tv Bloomberg Surveillance Bloomberg September 23, 2021 8:00am-9:00am EDT
>> typically the hiking cycle does end up killing the value trade as well. >> as long as the market consistently believes and puts money in it, i think it will move -- i think it will move higher as well. >> the next four weeks will be choppy, but i think 100 days from now, we are in a better position. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. tom: good morning, everyone.
it is a thursday, feels like a friday. huge idiosyncratic news flow, but it all centers on the central banker of the world, jerome powell. moved markets yesterday. the chairman moves markets this morning. jonathan: this equity market is taking it well. i think it was more than just a baby step towards tapering. he was queuing up what to expect in 2022 as well. i was surprised by that. tom: the real yield nicely under -1%, -0.59%. there are some dynamics there, but particularly in the spread market. jonathan: the spread between fives and 30's has narrowed. we are south of 100 basis points there. the focus not just on the federal reserve. it is on china and a company called evergreen. there's an interest payment due today on a dollar bond, $83.5
billion worth, and we haven't dealt with that yet. tom: what will we see from the chinese tomorrow morning? they are linked. lisa: the idea that it is less of a market specific story and a potential contagion from this particular default, then it is a real estate market that accounts for the world's second-biggest economy. i don't think we can ignore this. tom: do we know who owns this stuff, lisa? lisa: not only do we not know, but the pboc and the chinese officials do not know. can you help me out here? tom: do you think the bull strategists recalibrate off of what we saw yesterday? jonathan: growth is going to be
back to 1% to do percent at the end of next year. that is jan's call. tom: reaffirming today the new nominal at blackrock, and you missed it yesterday because you were on assignment, but you missed my culturally aggressively reaffirming his lower, more tepid potential gdp call. that shifts any watching and listening. jonathan: tk feels like it is friday because it is friday for him. he is off tomorrow. bond yields higher by four basis points to 1.34%. your equity market firm or by 0.5%. your dollar weaker. after the decision yesterday, we had some dollar weakness, then some dollar strength, not some
dollar weakness again today. it all together i think a lot of people out there are surprised that this equity market is taking everything so well in its stride after a big gap lower on monday. we are facing down reduction in accommodation from the federal reserve. this has been communicated for a while. ok. we are facing down the prospect that this chinese company ever grant doesn't make its interest payment today. and yet, here we are. we advanced 20. tom: brian nick with nuveen, their chief investment strategist, on what it means for your allocation, what it means for your confidence forward. you've got a single line, i love it. watch the unemployed of america. why are you looking at the tenancy of the unemployed to get to work? brian: because that is where powell and a lot of his
colleagues are going to come into play. we need to see large amount of people reentering the force in the next couple of months, as you get employment assistance from the c.a.r.e.s. act that has run out. the question is how many hundred of thousands or millions of people are back in the labor force. that would put downward pressure on wages and forestall the wage price spiral. let's put aside the supply chain issues and demand shock earlier this year. that is where serious disinflation is going to be coming from. i think we get there eventually, but probably not in 2022. big jobs numbers i think we'll leave the fed able to keep rates on hold for longer and prove those nine out of 18 to be ultimately correct. jonathan: let's build on this. the forecast for inflation next year and the year after, two .4% for core pce, 2.2% for 2023.
looking at the bloomberg, what do you make of that, getting back to 2% next year when they have missed it so badly this year? brian: it is a extremely dovish set of expectations. this year was obviously much larger. but if they are not even going to be back to 2% next year, and half the committee doesn't think they need to raise rates, they are not going to be back to 2% in 2023, that is a pretty dovish signal to the markets. i daresay that the nine that don't want to hike next year are more likely to be people in positions of leadership and people more likely to be voting on the committee next year, in addition to whatever governors president biden decides to nominate. so i think it is going to be a pretty dovish makeup of a willingness to tolerate
inflation. powell talked down even the possibility of 3% next year, so the playing down of inflationary risks, even if the forecast proves to be accurate, i think it's an important signal for equity investors. lisa: do you think we are underestimating the supply chain disruptions that are lasting longer than people thought? brian: he basically said that is why the inflation forecast went up for next year. we had a huge positive demand shock because of that one $.9 trillion that went directly into people's pockets. that is a one-off. we have high savings rates. we have really strong balance sheets. but that demand shock is a one-off. as that has started to wear off,
we will see supply and demand come into balance, even if some of those supply chains remain relatively tangled. tom: i love the idea that we are near the peak growth scare. i think that beautifully captures the omg out there. jonathan: do you think we are? brian: i do think we have seen big growth. i can tell you our fourth-quarter outlook is going to be just past the peak. we still have an overall positive view of where the economy is going to be going over the neck five or six quarters. that includes deceleration in your on your earnings growth and deceleration in gdp growth, but they are still -- but there is still much more positive than negative out there. when you look at the markets focused on some thing like ever grant, the context is markets are jittery about a slowdown in growth, about a fiscal mess that
could be coming our way in the next 40 days or so, and they are anxious overall about the declining pace of growth and the removal of monetary policy accommodation, the fiscal cliff with money wearing out and not getting renewed. tom: what is most attractive out six months? brian: when the markets are focused on low interest rates, decelerating growth, that would tend to lead you to prefer the u.s. over international markets. the next six months, relatively short timeframe, i think we've got to stay where we think things are going, what has been working well will continue to work well as markets anticipated liftoff from the fed. i think we are going to get a nice gdp number for this quarter
. if we get anywhere new the 3.8% gdp growth target for next year from the fed yesterday, i think cyclicals are going to have a period where they are running, so we are spreading out a lot to my and lu cyclicals and offensives. because the whipsaw in that trade has been extremely violent since the pendant started. we don't want to get caught offsides on that. jonathan: there's a difference therebetween working through so-called peak growth and the so-called peak growth scare. the scare comes afterwards. using we have come through that yet -- do you think we have come through that yet? this is the transition morgan stanley has been talking about for a while. lisa: evidently, and evergrande
unit has stopped paying staff and factory suppliers, just the slow-motion crash we are seeing. you do wonder, given the wall of worry, how much of an exhaustion us risk it takes to puncture through that and cause an actual event. the stage is set. jonathan: what are you up to, tom? tom: it is the first trip out with afterthought. jonathan: i haven't got a problem with it. you will call me complaining, you know you will. about all kinds of things.
of 22 on the s&p. advancing 0.5%. coming up shortly, the greek prime minister. tom and i have been meaning to catch up with him for a while. we look forward to hearing from him again. in new york, this is bloomberg. ♪ ritika: philippine president rodrigo duterte has signed a law taxing casinos, which cater mostly to chinese clients, according to a spokesman who says tax collections will be used for universal health care and to develop medical facilities. singapore's health minister says covid-19 cases in the country are rising faster than the government originally projected. the health official said the delta variant disrupted the country's plans for fully
reopening. the biden administration is pressuring companies involved in the semiconductor supply chain to be more transparent as the global chip shortage continues to disrupt many industries. softbank is leading a $200 million investment in a robotic startup that helps new york city with its covid-19 testing process. the move boosted value to one point $8 billion. last summer, the company's robots helped by performing repetitive tasks. i'm ritika gupta. this is bloomberg. ♪ ♪
situation seems very particular to china, which has very high debt for an emerging market economy, the highest that any emerging market economy has had, and government has been working to get that under control. there's not a lot of direct united states exposure. the big chinese banks are not trim into sleet exposed. -- are not tremendously exposed. jonathan: the chairman of the federal reserve there. futures up 0.6%. yields higher to 1.3321%. looking forward to hearing from them once more. we've got the perfect guest to discuss now, the author of "china, the bubble that never
pops." tom: this book has tremendous reviews from the years of experience tom orlik has. he joins us now. how do you respond to the lehman moment, omg hysteria? tom o: what china's authorities are trying to do with evergrande, it is a massive developer. it is emblematic of excess leverage and overbuilding, and china's authorities appear determined to make an example of evergrande to try to shock the
rest of the sector into a better way of behaving. tom k: what do you presume those authorities will do as they get to the china monday morning? tom o: it seems at this point china's leaders are not planning to intervene to prevent evergrande from failing to make good on its obligations. what i do think they will do is they will be active in the markets. the people's bank of china is already active in the markets to prevent contagion. a slowdown in the broader property sector, that is already underway, but the lesson of history is that china's leadership only allow that to run so far before concerns about growth takeover and they step in
to put a floor under the market. jonathan: just how far are they pushing this already, and how far do you think they will push it? tom o: china property is the single biggest sector in the economy. some suggest that instruction and associated demand drives up to 29% of gdp, but that has come at a serious cost for china. money that goes into building real estate isn't being used to lift the manufacturing sector of the value chain. it is not being used to push the innovation frontier. so policy makers want to shift the balance, less funds going into property, more going into sectors where there is greater growth potential. the question is how do they manage that transition. can they do it without a sharp
slowdown in china's economy? in 2015, the china shock slowed down the fed tightening cycle. that is a risk scenario that could play out again. lisa: i'm still stuck on this, kill the chicken to scare the monkey. who is the monkey that the chinese authorities are trying to scare? tom o: there's the financial sector monkeys and the property developer monkeys. the view of banks and bondholders is there is basically no default from china's big property developers. that means they have look forward to returns, but they have never accepted risks. huge moral hazard. the chinese government wants to change that. the second set of monkeys who are going to be scared here are the chinese property developers. they have always assumed that
the government has got their back. they have always assumed they can lever up and the government opal dilley -- the government ultimately will keep them solvent. that worry means less construction, less growth. that could send ripples around the world. lisa: this report earlier in the day saying that chinese authorities were looking into how this would play out if there were an evergrande failure. how do you interpret the inroads made on this level? tom o: i am certain chinese authorities are looking into how this plays out. there's a difference between allowing evergrande to fail and then stepping back and surveying the damage and allowing evergrande to fail, but being active in the markets to prevent
contagion. i think we are already in the second of those two options. the people's bank of china active in the markets, ensuring liquidity if we do see evergrande going down. you can bet that china's authorities are going to be even more active in preventing this turning into a systemic shock. jonathan: thank you, tom orlik. just perfectly captures the story in china for the last 20 years. tom k: i think netflix picked it up and they are going to do a six part series. jonathan: they should do. tom k: this has rave reviews. i cannot say enough about the pretenders like me on china. we are just fiction compared to guys like steve engle and tom orlik. jonathan: great people in-house
to work on these stories. british broadcaster idv saying bp to restrict u.k. fuel deliveries on truck driver shortage. again, bp is to restrict u.k. fuel deliveries on a truck driver shortage. tom: we americans are so naive about the passive energy north and south down to the mediterranean and of course, the united kingdom. the europe structure is not the same as the u.s., is it? jonathan: it is not. we've got the perfect guest to talk about this with her get a timely interview coming up. tom: this with the prime
jonathan: live from new york city for our audience worldwide on tv and radio alongside tom dean and lisa abramowicz i'm jonathan ferro -- alongside tom keene and lisa abramowicz i am jonathan ferro. a little bit of data in the united states of america. let's get that data with michael mckee. michael: we are looking for the jobless claims numbers. they seem to be coming out rather slowly. it is all done by computers these days. the chicago fed has a national activity index and it comes in weaker for the month of august. that would be no surprise that we have seen a slow down because of the way the economy has developed with the covid
variant. we are still not getting the jobless claims data. i am refreshing. everybody on wall street is waiting as we are. i would give it back to you for the moment because you have an important guest. thank you very much -- jonathan: thank you very much. the prime minister of greece just getting comfortable with tom keene in the other studio. tom green will be bringing the greek prime minister into the conversation. your equity market up 27. a couple of things to focus on. what is the aftermath of the federal reserve decision yesterday. a hawkish tilt, another step towards tapering. that will happen, perhaps, in november. that it is onto evergrande, and interest payment due today. the other conversation is about the energy situation in europe and that is developing a way
that is unexpected in the u.k., with bp closing u.k. fuel stations on a driver shortage. these energy problems not unique to the u.k. a similar thing across europe. tom: we are seeing that with energy and with climate change as well. in the mediterranean serious buyers. kyriakos mitsotakis is the greek prime minister and has the most original path through childhood to the height of politics of anyone i know. my life was transformed in 1969 by the movie, except i watch the movie, i lived it. it was a tumultuous time for greece. congratulations to you and all within your politics and even the opposition increase to this most stunning recovery of greece. what did you think at the low point of the greek economic debacle? what were you thinking about to
make greece recover as it has? p.m. mitsotakis: we took over in 2019 with the clear mandate to make the economy grow again. we were hit by the pandemic but we managed to implement significant reforms and we used the fiscal room available to us to support the real economy. we are encouraged by the recent data. the economy grew 16.2% in the second quarter of this year. we revised our forecast to 5.9%. this may be pessimistic for 2021. we see lots of interest in investment by american companies , making big progress in digitizing the state. we have a membership green transition print -- we have ambitious green transition plan and i think the country has a dividend changed mood. jonathan: the needle moved on the gdp as -- tom: the needle
moved on the gdp as everyone but jon ferro and i visited greece. people talk climate change. the american forest fires are time zones away. you have a fire 18 miles from athens. you are living fires, you are living record heat, what you need from europe and world leaders to jumpstart the climate change debate? p.m. mitsotakis: i am not talking about climate change, i'm talking about the climate crisis. that is hitting the mediterranean very hard. we put in place an ambitious plan to decarbonizing. europe is at the forefront of this effort. we have a commitment to be climate neutral by 2050 and reduce our greenhouse gases by 55% by 2030. what are we doing? we are shutting down all of our coal electricity plants.
we said we will do it by 2028. it will be possible to do it by 2025. we are contributing towards decarbonizing. we are adding renewables. in the interim we are going to be dependent on natural gas. we are retrofitting our businesses at a record -- our buildings at a record pace. we are putting in place an ambitious plan to encourage electric vehicles purchase. we agreed to what we call the next generation eu package. we are talking about 32 billion euros of grants available to greece in the next six years. a significant amount of those will be directed towards -- lisa: a lot of this is important. there is also imminent concern about rising gas prices throughout the european region. what would you like to see some of your member states to with respect to countering some of
the price pressures that seem to only be growing? p.m. mitsotakis: first of all, we have made a commitment to support electricity users in greece and we are doing it by providing state funding but also encouraging our electricity producers to absorb part of a cost increased. we would expect we will see no significant increase in electricity bills for the next three to six months. we have also tabled a proposal at the european level to find a european solution to what we consider -- this is a real problem for europe and i think it needs a european response that will go beyond what member states are doing. lisa: i was one of the member supporting the greek economy by going to visit over the summer. it was fantastic. i also noted it closed down in terms of tourism shortly after
as the number of cases increased. how much are you concerned about reviving a tourist industry where stores were closed down and a lot of the infrastructure was hampered by this blonde period without tourist. -- this prolonged period without tourist. p.m. mitsotakis: we did support our tourism sector. if you look at unemployment we are doing better this year than last year. we had a very good tourism season, which -- much better than we had anticipated. greece was at the forefront in january in terms of introducing the digital eu certificate, which may travel much easier in europe during the summer. we are quite encouraged by the performance of our tourism industry. we have a higher spending per capita this year than we had last year, which is our intention. we have a long-term plan to make sure we grow our tourist industry in a sustainable manner.
we have sensitive ecosystems in greece, especially our islands. we need to protect them and make them green at a fast-paced. people who go to greece want to unique experience and they care about sustainable tourism. i am encouraged by this summer and hopefully next year there will not be any covert concerns. i expect 2022 to be a bumper year. tom: welcome all of you to bloomberg radio and blumer television. the prime minister of greece is with us right now. i am the ugly american. my greek knowledge comes from the acclaimed restaurant on 58th street. maria always circles back to the need to live it and also to the ancient tension with turkey. give us an update on how you and your government are dealing with unique turkish experiment. not a devaluation, but a much
weaker turkish lira on interest rate policy. give us an update on your relationship with mr. erdogan. p.m. mitsotakis: it has not always been easy. we had a lot of tension last year but things are better this year. i've always been very open and frank in terms of my relationship with turkey. we have complicated issues. difficult legal issues regarding zones. there is only one rulebook and that is adherence to international law. we had similar problems with italy and egypt. we signed agreements with both. we all made the necessary compromises. there is a way to resolve this without having to use bellicose rhetoric or unnecessary tension in the eastern mediterranean. we need to work with turkey when it comes to migration. what europe will not tolerate is
a repeat of what we saw in 2015, uncontrolled migratory pressure. tom: is that a risk from afghanistan? p.m. mitsotakis: i think it is less of a risk this year than it was in 2015. i've been very unapologetic that we will protect our borders. we are doing in a humane manner. we are saving people etsy. we are granting -- saving people at sea. we are granting refugee status to thousands of people who make greece their permanent home. at the same time we are sending a clear signal we want to break down smugglers networks. we have successfully done so. we want to work with turkey and addressing the migration issue and make sure these people are closer to afghanistan and did not move to iran or turkey. lisa: you think president biden
is significantly different than president trump when it comes to his actions with respect to the european union, with respect to afghanistan and turkey and how that does trickle down to you? p.m. mitsotakis: there are certain policy issues where we are looking to the u.s. in terms of leadership. climate change is one of them. we will be meeting in five weeks from now and it is time to move from flowery reddick you always hear -- flowery rhetoric you always hear the u.n. to action. greece is trying to do our part and we are always looking to engage with the transatlantic alliance. i've always been a strong proponent of the idea of europe's strategic autonomy. there are issues in our region, in the eastern mediterranean, in the middle east, where europe needs a presence. if europe get stronger
militarily, this is to the benefit of the alliance and the benefit of nato. tom: as they this with immense respect for your father and all of greece. what is it like to be a refugee? p.m. mitsotakis: it is very difficult. when we meet the people, especially children, unaccompanied minors, it is shocking when you hear the stories. tom: you are one of those kids. p.m. mitsotakis: not in the same situation. we had to flee in 1968 and we lived in paris. there is no comparison between the stories. what we did successfully was address the issue of unaccompanied minors. when we came to power it was a shocking reality. you had these kids and teenagers in camps completely vulnerable.
we have addressed this issue. in places they can thrive. this is a country that has been open to refugees. there is a great success story. look at giannis, he is greek from nigeria. he is totally greek. he is a great example of immigration. tom: -- jonathan: he just wanted to fit in that the best basketball player in the world is greek. from new york, this is bloomberg. ♪
s&p futures up 27. a better feel to the market coming off central-bank action in the united states. lisa abramowicz and tom keene. i have to go to you with your greek experience. what did you think of the comments of the prime minister? lisa: i thought it was fascinating about energy given how much energy prices have gone up. i think about how difficult it is to open to tourism. the idea of the ecosystem that sprouted up to support traveling in pandemic. tom: lisa abramowicz realizing the ecosystem of greek tourism when she went. lisa: it was beautiful. tom: now joining us is ian bremmer of eurasia group. the greece modern experiment is a success. what does greece do when there
is another european crisis? how coalesced is europe right now? ian: much more so. in an environment where the americans and chinese are not talking to each other, the europeans are taking the lead on climate regulations. there are rules and regulations on privacy and data are the most advanced in the world and being taken up by other countries because there out in front. that is not to say their economies are performing incredibly well, but the lessons taken from the near-death experience of brexit and from the disaster that was brexit negotiations and has had a much bigger impact on the u.k. than the e.u. has helped to bring the eu together and the europeans ended up responding to covid in
a much more coherent and cohesive way, both in terms of the vaccines as well as economic restructuring and rebuilding. all of that means they are in a better position. tom: you speak of a misjudgment of president biden in america, whether it is china or europe. what is the prism they look through now when they observed this president. ian: i think they recognize that even though they like biden much more -- certainly the europeans with the exception of victor or bond -- victor orban all prefer joe biden by a long mile. they see the united states now has two presidents in a row who are much more taken with domestic affairs than their interest in the continued strength of the transatlantic alliance. on top of that, there is an ongoing pivot towards asia that
the europeans are not considered very aligned or much of a priority. frankly, even though trump and biden could not be more different as leaders and individuals, the european see more continuity and do not like it. it does not mean they have good alternatives at this point. absent the u.k., absent angela merkel and with the french president facing his own difficult election in the next six months. it is not like the europeans are replete with national leaders. kyriakos and mario draghi are probably two you would .2 right now. lisa: how much of the european union is getting left out of alliance that looks like the united states, australia, the united kingdom. ian: the united states has this
new agreement which has been described to me as five i's plus. when the united states looks at china, we see china principally as a government through a national security lens. with the exception of france, none of the europeans do. they are much more transactional. part of the dustup between the united states and france around all of this is on the one hand the french are the third-largest military exporters in the world after the u.s. and russia, so they are competing with the u.s. and lost out on the australians ripping up their contract. on the other, the french have been trying to convince the europeans to have more focus on security, more focus on building up european defense capacity and more of a proactive strategy.
very few countries in europe are interested in supporting that. emmanuel macron is neither fish nor foul at this point. lisa: we have been talking about ever grand all morning and the systemic risk with respect to the housing market in china that is cooling dramatically. policymakers are going to allow this. how does that dovetail into the rising tensions between china and the western world if at all. ian: as i said, the united states has two presidents that have now been much more focused on domestic policy. america first and domestic policy for american middle-class. the chinese are focused inward. belt and road investments have fallen off a cliff. china is much more committed to the domestic economic consumer and supply chain. with evergrande this is a really
big financial crisis for the chinese. what was their announcement this week? we are not going to be building anymore coal plants out of china because they will not be building much more of anything outside of china. that is the real shift. when i talk to policymakers in washington they are still thinking about aggressive cold war mentality with a china that is trying to take over the world. increasingly china's problems are domestic. tom: i would love to get you in robert kaplan on on the south china sea. ian: that would be fun. tom: ian bremmer with eurasia group. we have to sum up the morning. what is your town into the market opening? lisa: there is a much story about an markets are not worrying. that -- there is so much to worry about an markets are not reaching -- markets are not
worrying. we got a bank of a good decision talking about when they could start tightening policy. we got negative initial jobless claims. more initial jobless claims than expected. all of that shrugged off. then there is the evergr ande story. you put this all together and there is no movement in markets. tom: i'm trying to get a translation in greek. my greek is failing me. out of left field, doesn't every cfo say do a bond issuance to buy back shares? lisa: that is what is happening. with the evergrande issues there were people who pullback the plans. liquidity was an ample supply and that is propping everything up. tom: i had to go nerd with lisa. lisa: i bring it out in people. tom: the prime minister spend
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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: we begin with the big issue. chairman powell setting up the next move. >> november feels like the kickoff. >> they will taper. >> they have telegraphed the tapering. >> november. >> i do not think there is a huge amount of surprise in the taper discussion. >> the november tapering announcement is low. >> we seem to have a bit of clarity. >> a little bit more hawkish. >> this is actually