tv Bloomberg Surveillance Bloomberg November 12, 2021 6:00am-7:00am EST
future turns out. >> i think the fed job here is to be the steady hand and keep their eye on the medium-term. >> they are willing to let things run hot. >> this is bloomberg surveillance with tom keene, jonathan ferro and lisa abramowicz. jonathan: wrapping up your trading week from new york city for our audience worldwide, good morning. this is bloomberg surveillance live on tv and radio. futures are up seven on the s and p. on the week, heading for the biggest week of the kleins in about a month. -- some of declines in about a month. this goes to some of the politics in the last 24 hours.
there has been and anne-marie citing in new york city. you mentioned euro, bank of america is negative. it is the antilock -- anti-goldilocks weighing on european equities. tom: it's getting a little chilly here come a little bit of arctic gold coming into minnesota. it's the same thing in europe. it's the sum total of europe subsiding. what does that mean for chairman powell? jonathan: that's the european situation and we reopen the bond market stateside. this treasury market has been totally whipsawed. lisa: the expectation is for that to continue. the implied volatility and
treasury yield have risen to the highest since the height of the pandemic. why are stocks not responding more to the volatility we are seeing in bonds and the rise we have seen in short-term yields? jonathan: any fed speak today? lisa: john williams is speaking from the new york fed stop jonathan: let's get so the new york market was closed. yields are higher by three basis points, higher on the front end as well. we will touch on that a little bit later and crude is down for another week. a third straight week of crude grinding lower. that goes back to march of this year. tom: i looked at the chart this morning and it is a grind lower.
the sum total of inflation seems to be a lesson learned this week. not just about oil or rent, it's the sum of our inflation step jonathan: the euro dollar is negative lisa: we've been talking about policy diversions and that's been the theme of the week. i'm watching the idea that president biden will participate in the asia-pacific economic cooperation leaders meeting. the pandemic is an economic issue globally, the idea we have a zero covid policy in china and how do other nations deal with that which rely on china for supply chain issues at a time when their gdp has been declining? at 10 a.m., we will get the
university of michigan sentiment survey. i'm interested in the five-year inflation expectation. this has been rising significantly. at one -- at what point will it bleed into consumer expectations? i'm curious to see how much that continues to pull down. is this labor market getting less tight? will we see people fill those employment roles? later today, the new york fed president will speak. we will see if he says anything about the potential leaders of the fed and we haven't heard which of them we will be getting? jonathan: more hikes in 2022. they are looking for more moves
an additional rate hikes over the course of 2023. that note got a bush moments ago. tom: i believe very strongly in the calendar around november 15 that we are resetting this week and it's not so much into december but really trying to frame out q1, 22 and it starts today. jonathan: chris verrone joins us now. this curve is flatter, small caps are near all-time highs and many people are asking -- how can we have this re-acceleration of the sick will trade -- of this cyclical trade the same time the curve is flattening? >> when you look at the resurgence of some of these parts of the market, it seems to
be difficult to reconcile that with the shape of the curve what we did this week is we dug in. we are about 20 months off of the march 21 market low. what is the curve typically doing? believe it or not, the curve is tending to start to flatten anyway. this cyclical leadership is what we are seeing. it's historically not that uncommon. lisa: is this theme that we are significant moves in the yield curve and not significant moves in the broader equity market? >> we think about the two year yield in connection with the fund rate. i would be more uncomfortable if it were going the other way. the macro signal of two-year yields trading above the upper
bounds actually still says you are early to mid cycle. when you get too late cycle, it's when you get curve flattening because two-year yields are falling. i think that would be a more troubling set up. the equity market is not taking its cues off of this. when you look at the leadership profile,, at the margin, the market is telling us that this economy might actually be re-accelerating in one or two fed hikes year full not derail that. tom: everybody is talking about how we get out 65 months? you talk about the distance out there. on a technical basis, what is your confidence out 65 months?
>> everyone's confidence is out 63 months and it should be close to zero. known as a great forecaster. what we are talking about is by the time the curve starts to flatten, on average, you've got 4-5 years before the curve ultimately gets inverted. there is so much noise in the curve but until it's inverted, that's the signal. the flattening kurt is not an inverted -- the flattening curve is not an inverted curve. i think we have some time here. we prefer to take our cues from the equity markets. i think the equity market is screaming that the market is getting better. tom: i want you to push against
earl lumet ball in 1949. blumenthal tried to measure cathartic events. do you see the speculative forces right now that indicate cathartic events now or in the near future? >> over the last couple of weeks, this has in a market that has gone from a pretty cyclical bias the last month or two to starting to show some signs of excess speculation. we see it with people buying bitcoin for the provement and some of thespacs so there are signs of maybe excess speculation or excess liquidity out there. i don't think that's an important signal at this moment. we've never had any success making a sentiment call in november or december. seasonality is just too strong. if you look at q1 or q2, there
may be a moment or we have to make a cyclical call when things are running too hot, let's position for some type of a setback stop i think it's too early to make that call. jonathan: always great to catch up. look at this for an inflation forecast -- we look for a five .2% annual rise in the cpi during 2022. that's the next year. the call from wells fargo and once you get some of these inflation calls, you get the gdp call is well. gdp could rise next year. inflation with a five and a might get people concerned but real gdp through next year, maybe that's what some people want to see. tom: can you imagine me 104
years old? jonathan: i can see you doing this. tom: i see the bright lights of inflation. 5% inflation plus whatever john wants to put on gdp. you're talking above china american growth. lisa: the issue to me is still real wages. at what point do we see that become a significant issue especially with a bifurcated recovery? jonathan: what a week we have had already, wrapping up the week and we will catch up with the head of the blackrock investment institute step your equity market is up a little more than one/10 of 1%. from new york city, good morning, this is bloomberg. ♪
ritika: bloomberg has learned that washington has told the european union that russia make -- maybe considering an invasion of the ukraine. they have a buildup of russian forces on the ukrainian border. it's over energy supplies and immigrants. russia says it's unfounded. the government is reportedly coming up with an economic stimulus package of 450 billion dollars. it should benefit those 18 and younger. the economy is purged -- projected to forecast a little bit lower. chinese leaders have paved the way for the president to rule indefinitely by signing off on an extended ruling position.
the u.s. is joining with china and russia and urging the taliban to cut ties with terrorist groups and stop them from operating in afghanistan. that's after a series of attacks in the region. pakistan agreed to continue practical engagement with the taliban. the iphone posted quarterly earnings and its boosted by strong demand on new devices from apple. these companies on that sales will decline this quarter. global news, 24 hours per day, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. ♪
the veterans are the very spine of america, not just the back bone, you are the spine of this country. we will work with congress to make sure our veterans receive the world-class benefits that they have earned. jonathan: the president of the united states on veterans day, good morning, wrapping up the trading week with equity futures up seven. the bond market was closed yesterday and it's open today with the yield approaching 160. if you want a single name, here it is, j&j looks something like this with reporting from dow jones indicating johnson & johnson planning to break up into two companies splitting off a $15 billion division that sells band-aids. that indicates how much health care has changed since the company helped pioneer the industry.
that stock is up 3%. tom: i cannot emphasize enough how this is not general electric. they are two names associated together and j and is doing better. they have a 10 year per year return and this is not general electric. jonathan: 429 billion dollar company. people ask who's next. ritika: and the lisa: idea of what has changed for the pharmaceutical industry. there is the notion that it can be more steady and doesn't need the offset to balance the consumer product business. jonathan: the news from dow jones, johnson & johnson planning to split into two public companies. tom: i was proud of our coverage on general electric and it starts with the financial
integrity of a company and j&j, decades back, absolutely lit proof. they had their challenges and rebounded nicely with double digit returns that is acceptable. i cannot emphasize enough that this seems to be the trend. it's cfos like lemmings off a cliff. jonathan: 3%. tom: we remember what flock of seagulls did with that. jonathan: i imagine the j&j effort has been in the works a while stop i sense there is a
trend evolving. tom: were coming out of the pandemic as well. emily wilkins is with us and we're thrilled she could join this morning. what does the president's weekend look like? he will think about something, what will he think about? emily: there is a lot coming up in congress. inflation has to be on his mind. the number is the highest and 31 years and you saw the immediate reaction from senator joe manchin saying this is a big concern and has been a concern for a while. we know a small group from the white house is meeting on prices whether they should tap into the strategic reserve on gas. should they change regulations
and next week, the house is back in next week is the week that moderates promised progressives they will take a vote on president biden's signature social welfare and tax legislation stop that has to be lots of things for the president to think about this week. jonathan: a little bit of news from bloomberg in the last 24 hours about what might hold back the chairman from getting another term, what did we learn? emily: there was a question as to whether the stock trades that jay powell made. was that something he should have done? the fed has said it's about ethics and everything is fine. there is a question about perceptions and out bloomberg is reporting that white house officials are saying no, that's not something we are concerned about when it comes to jay powell and we are looking at the nomination process. joe biden said he would like to get a nominee out there soon and there is a question whether he
will go with jay powell and what will it look like in the senate? you need 50 senators to approve any nominee that president biden puts forward. you already heard concerns from both individuals. ritika: lisa: lisa: what does president biden want from a fed chair? a more dovish were hawkish leader? emily: on the issue of inflation, j powell and bernard are pretty similar in what they would do. it seems more of a question that we need to hear from senators and you hear them talk about regulation and about where it either stands on regulation and how strict they would be, i think that will be more of a moving point for senators as they consider what will be happening next. after the inflation numbers, they are right to point out inflation and that's something
that i think is on all the minds of lawmakers at this time. jonathan: thank you so much. the race to be the next fed chair. maybe we will get news later. j&j stock is up almost five percentage points in the premarket. dow jones reported the news that j&j is planning to split into two public companies. they decided to make the change because businesses that customers and markets have diverse oh much in recent markets including during the pandemic and this will be the key for many people who will ask this question. according to the ceo, lawsuits for the baby power did not play a role in this decision. there will be a lot of people asking that particular question. lisa: how much are they trying
to immunize with moderna and other pharmaceutical companies? i wonder how much of it stemmed from the pandemic and from there preeminence in certain developments of technologies. do theym want to focus onrna technology going forward? jonathan: it will take 18 months so this will take a while. the best part forward to ensure sustainable growth over the long term is to have the consumer business operate as a separate health care company. tom: we will have to see. this is a sterling company and i just looked at the debt percent between ge and these are two separate worlds. ge has 36% debt and johnson & johnson on the edge of aaa with 7.4% debt.
jonathan: three hours away from the opening bell stop your friday morning price action looks like this. on the nasdaq, up about two/10 of 1%. the s&p 500 is heading for biggest weekly loss to going back a month or so. in the bond market, absolutely whipsawed week to week. you had a 10 year yield that came in 10 basis but this week, it's up about 12. on the two-year, it came in about 10 basis points in this week it's up about 13. i can't keep up. yields are up another three basis points.
within a week, the conversation has gone from central banks pushing back and that one cpi changed the game. . tom: it was the breadth of the data, not just one item stop jonathan: let's look at the curve. topping out at about 157. we had a reach of 100 to the downside this week, 103 right now. does this make it difficult for the fed to tighten any time soon? do they need to push back against that at a time when people would like them to embrace what they are seeing in inflation and maybe do something about it? tom: i think they've are looking
at next month's data. i think they are slaves to three months of cpi data. jonathan: wells fargo is looking for a hike next year. i understand for the bond guys, that might be a scary idea but the people in the goodie market, some equity bulls will like that trade. inflation is high but real gdp is wishing five and they will stay long. tom: goldman sachs and other calls looking for a trend down toward potential gdp with wells fargo taking a different tack. we go to the head of microstrategy atumg. twisted notes on wall street and
it's a very thoughtful paragraph to paragraph about what the unseen is out there. george, i love what you say about the lack of depth in the three-month market. the gloom crew is worried about but it he and savings dynamics and you are focused on the lack of depth and treasuries. what do you mean? >> 2021 will go down as a year the bond market cannot catch a break. we started out with the steepening. those trays got unwound and during the month of our tober, interventions which they didn't really deliver. it really tripped up the short-term rate markets. as we head into year and where liquidity is precious, we are seeing some cracks forming. it's too early to say but you look at the liquidity index on
the bloomberg terminal, there is some concerns in the bond market. the bond market is the first to feel these things out. the bond market has more than one curve going on. tom: what he mentions there about bond market out front, i firmly believe in. i've seen it time and again. what is the bond market telling the equity market in six months? >> cpi finally is a wake-up call. this reading is the straw the rope cramming -- the camels back on the long end of the curve. even then, it's good to get around the idea that we will have positive stronger -- growth next year. if inflation persists at this
level, other markets will respond. even if it's only to hikes, markets are probably not ready for that stuff lisa: why are bond traders so gloomy? i ask this seriously because whenever i read notes and i gravitate to the bond market, there have been a lot of prognostications about cracks forming and you talked about the idea that as the tapering accelerates, it will reveal some significant cracks in markets. what is the bond market worried about that will happen as the fed starts to pull back more meaningfully. >> who will warehouse all this risk? we saw massive qed and expected it to go away quietly into the night. the bond market knows that's wishful inking. multiple bond markets are
forming around the core of the treasury market step it's made up of benchmark treasuries and then there is the treasuries that are less liquid especially this time of year and the fed is stepping back. lisa: our stock -- are stocks and bonds stepping back in equities following along with the presumption that central bankers will step in and stemmed the kleins and create a backdrop? >> it comes down to the credit market was just in the middle of the two. once it starts to affect credit volatility, then equities will matter. there is so much money chasing yield. credit should hang in there but ultimately if the bond market gets illiquid, it will hurt others. tom: is this a 2006 equivalent?
>> over all volatility and in 2006, we had a lot of complacency in the market back then. we thought we would have a reinforcing mechanism on growth and it didn't last. it's not a repeat of that per se but we have been on the back of fiscal stimulus and now that's going away. it's probably a good analogy. tom: what are the lessons from japan and the fixed income lesson that the west needs to learn? >> if you don't get the growth eventually, deflation always wins. lisa: what are you looking at in
terms of the trigger point for the long end? it seems relatively muted when you look at the flattening yield curve. what do you expect to happen here is the wake-up call becomes more widely accepted? >> you will see more curve volatility relative to specific points on the curve. it's been in a flattening trend but volatility is pretty high. in the grand scheme of things, it's the starting point. if we start to move once -- 160 on the 10 year, that's when we will start to see some concern. if it keeps going, that's where
you have tailwinds. jonathan: thanks for the kind word. you are welcome back anytime step i went through some of the weekly moves. we've had a 20 basis point moves -- move up five this week will step probably the biggest move into weeks. further out, the curve is significant. jonathan: this is lisa: lisa: what we heard from jay powell last week. i wonder why we are not seeing more of the volatility affect equities. equities used to be the more volatile asset class and in some ways, the load yield environment underpins the various alternative trades that sent people back to equities. jonathan: equities this morning
are doing ok. there is a move in the russian ruble that gets my attention. this year, the ruble has seen some real strength and we are starting to give some of that up in today's session after the united states warned europe that russia may be planning a ukraine invasion. they may be planning one. you can look at the bloomberg overnight for more details. over the year it's been about ruble strength. tom: there are three ways to look at ruble, dollar ruble, your approval in a convoluted basket which i have never understood. you go to dollar ruble but i wonder with the challenges of you crane and key have is only 60 miles south of the order in the challenges belarus is having with poland now, this is
combustible. the reporting of jennifer jacobs and the team is a combustible mix the white house is watching. jonathan: the conversation is around gas as well and the difficulties that come with that relationship between europe and russia. tom:tom: this is right on cue for november. it's the weekend before the holidays on an old-style wall street and the answer is, this is the week where you start hitting the reset for 2022. what's the reset for eastern europe jonathan:? jonathan:the ruble is about a move of one percentage point. equity futures are up 10. from new york city this morning, good morning to you all, live on tv and radio, this is bloomberg surveillance. ♪ ritika: johnson & johnson reportedly will be split into two companies. they will spin off the 15
billion dollar per year consumer group. the other company will handle prescription drugs and medical devices. there is the longest run since march, president biden is keeping investors guessing whether he will hold down prices that hurt consumers. the price of gasoline in the u.s. has hit a 70 year high and the president is considering a number of moves. at the climate summit in glass out, they are working on creating a common global market. we will continue today with less than 24 hours to go. donald trump has gotten a court when. a federal appeal has granted his request to keep some documents
from bring released to a congressional committee. the court will hear arguments in the case november 30. officials have a water marine aquarium and are preparing to treat a dolphin for a gastrointestinal abnormality. global news, 24 hours a day, on air and on bloomberg quicktake, covered by more than 2700 journalists in more than 120 countries. this is bloomberg. ♪
u.s. population and that's why we are seeing so many cases and why we are seeing so many deaths. we really need to now address the vaccine hesitancy and the folks who are still unwilling. jonathan: from new york city this morning, good morning. your equity market is up 11. the week who is down about 1% on the s&p 500. the yields are higher on the week. the team at bloomberg points out we are up about 20 basis went for the five year yield which is capturing the inflation debate. the move on crude is down.
tom: it's easing away. we've got a lot of questions on the hand them i can we will tackle those in a moment stop let's speak to the bloomberg school of public health about the pandemic. professor, we have johnson & johnson breaking up. they will kill themselves over the next months and weeks to tell people it's not about a litigious trail. from where you sit, is definitive virology and epidemiology, can big pharma still act like big pharma or is the litigation risk so great they have to break up? >> i think the litigation risk along with profit margins for things like antimicrobials and antivirals are the things that i oftentimes here for my industry
colleagues that are things that make them shy away from some of these treatments. it's a difficult thing to understand from my perspective because the use of antivirals and anti-mike reveals is such an import of our treatment regimen. you would love to see a greater investment in generating those compounds and maybe mitigating litigation risk is one of the ways you can stimulate more interest. tom: the romance of new jersey back 50 years with the j&j vaccine, that courage they had scientifically, is it now a new to mitte t that forces someone like j&j to rake up? -- to break up? >> i sound like a broken record
but the facts are the facts. we've got one of the safest and most effective vaccines against infectious diseases available. we've got pushback at all levels from people who are adamant about side effects and other things that are coming from the vaccine but there is no data to support that. one understands the risk of that from a company perspective but it's difficult from a scientific perspective to understand that. lisa: some nations are taking a harder approach including austria which is locking down some unvaccinated people in the country to stave off the threat of the virus. is this the way to go? >> the important strategy is to vaccinate more people who were unvaccinated. you are seeing lots of countries find ways to get those people to
understand that vaccination is a safe route forward population immunity and understand the risk that unvaccinated individuals pose to the vaccinated population. lisa: we have been saying the same thing for months. in the united states, we have seen adult vaccination plateau and there are those that are and are not despite what you are talking about stuff is taking a singapore stance of kicking people off health care if they don't get vaccinated, is that what has to happen or have we moved to a place where it's an individual choice and the public health concern has been stripped away? >> it still is important to get people vaccinated. it starts with a safe and effective vaccine to move forward. there are things that need to be done because we won't boost our
way out of this pandemic. we have to get everybody to either get the vaccine or do things the hard way and suffer through infections and try to get some level of immunity. we don't want the latter because of the cost not only on human suffering but also the overloaded puts on her hospital system. tom: do you believe we have a certain number of years out? >> the most important thing about boosters is covid-19 is here to stay in the human population. we have to find a way to turn these immunization strategies into one's that get is the longest and strongest immune response. we have been focused on short-term responses right now most we need to induce long-term antibody levels.
i don't think that will mean an annual booster but it may take a booster over the course of two or three years and a different schedule of vaccination to give us that long-term immunity we need to keep this virus away for an extended time. jonathan: thank you for your insight on this situation. when does it become about personal choice? when is it not about overwhelming the health care system? i find it incredibly frustrating that people continue to resist. we talk about it far too much. they have access to the best doctors on the planet. some reason, people think it's a big deal that they haven't been vaccinated. let's just not cover them. lisa: that's where the public
health aspect comes in and many say we are dealing with a doublet health crisis and not an end of the -- and not an individual choice. then you see germany and many places in europe seeing surges that are concerning. at what point does it shift to an individual versus societal question? i don't know the answer. tom: i had a conversation with london about our plans for da vo but selecteds countries are struggling to figure out how to get control. they are not like the united states. jonathan: this conversation is going nowhere. tom: how do you sing sweet caroline at the piano bar? jonathan: as usual i will come find you.
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>> inflation own to be getting worse before it gets better. >> the fed isn't going to make any presumptions about how the future turns out. >> i think the fed's job here is to be the steady hand and keep their eye on the medium-term. >> we have any reaction fun thing -- reaction function and they are willing to let inflation run hot. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. jonathan: it is operation get you to the weekend. 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. your equity market up 11 on the s&p, advancing 0.25%. the outlooks starting to pour out for 2022, and they feature, many of them, interest rate hikes.