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tv   Bloomberg Surveillance  Bloomberg  September 29, 2021 6:00am-7:00am EDT

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couple of weeks. the market is still looking forward to healing and developing economies. the concern is whether the yield is moving too far too fast. >> it will not in my opinion respond to supply-side inflationary shots. >> inflation gets too high, and it doesn't matter if it is hawkish or dovish. >> this is bloomberg surveillance with tom keene, jonathan darrell, and lisa abramowicz. >> your bouncing back. for our audience worldwide, good morning, this is bloomberg surveillance live. i am with jonathan ferro this wednesday morning. the s&p has advanced by three quarters of 1%. it is a bull market. tom: i missed my entry point again. i don't know what to say. i was sweating yesterday.
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this is how salty we are. -3%, carnage. i'm pushing back. i was a bull on this. he is going to restate the case. we are looking forward to catching up later. this means a lot of things to a lot of people. stagflation is being thrown around. there is downside risk. what is it to you? tom: the red sox chances are transitory. what is not transitory right now? we are overthinking. it is a raging debate, and that's what sets us up for surveillance this morning. the bond market has shifted. but how much.
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john: we will hear again in a little while. tom: what is so important to understand is that senator warren is a professor. she has astute abilities in bankruptcy. in stress and work out. she makes a comment which is fine, it is her right. she represents the people's republic of massachusetts, but if she is going to do that, she has to describe the evidence that he is a dangerous man. what is even more absurd is that she is qualified to do that. john: it was to get people like me to play it, and it worked. we will catch up a little bit later. who is next with the federal reserve? lisa: i want to articulate the idea that you are trying to get progressives on his side. he is putting forward an agenda. at the same time he has a lot of support internally and a
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bipartisan level of forging. how can they get a senator warren pick through a split congress? that is con traversal -- controversial right now. john: equity futures are up, bouncing back a percent. over the last couple of days, as been very difficult. this has dropped since may. the biggest one-day drop since march. 150, 142. lisa: their power issues in europe and china. potentially the united states. you also have the ever grand issue. china has contained the potential contagion. ever grand is expected to oh $45 million on a $24 bond. this is not good for the bonds. it is not good for stock. people do not care on a broader
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level anymore because china has stepped up and take aggressive steps, including ever grand to sell off part of the bank that is really opposed to ever grand and using the money to make good on some of the ever grand obligations. it will go to bonds. there is a pending home sale number. it is a slowing of home sales. if you look at what is underpinning that, it is sky high house prices. it is a record increase in house prices for three months in a row. it is a question the fed will have to answer, which is when will it become unsustainable. oil is out with an inventory report. how much do we continue to see inventory be depleted. it is a story that we are seeing. this is the highest price is 2018. john: thank you. this line up at 11:45 a.m.
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eastern time, the japanese, and the federal reserve, and in ecb forum. what are you expecting to hear? tom: they are going to do everything they can to not say everything. but it will be interesting, you believe, they are getting coordinated. you are seeing a trend. any whisper is what i would listen to. tom: the global head of strategy. let's talk about the dollar, and the real break out of the past 24 hours area is chairman powell a dangerous man. >> i think you summed it up well saying that senator warren. tom: look at the dollar strength. you are an expert at summing it up altogether. from a continental europe
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perspective, what is the character of the dollar strength. elsa: that is an interesting question. what was unusual about yesterday was the bond and equity joint set up. we used to be in that environment but we are seeing a positive environment for the u.s. dollar, even against what you typically think of. tom: let's get back to 101. is this a relative interest rate, or is this about flow of capital? elsa: both clearly mantle -- matter. you have to think about how much money european investors have piled into the united states. you can see it increase over the past year. we are in an environment that
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creates downside on the dollar. this is a global environment within sp set up. capitals are the key. lisa: is a dog a stronger or materially weakening? elsa: we have a massive increase in volatility. we are seeing people try to push that for that, and it fails every time. we don't expect a thing to happen. lisa: the euro is weakening to lower levels than we have seen in about a year. is this the story? as in a dollar story? lisa: it is more of a dollar story. i'm excited to see it happen. it has been in our court all year, and it isit is more of whn
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in emerging markets. i do think that the bank of england is very optimistic in already -- my view. we could see hikes, rather than not. jonathan: you push back against an idea that this will kick in
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and the bank of england may charge soon. why is that? elsa: we are seeing reports. the supply change disruptions at the moment are clear signs of inflationary pressures, but the central bank will not give us information. it was very clear. we will not necessarily listen to that message. john: thank you very much. you broke things down in a big way. will talk about the development economies and the dilemma of upsides risk to inflation. things have been premature. every single day, you've got a move like yesterday. it is a knee-jerk reaction to plugging in the story of the day. we are trying to drum up big
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ideas that are developing. it is too early to make a big statement about what is happening off of the back of a single day's price action. tom: when i was enjoying a beverage of my choice, it was everything against the dollar. the lire, as you mention, but it is a substantial shift in dollar strength. i looked at the block -- broad index on bloomberg. it was a very big index for the dollar. lisa: it comes with a backdrop of the united states. there is an agreement over fiscal aid and fiscal support, anyway, and those plans got stymied. what is driving this? it is rate differentials, then the pound should do better. that has not changed over the last week. >> is a lot of heavy lifting. a lot of potential. lisa: understood.
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but that is a credit risk. the market is not representative of that. tom: can we do science with john? i've never seen this. ever, ever. geology with john. we are doing this this morning. in the canary islands, john this has not happened in 50 years. this is gone from serious to way serious. much more is simply about the volcano coming out with explosive phenomena. john: phenomenal pictures. equity futures are backup three quarters of 1%. where in new york this morning. this is bloomberg.
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>> we are trying to avert a government shutdown. the economic to mende -- agenda. there is a giant spending package but time is funding out for funding the government and raising the debt ceiling. there is another 2008 meltdown that is causing chairman powell to react. powell is making it easy for big banks to take big risks. it could be a rocky parts if biden nominates powell for another turn. the former foreign minister says the country has him ruling party and is expected to be made >> and it has been promised for millions of yen and spending.
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the general election must be held by november. the british prime minister says the country's crisis and stabilizing. it is a pushback against industry demands. meanwhile, gas stations have run out of fuel. powered by more than 2400 journalists and analysts and more than 120 countries. this is bloomberg.
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>> it is imperative that
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congress addressed the debt limit. if not, our current estimate is that the treasury will likely exhaust its extraordinary measures by october 18. america will default for the first time in history. the full faith and credit of the united states would be impaired, and our country would likely face a financial crisis and economic recession as a result. >> secretary yelling on the debt ceiling. good morning. your equity market is at 34. it is 1/10 of 1%. low bit of calm after a bond market storm. yields are lower. 149 42. the euro is stronger. we break things down by .2%. crude is up to $74.75. it is down by .7%. tom: there is a little bit of calm. i saw a real comparison to
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yesterday. it is a shift back. i look at 21.68. it is nowhere near the angst level. 21.70. our bloomberg washington correspondent joins us this morning as we attempt to get through wednesday. what is the agenda? >> the agenda is going to be about democrats trying to get the votes for this. there is a bipartisan infrastructure that does not seem like the progressives are going there just yet. they are signing up and putting votes to it, but the main thing has to be to avoid a government shutdown by friday morning. we have a clean bill, which means there is no debt ceiling that attachment. security checks will go out, and we will get a vote on that today. tom: they are going to get that
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fixed. let's get back to the debate in the washington post headline. were talking about $4 trillion. we know it will come down as well, but it has to come down with negotiation. i don't see in are reporting any negotiation. >> well, it is cagey right now and it is allusive. you have senator joe manchin of west virginia and kyrsten sinema at the white house yesterday for meetings with the president and white house team. there is no hard evidence coming out of those meetings that they have agreed to any topline figure to really start get framework together that progressives can say they are happy with it and can move forward. the president has canceled an engagement in chicago to make sure he is squarely focused on the economic agenda. thursday is looking like it will be a very tough vote. we have heard from the chair of
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the progressive caucus say we will vote for bipartisan infrastructure but only when we have reconciliation. it sounds like she has the vote to take that bill that speaker pelosi will bring to the floor. >> this gridlock comes with a deadline. we heard of that from the secretary yesterday, saying that it is when the united states will run out of money. how much is that drop dead date in terms of when congress has to pass something? >> there is a lot of negotiation from yesterday, and potentially different avenues they could take. the president and chuck schumer are trying to have a simple majority vote. they will not do it by themselves but not with reconciliation. republicans have tossed that idea. it looks like democrats are going to have to go this alone unless they take it to the brink and try to get senator mcconnell to come back on side because they are at that point of a potential default. if they go by reconciliation,
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that means that it will be a little more cumbersome and a lot more labor-intensive. it will have a senate debate, there will be vote aromas into the evening, and that will take time. if they start that today, with five days, october 18, they will not start that. >> meanwhile, talking about the secretary, i am curious about her position on fed chair jay powell given the pushback from senator warren yesterday. how difficult will this be for president biden to get progressives on his side while also trying to figure out who we once and that c come next year. >> it was an awkward moment when senator warren called chairman powell, sitting next to secretary yelling, a dangerous man that she would not -- as he signaled this a few times, and we's heard from her mouth -- she will not help with the appointment of chairman powell. it is another problem for the
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biden administration. they are trying to get progressives on board. this is one of those headways. we are talking about a note over eight -- 18th deadline. powell said this is really the job, when it comes to banking regulations. that leadership post is up on october 13. we will he watching to see if there is movement on that. there is thinking that governor brain art will take the seat and that would pacify the progressives. >> thank you. our correspondent in washington, d.c.. there is an october 18 deadline. in capitals around the world, this is the worst deadline. >> you went through it first with the prime minister may five or six years ago. there were 12 deadlines.
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i do not play the game. i do not buy it. lee second -- lisa likes to play the game. ben: this is the first time we have heard from some of these officials about what the date is. in terms of the policy response from treasury, from the federal reserve, that gets more hairy. that gets political. that is what i am most interested in. what will stop them from stepping in and taking extraordinary measures to mitigate some of the consequences coming up against the debt ceiling? there is a default deadline. it creates pressure. john: that is the point we are trying to make about what the date is. lisa: you are saying it's a guess? of course it's a guess? john: that's sensible, right?
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tom: is there an extension here? there was a nice summary about the emotion of the white house. can we remember that, unlike many previous, this is a president with over three decades of experience with deadlines. forget about your politics. this guy is a grilled senatorial pro. i am going to say, i don't know. i don't know when he will step in. lisa: he has been in talks all weekend and it has not worked. tom: this is gone back to lbj in the early 60's and this is where we are. john: this is the big conversation. the s&p is up 1/10 of 1%.
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i deadline is not a deadline is not a deadline. tom: if the red sox have a deadline, they better win. they lost to baltimore. what is that about? john: from new york, this is bloomberg.
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john: all -- a little bounce after a little market. the bank is up by 3.1% following the biggest one-day slide since may. the nasdaq has sprung since march. it is 1.4 percentage points. we are doing ok with 1.9 percent. the equity market is there so you can guess where the bond market is. the 10 years and the 30 years, this has been really quick. the yields are backing out. it was 14976. yesterday it was upside down. the yields are coming at basis points. it is 2.0477%. i'll get to the faa's markets.
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that catcher attention. dollar strength. euro and dollar are breaking down. it is down by .2%. but the weaker euro, tom, and we want to look at that a little more later today. it is all of the same time. tom: it is a storm. i just fitted the 10 year yield, and it is a standard move. it qualifies as a storm, not a crisis. i have wrestled the numbers, from 112.58, and in the last couple weeks, it is really stark. look at the breakdown of big tech. apple and microsoft from the highs in early september. there been moves. there are massive moves. but some of those single names -- tom: absolutely, no question.
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we are shifting to the equity market to someone who observes the yield space. he has a buick -- bullish view on equity. been laid learn is a market strategist. . ben, you talk about the priors of yield. you talk about the other moments we see yield surge, and you say this time it is different. ben: i think the speed is been different. i think reacting to the bond yield move is not necessarily a rebel. it is the biggest move that we have ever had. more than we had in both quarters. it is a record. we have seen this move before. there was a hundred basis point move yield. there was a lot of #metoo movement -- movement. the market came up 6%, and it
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was not do similar to what we saw in 2013 which is the best year of the decade for equity. the markets is sending us messages. i think this sort of pain is temporary as the market rebounds a little bit. there is variance in what is being destroyed. tom: do we have enough of a draw down or pull back where the cash game is change for corporations? ben: the story for this year has been the lack of volatility. we've had a huge rally and a pullback this year. it is very low. you can make a case for why we might get more volatility, especially with everything that is coming out of washington,
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d.c. and everything coming out of china. the outlook is one, but there will be more volatility in the short term. there will be a rally at the end of the year as we clear this washington and china noise and it subsides. virus cases are down 30% in two weeks. that is set itself for a great recovery in the quarter. expectations are very low, so when we set up a earning speak. earnings peak. they are a fraction of where they were coming out of prior -- so we will support the valuation. john: people are waking up and looking at popular holdings. microsoft, apple, and amazon. they were down at the start of september. they were wondering what to do. i know you cannot do single names, for those big stories,
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that sector, what do you suggest they should do? ben: our nearest parallel was the first quarter. it very quickly recovered. the difference from then is that the yield was much more significant and it was, this time around, what we saw, is higher bond yields and higher valuation. more fluctuation. very quickly, we are reminded that we will see this in the third quarter. it is a strong parallel. they are not necessarily leading. there are financial valuations, but i like to see them going up. john: microsoft is down from the middle of september. the first week of september.
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these are big moves. lisa: they are big moves despite what ben is talking about. revenues are tremendous. at what point can big tech stop moving in lockstep with bond yields? ben: i don't think this is all about bond yields. if it was all about bond yields, then we would look to the microlevel with japan and europe where bond yields are dramatically lower. it would be a lot more expensive. the value sector and this recovery growth potential sets us up for sectors which are both -- most exposed to growth and you least exposed to bond yields. they will do better. that is commodities and financials. they have less sensitivity to the rebound. i think we should be talking about that now that virus cases are coming down. there is more sensitivity to high bond yields.
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i do not think you could say that they are doing particularly badly. valuations have come down for big tech, and the surprise of this year is that there are very strong growth rates that have maybe not come down as quickly as many thought they would do. lisa: the story of this week is the reflation trade. it is a new reflation trade when you look at sectors that are doing the best. energy, and the prospect of perhaps a yield curve. it is not industrials and discretionary as it is -- absorbs higher gas prices and supply chain constraint issues. does this mean something to you in terms of what reflation trade will look like over the next six months? ben: i think it is going to be much more specific. we are more in tune to the supply chain issues. there are a bunch of concerns on chinese growth out there which
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obviously involves materials that we do not have. i will also just say that we may be re-engaging in reflation trade and reflation expectations. the idea of the five-year is still to 23. they really have not moved very much. the fed has hawkish nest. the market has not moved from last week. i think we are at the beginning of that, rather than a big move already. tom: let's review the statistics coming out of 2018. it was up 31%. up 18% the next year. up 15%, john, so far this year. that is a lonely group. john: i remember it well. can we have a repeat of 2013,
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when everything starts to freak out about act -- accommodation. most people remember that year. the treasury move was so burned into memory that we sometimes forget that the equity market was up 30% with the s&p 500. how different is that from this time around? ben: i think we have a lot of this. we were scratched in the first quarter. there was a huge moving treasury yields. equity is up with volatility. this was a big move for equity. we are coming out of the bond market ndc and china for the next month, but we are set up for a rally in the year end, and those concerns are refocused on the growth rate which is a stealth catch up about two re-accelerate. we have seen a lot of data over the last few weeks.
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it was when the virus cases and global virus cases were 30% higher than they are right now. again, i think policy has remained in place. yields are a fraction of where they were coming out of those sessions. valuation will stay high. john: still constructive. a global market strategist. that is the optimistic view at year end. tom: what is important to me is the nuance for those that are bullish, just as there there are bullish for those who are skeptical. john: is it too soon to talk about rallies? lisa: you want to talk about it? go ahead. right now, it is too early, simply because of the unknowns. we are talking about china and oil prices. we are really expecting to see $100 a barrel oil. how did that change inflation? john: we fell around 18.
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we will hear from blank -- bank of america. they are pushing higher. tom: importantly, and we have great leadership yesterday with jeff curry in the early morning, and then with francisco blunts. it was a wonderful look at supply, and she made it clear that saudi arabia is the central banker of oil. are they going to turn on the supply to assist president biden and others? that is the supply question this morning. john: tom keene and lisa as well as myself. the market is up .7%. it is a long week. tom: yes. it is a five day week this week. can we do more geology? we need more canary islands. john: from new york, this is
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bloomberg. >> congressional democrats are at an impasse. they are attempting to deal with three crucial issues. they are trying to prevent that default and push bidens 4.3 trillion dollar deal. they want to raise the debt ceiling. meanwhile, democrats, progressives and moderates, cannot agree on the package. the latest rocket launch involved a hypersonic missile. that will help kim jong-un put nuclear warheads and the high seas. united states is on the defensive. there are 125 mile ranges which are difficult for experts to verify. at the canary islands, the volcano has erected nine days ago and is flowing into the ocean. it will be seen drifting into
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the air. it was 1800 degrees fahrenheit. there is a risk of toxic gas. in china, the government is promising to let house prices change. there is a supply crunch, and the government has been considering raising prices on industrial content. it is called unreasonable -- unreasonable energy demand. powered by more than 20 400 journalists and analysts and more than 100 20 countries. this is bloomberg.
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>> we are beginning to taper
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purchases for substantial further progress towards our goal. we have not met that, but i think we have all but met it on the path we are looking at. we would continue to add accommodation, not subtracted, until well into the middle of next year. john: chairman powell on capitol hill. good morning. this wednesday morning, the price action has bounce back on the s&p. we are up 31. it is the biggest one-day drop since may on the s&p 500. much worst on the nasdaq. .9%. yields have come in at 150 on the u.s. 10 year yields. we are progressing aggressively higher. it is 16. 59. we are hearing from chairman powell little bit later this morning. tom: there are idiosyncrasies that we want to watch. the turkish lira is nine to the
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dollar. i want you to explain substantial further progress and what litter for -- liverpool is doing in football. john: they are the top of the league. tom: they are well-positioned. the french giant insurer, with their support of the gentleman, the lads from liverpool. there is an executive officer who is joining us now. it is client risk. i have to say congratulations on the acuity of your study. you go out and speak to thousands of people. explain why this is different from last year or the others of the thousands you talk to? thomas: we are doing a study for the afa, and what it is important for others to understand is that it is maximizing them.
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you can see the hierarchy is changing over time. last year, the pandemic was the number one risk. we are now seeing that it is back at the top. it is important to understand one of the key risks and also, how can they be solved? >> what would be the key risk for us? are people worried about climate change changing their business, or are they worried about stakeholders turning their back on business because they are not worried enough of climate change? thomas: all of the above. the issue is that we have very many evidences around us that climate change is changing our life. when you look at covid-19, it is invariably connected to climate change. the issue is what we can do about it. how can we change it. in the political arena, there is a strong desire on the legislative front to really push the tradition and accompany --
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and companies and insurers have to fall in line. we are very early on in this game, making sure on the investment side, but also on the underlying side, but we are helping society, helping companies, to make climate change happen, because it is the top risk, not only in the general public, but certainly also for young people that for the first time, we actually have put a specific focus. john: give us some numbers for that. for the underwriting business specifically, have you changed doing business? thomas: we are looking at how we can make sure that we are avoiding companies that are risky. in 2015, it was actually decided to exit the investment side, and we have put the same logic on the others. we are redeploying the investment capacity in green
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areas. however, this is not enough. if you look at the meet of the tradition in the key area, it is about how to help industrial companies move from a mix that is not sustainable to something more sustainable. this is a traditional area, helping invest in a clear and credible tradition plan, and also doing the same on the underwriting sign. that is the journey we are on. lisa: is it more on the insurance side or more on the underwriting side, the investing side? thomas: i believe that on the insurance side it is even more powerful. on the investment side, we are one of many businesses, and if you want funds for a coal factory today, you will them, but on the insurance side, if you do not have insurance, you will not find any. there is a net shirov -- zero insurance allies. we are making sure that you can
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get the largest insurers together to see that risks are not underwritten, and we are helping our insurance oh and the companies that are in transition. lisa: has it been in -- effective? have you seen large company insurances struggle or shift their businesses in response? thomas: on the question around being involved with customer conversations, you can imagine this is not easy, but if we do not go this way, we will not make the transition. on the coal side, it has already happened. on the tradition side, it is currently putting things together. john: on the coal side, have you made a decision that you do not see those companies being insured russian mark or did you make a decision that you cannot put a price on the insurance?
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thomas: someone who does not contribute to the solution of climate is not somebody that we want to invest with. we see the negative effects of this on others. it is also health insurance. when you look at climate-related health issues, they have risked a lot, so it makes absolute sense to be true to ourselves. how can we avoid the risk of the insurance side and also make sure we have a better experience. >> what a position to put yourself in, to decide which company should or should not fail. which companies should and which shouldn't. should they go something else? thomas: there are other areas. if you look at health issues, there are questions about tobacco. when areas where there is a link between industrial activity and negative consequences --
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tobacco, and the first cigarette, it has a negative effect. in 2016 we exited that and redeployed our investments. this needs to continue. it needs to continue in a way that we are a company that our company -- that our customers know we invest in things that help the transition -- john: some people might think that is controversial. sunday is manchester city versus liverpool. we are going to have a prediction. thomas: it is clearly liverpool. they are well-positioned. john: i think there is a message she is trying to send. -- he is trying to send. which team succeeds, which team fails? thank you thomas. some people might find those comments controversial. tom: i thought your follow-up
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questions were very good. can you imagine the branding of axa? i can't. i have no branding right now. what is the sausage place? john: this is bloomberg.
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>> the market is starting to look forward to the healing and develop economies. >> the concern today is whether yields are moving too far, too fast. >> the fed cannot and will not respond to supply-side inflationary shocks. >> if inflation does get too high, it really doesn't matter hawkish ordovician. i think the fed -- hawkish or dovish. i think the fed has to respond. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. jonathan: some calm after a bond market storm. good morning. this is "bloomberg surveillance, " live on tv and radio. alongside tom keene and lisa abramowicz, i'm jonathan ferro. your equity market bouncing back 29 on the s&p, up 0.7%. it is a bounce back. the nasdaq up 0.9%. tom: all we are talking about
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