, february. from new york city, for our audience worldwide, this is "bloomberg surveillance," live on tv and radio. alongside tom keene and lisa abramowicz, i'm jonathan ferro. your equity market down 0.25 percent on the s&p, leaving behind an ugly january. tom: really interesting. step away from it. when you are in triple leveraged all-cash, you can do that. i'm sorry, the recovery the last couple of days was pretty good.