tv Bloomberg Surveillance Bloomberg August 16, 2021 7:00am-8:00am EDT
♪ >> rates will go up a little bit i think we will have more physical coming so i think the debt dynamics will born -- will point to higher rates. >> it's going to be a little more disruptive. >> jimmy, sub prime his contained as the inflation is transitory. . >> that headwinds today is supply chain. >> there no place else to go. you have to be in equities and ultimately, the recovery is here. >> this is bloomberg surveillance with tom keene, jonathan arrow and lisa abramowicz. jonathan: getting your trading week started, good morning. this is bloomberg surveillance live. your equity market is down 10. no matter what you throw at this market, there is still an all-time high. tom: it's a better than good
market and afghanistan seems to be removed from the market action. i see resiliency in the equity markets, witness the grinding up we have seen in the last number of days. jonathan: my perspective, the only question i can ask is to what extent does it overwhelm the domestic goals of this administration on the fiscal spending fronts? tom: i believe it was mentioned a number of strategists think it would affect the infrastructure debate. what it will affect is the census 2020 redistricting politics moving to november of 2022. there is a scathing note this morning that suggests the politics are turned upside down. jonathan: if you look to the
second largest economy of china, things are starting to slow down. lisa: it has to do with retail spending and consumption. spending and restaurants in china fell more than 4% in july from the fire month because people are concerned about covid and because there are more restrictions. how much will that trickle into the u.s. data we see in upcoming months and how much is this compounded by the supply chain disruption from china has increased prices and impacting consumer confidence. jonathan: here is the monday morning price action. we aren't negative by a doubt -- by about 10 points. 12767 in the bond market. that is unchanged. we will get you proper coverage and washington, d.c. from her washington team. outside of the bond market,
you're-dollar is slightly lower. we will hear from the fed chairman tomorrow. lisa: entering to see how he translates the potential ramifications of the delta variant step even though there is no market affect we can see that is dramatic from afghanistan, the human tragedy is casting a pall over all news. we will get empire manufacturing soon step it is one of the first high-frequency reads on what's going on with respect to jobs with factories in the wake of the delta variant. interesting to see how much that puts a damper on labor, supply and demand. new york will become the first major u.s. city to provide vaccination proof to eat inside. it raises the question of how much this will set a template
for what's to come in other industries versus how much pushback they get as they try to get people to comply. at 4 p.m., we get a sense of how much international demand there is for treasuries, keeping them flat regardless of the news one way or another. we get the net june treasury capital flows to see whether we still have the highest today. jonathan: amazing change taking place, thank you. if i told you two years ago that you would need vaccination to dine indoors, things have quickly. tom: we tried to indoors last night and we had to eat outdoors. we went to mcdonald's. jonathan: you say i don't
believe the market is acknowledging the ramifications of the biden administration china policy, what me through that -- walk me through that. >> were looking at a situation where we talk about the china slow down and supply chain issues. it has come out of this cold war that started under the trump administration but the biden administration has ramped it up. it's feeding into these inflationary concerns we are seeing out there. i think we are seeing a turn of sentiment among investors. i think it's a big deal. tom: what does the wall of money indicate? >> there is money coming out of
the treasury's general account to get out the different stimulus. that pushed other money further out on the risk curve. as you noted earlier, we have major news coming out of afghanistan which is not necessarily market related but there is definitely global ramifications in the market is just breezing through it like nothing happened. as you also noted, that's on most of 2021 has been. most of the past 15 months has been like that so that wall of money pushing things higher. lisa: is there any sign that people are starting to price in concerns. our people concerned about paying higher prices for the goods they buy? >> the survey was interesting.
it's not often i go to the michigan survey. some of the standouts were last april after the country shut down in march or in october, 2008, you had these major events that plunge consumer sentiment down. i believe the market was down about 30%, it was down 15% last year. we have the stock market up 20% to date and now it's at all-time highs. it's a different dynamic than the environment we have been looking at for the past two decades. i know chairman powell talks about inflation being transitory. we have had a symbiotic relationship with china where they create things at lower
prices for us so we get lower inflation and higher corporate profit. that pendulum is shifting the other way now. people on main street are pretty upset. i was at a family party yesterday and inflation was the number one topic.. jonathan: 12767 is where the bond market closed. 10 year yields are down by eight basis points. what is -- what does the market response tell you? >> i am not a big believer that we are into a stgaflationary environment yet the federal reserve will have to start tapering where growth in the
united states is decelerating. they've been warning about this for decades. it's always been an issue that you don't want to find yourself and that's why the fed is try to getting ahead of the curve, they don't want to find themselves in a situation where they are moving accommodation as the economy is slowing or growth is slowing. they want to be tightening into strength to keep up the pace. we have chose to flip to an outcome basic brooch -- outcome approach. jonathan: what is the number one trade right now? >> i like the banks. i think we will see the rates move higher. it's more the recovery and reflation trade. i think we will get through this and i think you will see not necessarily a return to normalcy
but you will see opportunities in that space. . it looks like we are seeing growth levels for the big companies. you want to go back to the more cyclical plays that will make it an economic recovery. jonathan: great to catch up, thank you. erin brown of pimco is looking for the recovery to come from cyclicals. leadership will switch back and forth with no clean leadership for the next year. tom: we come up on september 30 and number of weeks after that, we do it again also the earnings reports and visibility in q4 is
yet to come. jonathan: earnings in america have been tremendous. lisa: and there is a question of how long they can continue especially with supply chain issues. this is a new regime, supply chain disruptions are lasting are longer and people thought and how much longer can companies continue to pass price increases along to consumers that are concerned about that. jonathan: we talk about this a lot. over the last decade, we've gone from china exports and disinflation to china's issues importing real inflation. tom: i will go with that, i'm looking at the blunt instrument of nominal gdp onto what we do on the income statement of corporations. jonathan: coming up on the program, we will get into the conversation on foreign, futures down 10. yields are unchanged.
this program goes down to washington, d.c. next, from new york, this is bloomberg. ♪ ritika: the taliban are taking control of afghanistan two decades after they were ruling the area. the afghan president led the country in chaos reigned at kabul's international airport. thousands of people look to it -- exit the country. people try to forcibly enter planes that were departing. the death toll from the massive earthquake in haiti is almost 30 -- is a was 1300. it flattened homes and businesses in the u.s. deployed search and rescue teams to help find survivors trapped in the rubble.
aftershocks will hit haiti today. more americans will get vaccinated as the u.s. reported almost one million vaccine doses given nationwide saturday which is more than double the low point of less than 400,000 reached in mid july. almost 60% of the u.s. population has gotten at least one dose in almost 51% hopefully vaccinated. saudi aramco is involved in a 31 billion-dollar deal of a 20% stake in reliance industries. it's backed by an indian billion air. a deal could be reached in the coming weeks. this is bloomberg. ♪
they are now trying to get folks out. the plan should have been an orderly conditioned plan to draw down the forces and we delivered on that promise. jonathan: mike pompeo, the former secretary of state talking over the weekend. good morning. your equity market is down 11 on the s&p. yields are unchanged on the 10 year. euro-dollar is finally negative. there were many images over the weekend. the president of the united states sitting alone around the long table at camp david on a conference call. a man that looked lonely in more ways than one. tom: i hope you got some rest
within the exhaustion and what's going on putting the haiti earthquake. twitter lit up like a candle because of the security breach showing the cia and one of the screens on the left. this goes to the cheerfulness of any given administration and messaging at the moment step the headline here is the conversation at abc with jake sullivan. this is a movable story. jonathan: the national security council said you can expect some remarks from the present on anna stan. he went on to say the united states can fight terror with a large military thread and that's been part of the conversation or the last few weeks and the last decade. tom: in mumbai, our team is working on afghanistan stuff
thomas barfield will join us in a bit step emily wilkins joins us right now. let's talk about the body language in washington today. i find it fascinating, the relative silence of the hill step will that silence be broken today? >> i think that's absolutely something here very much looking for today. we have already seen silence be broken with numerous statements committed including from house speaker nancy pelosi and republican house leader kevin mccarthy, republican senate leader mitch mcconnell. you are seeing then come out and talk about what is going on in afghanistan in regard to kabul. to see a bit of a partisan split and how they are talking about things that you are hearing late last night, house intelligence
chairman adam schiff says he will hold a briefing on afghanistan to determine what the role of congress is and what their next steps might be and we will pay close intent -- close attention when joe biden later today. tom: i looked at kansas in the redistricting year of two senators and four congress types. as what we are seeing now, the heart at the kabul airport, how does that it into the lyrical dialogue to november of 2022? >> this is the question everyone is asking in washington. the images we are seeing out of afghanistan of refugees running alongside airplanes, trying to jump on them, shocking images and we will see more as the taliban continue to move in and impose restrictions on women and girls. this is something from a messaging and image standpoint
that is horrific and raw. you look back at the polling that the big going on for years. americans are split on whether we should even be in afghanistan. president biden promised to end these wars on the campaign trail. former president trump recognize the same thing that there were a lot of americans who no longer wanted to be involved in the middle east. what is happening in afghanistan is incredibly important but when you look at what the american people care about and are asked to list their priorities, international stuff really makes the cut step -- rarely makes the cut. lisa: speaking on msnbc, the international security advisor said the u.s. is now focused on securing the kabul airport and president biden is expected to
speak in upcoming days. there is a question of how much president biden is continuing in isolation in his strategy as president trump did and how much this has become a democratic and republican issue. what is your sense of that? does it change the shift toward a more nationalistic am a inward looking focus for the united states going over? >> its intrigues -- it's interesting to see how president biden has manipulated the international space. he pushed to renegotiate the iran nuclear accord any's doing things that involve international working together but not in regards to the military necessarily. that seems to be the pattern we are beginning to see with the button presidency. i think that's a very valid question. there are a number of american allies who are looking at us and looking at having serious
questions about how much the u.s. is willing to assert itself for its allies across the world. jonathan: emily wilkins, thank you. we have not heard from the president. we might not hear from him for a few more days. are you surprised by that? tom: no he will wait and i'm sure he will make comments. you talk about the fall of saigon and this harkens back to something i saw live which is where linda -- lyndon baines johnson announced on a sunday evening that he would not run again for president. ever since that moment, presidents have been very careful in crisis about when and how they speak. jonathan: how halted will he be by the comments he made? tom: this guy is tough as nails
and his fallback is the sequence from president trump to -- to present biden where president trump made some actions clearly to say we have to end this and president biden followed on. his saving grace here is the combination of trump and biden. these two presidents said we are not doing a third decade. jonathan: let's reflect on the works for a moment. there will be no circumstance where you see people being lifted off the roof of an embassy from afghanistan. the likelihood that the taliban will overrun everything is unlikely. the president of the united states in july. over the weekend, that's precisely what we saw play out. tom: there is ample history of presidents and administrations getting intelligence completely wrong. parted that would be the fall of
hey! it's me. the longer you've been with us... the more rewards you can get. like sharpening your cooking skills with a top chef. join for free on the xfinity app and watch all the rewards float in. our thanks. your rewards. (announcer) looking for a better way to lose weight and feel good? how about the one with a 98% success rate and a more affordable weight-loss solution? that's golo. there are no monthly fees and it's guaranteed to work or you don't pay. no stimulants, no starving, just results, results you'll keep for life. with over 2 million satisfied customers, golo is the new way to lose weight. go to golo.com and get your life back... -with golo. -golo!
jonathan: live from new york city, on tv and radio from an all-time high monday. equity futures are lower only got about one/three of 1% on the nasdaq and of the russell is down about half of 1%. let's get to the bond market step here is your 10 year yield this morning. i want to reflect on where 10 year friday. it was an eight basis point move lower. we always so that -- say there are two ways to look at things, either the data or the market response. consumer sentiment comes in a whole lot softer. it goes back to 2011 with
confidence lower on the back of higher prices. this market is very sensitive. the higher prices are about to reshape consumer confidence and reshape consumer demand. tom: this is about microeconomic foundations and looking at microeconomics. my key word is the ambiguity of august. they are tangible but that's nothing new. we are trying to make a bet on it with expert analysis. jonathan: let's talk about the situation abroad in china. retail sales were down. this is a bleed through. you see it in copper and crude, a bit of weakness. the aussie dollar is down by 1%.
crude is -1.75%. that's the second part of lisa's story. spills across the global economy. tom: we are usually data dependent. it goes back to what neel kashkari will say. we have to get out with a better understanding of q3 and down to q4.. jonathan: copper is down this morning. >> good morning, i want to start overseas and look at the international picture having an effect on what's going on in the u.s. market.there china that are falling pretty
hard in china and the u.s.. there was a warning that some of these online games need to respect history. they are down about 3% on the day. you were talking about the economic data out of china with the slow down and the reverberation that's having. southern copper and freeport mac memorandum -- mac moran are down. china's having to deal with issues in latin america. there is concerns about the tia maria project in peru. on top of that, you got a labor walk out in chile with copper minors and a new one with lithium producers. those shares are down today. there was a big case of 27 covid
cases on a cruise the left from texas to belize. it still is raising some concerns about the future of travel. keep an eye on cure back. this is the big laggard. some new data out this morning that says the next bit generation of vaccines, that suggest they may be on track and those shares are up about $.10 stop tom: let's get to the economy with thomas barfield scheduled on afghanistan. robert roser is with us with morgan stanley. morgan stanley is so good at putting out that 30 page deck that you gotta read. after you looked at the labor market, what are wages going to do? the ultimate inflation indicator
is rising wage growth. will we see that? >> thanks for having me. we are certainly seeing wage pressures right now and seeing them across and easing -- an increasing number of industries more in middle and high wage sectors as well. we are seeing somewhat of a conflicting side in the labor market where you get the signals of tightness in higher wages despite the fact that there is a lot of flak and still a lot of lost jobs and many people who were previously unemployed -- previously employed are now unemployed and are now unemployed enter out of the workforce. we looked at how much that labor supply is expected to come back and there is a number of factors behind why we see labor supply being constrained. a few of those factors are more short-term in nature. we have concerns around health that are lingering. we have caregiving
responsibilities that we think are likely to fade as schools reopen. we have the effect of supplemental unemployment benefits that expire in september. as we see things like that subside, labor should open up step that should begin to take some of the pressure out of wages as well. jonathan: what if it doesn't? you're looking for 3.3% unemployment year and next year. after that, you think the labor supply starts to continue to return in a way it often does. from your perspective, what would happen if it does not? what is the risk and what does it mean for policy? >> that's an important question. we have to lay out encz marks for what we are watching for an labor supply and job growth. our base case is that we get the strengthen job growth and a strengthen labor supply expansion particular as we move
to the full and the end of the year when we expect about two thirds of the decline in labor force participation which is nonstructural, we expect about two thirds of that to reverse by the end of the year. there is a lot of uncertainty there so we continue to have to watch these labor supply developments closely, particularly the supreme -- the september payroll support stop as we move past these factors, the labor supply will extend more notably. if we are stuck at the lows and disappointed and we don't get the labor supply upturn, it may be the case that the wage pressures last longer and that was -- would raise upside risk and could lead to fed to rethink a tighter monetary policy. lisa: there is a question of the
taper and what happens if that happen sooner than people expect were later than people expect. if the fed waits for longer, so that lower the on employment rate over the longer-term or lead to it being somewhat higher based on exactly that, having to read -- to reverse course? >> the fed policy remains data dependent so it's completely contingent on how the labor market evolved over the coming months. that will be a key determinant and whether the fed feels comfortable moving forward with their position to taper. as we look at the data and listening to policy makers in their official communications and public remarks, we think the fed remains on track to announce its taper and purchases by the end of this year. we expect that will be followed in the second order reporting by the first rate hike which comes
only when we get to maximum employment. it remains data-dependent in the fed will have to operate around that. there are a number of important uncertainties so the fed will have to keep a close eye on the data and have to carefully watch and carefully communicate around the data so as not to deliver major surprises to the market. if we have a rapid shift from the fed, then we have to think about what kind of consequences that could have for the economic outlook. jonathan: good to have you, thank you very much. to some degree, it's take gas, working out whether we get that full recovery in labor supply. a lot of things hang on that, fed policy and a lot of others. lisa: at what point is the fed policy affecting something that's dependent on the house backdrop as well as the immigration policy?
it's hard to understand how monetary policy fits in to either helping the situation were hurting over the long-term by continuing with price pressers we are already seeing. jonathan: are the goals of this fed overwhelmed by high prices in general? beyond the new year, i have no idea what the back end of next year looks like. tom: after we saw the data we saw, they will take a three-month moving average but more than that, the cacophony that was in the data last time around, they have to see more data before they make a decision. jonathan: the signs are that labor supply is returning and we need to see more of that. consumer confidence is starting to retreat as well. tom: the demarcation is hard data and soft data. the media talks about soft data but the fed looks at hard data.
it's oh k to say we have to wait for more data. that's what they will do. jonathan: hard data are the facts and soft data is how we feel. tom: that was a gift. jonathan: i watched the united game saturday morning and it was nice. lisa: i'm feeling it. tom: i west all of qpr. there were people having chicken and mushroom pies in the stands. it got it done. jonathan: this is what we should encourage, guys talking about their feelings. tom and i were out in the courtyard this morning talking about our feelings.
being closed. that is going to have an impact on the supply side, making a supply problem even worse. it's not just a demand issue, it's even more importantly the supply issue. jonathan: from new york city this morning, good morning, here is the price action this monday morning, four days of gains into monday and an all-time high close on friday. we are down slightly this morning. a big rally through friday's session. euro-dollar up slightly. let's talk about tesla. this headline said that the
united states opened a formal investigation of the autopilot system of tesla. that stock is down by about 1.9% this morning. the you has -- the u.s. is opened a formal investigation of tesla's autopilot. tom: there is monday angst in the market. here is david wilson. >> it's interesting to see financial stocks surpass energy last week to become the best performers this year among the s&p 500 11 main industry groups and along the way, we've seen a reestablishing of the traditional relationship between financial stocks and bond yields. when yields go higher, that means financial companies can make more money down the line. i looked at a 20 day correlation between the s&p 500 financials index and the 10 year treasury yield which ended last week at the highest reading since june of last year but go back a
couple of months and you see it was negative which doesn't happen that often. tom: so they are back in line? >> exactly. you have to go back to december 2016 to see that correlation. tom: do you as a grizzled veteran look at financials as homogenous or do you partition them into big banks, regionals and the smaller banks? >> i think you have to separate to some extent and understand the different dynamics. you think about the biggest banks and they are more associated with trading revenue than the smaller ones and that tends to be more volatile. then you have the insurance companies and all the rest especially now with the likes of square and paypal out there. financials of really become a big 10 so you have to look at
the pieces. there is a certain amount of value in considering them more broadly as well. tom: thank you so much for we have some breaking news with the unit -- with washington waking up to the collapse of afghanistan. we also look at the international relations of beijing. there is a past in afghanistan and that narrow strip of land is the same as new york to las vegas. how focused is the pacific rim on afghanistan this morning? >> there is a lot of focus and there were some comments out of beijing but the foreign ministry said they hope for a conservative rebuild in a yanis stand and they hope for a peaceful transition of power there. they respect the will of the afghan people and made the point
that their embassy is open and no chinese people have left. china probably won't say much more than that but like everybody else across the world, everybody is watching to see it spills over the borders from afghanistan and what it means in the role of the u.s. and china. lisa: while there is the international tragedy when you look at the human suffering, there is a very inward look particular in china where the economy is slowing more than expect to -- more than expected. retail sales were the weak spot. is there a sense of the policy response to that? we did not see a pboc easing as some had anticipated. >> things came in softer across the board. there is a sense now that the
economy is slowing more than anticipated stop unemployment rose 2.15%. the state council out of beijing put out a statement that they are concerned about great employment pressure. i think you can take it from that statement that they are noticing a slowdown in the economy. it's a question of what they choose to do. lisa: the international community is looking at china's response. do we have a sense based on the policy response of how long some of these major supply chain disruptions could occur as a result of the spreading variant? >> this is a big issue. a container port is partially
closed down and we don't have much information on when it will reopen them. they are not giving much details as to what is next. another port beside hong kong, they are under similar circumstances due to the covert outbreak. it was shut for weeks and has repercussions for the international shipping chain. we have spoken to a lot of exporters about this issue. people are concerned and are saying there will be delays. one manufacturer told me, when will all this and? this is front and center for the china story. jonathan: it's an expensive problem. we will come back to this. that's the supply story so let's talk about demand. the scale of the misses in the chinese economy overnight, they
had a 12.1% in china. in retail. the survey was 7.9%. that's a big downsides of prize out of the chinese economy overnight step tom: i don't trust the data i just don't trust the data but i will trust the trend and the trend is clearly weaker. 3% plus 3% is considered a recession given the unique characteristics of china were we are in the vicinity of 3-6%. jonathan: also people are looking at travel which is worse. lisa: the supply chain issues seem to be continuing for longer. this bleeds into prices directly as they go higher and people are lessening whether they can survive it. jonathan: not bleeding into the
how about the one with the 98% success rate and the more affordable weight loss solution? that's golo. there are no monthly fees and it's guaranteed to work or you don't pay. how can golo offer all of that? because it's not like any of those diets you've already tried. it's the new way to lose weight. no stimulants, no starving, just results. results you'll keep for life. no more sacrificing to lose weight only to put it back on. no more sacrificing, period. it improves your lifestyle and delivers incredible results. with over 2 million satisfied customers, golo is the new way to lose weight. this is the only program i have ever done that i have never deprived myself of anything. (announcer) if what you're currently doing to lose weight isn't working, or you feel like diets don't work, you're right. don't give up. get golo. go to golo.com and get your life back, with golo. (chorus) golo!
>> the anxiety around the taper, we think it will be a tantrumless taper. >> the federal reserve will have to start tapering. >> the headwind today is definitely supply chain and getting goods into the u.s.. >> there is no place else to go. you have to be in equities. >> this is "bloomberg surveillance, with tom keene, jonathan ferro, and lisa abramowicz. tom: jonathan ferro, lisa abramowicz, and tom