tv Bloomberg Markets European Open Bloomberg January 12, 2022 3:00am-4:00am EST
with a lockdown breaking gathering. francine: it is something that a lot of foreigners do not know what it is. this is not playing out in the markets, although it is some of the things we are looking at. for the moment, it is a buoyant move with gains across the board after the fed chair reassured the markets that he will deal with inflation. tom: it puts in coming fed chair jay powell with a goldilocks moment. talking about normalization and a long road to getting there. we highlighted what jeffery gardner had to say. he is on recession watch. the read across hong kong as well. we cross into europe and the futures are pointing out. the cac is up 8%.
we see the things was boris johnson still ongoing in the u.k.. the leadership at the -- in spain says we should start looking at omicron as an endemic rather than a pandemic. the s&p 500 and nasdaq came through very strongly yesterday. the u.s. 10 year at 174. brent remains elevated at $83 a barrel. there is arguments that the producers are not going to be able to meet that demand within the commodity space. we saw supplier disruption yesterday in brazil with iron or up 2%.
we have the softer inflationary picture out of china and the pboc may step up rate cuts to support that. francine: it is a buoyant day for today. if you look at treasuries, the powers of bloomberg if you have it on your ipad, the treasuries are finding that move. we saw sales of the 10 year move. in terms of what we are seeing across the board, sectors that are moving. basic resources and energy are doing well. there is pressure on health care but that has to do with the omicron and vaccines. we had wild gyrations on monday with the tech scene. tech and food and beverage are some of the worst performers. tom: that was an upgrade to the
earnings for the four year, suggesting there was a stronger mark reflected in the price action today. just eat is seeing a different picture. fourth-quarter sales came below the third quarter. that is down 0.18%. phillips down almost 10%. they did updates in terms of their forecast coming in below estimates, so we could see a potential 1% drop in sales for the full year of 2021. this is amid freight pressures for that company as well. let us get the bloomberg business feis with leigh-ann gerrans. leigh-ann: a standalone wealth management team in china on how
mutual funds should be effective. the teller has already worked on the studies and the plan is now under management. the move would make stanchart the wealth producers in china. limit supply to the global hold up. the ps5 consul has been in scarce supply in december 2020. morgan stanley is reported to be doubling its stock in paris. the newspapers said that they have 300 bankers in the country by the end of 2023 up from 150 currently.
and informal talks with the hong kong stock exchange about listing the financial times with ability requirements. they are expecting this giant to be compliant in evan d to 80% of its china securities. that is your bloomberg business flash. francine: federal reserve chairman jay powell will not hesitate to act to display inflation claims -- dispute inflation claims. he assured congress that 2022 will be a year of age percent. >> we and all mainstream forecasters forecasted that we would be seeing lower inflation by now. that is not what happened. the economy no longer needs or wants highly accommodative policies we have had in place to deal with the pandemic.
we are going to end our asset purchases in march, meaning we will be raising rates over the course of the year. at some point later this year, we will allow the balance sheet to pop up. it is time for us to move away from those emerging pandemic settings to a normal level. but it is a long road to normal from where we are. francine: we have our bloomberg reporter kristine aquino and our guest karen ward from jp morgan. charts, you have great charts today. i am excited about dxy. they have gone nowhere since november, but they have moved since november. kristine: it is interesting seeing the play with the markets
at the moment, and you can play that was the fact that the normalization process has been in the works at the desk for a while. we see that process being built into the market even before we began. we got indications from jay powell and the rest of the fomc on the number. those rate hikes really built up the last few months of 2021. the dollar has responded to that accordingly, and some of the fed gains that the dollar will have will be seen. tom: we will also bring in karen ward from jp morgan. what is the read across for the global market as a result of they constrained greenback? karen: the dollar is the result. it is not just eight u.s. story as we see -- a u.s. story as we
see in the next few months. not only is that a synchronized british story, but a synchronized global story. the rise we are seeing in real yields over the next six weeks has been a global phenomenon. i suspect that as that confidence builds in developed world, then the dollar will decline further. francine: there is quite a lot of valuation headwinds and i understand the dropping mood will put pressure on those. what is your prediction for 2022? karen: if you think about the last two years, the nature of the pandemic was very good for tech, for growth, because not
only did the demand put earnings in the sector for those companies, there are interest rates that were very good for those in the market. as we go forward with the demands and earnings story running, higher interest rates are because that is influencing the rotation. that is an environment that we are seeing over the past year that is more challenging for the gray areas in the market, but it is more supported by other areas in the market like the financials and industrial. a regional rotation as well and regional benchmarks are march -- much more value heavy. tom: that is sustained rotation as the key theme. when it comes to the growth
story, 2021 gave any of these companies the ability to continue expanding in terms of the stock price, even if they were not possible. we had the liquidity come through the central banks. that is not the case this year. the earnings season is under pressure that they can actually turn a profit. kristine: absolutely. it is profits not profit that will matter for 2022. it is about delivering on that narrative of high-growth for some of the companies that we have seen absolutely gain ground over the last fears. we have talked about -- last few years. we have talked about the move we have seen over 2021, but 2022 is going to be the year where investors will start demanding a
result to back up this narrative of exciting growth potential for these companies. that is being brought on by the fact that these sectors will have less to rely on in the way of monetary policy support. they are going to have to start standing on their own two legs, and results are the best way to show that. francine: karen, are you confident that some of these supply chain challenges will ease this year? karen: eventually, but i do not think it is going to be quick. i think the supply chain bottleneck will persist because omicron is a big feature of daily life in the west. it is spreading into the emerging world, and that is going to lead to interruptions. the inflation story to me is about the labor market, and that is what -- the rate markets are
tom: happy wednesday and welcome back to the open. we are 15 minutes into european trading day. gains of 5% across-the-board. every index is solidly in the green after the performance from wall street. asia is doing well as well. every sector apart from health care is in the green this morning. inflation in china. it is rising at a faster -- slower pace last month compared to november. that is according to the pboc. there is some space to recover
from that. still with us is karen ward with jp morgan. what do you make of the rates in china? karen: the story is the very positive news they have about interest rates. the overall theme is exactly that. last year, china height its myriad of spending. you had china tightening while global markets were using, and we look at this year -- were easing, and we look at this year. coupled with a macro picture which is relatively resilient, not least because it has strong
export demand. with the tighter turn, you could have investors coming back and chinese markets again have valuation after the stumble last year. francine: was there a misunderstanding or mispricing about what china could do? did that lead to discrepancy the -- in the markets that you can take advantage of? karen: i think that is right. it is understandable for investors. the question is, what is their agenda? what is the strategic ambition of beijing? as i interpret the intervention was that we need to have slightly lower sustained growth to be more balanced. everything they did, whether it was regulatory moves they made
or whether the property market and what they did was macro policy, more sustainable and more diversified growth. it does not change the way you pick the stocks you focus on, but the overall narrative is there. that was one of six directions we like from beijing. that would provide some comfort to international investors that comes back. tom: we had a little bit from ray dalio about china. in terms of omicron, is that the key risk for china? is it about their zero covid policy? karen: i think it is the key risk.
the variant is highly transmissible and will require these targeted restrictions. to be fair, in the last two years, it was. china had efficiently managed their external border and it has worked. need to give them the benefit of the doubt. it is a key risk. i spoke to my colleague yesterday who talked about big stories around how they plan to bring the global economy into china. that comes into the supporting arenas and approach to buses. it is a highly thought out plan. it is a key risk, but we have seen the manage it. francine: karen, thank you so
open. you can see that we are responding to the cpi figures yesterday and the fed chair really tried to ensure lawmakers and investors that he was trying to handle inflation. you saw the yields on the 10 year holding onto a drop in the curve with yields flattening. the fed has also been caught up in a scandal with trade officials in 2020. in his reconfirmation hearing, powell says that the organization will be handling the scandal. >> we are governing the investigation by principles and the inability to actively trade on the senior fed officials. this is the strongest i have seen in place for a summer --
government agency, and it does a krach -- does address the current situation. francine: joining us now is our reporter. why are people not more at arms? reporter: the big issue that u.s. voters are concerned about is the issue of inflation. that is overshadowing some of these ethics issues. people might evaluate what they are and are not doing when it comes to inflation. strategically, clarida's decision to step down on the's confirmation hearing -- on powell's confirmation hearing is more than what he ultimately did. the timing was very personal and
it took the pressure off of jay powell at his hearing. and the fact that we are seeing these ethics reports being put in place, jay powell just talked about it and gave them some reading room about how they are going to respond to these ethics crises that have come out. tom: are they going to change the makeup of the fed at any way? reporter: we know there are three open seats on the fed right now that president biden is going to have to name to those positions. these ethics sandals -- scandals that have come out they contribute to a delay we have seen. he was originally going to name these nominations by labor day, and now we are into the new year , so that means there is going to be a higher level of ethics that remain and that may have an
influence on who he picks. it certainly has had an influence on the timetable of this being laid out. francine: what efforts are congress making to this trade by policymakers? reporter: yesterday there was a report that kevin mccarthy, the leader of the house right now, is looking into stamping current members' trades in congress. if he does become speaker in the republican november midterms, he would stop the stock trades.
francine: welcome back to the open. 30 minutes into european trading day. here are your top stories. stocks rise as jay powell seeks to keep inflation in check. investors brace for cpi as a four year high in u.s. trades. securities on the pause to an idea for investors, the idea that has been confirmed at $22 billion. when you have a view on
everything, what we think on the markets is that the cpi and the fed tried to reassure the markets yesterday. tom: the forecast is the highest level since 1992. the s&p 500 breaking 30 days of losses. take a look at hs tech over in hong kong. you are looking at 5%, a pickup. stocks in china are moderating as well, giving the pboc more leverage as they wrestle with the spread of delta and omicron. gains of 0.3% across the european benchmark. the cac is also open and the u.k. is opening on the upside. should investors start to think about political risk in the u.k.? there is pressure on the prime
minister over partygate. he is facing pressure to resign. let us see how this is playing out across the sectors. iron ore placing out at 2.5%. up almost 2% in basic resources, followed by energy and industrial on the list. modest losses for what you are seeing. health care is up 0.3%. that is the picture 30 minutes into your trading session. francine: we have rising inflation and europeans are facing their own price green. it shows that households in the euro zone are more worried about rising prices than at any time in the century. we are joined by jari stehn, the
managing director and chief european economist at goldman sachs. the ecb would be the big cyclical. jari: the two big economies are in different stages in the cycle. we are seeing it happen everywhere in balanced economies, including the euro area, but we look at wage growth still running somewhere below pre-covid levels. we do think the inflation that we see here will confirm more gradually on an underlying basis. we saw the peak in inflation in the euro area in december. we had special factors dropping
out in january, and inflation will fall below 2% by the end of the year in the euro area. that contrasts with what we expect in the u.s. and the u.k., where we have inflation at 2.5%. that's drives a sharp divide between monetary policy in europe and monetary policy in the u.s. tom: was that outlook on inflation in -- with that outlook in the euro zone, that inflation for the years on, does that leave you comfortable with the ecb pledging to not raise rates in 2022? jari: yes. the likelihood that policymakers go up in 2022 is unlikely. the way to think about this is the governing councils there,
the inflation conditions they need to see before considering a rate hike. they want inflation to be close to 2% on an annual basis. they are still quite some ways from that. it is possible. francine: sorry, go ahead. jari: it is possible, but i think the ecb will be more patient on that. francine: how difficult is it to look at inflation at the moment? this is the single most important question i am getting on twitter. it all goes down to supply chain crunches. talk us through the trajectory worldwide of houde -- how you see inflation playing out. jari: it is difficult because
you have a whole bunch of distortions at play. you have technical distortions which will drop out in january, so that is the tech right there on inflation. you have the effects of the bottlenecks you mentioned, the supply chain issues which is a global issue. that is hard to forecast, but throughout 20 22, these supply chain issues are hoping to get better. and you have the big warm up in energy prices that we have been seeing. we think the inflation numbers will diminish it throughout the year. there is an important global component here through energy prices and bottlenecks, which is why globally inflation rates will -- for us in 2022.
you look at services inflation and wage pressures. those are more elevated in the u.s. and the u.k. than in the euro area. that drives a few about where inflation will settle in a year's time. tom: i want to bring your focus to the periphery in the euro zone. the demand was fading. demand is still there, but it is weaker than what we saw last year. jari: we have already seen an increase in resource spread. there are two things at play here. one is that the ecb has outlined its asset purchases starting in
2022. that implies that net supply in credit will swing from negative to positive this year, and that is something that is having effect on the markets. the second is political risk and the italian election that has come into focus, which we will find out whether it -- will be elevated to the presidency. we have seen some widening spreads. in the event that we get some delays in the recovery, we could see more pressure to the spread. our end-of-the-year forecast for the ecp -- ecb spread is pretty strong. we see room to grow.
francine: what is the interplay between china and europe at the moment? we see chinese inflation it -- inflationary data. this is not necessarily good news for the rest of the world. jari: that is why our china team just downgraded that from 4.8% to 4.3%. we're looking at the property sector but also because of the issues of containment. that is an asset for growth for the rest of the world. we have manageable spillovers into europe, but we need to watch closely whether new covid restrictions in china affect the
supply chain issues that we talked about earlier. that is a risk for global trade and for the european manufacturing sectors to monitor. tom: always important news. thank you, jari stehn, the managing director at goldman sachs. coming up, the business travel rebounds. how they rebound on a $1.3 billion evaluation. we speak to avi meir next. this is bloomberg. ♪
tom: welcome back to the open. we are 43 minutes into european trading day. the upside been paired across the benchmark, gains of 2%. the cac gains after a stronger start. a strong upside across japan and also the tech stocks in hong kong. also what we are seeing in the green on wall street. this is after jay powell made comments on inflation and assured on the picture. but us watch what is happening in the european travel space.
travelperk has raised thousands of dollars working with people, paring the company at a $1.3 billion valuation. the travelperk ceo, avi meir, is here with us. how was it to get investors to invest in this travel company in this environment? avi: travelperk is doing much better than the rest of the industry. at the moment, we are doing better than pre-covid numbers. while the industry has been impacted by this pandemic, at travelperk we used the pandemic to build our product.
francine: you cater to small and medium-sized businesses for travel. what kind of demand are you expecting? avi: what we are seeing with our numbers is that smaller sized companies, we are talking about enterprises with less than 100 and -- 100 employees, we have inflation concerns and there is -- if you think about it, you have an increased demand for meeting within the company. tom: you talked about 200% growth for 2022. can you still meet those
predictions given the lockdowns across europe? avi: yes. we are growing more than pre-covid numbers. francine: how much more do you grow from here? what is it looking like in four years? avi: the customers are realizing that we have two main fears. one is sustainability -- instability. not only for travel, but for the future of work. the future of work is not one where everybody is taking good credit. it is how everybody works and much is at stake. every employee that is doing their job on that computer can now work from anywhere. this new world requires flexibility.
we go from 8 billion traveling back and forth, but now you have a new travel where you need to meet your colleagues. this is one fear. the second is sustainability. we live in a world where we are worried about climate change and the impact that it has on the environment. how is our company growing in this economy while considering the environment? tom: it's me squeeze two questions into one -- let me squeeze two questions into one. what is the timeframe for an ipo? avi: we have greater opportunities.
travel company clicked in the u.k. we have great opportunities for similar companies and we are looking at it. tom: the ipo timeframe? avi: we are looking at building up right now. francine: come back when you decide on an ipo and that is no. -- let us know. that was avi meir, the ceo of travelperk. we look at more next. this is bloomberg. ♪
ukraine at the top of the agenda. moscow continues to build up aggressive buildup of troops on the border. we are joined by maria tadeo. the fact that there was no progress at the talks. maria: this is going to be a diplomatic effort that hopefully turns into something that is more substantial on paper. if you take what everyone said on their word, the diplomatic path to compromise is complicated. there clear that -- russia is clear that ukraine will not join nato. that has to do with the bigger implications for europe and ukraine. for vladimir putin, this is also about selling oil and gas.
it is hard to see how innovations and ukraine happens at the same time with something like nord stream 2 approved. the russians do have an intent to get to a diplomatic solution. tom: that is maria tadeo with the latest at nato. the powerhouse is valued at 22 billion u.s. dollars. it sent griffins' fortune soaring. what is the rank there among finances, given this new deal? reporter: it is supercharged. it went up 30% to this new maker. this is just behind blackrock.
they are one of the top three or four u.s. securities in the world. francine: this means they could now be looking at ipo numbers. reporter: that is an interesting part of it. they have investment along sign -- alongside paradigm. that seems to be the movement and the question is that paradigm being in there, does that mean that security is looking at the hedge fund? tom: that is around the beliefs of setting up their own hedge fund around crypto. it is technology, startups, and potentially crypto. reporter: exactly. the ipo patches move to crypto this year. francine: what is amazing is that in the past, ken griffin
said he was not into bitcoin. do we know what he spends his money on? reporter: he is certainly a big spender. he bought a wonderful townhouse off in paris, and more recently he spent about $14 million for a copy of the u.s. constitution. despite all of that outgrowth, his fortune continues growing. tom: thank you very much on the growth of citadel and its ceo. let us check in on the markets. you have the gains and they are protected -- particularly pronounced in japan. we also have the tech stocks in hong kong.
basic resources are up 2% and iron ore is up after the production constraints in brazil. we have five or so sectors in the red. bmw is now outselling mercedes in terms of luxury sales for the first time since 2015. they are finally taking the crown from daimler in luxury. francine: it is an interesting story as we look more into it. the fact that it is just the story that it is not going away. you hope that everyone will give you an interview and tell you ahead of time. that was a revelation overnight. tom: he did not do that. we do not know if novak djokovic will still play in the australian open and what this means for australia and his vaccination state.
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