johnson and alix steel. ♪ guy: wednesday the 29th. 30 to the european close. let's talk about what you need to know out of europe at this hour. stocks are bouncing. bonds are bouncing. this all after yesterday's selloff. we are still on track for a negative month, and many are pointing to the fact that may be today feels like a dead cat ounce. the u.k. -- dead cat bounce. the u.k. is calling up its reserve tanker feet to boost fuel deliveries spike the government saying the situation is fairly stabilizing. rolls-royce talking of petrol, is going to go all electric. we will talk to the ceo later this hour. equity markets are a little higher. yields are lower. we are looking at a pound being put under pressure.

the stoxx 600 is up 0.7%. got a really big pickup after the bank of england last week. we faded that move quite aggressively, down below 1.35%. there's a lot of things happening in the u.k. at the moment. a lot of stresses and strains, emblematic of the inflation narrative we are talking about, the shortages we are seeing on the supply side. alix: here in the u.s., it feels like we are reversing the moves we saw yesterday, with the exception of the dollar. the bloomberg dollar index up again. part of the sterling we may be because of sterling sterling weakness may -- sterling weakness may be because of sterling, but the other part is about the dollar. is it a better recovery today? equities higher, you would lower, crude higher, despite the fact that we saw that inventory build. guy: bruce richards had his were be -- had his warbys on. warby parker indicated to open it $50 to $52 after direct

listing. interesting what stacey cunningham said at the nyse, that may be choppy markets point you in the direction of direct listings. thing that is something we are going to pay attention to. but it looks like at the moment it is $50, 52 dollars. we will keep you up to speed with exactly what it looks like when it goes out the door. let's turn back to what is happening with the european economy. tb governing council member -- and ecb governing councilmember says policy must be ready to respond to potential he higher inflation. spoke to broome be -- spoke to bloomberg's francine lacqua earlier. >> that is the risk we need to be very conscious and aware of and ready to respond to if it happens. of course, the pandemic could have also resulted in structural change that pushes in the opposite direction, so right now , i think the key word is vigilance. guy: let's talk about what

higher rates potentially could mean for the credit markets, both here in europe and around the world. winnie cisar are, creditsights global head -- winnie cisar, creditsights global head of strategy, joining us now. we saw a big repricing yesterday. relative to history, it wasn't that big, but where we are now, it feels substantial. what does that mean for the credit portfolios you look at? winnie: it means we are sitting on some total return losses, which probably doesn't feel particularly good for a lot of credit investors. that really affirmed our outlook that investors should be preferring credit risk to duration risk right now. curbs are flat, even with the moving needles we have seen, and economic fundamentals are still recovering, and pretty much on pace to remain really intact from a credit perspective, despite the fact that we have a lot of headaches when it comes to inflation. alix: it does seem that the u.s.

and the u.k. maybe on a different trajectory when it comes to the ecb. breakevens higher here, not really moving anywhere in europe. real rates moving higher here, not really moving in europe. i wonder what kind of relative opportunity that might unfold. winnie: that is a really good point. in the u.k., you obviously have compounded headaches related to brexit, with supply chains and labor and inflation. i think it is important to consider that the fed is the really significant driver of global monetary policy. the u.s. markets are the most liquid. they are the largest. when investors are considering global relative value, particularly in fixed income, i think the u.s. is going to lead the way because a lot of investors are viewing the u.s. markets as a cash surrogate right now, and really keeping a keen ion the fed, and just expecting a lot of the other central banks to be a bit more of a follower, despite the fact

that we have seen some hawkish messaging and tightening from some of the european central bank's, from some of the em central banks. it is a really interesting study in contrast across exton come in the rates market -- across fixed income and the rates market. guy: should we be worrying about the credit market in this kind of environment? there's a lot of stresses and strains on companies, but companies have cash. where do you think the stresses and strains are going to show up as we start potentially to see rates going higher, we potentially see tapering coming through from the fed and the bank of england as well? how big a buffer do you think that cash is going to be? winnie: i think the buffer is pretty tremendous right now. over the past 18 months, all we have done is see issuers really load up on cash, fortify their balance sheets, and try to make sure they have enough liquidity to preserve for a rainy day or for more challenges to come.

the big question i am asking myself and talking to investors about his over the next three to six months, how do companies use that cash? are we going to see leveraging and debt paydown? probably not, given how cheap borrowing costs are now. instead, i think we are going to see a lot of cash cycle back into the equity side of things, given that share buyback programs, and that is actually the more challenging fun the middle catalyst i am looking for right now. i feel pretty confident about most abilities to manage through the supply and inflation headaches, but once we start directing cash towards equityholders instead of into the business more towards bondholders, that is where fundamentals start to get a little bit more concerning. alix: it feels like the question for equity investors when it comes to value, if you have higher inflation, if you have higher rates, you would think that means you're going to have a shift into value, which leads

you to europe. but i wonder what the knock on effect is when it comes to the credit market there and sovereigns over there. is there an equal trade to that? winnie: that is a little bit harder to say. in the european credit markets, we have been focused much more on seeking credit risk rather than duration, looking for things like hybrids or the energy sector, where you are still getting some yield and relatively short duration. the european credit markets benefit from shorter duration relative to the u.s. overall, but absolute yields are so low that it is really hard to look at that and say this is the time to really go in whole hog right now. but one of the things i think is really interesting is the european credit markets have been very resilient amid the broader volatility backdrop we have seen. guy: what about the rest of the world? we have talked about the u.s.. we have talked about what is happening here in europe. how infected could global credit

be by what is happening with evergrande? we were talking a few minutes ago about this subject. i am wondering if there are factors that could knock what appears to be a very solid credit picture you have just laid out off course, and do some of those risks minute from outside of europe and outside the united states? winnie: i think that is a good point. investors have been keenly focused on that. right now, our general view is that a takedown of evergrande into default is probably not going to have systemic issues given that much of the global banking community is fairly well inflated for really outsized exposure, and that is where you start to get very concerned about global contagion. so the reality is that chinese growth and gdp is pretty gross in gdp is pretty -- growth in gdp is pretty sick of for global growth. the offset to that is then you

potentially have a little bit less pressure on central banks to be aggressively, and the current context, tightening monetary policy. so there are some gives and takes there, but china and how the evergrande situation plays out, the applications for growth there and global growth is something we are monitoring closely, particularly in conjunction with all of the u.s. debt ceiling negotiations, or non-negotiations, that are occurring right now. it feels like a little bit of a perfect storm. alix: negotiations or none negotiations, i think that is perfectly said. -- or non-negotiations, i think that is perfect he said. there's the debt ceiling, the budget funding. what are some of the biggest one for 2022? eurasia group is out with its annual report. ian bremmer, eurasia group president, will be joining us next. this is bloomberg. ♪

ritika: let's check in on the bloomberg first word news. congressional democrats are at an impasse. they have had a wall in an attempt to deal with three critical issues, to avoid a government shutdown, avert a debt default, and advanced president biden's agenda. democratic progressives and moderates can't agree on the giant tax spending package. in japan, fumio kishida is set to become the next prime minister. the former foreign minister won the leadership of the country's ruling party and is expected to be named to succeed outgoing prime minister yoshihide suga. he will face an immediate test of his broader appeal and a

general election that must be held by november. the u.s. and european union are expected to kick the inaugural meeting of the trade and technology council in pittsburgh today with an announcement on semiconductors. it will focus on shorter-term supply chains. biden adminstration officials also told reporters there will be commitments on artificial intelligence and global trade challenges. global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'm ritika gupta. this is bloomberg. alix: thanks so much. you have u.s. and eu officials meeting in pittsburgh, talking about the global trip shortage. that is just one problem facing the global landscape for the rest of this year and really into 2020. joining us now for more is ian bremmer, eurasia group president. you guys just did a report that you put together. you interviewed a lot of individuals, a lot of companies. what did you find they see some

of the top risks right now? ian: the good news is that for the first time in a couple of years, the pandemic is not on top of the list, and it is because people do recognize that we have the tools to respond, even if it is taking longer and there are stops and starts. but on climate and on cyber in particular, at the top of the list, getting much worse than previous years, and understanding that there isn't global leadership, there isn't global coordination, and the consequence, the challenges are growing. guy: in terms of how that challenge is going to grow, ultimately are we settling down into what some call a new cold war? china obviously a big part of american foreign policy focus right now. russia, when it comes to the cyber story, front and center. are we basically getting back into that kind of a mentality where we are segmenting the world?

the global story is gone? ian: no, the global story is gone, but we are not heading into a new cold war. there are two reasons for that. the first is that if you look at the global economy, most of the key participants in the american economy are either maintaining steady-state interdependence with china or they are increasing their exposure into the p.r.c.. a few are decoupling, and those indeed do matter, but the politics coming from washington and beijing don't reflect the underlying economic realities, and that is really important. the other reason we are not heading into a new cold war is because in both the united states and china, there is increasingly inward focus. the bigger priority in the united states is $3 trillion in it for structure. the bigger priorities in china are things like evergrande, trying to get their technology sector under control, the private sector from the government. that creates enormous lack of

global coordination, but not because we are fighting the chinese. rather because neither country really cares about global leadership. a very different kind of scenario. alix: at the same time, it feels like everyone wants to collaborate or work together on climate change. even when it comes to friends and u.s., they are going head-to-head about the submarine issue, but we will also go to cop26 and be happy. how do we work together on these things and not have global leadership on anything else? ian: there's a lot more grassroots movement towards renewable energy. that has translated into corporates, financial institutions, and the eu doing a lot. the united states did nothing for four years. now we have a president focusing a lot more. but the announcement that we are going to be net zero by 2050 is very different from something that is actually passed through congress that shows how we will do it.

we don't have that. china, the largest emitter of carbon in the world, 2060 net zero plan, no idea how they are going to get there. they just announced last week they stopped doing coal financing outside of china. but they are not doing any coal financing outside of china. having said that, in the last year, there's been more new coal investment inside china than the rest of the world combined, so this summit coming up, you are going to have virtually no coordination between the u.s. and china, very little trust between the wealthy countries of the world and the developing countries of the world, who are being asked to do a lot more, but not being financed for it. guy: let's come back to the issue that alix raised, and that is that china wants to link every issues together. it can't segment them into different buckets. foreign policy links what is happening on climate with submarines and geopolitics. how do we make progress in each

of these different silos and avenues if the chinese are linking them together? because they are all going to move at different speed and they've all got different issues. ian: the fact that there isn't a cold war doesn't mean there is trust, doesn't mean that there's any sort of cooperation or even managed competition. the competition that is occurring between our countries right now is unmanaged, and you are right, the chinese government is basically saying that unless we are sitting down and talking with them on how to work through our challenges on artificial intelligence, on semiconductors, on trade and ip, and cooperate with them, they are not prepared cooperate with us on things that we want like climate. i don't see that happening in the near future. i don't see a breakthrough precisely because inside the united states, biden said we are not in a cold war in his you in -- in his un simply speech, but we know that one issue the entire spectrum agrees on is we

want to take a harder line politically on china. we want to boycott the olympics, at least diplomatically, coming up next year. they are ripping off our ip. they are right in gauged in malware attacks. they are building up their military cape abilities. it is a long list, and i don't see a breakthrough between the americans and chinese anytime soon. alix: how do you categorize the relationship between the u.s. and europe right now, and what risk might that pose, or not, in 2022? ian: i think the europeans, clearly brexit was a big problem for the transatlantic relationship. it is the country that the americans are not only closest to come up also most strategically aligned because we both think about national security and intelligence, more engagement in the end of pacific, all of that.

all europeans have their focus on national security. but the french are the third-largest military exporters in the world after the u.s. and russia, and they aren't as aligned. the rest of the europe doesn't see the world through a national security lens at all. they focus more on trade and economic interests. the baseline of the relationship is not only less coordinated, but less important. the americans are pivoting into asia, focusing more on the quad where biden just had that first in person meeting in the white house a week ago. they are focusing more on the new defense pact with the australians and the u.k., while the europeans not only will not have merkel, who has been the strongest leader from europe and also aligned on multilateral is in for the last 16 years, but they aren't as coordinated or as trusted, as trusting as the americans -- as trusting of the

americans. that is almost as true with the biden administration as it was with trump which is really quite something. guy: what does europe do next? we've got a french election coming up as well, so who ultimately knows who will be in the elysees coming up next year. what are europe's options if it wants to be more relevant in this world that sees the u.s. pivoting towards asia, towards china? ian: where does it leave europe? it is a centrist but weaker german chancellor. it is macron probably winning, but was almost 45% of the french populace supporting people like le pen who are strongly antiestablishment, burn it all down types. mario draghi is fantastic, but it is italy. new prime minister's happen every few months there. so what it means is weaker individual government leadership

by countries in europe, but brussels and europe in terms of regulatory leadership, not on national security, but on climate, trade, on tax, on data, on privacy actually mattering more. where the united states and china are turning more inward and having their own domestic challenges, frankly, there is more space for the europeans, but not in terms of the kinds of global policeman role that the americans used to play because that is just not where european power is, and it is not an interest that any of the europeans other than the french actually have. alix: one could argue that president biden has already made some and policy mistakes. what is the biggest risk that the u.s. a adminstration does now? ian: the biggest risk is that they fail at the $3 trillion of domestic spend they are trying to get because that

would be by far the sigel biggest thing he needs to accomplish as president. having said that, it is an enormous priority. part of the reason they screwed up on the afghanistan execution of withdrawal is because it just isn't a high priority of the allies in europe or middle east that are upset with biden. biden's over woman priority -- bidens overwhelming priority is to ensure that progressives as well as manchin and synema in the senate get together on the steel. if that happens under biden, it matters -- and sinema in the senate get together on this deal. if that happens under biden, it matters. guy: ian bremmer there of eurasia group. this is bloomberg. ♪ ♪

guy: we are heading into the close here in europe. a gap higher first thing this morning, largely held. we are off our earlier lows, and the green for most of the day. london outperforming today. the ftse 100 may be getting a boost to the pound as well. the dax and the cac 40 bouncing back after big losses yesterday. we will dig into the details in just a moment to give you an idea of what is going on exactly. quite interesting sector rotation story developing as well. the other thing i want to mention is we are going to be talking more about the ev transition. talking to lucid in the last hour. . this hour, rolls-royce. the company announcing today it is going to stop selling gas cars. it is going ev. the new car is going to be called the spectra. the ceo is going to join us next. ♪

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guy: after being battered yesterday, european stocks

bouncing back. some people talking about a dead counts -- a dead count about -- the debt cat bounce, i.e. not convincing -- a dead count bounce, i.e. not convincing. was it a deficits care, was it driven out of the u.k., or was it fears about what is going to happen with the united states and what is going on with d.c. in terms of the funding story? today we bounce back. the ftse is outperforming. up 1.2%. the pound is going down. a mechanical process in terms of translating earnings. the sterling story giving the ftse a boost. this was market up 1.5%. this is how the session looks. does not capture the gap higher. we did get a gap first thing this morning. reasonably tight range. 455.

we have been up to 475 on the stoxx 600. well below where we were then. we look at the longer-term charts it looks more positive. let's talk about the sector rotation story. this is what we're looking at in terms of moving. we did have a fairly big emphasis on what is happening with the oil and gas and the mining story. that gave london a boost. today we are seeing the car sector bouncing back. health care getting a bid. retail and the food and beverage sector. the bottom end there is concern about longer duration assets. concern that europeans -- if we are going to see a change in the rate environment might look vulnerable to that valuation story. let's talk about some of the names we are focusing on. a downgrade from royal mail. the concern is lived logistics businesses, and royal mail is big into parcel delivery.

labor shortages and labor costs. that will impact the middle of the margin story. the other end of the story, the e-commerce sector. home interiors retailer coming through, storming numbers, upgrading their figures once again. this is the second or third time they have done this. the power coming through from their e-commerce platform delivering. asml, it builds the kit you use to build chips. if you know there's a shortage of chips at the moment, and as a result of which asml pointing to a long-term cycle a very strong demand for this. it was interesting to see the macron story in relation to this. nevertheless, the kit

manufacturers seeing a very positive story going forward from here. alix: we want to update you on -- it is a direct listing. we are higher as we are heading towards a full opening on warby parker. let's get more on asml. bloomberg's ian king joins us. asml had 10 years of surging demand. why is this down? ian: the company is up more than 60% this year and the reason it is up more than 60% as everyone knows if you want to make chips, this is where you go. there is nobody else that competes with them, project lead type of technology that becomes absolutely essential to making the chips. that is a widely known thing.

that is no secret. guy: in terms of how strong demand is going to be, how short is the market of the kit that makes the chip? how much are we talking about? ian: it is not a shortage of the machinery, it is more of the leadtimes. if you told me let's make a chip factory, can we start production tomorrow, i would be telling you know? that will be $15 billion and probably 18 months before we can think about opening the doors to production. that is what you're talking about is inertia. all of these companies, i need to ramp up my investments, ramp up my productions, and asml is one of the biggest beneficiaries. you did not get a machine tomorrow, you get a machine in three or six months time. guy: that is a serious leadtime story. ian king on asml. automakers focusing on the chip

story, stepping up their pivot to ev. earlier we spoke to the loosened motors ceo. >> we are pushing as hard as we can to satisfy as many as we possibly can. we will ramp production up significantly. what really matters right now is not getting rushed into driving numbers down the line, making sure each customer receives a quality product. we are on track to ramp up to 20,000 units next year with a target of 50,000 in 2023. guy: lucid relatively new on the block, certainly compared to rolls-royce. today it is making its pivot. rolls-royce announcing it. making internal combustion engines by 2030, announcing today a new vehicle called the specter.

i understand there is no relationship between the bond movie coming out and this new vehicle being confirmed today. the ceo torsten muller-otvos joining us now. let's talk about the pivot to electric vehicles. you said in the past, and you said a number of times you want to hang on to the ice engines for as long as possible. that is a quote from you. why are you accelerating this move to the eeev? why make the decision now? why not hang onto the ice engines? torsten: i still, first of all, hello. it is great to be on the show. with specter we start to introduce electrification step-by-step in our model range, and as you rightly pointed out by 2030 it is fully electrified.

that still means nine years to go. rest assured we are proud and i stick to my word we will carry it as long as possible. the last we will sell will be in 2030. in between we need to prepare ourselves for what i say is the next generation for propulsion. that will be electric. we have decided that for our brand we will go electric. it fits perfect to the brand. it is as talky as our great 12 cylinder engines. it delivers the flight of land feeling and is well-suited for rolls-royce. we are not defining ourselves about engine noises or combustion sounds or exhaust pipe sounds, and for that reason electrification is spot on for us. it is not accelerated. i think we are proud we are the first ones in the luxury segment going full electric, and rightly

so. from there we go. guy: -- alix: i hear that you do not think the strategy is different from what you've laid out before, but bmw is doing it differently. they will make combustion engines, hybrids, fully electric, they will do all of it while you transition to 2030 and just do ev? . how does that work internally? torsten: very good. we are not a car business. we are a luxury goods business. our customers are buying rolls-royce not for mere transportation. we have very different driving patterns. they are mainly used for commuting into the city, commuting out of the city, usually around cities, using the car for a weekend drive, but none of our clients is going

long distance. for that reason electrification is perfect. we will offer a suitable and sufficient range in our car. also you need to understand many of our clients already own an electric car in their portfolio of cars. for them it is not new. i think they have charging at home, they have charging at the office locations. for us, big worry about the infrastructure. it fits well and is right for us as a luxury brand. the strategy to diversify and to have different drivetrains is probably the right one. guy: what is it going to mean for the factory in goodwood? how big of a shift will it be in terms of the number of people you will need to employ?

how important is the drivetrain there? how important will it be in terms of the way you will reposition the vehicles? i wonder how big a shift this will be in terms of the nuts and bolts of building cars for rolls-royce? torsten: it will be a shift. that is for sure. we are already in the phase to prepare the plan for building the cars. one thing is also sure. it will be a rolls-royce and it will be handmade, crafted by hand. it will take 100 hours, as it is with all other rolls-royce models. this focus possible up to your imagination. it will be fully embedded in rolls-royce at goodwood. for that reason it is technically a big transformation that happens currently in our plant. from education levels, from training levels for our people, that is something we have started already a couple of years ago to prepare ourselves

for the next step into electrification. when this car ramps up in volume at the end of 2023, we were well prepared this happens. nobody in goodwood needs to be worried about his job. we said that already. we have prepared ourselves in the right direction. we train people into new qualifications. that is all done and dusted already. alix: we ended the european close talking about asml and the chip shortage and how they will see a strong decade of demand. i can appreciate how your buyers are not price-sensitive so you may have nice passed in terms of pricing. can you give me some perspective on the shortages you are seeing? torsten: we are very lucky to be part of the bmw group, and for that reason we are well served with all semiconductors we need. rightly so, knowing the contribution margins and how profitable our business is and

for that reason we are not running short. we can satisfy the unprecedented demand worldwide for our products. we are seeing at a book as strong as i've ever seen it and for that reason we are in good shape and well situated with semiconductors. guy: one final quick question from me. we were just talking to lucid motors, and one of their big focuses will be on ai and autonomous. we are seeing the same thing of tesla, we are seeing the same thing at volkswagen, a huge amount of investment into software. bmw making big investments as well. when you think about a rolls-royce going forward, how much of it will be about the physical product and how much will be about the software that goes with it? how different will the experience be when we get to autonomous? that is not that far away, potentially. torsten: i think economists will

come into the brand of rolls-royce. the question is when. all of our clients have access to a chauffeur come obviously you need to know that 80% of our cars are self driven. a chauffeur is always around. the chauffeur is not only the person who shivers the car. the chauffeur is often the right-hand assistant to the owner. for that reason something you cannot easily substitute by artificial intelligence. it is far more than just somebody driving a car. it is your friend, your secretary who helps you in your daily life. for that reason probably not so easy to be substituted. definitely the time will come when rolls-royce's will be autonomously driving but we are doing a time it fits our customers. nothing else. guy: we will leave it there.

thank you very much indeed. torsten joining us from goodwood. let's talk about the european stock market. these are the final numbers. a bounce back from yesterday. the ftse outperforming, up 1.1%. the dax up. carmakers trading strongly. the cac 40 up .8%. this is bloomberg.

ritika: this is the european close. coming up, united airlines ceo spot kirby at 1:00 in new york, 6:00 in london. this is bloomberg. alix: live from new york, i'm alix steel with guy johnson in

london. one of the biggest risks coming out of d.c. is the debt ceiling. you have a budget, and have two infrastructure bills. president biden is facing a pivotal date. for more return to washington correspondent annmarie hordern. every day feels pivotal. why is today extra pivotal? annmarie: there is a lot this administration is trying to get done. first on the list is avoiding a government shutdown, which would happen at 12:00 on friday. speaking on the senate floor, senator schumer said they would move in action on that. this would be more of a clean bill and would not include the debt ceiling which has become controversial between the two sides. potentially that gets dealt with today. then senator schumer said they would not go through reconciliation to avoid the debt ceiling drama. republicans -- democrats are

urging them to do this bipartisan or at least allow a simple majority vote in the senate. right now the republicans say no. those are the first things. the second is tomorrow they're supposed to be a vote on the heart infrastructure bill. -- progressives in the democratic party are saying they can tank that bill because they do not see enough being done on reconciliation. the people who have the keys to unlock the negotiation are the two moderate senators, senator manchin from west virginia and senator kyrsten sinema of arizona. they had a meeting personally with the president and we are waiting to see whether or not there can be some sort of deal so that vote can go ahead. if not, potentially this could be weeks or months of debating in congress for the president's economic agenda. it is not embarrassing but we are also in the middle of the pandemic. guy: it seems to be stalling in

a fairly embarrassing way for the president, potentially. thank you very much, indeed. we will see what progress ultimately is made. there seem to be a lot of plates spinning. let's talk about what is happening with the world of central banks. we focused yesterday on treasury secretary janet yellen and jay powell giving testimony to the senate banking committee. today we have date two of the ecb forum, it used to be called sintra. basically we are awaiting a panel of some of the world central banks. we have governor kuroda speaking right now. i think we have jay powell on the session, we have governor bailey and christine lagarde will joining us now percent of what we can hear from the central banks is bloomberg's international course be -- international economics and policy correspondent michael mckee. in some ways the central banks are increasingly on a different pages. michael: that is what makes it interesting.

they are all in the same boat, reopening economies after the pandemic shut down. they are dealing with different problems. the ecb has inflation rising on a headline basis but not so much on the core. they want to stimulate because the economies of the eurozone are running at different speeds. the united states, jay powell, we have heard a lot from him. they have a question of how hard they let inflation run. it is higher than they were else but also growth is stronger. he is in a different place. kuroda has a new prime minister who will spend a lot of money on fiscal stimulus, or he says he is, so how does he handle that? this is the day kuroda becomes the longest serving of the central bankers. andrew bailey is in the unusual position of dealing not just with the pandemic reopening, but

brexit and the shortages that is creating. they have inflation high enough the bank of england is already talking about the possibility of rate increases. alix: talk about the sequencing a little bit. if we look at the u.s. and the u.k. which would be inching more closely to tightening monetary policy, the sequencing is very different. what are the different effects of that? michael: it depends how the timing works out. if the bank of england goes first and raises rates it will not have a huge impact on the rest of the world. if the u.s. starts tightening policy it will have a major impact because there'll will be spillover effects to emerging markets and those will spill over to some of the other big markets as well. some of the major central banks. the european central bank is trying to stay out of that, but the problem christine lagarde has is what happens elsewhere bleeds over. people will be watching to see if they can hold out and continue their efforts to try to

boost the economy through monetary policy. guy: we were told time and again it would be easier to control inflation because central banks had a long history of controlling inflation and understood what the tools were, then dealing with his inflation. is that true? michael: it depends on what you mean, dealing with it. if you're talking about central bank response, it is easier to deal with inflation because you raise interest rates. what we have found with low inflation is just cutting interest rates does not raise it. in japan it is found that doing a lot of qe does not raise inflation, either. if your inflation is too low, central banks are constrained. alix: thanks a lot. we want to listen into christine lagarde who is speaking at this forum. pres. lagarde: an unusual recession followed by an unusual recovery.

it is an unusual recovery because it is the steepest recovery we have seen in the euro area since 1975. by the end of 2021 the euro area will be back to pre-pandemic levels and we will move back to the trend that it was on before the pandemic hit us. this recovery is very unusual, very rapid. i would say it has been largely attributable to the rapid vaccination campaign, because now over 70% of the population over the age of 12 is fully vaccinated. it is attributable to the removal of the containment and the lockdown measures that have been virtually removed in all euro area except for some social distance protection such as the wearing of masks. it has not stopped or reduced the activity, both in manufacturing and in services,

which have picked up significantly. we have seen interesting reaction on the part of those who suddenly were released in the sense that we have seen a pickup of purchases of goods, which was very unusual, and of course the services has been seriously accelerating. we are seeing unusual instruments to try to measure that, mobility measurements are clearly showing people are going back to consuming services and sometimes more than they had before the pandemic. contrary to last year, where we said there was a sea of uncertainty, the sea has receded , but we still have uncertainty. the uncertainty offered -- operates as a threat. alix: you been listening to the ecb forum on central banking. you have jay powell and kuroda

and andrew bailey talking as well. christine lagarde saying europe is back from the break but not out of the woods. a more conservative estimate that he would hear from other central bankers like jay powell. you can follow along with this on bloomberg clive:. no doubt, that will be -- on bloomberg live . interesting to parse the difference between what bailey, powell, and lagarde say. guy: i am fascinating with what andrew bailey has to say. he seems to be changing mood around the u.k. story. "balance of power is coming up. the cable is up next. this is bloomberg. ♪

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>> from the world of politics to the world of business, this is "balance of power" with david

westin. ♪ david: from bloomberg's world headquarters in new york to our tv and radio audiences worldwide, welcome to "balance of power." another big day on capitol hill. with time running out and a government that will run out of money at midnight tomorrow. today go through a hectic day we welcome washington correspondent annmarie hordern reporting from capitol hill. 36 hours is all they have got. a lot of federal employees wondering if they will get paid friday. how do they get from here to there? annmarie: social security checks, money to troops, number of issues will come up at 12:01 friday morning if they do not keep the government afloat and they run out the fiscal year. at the end of this morning senator schumer had said