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tv   Bloomberg Markets  Bloomberg  January 17, 2022 5:00am-11:00am EST

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10:00 a.m. in london, five :00 a.m. in new york. our top stories today. first turmoil for credit suisse. the banker task with fixing the company ousted, shares falling on the news. china's growth slows as consumer spending flips. the pboc east policy more than expected by cutting two key interest rates. mobile bond markets came under pressure after treasuries sold off on increasing speculation of a march rate hike. happy monday, happy mlk day. volumes are light. you may be at home, not trading these markets today. here in europe, we certainly are. we are looking at the stoxx 600 able to push higher this morning, up by .5%. the u.s. is closed. we are having futures trading. the u.s. underperforming that.
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here is what you are looking at in the 10 year bond future. it is a global bond market, so we are also looking at german bunds. just three basis points away from turning positive. this is quite the story. what does it mean for ecb policy? we finally get german bund deals -- yields in positive territory? given that, crude able to rise today, on the cusp of hitting the highest levelnc. it's a buyers' strike in this bond market. it is not just government bonds but also high-yield, very present in the etf flows. this etf offered by blackrock -- we have seen more than $2 billion worth of outflows. that is on pace for the worst month in terms of flows for this
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etf since march, 2020. where do bonds fit in your portfolio at the moment? let's get back to some of our top news this morning. we start with credit suisse, -- ousted due to breaching covid protocols. for more on what the surprising announcement means, marion hofmeyr is with us. we knew about this issue within credit suisse. we knew that antonia had broken these rules, but why such the surprising news for the market at the moment? >> it is quite surprising because credit suisse is in the middle of one of its biggest crises since the finance or crisis. chairman antonio horta-osorio was seen as a man who would pull
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them out of this crises and set the strategy going forward and recover from the huge losses they saw last year. so it is a surprise in the sense that this is the man that is supposed to save the bank, yet he has gone and done a few things that are not ok, and they are now having to suffer the consequent as of that, now affecting badly on the bank that they have lost one of their top managers. they replaced him with axel lehmann, who has a strong risk management background. dani: credit suisse shares down 1.3%, not the most massive selloff we have seen in the volatility in credit suisse of the last two years. how are shareholders likely to take this news? marion: i think it will take time to digest, mostly because axel lehmann is not well-known outside of switzerland. he has a very good career in habitation in switzerland, had a
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long career at ubs as well as in an insurance group, but for outside investors were not local, it may take time to assess his skills. he will have to prove himself before they willingly accept him right away. but at the moment, because we already had the strategy set out, as long as he follows that path and that strategy has been supported by external stakeholders, that should be good news. dani:dani: it is fascinating to see because horta-osorio had been held up as this turnaround specialist for credit suisse. we are also nearing their earnings as well, heading towards earnings season for the european banks, already there for american banks. are we likely to see enough of the change that this chairman, now former chairman, has put through shine in this earnings season? how crucial with this in his report before the future of credit suisse? marion: i think the upcoming
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earnings will not reflect all the changes that were put in place to a lot of the executive changes are only taking effect as of january 1, 2022, so we have not really seen everything fully change organizationally to have that reflection in the business division. so they are closing out a year of the scandal, so we will see that still in the fourth quarter for them. i think the more important earnings will be on the first quarter, a couple months ago, see whether or not the strategy shift has had the real implications for business. dani: let's get into some of that strategy swiss -- strategy shift. what are we expected from credit suisse? marion: we are seeing their new head of the wealth management division take control, francesco de ferrari. he has previously been with credit suisse.
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they are basically shifting all of their wealth managers into a single division, quite similar with their competitor, ubs, to bring all the control to headquarters rather than having it in different regions. -- we will see some of the risk tolerance go down. so that should mean less -- potentially less loans, potentially less business as they pare back risk. dani: just when you thought the boring times at credit suisse were over, some, coming back. bloomberg news' marion halftermeyer. now let's get to the bloomberg first word news with leigh-ann gerrans. leigh-ann: in china, beijing is trying to bolster an economy that has lost momentum because of a property slump and repeated
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coronavirus outbreaks. official data shows that china's growth domestic product rose 4% last quarter from a year earlier, the weakest since early 2020 for the fourth time this month, north korea has test filed -- testfired missiles. kim jong-un regime fired what seem to be two ballistic missiles off the coast. it could force the biden administration to come up with a new strategy towards kim. in texas, authorities identify the man who entered a synagogue and took four hostages. he was a 44-year-old from the u.k. the standoff ended with the fbi rushing into the building and the death of the suspect. he was demanding that release of a pakistani convicted of trying to kill u.s. soldiers in afghanistan. the anti-vaccination staff of tennis player novak djokovic
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cost him a potential payday of $2.1 million. djokovic was deported from australia after the nation's federal court upheld a decision to repeal his entry permits. the government said it would strengthen anti-vaccination -- he would strengthen anti-vaccination sentiment. he came australia to play in the australian open. global news 24 hours a day on air and at bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'm leigh-ann gerrans. this is bloomberg. dani. dani: leigh-ann gerrans there in london. coming up, london bankers changing jobs got a big boost in the fourth quarter. we will discuss the big payouts that the area's bankers are soon to see. and china's economy grew faster than expected, but the pboc surprised some by cutting rates. first, more on the markets.
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this is bloomberg. ♪
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dani: this is "bloomberg markets ." i'm dani burger. china's economic growth slowed last quarter as consumer spending took a dive, giving the central bank cost to cut its key rate for the first time in two years. enda curran gives us an update from hong kong. enda: china's central bank cut two key interest rates today in a clear sign that authorities are both concerned about the depth of the slowdown in the economy and that they are now ready to add more support to
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ensure growth gets back on track to the pboc took that decision at that same time we got numbers showing retail sales in december continue to slide. that seems to reflect the ongoing outbreaks of covid across china, which necessary -- necessitates an aggressive response by policymakers to control the spread of the virus. on the flipside, there is a divide going on with manufacturing so strong and consumers remaining weak. the bigger story is china's economy is china's economy starting the new year on a wak -- weak footing. dani: undercurrent there with the dated him. joining us now is the head of macro research as ts lumbard. interesting turn of events with china's growth a little better-than-expected. yes, there are nuances below the surface and the is a rate cut
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pay what do you get of the -- >> it is always good when you can stabilize impact of the renminbi. good timing from that perspective. but as you said, as you dig down into the numbers, this is still a weak print. the q3 numbers were weak, so this is a favorable basis. there is the tendency to look at the year on year for china, but the q3 is much more up-to-date. looking at that quarter on quarter picture, that does pick up. it is a very favorable base here what we are really interested in is this story in retail sales, which stubbornly refuses to turn around. we actually got indication from the pboc at the end of last year
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that they began the rate cutting cycle at the end of last year when they introduced the new green fund provisioning scheme, because it was much lower than the rate that they just cut today. i think that easing cycle and the sign of cutting rates begin at the end of last year, and this just cements the direction of travel, that they need to stabilize growth and what is a very important political year for xi jinping. dani: speaking of which, xi is speaking at the moment, speaking at a virtual w.e.s. session, calling for cooperation in the fight against the pandemic, fair dissipation of the vaccines, and saying that global inflation risks are emerging. we are hearing this not just from central bank aids but also from the physical side -- from central bank aides but also from the physical side. --
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freya: their fiscal channel is alongside the pboc as well. signs are just it comes from local government bond issuance. these two things have to work together because what we saw last year was that there was still a reasonably strong target for fiscal, for the local government bond issuance quota. we got that issuance coming through, but governments were not able to spend the money, because the guidelines on the project were too tight, because china has been over investing for over a decade. so this year, what we expect is they probably will, alongside a reasonably strong quota for bond issuance, loosen the guidelines, and that feeds back into the liquidity conditions. when they spend the money, they are actually pumping liquidity out into the economy. the pboc funding the commercial
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banks, and the commercial banks then go on and buy the bonds. normally, the liquidity conditions move in lockstep, but we saw this divergence in those two things last year. as a result, the impact of fiscal policy was curtailed. they are very restrained, both from the monetary and fiscal side. dani: i should say xi, at this meeting, is urging coordination among fiscal and monetary policies among nations. when it comes to the credit and post in china, a stock collapse there. is this a base beginning to form? does credit impulse get a boost from here on out? freya: that is definitely what they seem to try -- at least stabilize. i do not think they are aiming to create anything like the stimulus we have seen
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historically, either in 2020 or in 2016, certainly not in the global financial crisis. but they are trying to stabilize growth. that does not seem to be working at in terms of the money and credit numbers. the year-over-year figures are turning around, but again, there will be a lot of base effect as well when you look at the loans numbers, there is some evidence banks are trying to use as many loopholes as i can -- as they can in order to meet their loan quotas. that is not really what the pboc wants them to be doing. this speaks to why the call on china, the policy is much less effective than it has been historically, partly because they have changed the monetary policy system but also because the economy is already stuffed to the neck with that -- debt.
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in the context of the property slowdown we are seeing with funding, this just is not an environment where you have any margin of borrowing in china able to respond to the cutting of rates from the pboc. so the physical environment they are in, they're trying to stabilize. dani: globally, we are contemplating a put that is not a strong from the fed as well. i want to talk about the elephant in the room, omicron. when you see omicron spreading in the political, financial, and tech hubs of china, force much less than the western world, but with a zero covid policy, is it like a we have not seen the worst of the effects given a china which is very willing to put on these restrictions when there are covid outbreaks? freya: yeah, and the problem is this is not just about the chinese communist party wanting to control everything, whether it is in the natural world or in
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the financial markets. it is also about the number of beds in china, a key physical country that prevents them from taking the risk that has been taken at the other end of the spectrum, the likes of the u.s. and the u.k. that is our problem for them in terms of the covid policy. but the signs on omicron is that it is milder, to put it frankly, the death rate stays more benign in these economies are taking greater risks, then maybe, through the course of the year, we could see some public pushback against zero-tolerance. but it is so controlled in terms of the media outlet, it is difficult to get a gauge on where exactly the economy is going with it. but over time, they should have some moves over covid tolerance.
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dani: coming up, london bankers changing jobs got a big boost in the first quarter. plus, we will discuss bank earnings. this is bloomberg. ♪
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dani: welcome back to "bloomberg markets." the big banks earnings season kicked off, and if you were listening to the first crop of corporate calls, you heard a lot of talk about hiring, paying and retaining bankers. london bankers changing jobs got a 19% pay boost in the first quarter. for more on this, let's bring in our time that catholic -- our tom metcalf with bloomberg news. tom: that it is just we are back to pre-pandemic levels. we had a 90% rise in the fourth quarter. if you are a banker and looking to change jobs, now is a very good time. it looks like pay has gone up pretty much across the board. dani: how much of this is
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switching jobs and the banks themselves giving existing employees a booster try to retain them. jpmorgan earnings -- a huge number of expenses that boot markets. tom: right. what we saw friday, one of the huge things was that huge increase in conversation. conversation is going up, and there is a battle for talent at the moment, and i think jpmorgan's dimon came out and said i am happy to pay whatever it takes to keep the best people. let's speak to some of the other -- dani: let's speak to some of the other points. what did we learn from our friends on the trading desks this quarter so far? tom: it is going to look like a tricky quarter for traders. i think the decline was bigger than most shareholders were hoping for. particle before barclays, they have a tough act to follow.
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typically, u.s. banks have outperformed the european banks. dani: goldman expecting the same story -- oldman, excepting the same story from them? tom: yes, we expect strong performance from the dealmakers. we will see if they managed to outdo jpmorgan. that is what most people will be particularly interested in. dani: fascinating story on the hot market in london and globally at the moment. that's our tom metcalf. coming up, kiran ganesh, of ubs, joins us, coming off the back of the week where yields hit their highest level since january. this is bloomberg. ♪
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dani: this is "bloomberg markets ." i'm dani burger.
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it is a holiday in the u.s. let's get a check on the markets because cash markets may not open for equities and bonds, but the futures trading session is off. s&p 500 futures up 0.2%. that is despite the selloff we have seen in this bond market. not upsetting equities at least for today on friday. we looked at an s&p 500 flat yesterday. bond futures dropping, down 0.3%. perhaps it will take the cast market to open to set equities off as we tend to see. bond futures down 0.3% following yields at their highest since january. but this is a global bond market. we are also looking at german bund at just under three basis points away from hitting a positive level. it will be the first time since may of 2019. also looking at a resilient student learner -- sterling even as boris johnson faces questions over his activity over the height of the covid lockdowns.
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that is not showing through markets. and a weaker dollar story continues to be the dominant theme for this currency market. let's hone in on the bonds. last week, we saw a broad selloff in u.s. treasuries, spurred by hawkish rhetoric from the spread, and momentum can be seen across the global bond markets. kiran ganesh with ubs wealth management joins us. thank you for joining us. these moves in the bond market come off the back of strong calls we had. jamie dimon talking as many as seven rate hike so far this year. when it comes to a shock and awe policy, what would something like that accomplished, it is even necessary? kiran: i think what the fed would be trying to do it is such a shock and awe approach to reestablish its credibility. the fed is being seen as behind
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the curve, and they need to catch up with that. do they need to raise interest rates more quickly in order to reestablish that credibility and stop inflation adding embedded to the system? that is what they would be trying to achieve. if you look at our forecast, we are looking for three to four interest hikes this year, enough to contain inflation, reduce demand sufficiently, but also not so many that it starts to cause other negative effects, like negatively affecting credit markets or tightening financial conditions. we still think the fed will try to find that middle ground, but that middleground will involve more rate hikes than the fed or we had expected a few months ago. dani: this is fascinating to me, because you have this idea of more rate hikes to combat inflation gate at this moment, what is the policy risk? is it not hiking enough, or is it being too aggressive and also stifling economic recovery? kiran: it is both, but i think
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the balance has shifted more towards the fear that inflation could get embedded, so we have seen high rates of inflation for him -- for a number of months now, and the longer it goes on, the more it feeds into that, and that is concerned that -- get embedded. their calculus has shifted more towards worrying about inflation and a bit less about worrying about jobs, given where unemployment is today. dani: what would a quick pivot to a more aggressive policy then is already baked into the picture mean for your portfolio? kiran: the big areas you look at our the tech parts of equities, because they tend to be much more sensitive with higher interest rates because they are more depended on longer-term growth.
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the other part is within the bond space. you have to think about where are higher rates already priced in or where could we see bonds selling off more? we think in the bond space, the short end of the curve is pricing in fed interest rate hikes pretty well. there is more curve for the selloff to keep rising. we think in the megacap send semi conductors, they would be outperforming what they should have done relative to what is done with interest rates, so we suggest investors rebalance away from semi conductors and more towards smaller and mid-cap names. dani: so maybe duration writ large escape from that position. but when it comes to this bond market, what place does it have an your portfolio in terms of the hedge, if we are expecting are just a short edge but also the long edge to join in the global bond market selloff? kiran: what we are speaking with
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clients about is reducing exposure to the long end of the curve, because we think while the market has done a good job of pricing in interest rates in the near term, we think the longer-term interest rate increases are not yet getting priced in. so reducing the yield with more than a seven or eight year duration. the increased -- if you start to see the entire bond market selling off, you are not effective, but if we start to see that curve steepening, then markets are starting to think about maybe rates will have to stay higher for longer, then that would have a positive effect on the portfolio. dani: as well as the long end not moving as much as the short end, another area where we have seen remain deeply negative is real rates. what needs to happen in order to see that march back towards positive in the u.s.? kiran: obviously, the nominal rate and inflation expectations
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need to come down, and that is what the fed will be trying to achieve with a more aggressive policy. that would be a good indication that the fed is reestablishing its credibility, if we start to see real rates moving higher. so as interest rate excitation start to reduce, quantitative tightening, higher rates, we would excite to real rates increasing, and that will have effects across the market. dani: what effect would that have? is that the same as sally duration type assets? kiran: it is pretty much similar. higher equity market volatility, you will see growth stocks getting negatively affected, expected -- particularly those at the highest evaluations or they will start to get negatively affected as you see real rates rising. at the same time, it could -- financials tend to be more positively impacted as real rates move higher, so we will be tilting more towards of those
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areas in that environment. dani: we will definitely get to the energy story in just a bit, but looking at your tech portion of the portfolio, there have been when is that, if he had not bought them in the past decade, you would have deeply missed out. there is sort of this pavlovian desire to buy the dip in tech because it has been so successful and a highly concentrated part of her folios over the last decade. kiran: a lot depends on the timing. they are talking about our earnings going to grow quickly? is a multiple going to contract? if your time horizon is long enough, really the only thing that matters is earnings growth. that is what tech has shown over the past decade, really strong earnings growth driven by strong outperformance. getting exposure to things like artificial intelligence, big data, cybersecurity, these will see really strong earnings growth over the course of the next decade, and perhaps if we
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see volatility in the near, that is a good opportunity to be entering those trades. if you are a bit more short-term, looking for tactical opportunities, that is where we would recommend looking at rebalancing exposure away from those areas that performed well, the are more interest rate sensitive, toward some of the cyclical areas, financials, energy, mid-caps, which would be less sensitive to interest rate increases and we think have got a better scope of performance for the first half of this year. dani: thank you. we will turn next to commodities, energy nearing its highest level since 2014. from london, this is bloomberg. ♪
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dani: this is "bloomberg markets ." i'm dani burger. brent oil traded at nearly the highest intraday level since 2014 as the markets' heightened concern about covid eased. -- oil looking strong at this point. what are the drivers behind this nearly highest price since 2014? will: i think the realization the omicron wave looks like it it is passing without being disruptive as people feared. remember at the start of
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december, when omicron first started gaining traction, people were very concerned it meant another shutdown of the world economy, lest flying, lest driving. broadly, that has not happened. i think as a way of in europe and the u.s., the market is looking forward to an economic growth, particularly a resumption of flying. gasoline demand around the world is strong. people are driving kate i think that has really become the focus , the robustness of demand, at the time when increasing questions were being asked about how much supplies out there. opec is raising production, but later this year, they will probably reach that edge of what they can do. people are really starting to think about strong demand and slightly constrained supply, which is a pretty bullish picture. dani: that is where we get calls from bank of america of 120 on oil, for example.
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is the consensus -- will: that is what most people think, as long as we do not get an omicron stock. what people care about most is china, slowdowns about the construction, what it may mean for the wider economy, and they are still pursuing a zero covert strategy, which made -- which may force -- pursuing a zero covid strategy. that is a cause of concern for a lot of people. but outside of china, i think people feel the bullish and aerial right now is fairly well entrenched. dani: and the bullish scenario is not just oil but metals. will: yeah. copper has not risen as fast as perhaps other commodities, often with a call dr. copper, the economic bellwether, and that may reflect china concerns. but we are seeing other metals do well. nickel, used in ev's, battery
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metal, is at the highest in a decade. aluminum has been very strong, partly because it is hard to make, which constrained supply. than lithium, incredibly important to batteries -- and you know this is a year when car manufacturers will be ramping up production of electric cars -- those happen performing strongly. people come on the whole, pretty bullish about the commodities conference across the board. dani: that super cycle call starting to creep back into conversations. thank you. that is will kennedy p we welcome back kiran ganesh. we were just hearing about some of the drivers behind this rally in energy, different commodities. you like a bit of energy stocks yourself. but when you look at the commodity space, are you, too, on this growing bandwagon that
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we could be heading for a commodity super cycle? kiran: we the oil prices are not likely to stay high as the market is projecting long term. over the near-term, oil could hit as much as $90 per barrel with the expression of increased demand relative to expectations, but where we think the market is getting it wrong is how long this will last. we think oil might stay elevated over the next two or three years, and because of some of those longer-term concerns about supply and whether that can keep up with demand, that is where the opportunity is, whether it is in longer dated oil contract or within energy equities, which is still pricing oil prices to four over the coming years. there is an opportunity to buy into those names and benefit from further upside. already strong performance this year, but we think that is where to go. dani: how much of your energy because about that sustained
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level of oil prices versus an entire value rotation throughout all of markets? kiran: it is a bit of both. i think we see higher oil prices and the perception that oil prices will stay higher for a longer, clearly that is supportive for earnings trajectories, but fundamentally, going back to the conversation about increasing interest rates, higher yields, that tends to be negative for growth sectors like knology and more positive for value sectors like energy and financials. so we think this could be well positioned, both to benefit in a fundamental sense from higher oil prices but also from a more tactical and technical sense if we start to see investors looking more for value and less for growth in 2022. dani: i am just trying to work through this at the moment, so bear with me. what is there a scenario where we continue to see this higher oil price, the energy conference becomes more expensive, and that
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has an effect on the consumer and, in a roundabout way, hurts the value trade? how much of a higher energy complex story is also a consumer negative story? kiran: clearly, higher energy prices negatively affect consumption in importing regions like europe and the u.s., where consumer spending on energy is a part of the consumption basket, so it will have a negative impact. i think it is a matter of scale. if we start to see energy prices doing $120 to $130 per barrel, that has a negative impact on consumption. we saw that in 2008. but $90 a barrel is broadly back to where we were pre-pandemic. we do not think that will have a major negative impact on consumption unless you start to see much higher increases in oil prices. dani: great to have you on the
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program this morning. kiran ganesh, global head of investment communications at ubs wealth management. now let's get a quick check on the markets. we are nearly two hours into the european trading day. we are looking at s&p 500 futures come up asked about 0.1%. bond futures continue to slump. cash trading is closed today for your martin luther king holiday, so we are looking up futures down 0.3%. continuing to see a weaker dollar, despite the fact we have seen a more hawkish fed. credit suisse under pressure, down more than 1.5% given we have seen the ousting of the chairman, who was the turnaround specialist, horta-osorio stepping down. what does that mean for the future of the bank? much more on these markets to come? this is bloomberg. ♪
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dani: welcome back to "bloomberg markets." i'm dani burger. we are in the early innings of earnings season, and it is shaping up to be a pivot along
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with monetary policy influx. -- maybe sometimes we too often focus on this macro picture, and it is hard not to give in what the fed is doing. to what degree -- what to expectations look like? >> today, we have a note out from j.p. morgan's strategist, and they are super bullish. they say a lot of clients are very concerned about margin pressures, concerned about inflation, supply crunch, but the strategists are very bullish and they say eurozone earnings could grow while the base expectation is 7%, so they say the forecasts are conservative at the moment. dani: we certainly saw it in past earnings seasons. you mentioned it was 20% for the eurozone. how does the pitcher look in terms of u.s. and european equities? ksenia: that is where the big
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waves concave the u.s. usually out performs europe. but clients and -- are betting on european equities finally are performing u.s. the base is lower, so it has lacked before. what is benefiting europe is the lack of big tech slots. what is also great about europe as there are so many value pocket such as banks and energy, some of the best performing sectors this year. especially banks. they benefit darkly from higher bond yields, so banks are the best performing sector so far this year. last year, they gained 34%. more upside is seen by the likes of credit suisse, goldman sachs. everyone is betting on european banks. dani: maybe the period of
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american exceptionalism is finally ending. that's get over to the first word news with leigh-ann gerrans. leigh-ann: good morning. credit suisse has ousted its chairman and reported -- in reported breaches of swissie and u.k. quarantine rules. antonio horta-osorio resigned after just nine months. his exit follows a disastrous year at the swiss bank. two scandals because credit suisse more than $5 billion. board member axel lehmann has been named the new chairman. the omicron variant has now spread to major cities in china. beijing, shanghai, and shenzhen have all reported cases. it is causing concern because of the timing. the lunar new year begins february 1, marked by massive tribal. the beijing olympics begin just three days after. it prime minister boris johnson faces another bruising week with his political future in the
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balance. six lawmakers in his own conservative party has called on johnson to resign over reports of parties in downing street during lockdown. meanwhile, there reports of staff changes. unilever plans to sharpen it focus on health and hygiene and sell off slow growth france. it comes at a time when the company is considering whether to increase its bid on glaxo kleinsmith. global news 24 hours a day on air and at bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'm leigh-ann gerrans. this is bloomberg. dani: thank you. coming up in the next hour, we will dive deeper into markets with the asset management chief
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global strategist. what does he make of the global bond market selloff? everyone from the u.s. to australia to japan seeing bond markets and toil -- in turmoil. cash equity trading will be closed in the u.s. futures showing a decline of 0.3% with yields hovering around their highest and's january of last year. s&p 500 futures also up 0.1%. continuing to see weakness. credit suisse continues to be under pressure as well, down 1.6% with a change with the chairman. this is bloomberg. ♪
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♪ >> 11:00 a.m. in london, 7:00 p.m. in hong kong fresh turmoil for credit suisse, the baker from breaching coven quarantine rules. china's growth slows as consumer spending slips and surprised by china's central banks. policy east more than expected by cutting interest rates. global bond markets, the -- com e under pressure. happy monday to you, happy mlk day. if you are in the u.s., you have the day off. trading will not happen today.
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we at least have futures trading and we can continue to see a selloff in these fond futures down about 3/10 of 1%. it is outperforming the u.s. but of course, holiday volumes will be low. looking at a bond yields getting ever so closer to reaching zero, about three basis points away from doing that. those yields marching higher by two basis points. crude, unchanged. we are seeing oil flirt with the highest since 2014 as the calls come into a commodity super cycle back in the picture. bond markets continue to see a buyers strike and that is ever so present in the etf. this is the 20 year treasury, long-term treasury etf. it has seen more than $2 billion worth of outflows already this month. we are not even halfway through
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january. the biggest outflow since march of 2020. how much of this is already pricing in a hawkish fed? how much more shock and onto we potentially need? joining us is john bail, chief global strategist. thank you so much for joining us. it does seem like this need for a and all is building. i want to redo some of what bill ackman tweeted. he said the federal reserve worked to restore its credibility with an initial 50 basis point supply moved to shock and awe in the market which could demonstrate its resolve on inflation. the fed is behind where it needs to be with painful economic consequences for the most vulnerable. do we need shock and all in this market? >> it is not a terrible idea to have 50 basis points but it is very unlikely. the fed does not like to
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surprise the markets too much. it is probably the fastest pivot in history from a very accommodative story to a rather hawkish one not only on the interest rate front, but also on qt. much more quickly than anyone has anticipated. the fact that the 10 year bond yield is only about 1.8%, 1.9% is a success given such a huge pivot by the fed. it is not like bond markets are out of control a deal devising. whether that expands a great deal more has a lot to do with what happens to the stock market. if the stock market falls quite a bit, bond yields would probably be tempered. >> it's interesting you bring up that the 10 year has been reacting pretty sanguine given the mood from the fed. we see the same thing from the
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real yields as well, still deeply negative. how much tightening needs to come from the fed in order to feed this reaction, in order to see tighter financial conditions which, for the most part, have remained very loose? >> there are so many factors. it would be great to see the oil price fall. that would be a tremendous help to the fed and convince them that they don't need to hike so quickly. another big driver of inflation has been auto prices, both new and used. if auto prices could be raised and less price hikes by the auto companies, that would be where prices start falling for new and used automobiles. that would be great for the fed. everybody is expecting some of that. that could bring cpi back below
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3% by the end of the year. everybody is hoping for that. what >> do you make of the consumer picture right now? we saw a retail data coming in on friday weaker than expected. should we be concerned about the u.s. consumer at this point? >> i have found those retail sales numbers quite surprising. a real whiff of stagflation, i guess you could say, and the real retail sales after deflating for the goods portion was even weaker. that is an initial sign of some slowing, clearly. that was a very concerning sign for the u.s. consumer. definitely a lot of angst out there, a lot of people are upset
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especially in the lower to middle classes about the cause to inflation. >> so if there is a potential for that, perhaps we have overestimated the strength of the consumer. what does that mean for your portfolio as we contemplate the start of earnings season? >> is a tough one. things should be great this year for the consumer, the opening up of the economy, so it should be very good. the question will be how much companies actually start to cut prices to get those sales because they have not been cutting prices at all. but if they consumer does rebound, it is obviously very good for consumer stocks, for staple stocks and for travel-
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related stocks. certainly one area that could have a real tailwind. >> i also want to get your take on this greenback. we started the year with positioning long. there were expectations the dollar would continue to chart higher. the economic data has not been too bad in the u.s. we continue to see this weakness. what do you make of it? >> it is a bit surprising, to be honest. the bank of japan could be moving with some signs of a pivot with a more hawkish stance. the big question would be how far and how fast. it depends.
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europe, there some question about labor costs. there certainly a trend globally except for china toward title policy. >> you mentioned china. a mixed bag for the economy. one is the impact of china having a loosening policy? >> especially for domestic
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investors,'s the cat was not deemed to be to material. not too much effect so far. a lot of that is fixed income money forced into china by increased benchmark weightings of china it was a very mixed bag for the dated today. especially retail sales, especially when you look at it in real terms. a lot going on in china.
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it is a pretty cloudy situation and will be for the olympics causing lockdown and lower investor production especially in the areas around china. >> thank you so much for joining us, great to have you on the program. we were just talking about china and the economic growth story. john giving us his outlook. consumer spending took a dive, giving the central bank cause to cut its key interest rate for the first timw in --t ime in two years. >> china's central bank cut two key interest rates today in a clear sign that authorities are both concerned about the depth of the slowdown and that they are ready to start adding more support to ensure growth gets back on track. the pdc took that decision at the same time when we got numbers showing retail sales in
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december continue to slide to reflect the ongoing outbreak of the covid virus across china, which, of course, necessitates a response by policymakers to control the spread of the virus. industrial production in the terminal was quite strong showing that there is a divide going on with manufacturing and consumers remaining. china's economy is starting the -- new year on a week footing and most support is inspected. >> let's get over to the first word news. >> credit suisse has ousted its chairman after reported breaches of swiss and u.k. quarantine rules. he resigned after just nine months on the job. his exit follows a disastrous year at the swiss bank. two scandals cost more than
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$5 billion and hammered the stock price. in china, the central bank has cut a key interest rate for the first time in almost two years. beijing is trying to bolster an economy that has lost momentum because of a property's slump and repeated coronavirus outbreaks. initial data shows that china's gross to mastic product rose 4% last quarter from a year earlier. that is the weakest since early 2020. the anti-vaccination stance of novak djokovic has cost him a potential payday of $2.1 million. djokovic was deported from australia after the nation's federal court upheld the decision to revoke his entry permit. the government said his presence would strengthen anti-vaccination sentiments. he came to australia to play in the open. u.s. aviation regulators have cleared the way for some jetliners to operate where new5g wireless services will begin on wednesday.
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the faa says playmakers have shown that they will not cause interference with critical aircraft equipment but a majority of boeing and aircrafts are still subject to the limitations which could lead to flight disruptions. 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. >> thanks so much. coming up, christian scholz joins us with his outlook. plus, after the vice dean of the johns hopkins bloomberg school of public health. also, could partygate topple boris johnson? how the scandal of breaking covid rules is threatening the stability of his party.
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♪ dani: this is bloomberg markets.
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switching jobs proving lucrative for financial service workers in the city of london was secured and average pay rise of 19% when they changed companies in the fourth quarter. let's get more with the reporter on the story, tom metcalf. what is driving this 19% rise for those switching jobs? tom: it is basically this battle for talent. finances very busy and that is basically seeing a huge demand. what you are seeing is as people switch jobs, they are getting very big pay raises. basically what the recruiters saying if they are back to pre-pandemic levels. head of the recovery for 2020. >> this is also happening in the city of london. the city of london, everybody would be going elsewhere. those would be the new hubs. does this tell us anything about the staying power of london as a financial hub? tom: yes, some jobs have moved,
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but not as many as people thought. whatever happens with brexit, it is pretty clear and obviously in terms of jobs and demand, it is not dislocated from the new york of this world. dani: how does it compare to the new yorks of this world? tom: we just mentioned a 19% rise. in new york it relatively tame. particularly with the u.s. banks, you see it with the big bonus jump. in the u.k., it is a bit more restrained. anyone ordinary would say that everyone is doing pretty well. dani: it is interesting to see j.p. morgan, their expenses are much higher, in part to do with this payout story. investors, they didn't really seem to take that news very well. tom: jp morgan shares are down more than 5% on friday coming up against a very tough year before. you've got those extra costs both on compensation and also
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the tech and investment spenders. dani: and citi, similar story as well. they have had this restructuring. how do we evaluate the story of trying to transform the company at a time when earnings also seem to come under expectations? tom: i often think of a credit card business more than the fed or jp morgan. a bit like jp morgan, disappointed on the kind of credit card side. the u.s. economy seems strong but i think the expectations as investors are so high that any underperformances really hit. obviously these have all risen pretty strongly in the last year, so you're really seeing that downside. dani: what does that mean for european earnings? tom: they also kick off in the next few weeks. berkeley, i would be very interested to see if maybe they could out-perform the u.s. bank. the big question, how strong are the european economies? my gut says it is probably not
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going to be a great earnings season. dani: thank you so much for joining us. let's stay with the banking story, and wells fargo reported tepid loan growth in the fourth quarter and said borrowing is likely to pick up this year as clients start to take on debt again. mike maximo told bloomberg tv that consumers still have a lot of liquidity to grow the economy. >> we did see continued progress in the recovery and i think you saw that through the loan growth that we saw. it was really across the board both on the consumer side as well as the commercial side. the consumer side, we saw growth in auto, in cars. underneath, we saw some growth in our nonconforming mortgage portfolio as well. we finally started to see some of that growth materialize which i think will be a good thing. >> just one quick follow. on the auto loans, can you give
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us more perspective? if i'm reading the data correctly, a lot of it was higher value on the loans themselves. with the volume of loans also higher? >> we had a record origination quarter. third quarter in a row in the auto business. about two thirds of the auto business is used cars, so we are benefiting from higher used car prices, but we are also seeing that volume the really strong as well. the new car markets, a little more constrained, but we are seeing that really come through in used car volume which is good given the mix of our business. dani: inflation can impact consumer spending on the other hand, and you have higher interest rates. i'm wondering how much those higher interest rates could potentially stifle some of this loan growth and deter some consumers from taking on more loans. >> i think you have to first start with the fact that we are talking about raising rates meaning we have a really strong
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economy underneath it. you see that in consumer spending, you see that in the equity markets, you see that in loan growth as we talked about. coupled with that, consumers still have a lot of liquidity. it may be off the peaks that we saw a couple quarters ago, but on average, maybe 30% more in consumer deposit accounts, so that really should help consumers continue to be out there growing the economy. rates will be helpful for us, and we talked about that in terms of our net interest income. it is a good sign that the economy continues to be pretty strong underneath it, which should be good as we look to the rest of the year. dani: beyond the consumer business, you did show some driving your investment banking business. i really curious about specific plans to potentially grow that business even more into the year and how competitive you think you could be. >> look, we think we have a lot
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of opportunity in the investment banking business. as you think about going after the opportunity to work with our middle-market and commercial banking clients or we have a really great market share, we talked about that opportunity for the last few quarters. we think there is a lot of room for us to continue to grow. we are adding people in the commercial bank and in the investment bank. that is in the context of us continuing to execute on our efficiency initiative and agenda while we are still able to get costs down and make those investments to go after that opportunity which we think will be significant over time. dani: talk to us about getting those investments, adding those people where you want to expand. you're talking about $500 million in wages and inflation. how are you competing for the right talent right now? >> is certainly a competitive market and we have seen some wage inflation and that $500 million is above and beyond the normal increases we see in pay each year. and part of that is us increasing our minimum pay across the board, similar $80-20
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two dollars depending on where you are in the country. we over the seeing that have an impact on both recruiting and retention across that part. we are going to continue to have to be competitive, but we still think we are able to do that, we see good ability to attract people to the platform and again, that is still in the context of us being able to manage overall expenses as we look at 2022. dani: wells fargo cfo mike sent to mossimo -- mikesantomassimo. we're going to speak with christian schulz. european equities are open despite closed commodities in the u.s.. we are looking at s&p 500 futures underperforming, up to tens of 1%. all the context for this is a bond market which continues to selloff futures, down three tense of 1%, of course.
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a dollar that continues to look soft versus the euro, and credit suisse down 2% after the ouster of its chairman. we will dig more into the europe story next. this is bloomberg.
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dani: welcome back to bloomberg markets. the world is grappling with a bond market selloff and inflation and how central banks react. what will be the reaction of the ecb as they have their own idiosyncratic energy problem? let's dig into it. christian, good morning to you, thanks for joining us on today's program. does the ecb need to be reacting to a eurozone inflation number that continues to set new records? christian: well, good morning. we think that the current spike in the energy crisis is more of a challenge to fiscal policy than to monetary policy. we've seen governments right around europe trying to offset already the impact of the higher
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industry prices, and i think it needs to go beyond that. they need to be a response that increases supply of energy. for instance, last week, we've seen the french government trying to increase the supply of cheap nuclear power by 20%. that is a real help to manage -- monetary policy so that monetary policy doesn't have to react to higher prices, which we believe is going to be counterproductive. dani: how much of this is a short-term concern versus a long-term concern? europe itself is also contemplating this energy transition which in itself might also mean costly prices for consumers. christian: that is absolutely right, a good question to ask. the debate about the longer-term troubles that the green transition can bring to the european economic outlook particular to monetary policy of course is squarely in the focus with the executive board members the other day.
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what we know is that of course, governments are going to use price signals to deter people from using polluting energy and get them to use less pulled energy with higher co2 prices and perhaps indirect taxes on energy consumption in particular. that is going to drive up prices, but it is going to be one of the things that the ecb should look through. but there is another element which people are increasingly discussing and that is the energy supply that might be more volatile because renewables are not as reliable as the fire power generation, but because these ignition technologies, gas, for instance, will be volatile. what we of course can't have is that monetary policy reacting every time the weather is right for solar power or for wind power to be generated. again, that is not something for monetary policy to result. that if something where fiscal
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policy needs to worry about supply. dani: as you so wonderfully explained out in your note, this divergent understanding of how inflation is evolving and how to tackle it, what is the net result of an ecb of central banks that have these different views of the cause of inflation and the staying power of these types of inflationary forces? >> i believe it is more than just the understanding of what drives the staying power. we simply have different inflation stories between the u.s. and the u.k. and that is going to do to convergence between the policy response. demand is strong, supply is responding, but supply isn't responding fast enough. in europe, we have demand which is relatively strong, but not
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back to precrisis levels. if we get into demand now, supply in the economy will recover fully and then we will have a permanent hit to the economy from the pandemic which is simply unnecessary. this is the risk of premature typing. in the u.k., of course, we've got brexit, another supply shock to contend with, but that is going to be one which is necessarily more permanent. we are going to see the fed tighten, we are going to see the ecb tightening much less fast. dani: how great is the risk in your mind that we do see a premature typing? is -- tightening? is this a real concern at this point? christian: yes. we knew inflation was going to be high and we knew the path of the council would respond to
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that because we've always had a hawkish council. but the hawkish one never really had an argument because inflation was never high. now they do. we don't really have much evidence of it yet, but if we do get higher wage increases in the second half of this year, and germany in particular but elsewhere as well, they have enough evidence to call for rate hikes in that is going to be the story into 2023. we really have to watch the labor market. the fact is that we don't have that evidence yet, and that keeps the ecb from tightening prematurely and what we think is going to happen is that they find out in the second half of this year that the. high-end wishing we are seeing at the moment is cutting peoples' real disposable income and is going to lead to lower demand and bigger output gap and that is, we believe, going to
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lead to the ecb staying on hold at the end of the year. dani: in terms of the market reaction, this is a global bond market. as we see u.s. yields turn higher, we are also looking at german bond yields of just two basis points this morning, nearing their closest to zero since may 2019. what would be the implication of getting positive reads yet again on german yields? christian: i don't think anyone is concerned with german borrowing costs. just last week we learned that the german government has a budget deficit of 4.3% of gdp last year, like a quarter of what the u.s. has relative to gdp. that is not the issue. we do have governments with much higher debt piles to start with and higher spreads. and they get pushed higher in terms of costs as well, and that is withdrawing physical space
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for them. at the moment, that may not be a concern with the recovery from the e.u. recovery fund which has given everybody a bit of physical space. but what if governments decide that they need to react to these higher energy prices and that this requires more borrowing in order to give people more income to deal with this? that is where we are concerned that some countries will run out of fiscal space. dani: let's stick with the italian picture. heading into italian elections, how do you factor in political risk in this environment? christian: nice segue, isn't it? italy is once again focused in terms of political risk this year as the most immediate problem with the presidential election.
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conversations with investors suggest that people are barely relaxed. if he becomes president or remains prime minister for another year, we can worry about the problem next year will leave get scheduled elections. we believe there is a big risk of complacency here. we believe that if -- and this weekend, the right-wing parties have agreed to supporting him for president -- if the coalition that supports and can even agree on such an important question at this point as who would it take to be the next president, what else can they agree on? if they can't agree on policies, his role as prime minister could prematurely as of next week. we would be right back into
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campaigning and we would be right back into the kind of risks that we saw in 2018 when we ended up with this government. i think there is a risk that people under appreciate how risky or how big the probability is that mario draghi's political career simply ends next week. dani: really fascinating again. we also see a lot of other potential political headaches cropping up. we have a french election, in the u.k. there are calls for boris to resign. do any of these register on the radar as well? >> well, they do because in europe it is going to be crucial year as we move out of the pandemic and into the post-pendant rebuilding phase. one debate we are going to have is what happens to the fiscal framework in europe? for that, we need input from italy, germany. we don't know exactly how much
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leeway there is with this new government giving fiscal space to everybody. position to men president. but is not clear to us that if he remains president, he will also have a majority in parliament. and if he doesn't, his influence on french-european policy and his political capital in europe more generally will be diminished. and with an uncertain german government, with perhaps political stability in italy and political capital the french president, the risk is that we don't see the bold fiscal reforms in europe that would be necessary to ensure long-term recovery. dani: thank you so much for joining us this morning, have a great rest of your week. let's get to your first word news. >> north korea has testfired
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missiles. south korea's military said that kim jong-un's regime fired what. to be two ballistic missiles into waters off the east coast. a new strategy. the omicron variant has now spread to major cities in china. beijing, shanghai and shenzhen have all reported cases. while they are small in number, the infections are causing concern because of their timing. the beijing olympics begin just three days later. british prime minister boris johnson faces another week of his political future in the balance. six lawmakers in his own conservative party had called on him to resign over allegations of joining parties in downing street while the country was locked down. british media reports he is planning staff changes in a series of popular policy
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announcements. and walmart is setting the stage for meeting its customers in the metaverse. the giant retailer is preparing to create a currency in non-fungible tokens. walmart plans to sell goods such as electronic coming to court on the toys, sporting goods and personal care products. 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. this is bloomberg. dani: thank you very much. coming up, dr. joshua sharfstein . we will speak to him on all things covid. of course, market looking through any sort of omicron threat at this moment. let's get you a quick round of where we stand. u.s. markets are closed all day today for the nok holiday, but futures are up. looking at the stronger level,
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many futures up 1/10 of 1%. europe out-performing. some of the flavor of the value rotation as we continue to look at a bond market selloff. seeing some of those value tightening's do better. the nasdaq 100 only up just under 1/10 of 1%. small-cap up a quarter of a percent. it is still the value rotation under the surface with reactions to bond market cells and yields continuing to push higher. basically, unchanged. the dollar continues to be weaker despite a more hawkish fed. and after the ouster of credit suisse's chairman, under pressure. we are going to continue the covid conversation next. this is bloomberg.
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♪ dani: this is bloomberg markets. let's get you a quick check on
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these markets. it is a closed today for cash trading in the u.s., both s&p 500 cash equities as well as the bond market up. however, we are looking at a bond market at 178 yesterday. the highest level since january of last year. we are still looking at equities pushing higher both in the future session and the european cash equity trading. there is a value rotational tilt of the session, so still some reaction to that higher bond yield. is it shot and -- is it shock and awe this market needs? the pound turning to negative this morning, down about 1/10 of 1%. speaking of u.k. market, another bruising week. it features the prime minister -- the future of the prime minister in the balance. this follows a public backlash
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over rule-breaking parties. reports suggest the prime minister is set to lift covid restrictions in england within weeks. thank you so much for joining us this morning. how under threat is boris johnson's prime ministership at this morning? >> i think he is right on the edge, to be honest. he has been suffering since early december with just a kind of unstoppable stream of revelations about the party's that were held by his staff during the u.k. lockdown and last week we got what may prove to be the kind of crucial development that he actually attended one of these parties himself, which really puts into question both his credibility and his moral authority. dani: there have been some of these staff changes, some measures put in place that the times has reported on. are they enough to perhaps restore some of his favoritism and credibility within the
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government? ben: he's talking about potentially replacing his chief of staff, his leading civil servant, this director of communications. those are the reports we've seen. it is a pretty major overhaul. it is not clear whether that is enough to dealh the discontent particularly in his party. i think one of the key issues here is that a lot of people are saying that it is johnson's character, his integrity issues themselves which is the issue and if that is your problem, just changing the people beneath him is not going to relieve this problem. dani: what about some of these changes to covid policies? ben: to be fair, the kind of got it right over christmas on omicron. he held off introducing any serious restrictions in the u.k. despite the surge in cases and
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the number of hospitalizations kind of vindicated him there. he is now looking to ease further restrictions, which is obviously going to go down well with voters. he is trying to change the conversation, but the amount of commentary on social media and mainstream media over the weekend about these parties suggest that is going to be really difficult for him. dani: right, the dead cat strategy certainly is part of the conversation. take you much for the update. we heard from ben about covid restrictions turning to ease in the u.k. are we going to see the u.s. follow suit? joining us now is dr. joshua sharfstein, by stephen of the johns hopkins school of public health. thanks for joining us this morning. we look at a u.k. that is moving at least, in theory, to have any
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more endemic stage of the pandemic, looking at lifting restrictions come january 26. is the evidence there that we are looking at the endemic stage? >> i think it really does depend on who "we" are, where this is actually happening. the virus can be causing a lot of problems in one part of the country and then in another part, it can really come down, the cases can really drop dramatically in the situation could look different. i think we have to think about the pandemic a little bit like we think about the weather. sometimes it is really good and we know we don't have to carry an umbrella around. other times, we need the umbrella. right now i think it is foreseeable that the cases will continue to drop in the united kingdom and as a result, it is appropriate to lift restrictions. just because they are doing at this minute doesn't mean it might not be raining in part of the united states and we would expect cases to go up on the
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west coast. dani: in that case, if we see cases go up on the west coast, is the u.s. just behind the u.k.? is there a scenario where a month down the road, policies might reflect more in the u.k. of this endemic strategy? >> absolutely. i think on the other set of the omicron surge, it has got to look different. the only crime surge, we are still seeing growing hospitalizations in the united states and in part of the country they are continuing to grow. when it comes way down and we are in a different situation, we really do have to adjust. hopefully we will get a bump in collective immunity from omicron and that will give us some protection for a while and that will allow even more openings. i do think that 2022 doesn't look like the future will be exactly where we are right now in the united states, but our
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problem has been as soon as there is a little bit of light, we think "thank god, it's over." but really we are going to have to stay vigilant and be prepared to mask up again if things get worse. dani: maybe we have been burned one too many times over the past two years to celebrate prematurely. we also see a cdc that are starting to offer free rapid tests. how crucial is it that we have these more readily available as the u.s. combat the only crime wave question -- the omicron wave? >> the rapid tests are helpful, but their use can be overstated. the united kingdom has more access, and i don't think they are magic solution. sometimes people talk about it as if it is the only thing that matters. there are a lot of things that matter. but i do think that having access to a test is a good thing. if you are, for example, going
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to see the grandparents and really want to take every precaution, doing a rapid test on top of making sure people don't have symptoms, it is an extra level of security. but in general, when cases come down, i don't think people are going to want to be testing themselves every day. i just don't think that the test is going to serve to define our life. i think it is a tool we can use to help us in certain situations. dani: i definitely need to tell it to the variety of friends who have required for a dinner of three people to make sure you get yourself a rapid test first. thanks for joining us, of course, on the holiday. coming up, james athey joins the program. on a day will be are looking at u.s. markets closed, but still, there are consequences of this bond yields push higher that we continue to see. what does he think of it and how
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is he adjusting his portfolio? does he think that the potential banks in the u.s. also needs to head toward a policy as recommended by bill ackman? risk on again despite the lower volume. in crude just dipping into the red. this is bloomberg.
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♪ >> it is 7:00 a.m. in new york at 8:00 p.m. in hong kong. this is "bloomberg markets." stocks mixed as traders weigh a potential march rate hike from the federal reserve. the advance of the omicron variant comedy start of her earnings season, and a boom in m&a color investor sentiment. fresh turmoil for credit suisse. charged for bridging covered quarantine rules, shares falling on that news. surprise rate cut by china's central bank. growth slowed in the world's second-largest economy. consumer spending could the largest hit in december as the government tightened virus controls. all of that and more, coming up. welcome to the program.
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welcome to "bloomberg markets." let's get a check on the markets, a day when we don't have u.s. equity markets and play. we have european equity markets very much in play. european equity markets moving up by 0.6%, but playing a little bit of catch-up with what we saw in the united states friday. it is martin luther king day, so no trading of equities in the u.s. also no trading of cash treasuries, although we have a sense of where things are heading from the futures. i put in the yen because the boj looms on the agenda this week. i put in the brand price as well. the price of a barrel of oil, $85.75. that is something the market is very keenly watching. through 2022 so far, we have
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seen strength in the energy space, strings coming through in commodities. i also put in the unilever share price, moving to the downside. a lot of concern that this consumer goods company might become to to overpay for the consumer arm of gn k. will they come back for the fourth bid? that stock is down by 8%. now for the latest commentary on the markets, let's get some analysis. james savvy -- james athey at aberdeen joins us. good to have you with me this afternoon here in london. let me talk to you about what is going on on treasury markets. we don't have treasury trading today, but it is to some extent turning into a global narrative, and it is something we will be focused on a lot this week. we've heard from jamie dimon over at jp morgan, who has talked about the possibility of having seven hikes this year. what is your expectation for the
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fed in terms of the number of hikes? what is the number you have penciled in? athey: it is -- james: it is difficult. there's going to be some interplay. i am minded to think of an ancient philosophical thought experiment. if a tree falls in a forest and no one around to hear, does it make a sound? if the fed hikes and financial conditions don't tighten, did they hike at all? i think that is the challenge that the fed is facing at the moment. they told us in quite a short space of time that they have shifted their expectations for policy tightening aggressively. six months ago, we weren't talking cutie at all -- talking qt at all, now we are talking about quantitative tightening. they are about 0.3% tighter, but
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that still makes them roughly 3% easier than they were at the end of the last tightening cycle, and obviously the growth and inflation pictures are different. the fed is not tightening policy by its own metrics if financial conditions are not tightening, and that can create a problem for them. i don't think they want to be too aggressive too early, for fear of destabilizing financial markets. if policy changes are not having traction, they are pretty much mandated to do more while inflation is elevated and the labor market is tight. i think four is quite reasonable at the moment, and we have been taking risk off because we have moved along long way quickly. in the end, it would not surprise me if they only had to hike two or three times, or if they had to hike five or six times. anna: we have seen the market and analysts adjusting their expectations.
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i think the average expectation is now for more than four hikes in 2022. we have also seen a lot of people commenting on whether we need some kind of shock to the system. i wonder if you see any sense to this kind of narrative. we heard bill ackman talk about maybe we need 50 basis points to restore credibility. asked week we were talking about the 19 seventies wall street dr. doom, who was talking about we needed to change the in market -- the market inflation attitude. do we need some kind of shock therapy, or does that not make sense? james: i think there is some sense in that. one of the problems the fed faces is that financial markets have been conditioned for so long to expect a low inflation, low growth, easy monetary policy equilibrium, whereby every policy is without consideration
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and there is no threat to that scenario because inflation is so benign, and that is a danger. conditioning investors in such a fashion is not healthy for the financial system. it is not healthy for the transmission of policy. i do see the sense in shocking markets out of that. of course, you run the risk of creating a very precipitous unwind of some of these positions such that you can't really manage the inflation outlook because financial markets are so destabilized. so i don't think you want to be too aggressive, but i think it is interesting that we are discussing a 50 hike. in a week or so, you were down to seven meetings for the year, and if they want to hike six or seven times, then every meeting is in line, or you get off to a quicker start. lots of talk about doing 50, and
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twice they have passed up the opportunity to do 50 and have done 25 get to me that is probably representative of, and general, how careful and cautious central bankers are. it would be a big shock at this stage if the fed when 50 as soon as march, but i see the rationale of this shock to the system to shake investors out of this conditioned behavior. anna: would there need to be a catalyst for this kind of action? we have plenty of experience of central banks cutting rates quite aggressively, more than 25 basis points to try and kickstart things to give a very serious message to markets. it is harder to see the catalyst that will provide the arguments of doing that on the upside. james: that is absolutely right. that is 30 years or so of learned behavior. central bankers have been unbelievably asymmetric in their response to upcoming information. the minute there are signs of trouble, they are quite 50 to
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cut and grow the balance sheet in gargantuan fashion. they have not really had to face a positive shock, the sort of shock that might require aggressive hiking of policy. we see it going on in emerging markets, where central bankers have an hiking by 150 at a time. would it mean some sort of upside stock? yes and no. if inflation pressures persist, if the signs of second-round effect, ultimately wage negotiations being at least equivalent to the change in headline inflation, then i think that is the sort of scenario where central bankers and the fed will be thinking their credibility is significantly on the line, and maybe that is a trigger for them to openly start
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considering more open changes to policy. tom: -- anna: that would be really interesting to watch. given all the certainty about the year ahead, if you could see arguments for to hikes and a situation where we ended up with more than five, is that the range of possibilities still ahead for us in 2022? how do you position for that kind of uncertainty? james: for me there are a couple of trades which still offer you quite attractive asymmetry, even if any -- even in a bimodal distribution. i still like that as a way to position for the potential for much more aggressive monetary tightening. the base case of a significant amount of monetary tightening, but a tail risk for some, a more considerable risk for others, including myself, that growth and inflation might disappoint more significantly versus expectations. all those environments where we
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are today are likely to weigh on the yield curve, so yield curve flattening is in the u.s. i think is a good expression. a similar dynamic for longer dated are givens, so suggesting that inflation will run above the fed's target on average for 10 years. in reality, the fed is responding in real time with changes to its policy communications. so if inflation does not come down on its own this year, i think the fed will be mandated to respond one for one of policy tightening, and policy tightening tends to weigh on longer dated breakevens. if the fed has to tighten, that should cap longer dated breakevens. and i like the dollar for similar reasons. anna: james, thanks so much. good to speak to you. james athey of aberdeen, thanks
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for spending time with us on "bloomberg markets." let's get to some first word news for you and get an update on some of the top stories we are covering here at embarq. here is angel feliciano -- at bloomberg. here is angel feliciano. angel: credit suisse has ousted a chairman after reported breaches of swiss and u.k. quarantine rules. he resigned after just nine months on the job. his -- a disastrous year for the swiss bank. board member axel lehman has been named the new chairman. in china, the central bank has cut a key interest rate for the first time in almost two years. beijing is trying to bolster an economy that has lost momentum because of a property slump and repeated coronavirus outbreaks. official data shows that china gross domestic product rose 4% last year -- last quarter from a year earlier, the weakest since
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early 2020. for the fourth time this month, north korea has testfired missiles. south korea's military says that kim jong-un fired what appeared to be two ballistic missiles into waters off its east coast. the tests could be a way to force the biden administration to come up with a new strategy towards kim. the omicron variant has spread to major cities in china. beijing, shanghai, and shenzhen have all reported cases. while they are small in number, the infections are causing concern because of the timing or get the lunar new year begins february 1 and is marked by mass travel, and the beijing olympics begins three days later. 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. this is bloomberg. anna: thank you very much, angel feliciano joining us with the latest. the top stories we are covering. along with that, we should throw
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in some corporate news flow and some m&a speculation, or confirmation that m&a is being talked about. whether it will go through is uncertain. unilever is considering upping its $68 billion bid for glaxosmithkline's consumer unit. could this market pivot towards health and hygiene for the unilever business? how well will that go down with shareholders? the share price of unilever is down by 8% in today's session. we will get further analysis on what motivated this conversation and china's economy grew faster than expected, but the pboc surprised some by cutting rates. plus, the partygate talk of boris johnson. how the scandal of breaking covert rules is threatening the stability of the tory party. not weighing on the pound,t hou -- on the pound, though. this is bloomberg. bloomberg.
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anna: welcome to "bloomberg markets."
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17 minutes passed 7:00 if you are in new york. unilever plans to sharpen its focus on health and hygiene as it weighs whether to make a higher offer for classes missed klein'-- for glaxosmithkline's consumer unit. joe easton joins us with the latest. the market reaction to all of this news flow about unilever making three offers for this unit, and the reaction has not been positive in the share price, nor from some of the analysts we have been speaking to. give us a flavor of some of the negative response. joe: analysts pretty much negative across the board, and i don't think it is too surprising when you look at the offer price, given that glaxo sort of shrugged at that. it could been chilly go up to $60 billion. that is a really high multiple,
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and it would value around 20 times earnings. if it went further, you would be getting to even higher multiples, so you can understand why investors and analysts are saying this doesn't seem to make sense. also just in terms of synergy, big difference between making mayonnaise and making painkillers, so you are questioning where the over apple is -- the over app -- the overlap is in these businesses. anna: but the unilever stable is already quite broad, and yet it makes the like it or lov -- or lowe's it products or lowe's -- or l -- or lo -- or loathe
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it products like mayonnaise. but there are some who must see some strategic benefit to it. joe: there are some areas of growth in the consumer health areas. those marketers to underpenetrated, and consumer health is becoming much more important not just in the developed world. that is something that obviously the pandemic has helped to accelerate, so there are big areas of growth, so it is not necessarily that it doesn't make sense in terms of sales, but at the price of the toolkit, it seems like unilever is really going all out in trying to get this unit and see that as being a necessity in terms of their strategy. but the price is what is being balked at here. anna: even though unilever saying they will employ
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financial discipline, trying to reassure the market in that sense. what about from the glaxosmithkline perspective? they have been under activist and breast are -- activist investor pressure to open themselves up to this kind of offer, whereas the plan, i understand, was to spend off in some other way. joe: the plan was to ipo or spin off in the public market, but there is so much uncertainty that by the time they go through the whole process of setting up the ipo, will there be an appetite? it is so much uncertainty. it will be so much better for gsk and for investors if they can just sell it in one lump to the company like unilever.
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if they could get it, it would be beneficial at the right price. you could potentially see somebody else coming in. some analysts have thought there could be someone like one of the other big giants in these projects. i would not say it is over for now. gsk obviously looking to refocus on oncology, cancer treatment, also vaccines during the pandemic, so looking to focus on the main drugs business. so probably just looking to get the right price, i would say. anna: you wonder whether some of the big u.s. names might be looking at this as well and but his holy thinking about getting -- and potentially thinking about k involved. thank you for joining us with the latest about unilever and its latest pursuit of a part of gsk. credit suisse group's chairman
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has resigned after just nine months and the role after a series of missteps, including reported breaches of u.k. quarantine rules that eroded confidence in his leadership. joining me is bloomberg's michael moore. what are the breaches of covid rules or the infractions he is said to have committed here have led to this resignation? michael: he has already apologized for breaching swiss quarantine rules. he came into switzerland from london and then left before the required quarantine period was up. media publications have also reported he attended wimbledon this summer when he should have been in u.k. or in teens. so this all came to a head because he was brought in to drive this cultural change at the bank. his method was all about personal responsibility, and
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having himself in the spotlight here was something that i think the bank and he felt was not sustainable, so he resigned. it was quite a surprise. most people expected someone of a slap on the wrist for this. anna: i suppose you might think may be a slap on the wrist, but when you brought in to improve risk management, you become a risk, that is not a great look. what about the leadership vacuum that was potentially opened up, although we have seen this with bank announcing pretty quickly a fix-it? michael: yes, they were placed in with axel lehman, a board member who just joined credit suisse's board late last year, so a relative newcomer, but is well known in switzerland, having been at ubs in insurance. but you have at the top of the bank now to swiss executives who
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were put in in an emergency situation, and thomas gottstein came into the role after his predecessor was ousted for spying. anna: after the spying scandal, then there was archegos and a big focus on risk management as a result. thank you for bringing us the update. shares credit suisse down by 1.7%. thank you very much to bloomberg's michael moore for bringing us the latest on the swiss banking sector. as he pointed out, a surprise announcement there from credit suisse. coming up on the program, chris turner, head of foreign strategy at ing bank, joins us. has the dollar done exactly what
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you thought it would? if it happens to, we wasn't about where the u.s. consumer heads from here. what will that play on the dollar? also, go around the world and currency. this is bloomberg. ♪
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♪ anna: welcome back. this is "bloomberg markets." half past 7:00 in new york this martin luther king day, so we don't have trading in the united states today. we are here in full complement in europe. let us get to the markets. we have the stock 600 moving up by 0.6%. we will ignore perhaps u.s. futures for the moment because we are closed on u.s. equities, but we do have to the upside and european equity market, by 0.6%. the ftse up by 0.8%. u.s. futures, we won't hold too much in-store by those, but they are pointing to the upside. the yen is on the move a little
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bit this morning. there is much else to talk about in the fx market. one dollar 14 since his were retrade on euro-dollar. $1.14 is also were retrade on euro-dollar come up with a decimal point in the different place. the print price testing a seven-year high. the unilever share price because of this lot -- this large, fast-moving consumer goods company, it is met with some resistance from investors and indeed from analysts today. let's get to a chart which caught my eye this morning. this is to do with what is unnerving some in markets at the moment, and that is the pace at which we see yields go higher on u.s. treasuries. the bloomberg consensus now suggesting that we expect over
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four hikes in 2022. interesting to see that the consensus and market pricing is edging upwards. in terms of the politics, let's deal with one u.k. to mystic story that is lingering. boris johnson faces another bruising week following a public backlash over rule breaking parties at his downing street office. some more on the so-called party gate fallout. let's bring in david merritt onset in london. this won't go away, will it? it does seem as if there's been a long string of suppose it scandals that opposition parties have tried to make stick against the ruling conservative party, and many of those fell by the wayside. you have seen the evidence of that in the polling?
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>> boris johnson's personal pull rating really collapsing and dragging down the conservative party about 10 points at the moment, their best showing for many years. of course, boris johnson stitched together this coalition across large swaths of england and one the 80 seat majority. there are questions about these covid rule breaches. no wondering if this man is actually a liability. anna: he is somebody who wins things, and that is what the conservative party likes about boris johnson. we won't get too much into the weeds of the committee and the
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tory party, but if they wanted to, and number of letters have to be received by one man. david: that's right. there were reports over the weekend about how many of these ranging from single digits to 25 already. clearly, he is sticking to be in prime minister, so his own mp are going to have to get rid of him. there is this drawn out process. most of them now saying they are sitting and waiting for the ski report -- waiting for this key report. we are not sure when forget it could be later this week, could be next week. not only mp's, but johnson's cabinet saying let's wait and see. they are trying to buy a bit of time. is the public going to move on? maybe we will see some better news about covid restrictions being lifted and the prime
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minister will get a bump from that. they are hoping some of these things will blow over, but there's also risk that more of these revelations will go by without another party being described, and all of this just fuels the anger amongst the public and perhaps make it more likely that his mps will not support him in the future. anna: and having to make an apology to the queen which is pretty unprecedented, over the weekend. thanks to david merritt for bringing us the latest on that. with all of that political tension, a possible change of leadership. you might have thought that we will see a lot of pressure on u.k. assets. the pound is taking a lead lower for another session, but not really by much. we will get back to that in just a moment. on the currency to watch, the dollar trading at its lowest
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level despite an increasingly hawkish fed. we will come to the dollar a moment. i will linger on the u.k. story for just a moment. it seems as if, during the brexit negotiations, it really mattered which individual was leading the conservative party because that could take the country in a very different direction. but right now, the pound, and that particular u.k. asset, does not seem to be moving around based on the fortunes of prime minister boris johnson. other things are at play here. the bank of england, stock exposure and people wanting to get into the ftse 100. what is driving exposure at the moment? >> i think they moved on from brexit, and if you look across global fx markets at the central bank that are prepared to react to inflation, the bank of
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england has been in the forefront -- potential he hiking rates again in february. investors have appreciated those central banks are prepared to move early, and that is one of the reasons the pound has continued to do quite well. anna: that is one of the reasons the pound continues to do quite well. do you see that being sustained as we head towards may be a lifting of some omicron restrictions, the ones we do have in place? we don't have very severe restrictions of the u.k., but that to be ads upside to the u.k. economy. on the others, a consumer spending squeeze could lie ahead because of higher gas and fuel prices. where you see the pound heading from here? chris: we think the pound is largely going to hold its gains, trading about 83.5% at the moment.
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i think a strong sterling within europe could lead to cable, holding up a lot better than some of the other currencies, so we have cable trading in a range between 1.30 and 1.40, but because we are quite positive on the dollar in the first half of this year, we think cable will probably come a little bit lower in the summer. anna: apologies for everyone, we have slight issues with chris's line, but i think we are just about getting the gist of it. you are quite positive on the dollar. we have had some weakness on the dollar, though, despite fed hawkish in us. you might have thought -- fed hawkish in us. you might have thought that the dollar would benefit from that. do you cs jumping back into the dollar? chris: yes, i do. at the start of the year, the narrative is that all of the fed tightening its price. let's look elsewhere.
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opportunities in emerging markets, opportunities and commodities again. but i think what is priced for the fed curve at the moment, the terminal rate at about 1.6% over the next two or three years, if we see rates strategists say the next move is still probably higher closer to 2%, that may happen we think in the first half of this year. maybe the fed dot plot in june this year, they hope to reprice that cycle. i think in the early stages of fed tightening, we prefer to back the dollar staying strong through this period. anna: would that be despite any weakness for the u.s. consumer? because certainly the u.s. consumer could be under pressure and savings may be ebb a little bit as the fiscal impulse is reduced compared to last year, at least for some. what is your expectation of how the u.s. consumer plays into the
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dollar? chris: it is an interesting angle you mentioned there. i think it isn't concerned too much about u.s. consumption this year. businesses have a lot of savings, and even though consumer confidence has come down over the last couple of months or so, i think you're looking at pretty strong u.s. consumption, so i don't think the fed will be too concerned about that. but the flipside is strong u.s. consumption this year is really driving wider external deficits, so the u.s. current account deficit last year was 3.7% of gdp, so very large, actually. that will be the achilles' heel i think of the strong dollar story, the point at which the u.s. cannot fund these growing imbalances through strong domestic consumption. i don't thing that is going to be a story this year because u.s. growth and u.s. interest rates can keep the dollar as an attractive asset, but i think into 2023, that story could
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turn. anna: chris, thanks so much for joining us. chris turner of ing bank joining us to take us through his thoughts on the pound and the dollar. some interesting narratives from the fx world so far in 2022. let's get an update on first word news. we will go to angel feliciano and dubai. angel: the omicron variant has spread to major cities in china. beijing, shanghai, and shenzhen have all reported cases. while they are small in number, the infections are causing concern because of their timing. the lunar new year begins february 1 and is marked by mass travel, and the beijing olympics begin three days later. french oil has been trading at its highest level since 2014. futures in london held at about $86 a barrel. trader vtol group says higher prices are justified and could rise even further. concerns about the impact of omicron on demand heavy eased. it's prime minister boris
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johnson faces another bruising week with his political future in the balance. six lawmakers in his own conservative party have called on johnson to resign over allegations of parties in downing street while the country was locked down. meanwhile, british media reports that johnson is planning staff changes and a series of populist policy announcements. in london, bankers have changed jobs in the fourth quarter at an average salar -- average salary increase of 19%. after covid slowed down, recruitment in early 2020. 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 angel feliciano. this is bloomberg. anna: thank you very much for that update. let me just get to some breaking news coming through from the drugmaker moderna. we are seeing stefan bonsall, the ceo -- stephane bancel, the
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ceo, speaking from the virtual davos event. there is a limited online event taking place, and we hear him speaking at that event, saying that the omicron focused shot will be in a few weeks, which is an exciting develop and. he was actually on bloomberg tv at the end of last week saying that the pandemic could start moving into endemic phase in 2022. we will get further analysis of where we are from panda metoo endemic -- from pandemic to endemic. still ahead this hour, a look at oil as demand pushes higher, tempting seven your highs on brent. the oil price will return to that story shortly. this is bloomberg. ♪
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anna: welcome back to "bloomberg markets."
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for more, let's bring in bloomberg's will kennedy, executive editor for energy and commodities. a real-time check of the oil price, $85.81. we are down 0.3% compared to the previous close. the direction has been to the upside. is there in petition that that carries on? will: that does seem to be in the market. i think that is being driven by the sort of passing of the omicron wave in europe to some extent in parts of the america. that's all been covered now. on the one hand, gasoline demand
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is strong. people are worried that opec can't keep raising production forever. the supply may be a little bit constrained. anna: it is clear that demand does seem to have been stronger than those who were most fearful had expected in recent months, but there are still questions hanging over china and how the chinese demand story plays out for the rest of this year. will: i think that is probably the one thing people are concerned about. they are locking down provinces, restricting certain cities, and that does make people more fearful that there are not people driving as much. so far that does not team to be having an impact on demand, but in the rest of the world, demand remains very strong.
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what we are seeing where people are buying oil, refiners are very keen to get their hands on oil because they see the man for fuel rising in the first half of this year. anna: what is the risk on the supply side? is that more supply comes back from places we haven't seen playing on international markets for some time, or is it that producers can live up to the expectations of their pledges? will: clearly 2021 was a period where we saw opec, a lot of the supply they had taken off of the market at the early stages of the pandemic, they slowly said that back into the market, but quickly they will soon reach the limits of what they can do. we are seeing some opec countries already in africa and to some extent russia being able to meet the commitments to bring oil back into the market. saudi arabia will still have spare capacity. the uae. but i think people are very focused on how much they have left to bring back. the other thing is because of the energy transition,
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investment in new oil fields is not fashionable. there's a concern that we are not replacing the oil that we are using, and for that reason, people see supply tightness in the years ahead. anna: thanks so much for joining us, will kennedy of bloomberg news with the latest on oil prices. china clearly a big consumer of oil. china's i, growth slowing in the last quarter as consumer spending took a dive, giving the central bank because to cut its key interest rates for the first time in almost two years. in the current -- enda curran gives us an update from hong kong. enda: china's central bank cut to key interest rates today in a clear sign that authorities are both concerned about the depths of the slowdown in the economy, and that they are now ready to start outing more support to ensure growth gets back on track. the pboc took that decision at the same time when we got numbers showing retail sales in december continue to slide. that tends to reflect the
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ongoing outbreak of the covid virus across china, which necessitates an aggressive response by policymakers to control the spread of the virus. on the flipside, industrial production in december was quite strong, showing that there is a divide going on with manufacturing, and consumers remaining week. but the bigger story is china's economy starting the new year on week footing and more support from both the central bank and the government is expected. anna: that was bloomberg's chief asia economics correspondent with some of the highlights. let's bring in bloomberg's tom mackenzie, who follows the story for us here in london. there's weakness in the chinese consumer, and you wonder whether that worsens. what was your take? tom: that is crucially the weak link for china. they don't face the same inflation or dynamics as we do in the u.k. or the u.s., so it
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gives the pboc that room to address that by cutting interest rates, but it is the consumer not back to prepend him of levels still, and we are seeing restrictions put in places like xi'an. now we have local cases in beijing and shanghai, so it continues to spread, and as it spreads in china, because of covid zero policies, they put in these very tough research and's. mix it very difficult to go out and go to the shops, when you normally get the biggest mass migration of people you have ever seen. anna: this is usually a big time for people to travel across the country get together with friends and family
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are seeing the variant now, and this is the heart of the financial world the heart of governments in china, the tech world in china. will: for the first time, that is what we are seeing -- tom: that is what we are seeing now. they have had very tough restrictions. again, normally a platform for china to show itself off to the world, they will create a bubble around them. this is in a very important year for xi jinping, the party congress happening, and hoping to cement another term. anna: the set up around the olympics is going to be really crucial. is there any sense that the zero
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covid policy is weakening, or that it could be reassessed in light of what we know and what we don't know about omicron? is there any sense they could revisit that policy? tom: so far, very little since he will get a revision of that. we had chinese officials coming up saying the covid zero policy is still possible to implement. some china watchers are suggesting that after the party congress towards the end of this year, a b that is when you will get a relaxation. very unlikely ahead of the olympics and that party congress, and there are those who say china has the toolkits in terms of track and trace to deal with this. others say it is unrealistic and they will have to make changes. anna: thanks for the update. bloomberg's tom mackenzie joining us with the latest. coming up, jason draho of ubs wealth management. we will turn to him shortly and
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get his perspective on how many rate hikes we will see this year from the fed. what will the balance sheet look like? what will the inflation cycle look like in 2022? more on the markets next. this is bloomberg. ♪
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♪ anna: it is 1:00 p.m. in london, 8:00 a.m. in new york, and nine akaka p.m. in londo -- and nine akaka p.m. in hong kong -- and 9:00 p.m. in hong kong. moderna says and omicron focused shot could be in clinics within the next few weeks. we will bring you the virus latest period earnings underway. we cut up with the wells fargo cfo, who says consumers still
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have a lot of liquidity to grow the economy. that conversation later in this hour. welcome to the program, everybody. we will check the markets for you this martin luther king day, which means we are without the united states today. we don't have u.s. equity trading. we also don't have u.s. treasuries trading, but we have trading in europe on both of those fronts. european equity markets moving to the upside, up by 0.6%. that is really just catch up with the united states. u.s. futures point to a higher open when it comes tomorrow. i put in the yen because we do have some moves there. the euro is weaker, 1.14. the pound a little bit weaker this morning. we talked about what was going on in oil prices earlier with will kennedy. a lot of westerns about demand from china. at the moment, the demand story pretty robust. that is sending oil prices higher, although they retreat today.
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you see the unilever share price there, and we have seen that stock pushing lower buy as much as a percent in today's session. a little bit of a lackluster reception for the news over the weekend at that particular consumer goods company has made three offers for parts of gsk. let's get to bloomberg dani burger, who has a breakdown for us. what caught your eye? kriti: it really is --dani: it really is about shock and awe. four rate hikes seem to be the baseline. we have seen a market that already has been pricing in four rate hikes just in the past day or so. it has ticked above four rate hikes. strategists have tended to tread behind the market expectations. they have caught up, seeing above four rate hikes for 2022, but will that be enough? this is quite the regime shift in that it is only the baseline.
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we heard from bill ackman of pershing square saying that in order for the fed to regain credibility, it could work towards an initial 50 basis point surprise, which would demonstrate its resolve on inflation. bill ackman of course isn't the only one. jamie dimon as well saying he is prepared for as many as seven rate hikes, saying it will not be as sweet and gentle as some expect. anna: of course, a higher yield environment might give some reason for pause. it might create some uncertainty around risk assets, especially if we see yields climbed quickly in a short space of time, but one sector that likes to see a higher yield environment is the banking sector. certainly that has been a feature of some of our conversations about banks as we get into the earnings story. dani it really: if this meeting between the macro environment and the banks, that so far have not been the most reassuring perhaps because expectations are so high. the kbw bank index up 11.25% this year.
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on friday we saw citi and jp morgan both fall. wells fargo does better. wells fargo did say that their net income should rise about 8% this year, so that is the macro story of perhaps a steeper yield curve helping the banks, but it is a different macro story that hurt citi and jp morgan, and that is the inflation story, specifically wage inflation. costs were much higher for these banks. valuations looking good for jp morgan to start the year. thousand for people to be concerned about what expenses mean for these banks. i should say jamie dimon, along with talking about seven interest rate hikes, said it is good for workers, good for business rise wages, and also said people shouldn't be crybabies about it. [laughter] anna: thank you very much, with the latest on how the markets are pricing in the fed and what that does to the yield curve in the bank earnings story. get some market analysis. let's welcome to the program jason draho, head of asset
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allocation for the americas at ubs. the markets tell us now that four hikes or more are expected from the fed this year. does that go with your thinking? jason: it does. really, we think they will start hiking as soon as possible in the march timeframe and do a couple of hikes. what is more subtle is that it also wants to be outcome dependent. whether it is three hikes, four hikes, or more than that, i think that is really going to depend on the data. getting to 2% at this point is not necessarily that a full -- that helpful. where the market is underpricing is not so much this year, but next year. all told, the market is pricing
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about six or seven rate hikes into the entire cycle. that seemed to pessimistic on the long-term growth outlook, or maybe optimistic on getting inflation under control. all of that means that reit's will have to go higher than they are priced right now. anna: what is the limit of our expectation here? we saw jp morgan's jamie dimon saying we could get as many as seven. what would have to happen to take us into that kind of territory, do you think? jason: there's two scenarios. the bad scenario is that inflation continues to stay at a really elevated level, the fed realizes they are far behind in has to raise rates. the more optimistic scenario is that inflation does moderate, but growth is so strong, the fed can react pretty quickly. it is certainly going to be better for the markets as opposed to the former, where i
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worry about the overall market if the fed has to do seven hikes this year. i think risk assets at a minimal will become more volatile and probably see some pullbacks. that is the really extreme outcome, to get seven hikes. anna: what about the argument that we may be need to see something a little unusual, some sort of shock therapy for markets? do we need to see a 50 basis point hike in march? is that something we should be talking about? do you see rationale for the markets needing that kind of wake-up call or the ambitions of the fed, or just to shake markets into expecting that the fed is really serious about tackling inflation? is there some merit to those arguments? jason: that is i think the underlying argan into the credibility point. therefore, it needs to move aggressively and could lead to get under control. if you look at the bond markets in terms of inflation on the medium to longer term, inflation moderates.
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we saw the ppi number last wednesday, breakeven excitations came down. if you look at the long market pricing, it is not worried about him place and long-term. it is an implied credibility for the fed at least at the time, so i think 50 basis points now without having the fed to really prep the market with that might be more of a negative for the market. at least from the bond market, that is what it is signaling to us. anna: what kind of problems are thrown up by the fact that we've got world's two largest economies moving in different directions on monetary policy? what kind of opportunities and concerns does that throw up? we've got the fed getting ready to heighten policy, concerns around the retail environment. what kind of world is that take us into? jason: as we look back into the history, we saw the fed was looking to tighten and the pboc was looking to ease, so we had
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the central banks moving in an obvious direct -- in an opposite direction. that is certainly not the whole story in terms of what is going to drive risk assets, but it does suggest that, at least for the pboc, it is a little more optimistic scenario for china in terms of wanting to ease policy on a relative basis. if you contrast that with last year, were u.s. equities did incredible well, china equities were actually down largely because of regulatory issues, i think that is some sort of mean reversion or bursal performance intentionally. but for the overall global economy, i think the key story is do we get a bit of coloration of growth when this omicron wave subsides. i guess the key point is are they looking at the data and will they tighten as much as the economy needs? that is the bigger story for financial markets more so than with the pboc is doing right now. anna: we were also talking just
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a moment ago about the banking sector and reports from the banking sector, entirely we have seen some banks report already and cut the cost base which is clearly an issue with some, and wages in particular. how much of a narrative is this going to be throughout the earnings season, do you think? is it just going to be restricted to financial services professionals who are good at finding inflation numbers on their bloomberg and taking it to their bosses and saying this is the real world i live in? is it just restricted to financial services, or is this going to go much broader? jason: i think there is going to be a narrative story for the whole season. i think investors were concerned when q3 earnings were being reported in terms of the potential inflation impact. if it turns out the data did not show that, that wage pressure inflation really wasn't showing through, but now we are seeing some kind of financials, and we sell retail sales last week, there may be some indication that pressure is going up and is starting to crimp consumers.
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so we could see that starting to show up in the earnings season. i thicket is going to be a key story because earnings growth is going to have to drive equity markets higher this year. if they are constrained because of rapid wage growth, we could see an impact in terms of the market outlook. anna: thanks so much. good to speak to you. now let's get an update on some of the first word news stories we are covering today here at bloomberg. for that, we go to dubai and angel feliciano. angel: he was the banker whose job was to fix credit suisse after a pair of scandals cost its billions. now the chairman has resigned after just nine months on the job because of reported breaches of swiss end u.k. quarantine rules. even before news of his quarantine issues began emerging last month, his leadership style had received makes reviews within credit suisse. he will be replaced as chairman by board member actually meant. in china, the central -- by board member axel lehman.
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and china, the central bank has -- official data show that china's gross domestic product rose 4% last quarter from a year earlier. that is the weakest since early 2020. in texas, authorities have identified the armed man who entered a jewish synagogue and took four hostages. he was a 44-year-old from the u.k. the 10 hour standoff ended with the fbi rushing into the building and the death of the suspect. he was demanding the release of a pakistani convicted of trying to kill u.s. soldiers in afghanistan. unilever plans to sharpen its focus on health and hygiene with plans to sell off high lung growth plans, while it is considering increasing its bid for glaxosmithkline's consumer unit. global news 24 hours a day, on
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air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'm angel feliciano. this is bloomberg. anna: just on that corporate story, the unilever share price down by over 7%. the gsk share price up by 3.7% in response to the news flow over the weekend that unilever has made three offers. will they come back with a force for part of gsk? coming up, the omicron variant has now spread to major cities in china. beijing, shanghai, and should have all reported cases, so we now see a real focus on fighting it in the financial, government, and tech capitals of china. this is bloomberg. ♪ ♪
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anna: welcome back to "bloomberg markets."
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let us talk about energy markets right now. russian gas flows to europe have slowed significantly, driving up the cost of energy at a time of peak demand. let's get some analysis. jamie rushed joins us, chief european economist for bloomberg economics. good to have you with us. you have done some analysis and come up with some forecasts as to where you think household energy bills across europe are going to go this year. and on urinalysis, the u.k. consumer has some things to worry about. why is that -- on your analysis, the u.k. consumer has some things to worry about. why is that? jamie: german utility providers by their gas a lot of time in advance. it is not the case in the u.k. so they are getting more of the pass-through to consumers when the price cap is altered in april, so we are going to see a huge lift and the cost of bills for households.
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about 50%, we estimate, that will take u.k. consumers from the most insulated to the least insulated against rising gas caps. anna: they have not felt a lot of the increase we have seen in market rates for gas, but that can, it is reviewed periodically, and they will see this big increase in those consumer energy bills. what about in france? we had some news flow on friday talking about how the french government was requesting certain policy from one of the electricity suppliers there. what do you look at when you look at france in the energy mix they use? jamie: we see more use of nuclear energy, so that reduces the dependence on gas, and the french state has been making quite a few grants and transfers to ease the burden on consumers, and that has not happened in the u.k. yet, so that is looking to over the next few months to see whether policy does change.
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jamie: it seems that spain and italy consumers are the ones who have felt the brunt of the moves right now. you can see them on that chart in the pink and the blue. that is where we have seen the brunt of this already, although we do -- although you don't expect that to get too much worse from here. jamie: that is despite measures that were taken, so spain did sales tax cuts on energy and so on, but there is support, and that is why, because there is any support in the u.k., we will leapfrog spain and italy this year because the support isn't there from the u.k. government. anna: we will wait to see if we get any further support because there's lots of talk about a cost-of-living crisis for various reasons, but heating costs is one of those. one of the other things really weighing on consumer spending at this point here in the u.k. -- what are the other things really weighing on consumer sentiment at this point in the u.k.? jamie: i think it is actually
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quite interesting that because of the delay to the feedthrough of energy costs, it means that the spike in inflation is going to be prolonged for much longer in the u.k. than other countries in europe. so while inflation is definitely a target in the euro zone, it is going to be over 4% by the end of this year still in the u.k., so just a shift in the timing of these things could affect central bank behavior. anna: thank you for joining us, jamie rush of bloomberg economics. this is, to some extent, a global a story. to some extent, a european story. these higher gas prices certainly a european focus. with new faces added to the mix making their brussels debut, the balance of power in europe could shift.
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for more, we go to our european correspondent maria tadeo, who is live on the ground. i know you have been focused on these new faces and the arrival of them. i don't know how any people you have had arriving so far. i can see you when what looks to be the entrance hall. what do these new faces mean to european fiscal policy? maria: that is a very interesting question, particularly this year. we know that the fiscal debate is back at the forefront in europe. there is some real debate about the 2% deficit, the 60% debt to gdp and whether or not that can change. the market has always been very into this idea that europe could get spending and bigger numbers, and it is interesting because i did get a chance to speak with the dutch finance minister, and she did say when it comes to frugality, at times this is a good asset, but dynamics and the narrative is changing, and we may have to adapt. this is a different government. with the dutch government that had a very strong line approach to being very fiscally
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responsible and not spending too much, with this new government, that could be about to change. anna: i was just talking to jamie rush about gas prices and the cost of living in the u.k. and across various european geographies. i know this is something many of the finance ministers you are busy tracking down in brussels today, no doubt having to talk their constituents, to their populations about come price -- populations about, price is the thing they have been concerned about. is there anything they are considering to pressure on consumer bills? maria: it certainly is top of the agenda, especially when you look at countries like germany, where it has always been such a tricky issue. they want to send a message that germany is all out for price stability. when you look at the french in particular, this is an election year, and emmanuel macron made it clear that by the end of his term, the french would see their
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purchasing power go up with inflation, reflecting any higher bills that become more problematic area so in general, there is a sense that inflation could really bite consumers this winter. in terms of what to do with this, there's a real split. some would argue this needs pan-european measures, perhaps joint purchases, joint procurement. those -- as to whether that means gas and nuclear to bridge that gap before we go full green , and of course that is creating tensions come already putting the french and the germans at odds. they see this very different. one argues that gas is the past, and that nuclear is really the future. anna: you mentioned russia, and that hangs over every story around european gas consumption at this point. we have seen european gas prices moving a low bit lower, but
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russian gas supply remains in focus and will remain so for as long as we see storage levels quite so low here in europe. maria: maria: which have been under --maria: which have been under 50%, which is unusual for this time of year. we know europe is still very heavily dependent on russia. the flipside, this is sometimes something i hear, that this is a short-term situation. we are looking at 1, 2, 3, 40 years down the like -- for years down the line. the winter is the time of year where the european union is the most vulnerable to price changes when it comes to gas, and this transition phase also makes it extra vulnerable to changes on that front, and that is perhaps what is not just accelerating the tensions we are seeing on the price front, but also the political and geopolitical right now. anna: maria, thank you so much for joining us with the latest on the politics and how it is
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playing into conversations around energy bills in europe. coming up, we discussed with the department chair and professor at the yale school of medicine the fight against covid-19, the fight against omicron. that is coming up next. this is bloomberg. ♪
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anna: welcome to our special edition of the program because we don't have you have equity markets open here in europe. the european section looking to be quite buoyant. we don't have a great deal of movement in fx markets today tracking dollar-yen. the pound also on the move a little bit today. broadly speaking, quite a lot of calmness to fx stories through the session. we are down .3%, but we have seen the print price looking to move up toward seven years high, hitting levels we have not seen since 2014. we have seen oil prices gaining some 10% since the start of this
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year as amanda story proves to be more robust than anticipated. unilever, the fast-moving consumer goods giant considering making another offer. let's talk about where we are in the fight against covid. the omicron variant has spread to key cities across china. the country faces a growing number of cases despite the government's strict zero covid policy. we are joined by tim lowe who is with us. very good to have you with us. the latest we have seen on the omicron variant from china, but of course, this is a global story. we are seeing it developed very differently in europe and north america. conversation has turned to whether this is going to become endemic. what is your assessment on what that means?
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what does the world look like, how different is it, if we are in an endemic phase? >> as you point out, the situation is much different over here than in china. a lot more virus here and we are -- the word endemic applies -- it implies the pandemic will be here for the rest of our lives. there are already for coronavirus -- viruses that circulate the world and cause common cold. in the long run, that is exactly what this one may turn into. it could take a little bit of time before we arrive at the point where we can treat this like the others. for that to happen, if we are lucky, the population just needs to keep building up immunity through vaccines or infections. fundamentally, in countries where there is a good level of vaccination for the virus has ripped through, they have already built up a lot of population immunity.
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you sealed some of that in the u.k., certainly in south africa. where i am sitting in germany we probably are not quite at that level. vaccinations have lagged a little bit. also, has not been as much virus circulating in the last couple of years as other places. a little bit more vulnerability here, but it is where everyone eventually is going to end up, in this endemic state. 0 anna: how do we manage the fact that some parts of the world are not managing the virus in the same way? what breaks in that scenario? it might be the right decision for the population or not, but whose policy meets whose? does asia policy of all over the years to look more like the west but only when it is safe to do so? how do we all come together again? >> it is a combination of the
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virus in the country and how it is circulating and hitting people. how vulnerable the population is. if you have a younger country, you might not have as much risk of for tablet these. most importantly, with the policymakers i'd what about -- level of virus they're willing to tolerate. europe and the americas, it has been a higher level than a lot of countries in asia. you can't keep these things out forever. you can't keep the flu outdoor colds out and it is going to circulate and hit every country. eventually, the urgency of the crisis will subside and countries will have to figure out to what level they can open the door more and more comfortably. in not doing so, there are potentially economic costs. anna: thank you so much for joining us tim loh with the
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latest. governments around the world are grappling with the same questions, what comes next in the pandemic? very nice to have you with us. we were just talking about the way that this might be coming endemic in certain parts of the world. what does it mean for you for this to become endemic? >> endemic means we are having constant transmission in all parts of the world. obviously, this is going to be the case with the covid virus. it is too highly transmissible. we are not going to be able to eliminate or contain it and contain at a level where it maybe causes epidemics. if there's anything we have learned, we had a supercharged
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variant which was much more transmissible than the one we have encountered in the initial phase of the pandemic. now, the omicron is twice as transmissible as delta. anna: indeed and we are certainly familiar with just how transmissible it is. i am reading lines coming in from anthony fauci, the top medical advisor to the u.s. president who is saying it is too soon to say that omicron heralds the end of the pandemic. can we link omicron with the end of the pandemic at all or is it just too early? >> i think he is correct on that one. it is still too early. if there's anything we have learned from this pandemic, it is what is going to drive these waves and surges are going to be new variant. we have seen this with the alpha variant that's was first identified in the u.k.. we saw with the delta variant in
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india and the omicron variant in south africa. if there is anything we have learned for the future is that we are going to have future waves. the key issue here is that because we are already dealing with a highly transmissible variant at this point and our vaccines as well as natural infections don't provide high levels of transmission, it is going to be very hard to control this. this is certainly going to drive us into this endemic phase of transmission. anna: what do you think of the way this is being managed? you can speak about the united states but also your in the u.k., there are some similarities. as long as hospital systems can cope, are we doing our populations a favorite to allow large waves to become exposed
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which seems to be a mild diversion of covid-19? >> i think that is right. we have two polarized views of how to approach the pandemic. one is the euro covid complete containment policy as you illustrated earlier the program. the other is the let it rip strategy. the answer is really in the middle. the zero covid policy is going to be unattainable because of the high transmissibility of omicron. it is going to be impossible to control. on the other hand, the let it rip strategy, what we are experiencing here is that even though omicron is less severe, because it is so transmissible, it is quenched -- going to translate into a large population.
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we are going to have to toggle between those two policies in order to not overwhelm our health care systems and most importantly, lead to loss of life. anna: do think that new variants, as they emerge, will generally produce milder symptoms? if they do, will that be because they have seen vaccinated populations or because they are becoming milder? >> the emerging variants -- many of us thought that if we were going to have a variant, it is going to be something derived from the delta variant which spread. this came out of the blue in a completely separate lineage. i would urge caution in trying to predict whether there are going to be -- it is good to be more verlander.
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we have to prepare yourself for new variants as they emerge and ones that may be more verlander as well as ones that potentially may escape our immunity due to vaccination. anna: where would that leave us? that would leave us requiring new rounds of vaccinations? taylor to that specific variant? and other scientists are working on that, but we seem to have managed to fight it with very high case numbers. we are going into our third year, but the key issue here is to not take our foot off the paddle. we have to wrap up vaccinations. 25% of the population have gotten boosted. the key issue here is saving lives.
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one important issue is going to be -- in order to do that, we have to decentralize testing. we are going to have to get better vaccines. we still have to do the work and hard work. we are going to have to strive for vaccines. anna: thank you so much for your time. >> prime minister boris johnson
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faces another week with his political future in the brink. british media reports that johnson is planning staff changes and a series of populist policy announcements. those who changed jobs in the fourth quarter got an average increase of 13%. after covid slow down the men's in early 2020. brent oil has been trading near its highest level since 2014. futures in london held at about $86 a barrel. one reason is concerns about the impact of omicron on demand have eased. amazon has made a last-minute reversal.
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it will not ban the use of a visa credit cards issued in the u.k. amazon has previously said it was taking those that because of the rising cost of the visa credit cards. the bandla sets take place wednesday. global news, 24 hours a day on air and on bloomberg to take -- quicktake. this is bloomberg. anna: thank you very much. still have on the program, we continue to watch earnings rollout from the largest u.s. banks this week. lending has been a key focus for investors after demand log for much of 2021. we will bring you comments from the ceo of wells fargo next.
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anna: welcome back. wells fargo reported loan growth
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in the fourth quarter but says borrowing is likely to pick up this year. consumers is still have a lot of liquidity to grow the economy. >> we did see in the quarter, continued progress the cover he and i think you saw the other the lung saw. both on the consumer side and on the commercial side. on the consumer side, we saw growth in auto in cars, underneath, we saw growth in our nonconforming mortgage portfolio as well. we finally started to see that materialize. >> one quick follow. on the auto loans, can you give us more perspective because if i'm reading the data directory, i did see a lot of it was higher value of the loans themselves.
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>> third quarter, we are benefiting from higher used car prices but also seeing the probe -- volume be really strong there as well. we are releasing the come through and use carb ion. >> on one hand, you have inflation which could impact consumer spending and on the other psych, higher interest rates. we are wondering how those could financially stifle some of that loan growth and deter some of the loan growth. >> the fact we are talking about raising rates means we have a strong economy underneath it. you see that in consumer spending.
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you see that in long growth as we talked about and coupled with that, consumers still have a lot of liquidity. it may be off the peak we saw a couple of quarters ago, but on average, maybe 30% more. that really should help consumers continue to be out there growing the economy. rates will be helpful for us and we talked about that in terms of our net interest income but i think it is a good sign the economy continues to be strong underneath that. >> you did shows drives in your banking business best --. out about potential plans to potentially grow that business into this year and how competitive you think you can be. >> we think we have a lot of opportunity in investment banking business. in particular, thinking about going after the opportunity to work with our commercial banking
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clients. we talked about that opportunity for the last few quarters. we think there is a lot of room for us to grow. that is in the context of us continuing to execute on our efficiency initiatives and agenda while we are still able to get costs down. >> talk to us about those investments and getting that talent and adding those people. talking about 500 million in benefits inflation. how are you having to compete to the right side of talent right now. >> it is certainly a competitive market and we have seen wage inflation. it is beyond the normal increases we see in pay each year. part of that is increasing our minimum pay across the board somewhere between 18 and $22 depending on where you are in the country. we are releasing that part of it have an impact.
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we are going to continue to have to be competitive there, but we still think we are able to do that. that is still in the context of us being able to manage overall expenses as we look at 2022. anna: that was the wells fargo chief financial officer. we can also look forward because we have a number of banks reporting. let's go to bloomberg's michael moore who joins us once again with thoughts on this. it was not concerns about high levels. it did weigh on other banks. it certainly weighed on jp morgan. how much is this idea of higher compensation, higher wages and other payments staff going to be
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a really dominant seen this quarter? >> i think it will be a strong theme throughout the quarter. it is something where a lot of investors are focused on it because it is one of the few levers the banks have full control over. you heard them talking about interest rates and the broader economy and banks are often really reacting to that. and don't have as much control. they do have more control on the call side, but we see that pressure building throughout the year whether it is junior investment bankers or senior folks. goldman having to pay more to their partners. there does seem to be a very hot job market both on the sell side and buy side on wall street and you are seeing that reflected in the banks results. anna: so that is something we will continue to focus on.
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something else the ceo of wells fargo mention was the higher interest rate. this is something that don't do anything about that, but they will be happy to take the benefits. what kind of impact will this have on the various banks be are following? >> i think broadly, the interest rate environment is helpful to banks as we see it creep up, but the big question out there is what is the trade-off with loan demand. loan growth starting to pick back up. i some of the stimulus rolls off , it is kind of a tug-of-war in what will win the higher cost to consumers as interest rates go up or the stronger economy presenting more opportunities for them to borrow. anna: and you wonder how quickly
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we will see the loan growth story returning if we are still seeing deposit consumer liquidity fills 30% higher than you would expect it to be. that was something that way down on loan growth in prior courses. >> with stimulus payments, the childcare tax credits, there have been a number of things that have affected the consumer balance sheet. a lot of them have paid off credit card debt during this period. less travel expenses and things like that over the last couple of years. how quickly that picks up, that will be a big driver for the banks because they had a tremendous run over the last 18 in terms of their share price. anna: thank you so much. thanks for joining us. let us just tell you where we are across european equity
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markets right now. more on the markets in our conversation still to come. peter will be with the team to take you through what he's he's on these are get. perhaps a focus on fixed income markets.
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>> monday, the 17th. it is martin luther king day, a holiday in the united states. welcome to bloomberg markets. u.s. markets are closed today in observance of martin luther king jr. day. we have the results which have most of the main markets out. what is interesting is that we are seeing ok volume over here in europe. u.k. equities back on the front foot. back in the low to mid for 80's, 484. while u.s. bond markets are closed, take a look at what is happening in futures contract and what you will see is a selloff. an indication yields are going to go higher. euro-dollar flirting with 114. that could change the narrative around the recent euro strain and maybe we get a period of
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dollar strength. certainly, the setup is for a pause this week rate crews continue to rumble on i know we are getting a bit of a debt right now, but nevertheless, 8568 on brent. relatively elevated and people are talking about more commodity and patient still to come down the pipe. let's talk about what this means for the fed. clearly, that is front and center. ahead of the blackout period, which started friday, the new york fed president joins a chorus of fed officials voicing concern about the spike in consumer prices. >> inflation is very high and too high. we would not want to see it persist at a very high level. we have a 2% inflation goal. in my mind and my colleagues minds. >> i deftly see rate increases coming as early as march. >> three hikes is still a good baseline.
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we will have to wait and see what inflation looks like in the second half of the year. >> we need to get inflation back down in the ballpark of our two-person objective. >> are monetary policy is focused on getting inflation back down to 2% while sustaining a recovery that includes everyone. this is our most important task. guy: ramping up those comments on her confirmation hearing. if you take a look at the function on her bloomberg, you will see the prices have gone down. futures pointing to higher yields when trading restarts overnight into tomorrow morning. we will see what cash opens tomorrow and we will see exactly where that takes us in terms of the outlook. peter joining us now. he sees a second quarter correction.
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he is talking about the s&p 500 going back down circa 4200. let's not start with equities. let's start and talk about what is happening in the bond market and then move on the credit and talk about what is happening with the equity story. there is a growing sense the fed is going to hike and be a three times or four times this year, we are heading for higher rates. futures are pointing to higher yields. my question to you is, how high could we go on a u.s. 10 year and what kind of timeframe are you thinking about? >> we see most of the moves actually happening in the back end of the year. long-term u.s. rates doing well above 2%. that kind of magnitude. the thing with this market is, right now, it is transitioning. last year, the move higher was
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really all about nominal interest rates and inflation expectations. now that we have confidence that the central banks are going to get into grips with the inflation issue, now, the move is in real rates. you have a different set of sellers and that can make the move -- mean the move quite quickly because of the overshoot territory. i would be reluctant to put much of a ceiling on u.s. long-term yields here. i think they are still not offering adequate compensation to the risk that one is taking in being long these assets. i think this is a correction where we could well see in overshoot versus the kind of fair value metrics that we and others were typically look at. that can be -- that could mean above 2% even in this quarter. guy: do you think the fed wants or needs to get the market on
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board with that as an idea? at the moment, the market reaction is fairly benign to what is an increasing chorus of fed speakers signaling they are determined to bring inflation back down to target. bill was tweeting over the weekend talking about the idea that maybe actually the market's underpricing without first hike in march could look like. what are your thoughts? >> i'm not on board with that view merely because the way i see it, that would be so destructive to value in other asset classes because the move in the three-month dollar rate in real terms in particular would be so aggressive that it would be very difficult for the market to absorb that without causing a significant correction, more significant correction in risk assets than we are looking for.
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that could bring some of the other tightening. we think they would be plotting a more sanguine but much more aggressive tightening path and that is one they should stick to. guy: one of the things we are watching very carefully is the point at which the german tenure goes from negative to positive. we are not very far away from it right now. we're watching very carefully to see what that trajectory looks like. if we start getting positive yields in europe, what impact is not going to have on the treasury market? at the moment, money continues to flow across the atlantic in search of a positive yields. where we able to get a positive yield, does it flow rivers, what impact as i have on the treasury market? >> i believe it would temporarily reverse. we have not seen a positive yield on the 10 year risk free rate of europe for a long time. certainly not in a sustained manner.
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2019, there was this massive plunge in yields and we have not really moved about that. i would expect there would be significant real money flows into euro assets if we were to get a positive yield. saying that, i also don't think the positive 10 year yields would be sustainable. we see fair value being somewhere south of this and i think we are in the right conditions where bond yields can rally and follow the same time treasury yields are going up because we are going to be thinking about and actually having delivered balance sheet divergence as well as rate emergence. >> let's talk about the impact of all of this. i continue to see reasonably positive notes on what is happening. seeing a lot of primary issue already this year. what do you make of that positive outlook particularly at the more risky end of the market?
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>> and european credit, is -- it is more a question of desertion and decompression. not in keeping with our review, but these risks of high rate but also, there is going to be greater term premium in the rates market and that is going to feed into greater credit risk premium. it will have a contagion effect into euro. european credit is going to likely get cheapened, decompressed and for the second half of the year, if we write it as a big recovery and risk asset, that is going to be the conviction point for long positions once again, but for now, it is about courtship. guy: what gets us to 4200, give us a timeframe of what the catalyst looks like. >> we think that level would be hit if the market is able to
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believe in everything that is currently being communicated by the fed and everything currently priced into the dollar rates curve and they deliver the balance sheet reduction that some of the fat are talking about, that would be sufficient to basically take the equity multiple a lot lower and if we also think about softer earnings , likely to be quite prevalent in the second half of the year as growth slows, that is also sufficient to take things down to that level. guy: always a pleasure. what are we going to do next? we are going to talk about china's central bank diversion. china certainly going in a different direction than many other central bank.
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an economy certainly losing momentum.
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>> the fundamentals of the chinese economy characterized strong resilience, enormous potential and long-term sustainability -- remain unchanged. we have every confidence in the future of china's economy. guy: that was the chinese president speaking at the virtual meeting of the world economic forum.
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we will see what happens in the summer. this is speech comes on the back of the pboc cutting its key interest rates for the first time in almost two years. the gdp number was a little bit better than anticipated, but still relatively weak. joining us now from hong kong is bloomberg's chief correspondent. walk me through the importance of this rate cut and how it relates to the data we have seen today. >> it is clearly a signal that officials now are worried the economy is losing momentum past. it is quite a pivot. remember through much of laster, they were preaching discipline. they have now gone ahead and lowered it. the expectation is that more support will be needed from but the potential bank because we have data today showing weakness in key sectors.
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so much of the growth's consumer sentiments getting hit hard by ongoing sporadic outbreaks of the virus and the aggressive restrictions the government is forcing to control the spread. certainly a sign the pboc is coming up as islands that the economy needs to -- and the expectations is that there will be more support. guy: policy works with a lag. we have congress coming up. is the expectation that by then, the chinese economy will be back in here? >> i think the key thing is zero covid and whether or not the authorities can continue to control the virus the way they have been. one of the key success stories has been its ability to control the virus.
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and allow consumers to recover. if they can contain the virus again, whereby the consumer side of things recovers somewhat. if they can't and it becomes this whack-a-mole game of very aggressive restrictions around the country that both disrupts consumers and travel and manufacturing, that is going to put a lot of pressure on the economy and that will further threaten the economy to respond. right here right now, it is hard to look beyond the zero covid policy they are pursuing and whether or not they can sustain that. guy: let's talk about that and the potential timeline for maybe the easing of the policy. clearly, the beijing olympics is
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the next major event on the horizon for china. once we get through that, is there an expectation that maybe the zero covid policy could be released or do we have to wait until after the autumn congress before we see an easing of that policy? >> most expectations among economists is that the government is going to dig in and will be with this policy for the long-haul probably stretching into beyond the party congress where the president is expected to get another term in office. politically speaking, china would not want a major public health crisis in the lead up to that. we don't have the hospital infrastructure in place. there is now? about how much of an impact all of these restrictions in the
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aggressive crackdowns will have on consumers, on consumer confidence, on manufacturers, on ports. we are seeing a reasonable amount of -- already. we had outbreaks at a port. i talked to a manufacturing manufacture last week you told me he has five containers already delayed and is worried about missing the vital spring and summer season for getting his goods to the u.s. and europe. politically speaking, they absolutely want to keep the status quo. i think the question becomes whether or not it will be sustainable without causing border pain on the rest of the economy. >> great stuff. thank you for your time. 17 minutes past 10:00 in hong kong. february 1, we get to a new year and february 4, we get into the olympics. whatever going to talk about
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next? the credit suisse chairman is out. more on the chaos at the swiss bank, next. this is bloomberg.
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>> it is time for the bloomberg business flash. unilever plans to sharpen its focus on health and hygiene and plans to sell off slow growth brands. it comes at a time when the company is considering whether to increase its $60 billion consumer units. it has not rejected three offers from unilever. oil has been trading near its highest intraday level since 2014.
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futures in london held around $86 a barrel. it is at the high prices are justified and could rise even further. one reason, concerns about the omicron on-demand have eased. amazon has made a last-minute reversal. it will not ban the use of visa credit cards issued in the u.s. -- in the u.k. the band was set to take place wednesday. amazon says it is working with we saw a potential solution rate a pair of scandals cost credit suisse billions. now, the chairman has resigned after just nine months because of reported breaches of swiss and u.k. quarantine rules even before news of his quarantine issues began emerging last month. leadership style had received mixed reviews. he will be replaced by a board
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member. that is your bloomberg/. guy: thank you very much. how much more can credit suisse take? >> that is the million dollar question. i thought at the end of last year, we were already at the map. this is just the next blow. hopefully, from this point onward, with the new chairman, they will be able to actually execute on the strategy they set out last fall. there are still some questions around whether or not he might tweak some of that strategy and there might be any more executive changes. guy: is he perceived as being more than just a short-term fix? when i read the story this morning, certainly, there seemed to be a sense that that is what he was there to do. short-term stabilization and then we figure out where we are going.
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do think that is where his role is or do you think he will be around for a while and they will go for a more swiss-based management structure going forward? that has certain -- there has certainly been a lot of trouble brewing outside of this. >> he is there permanently from what we understand. he will need to be reelected as all the board members are every year. but for credit suisse, it is a permanent selection. as for the ceo, that is the same understanding at the moment is that they are looking to go forward and go from there. >> what the regulators think of this, do you think? >> it is hard to think. this was regulators are notorious for being quite quiet on issues like this. they tend to not make very public comments but from what we understand, they have been alerted of the matter back in november and december when the
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issues of the chairman breaches came to light and they have been following the matter and have been can you getting with the bank over the issues. there was a board of investigators investigation into the matter and behavior and that is why the focus has certainly come to the designation we are talking about today. for now, i suppose regulators will keep watching. they have had a keen eye on credit suisse over the last year because of the scandals. there is no action to be taken from their side right now. guy: do you think this will in any way change the view of credit suisse as a takeover target? does that become a more attractive option? >> it is a good question. i'm not sure the chairman change makes credit suisse is a cearley weaker from a business point of
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view and a takeover point of view. it does certainly put some delays and banners in the works in terms of the execution of the new strategy and moving past all of these blunders. i'm not sure ably dries it to a point where it is forced to be taken over or forced to accept that takeover offer. >> final quick question related to that. clearly, retaining staff is a major problem for all banks at the moment. credit suisse looks weak. can it retain staff? >> it will struggle. it has had a cut its bonus pool because of the losses i had last year. they have already lost a lot of people, particularly the investment bank which is the most competitive. they will definitely need to pay up selectively but it won't be able to pay up for everybody. that is the message we are getting.
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>> rate reporting. thank you for joining us. coming up, words of caution from dr. fauci. he says it is too soon to see if the pandemic is switching to an endemic phase. there is a differing view may be over here in europe about what comes next. we will discuss all of this. this is bloomberg.
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>> we are talking about in the
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next month or so to have the capacity to get anywhere from 200 million to 500 million tests per month. many of them will be free, many of them will be reimbursable to insurance. guy: dr. fauci speaking earlier today at the world economic forum's online. omicron has not yet peaked in the united states and the next few weeks will be tough. let's bring in the bloomberg school of public health. where are we in this process? we are getting mixed reviews from the medical community as of the impact omicron is having, whether or not we will soon get to the end, it phase. want -- the pfizer ceo saying we will soon be able to return to normal life but dr. fauci saying it's an open question as to
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whether or not omicron will be what everyone is hoping for. what does the rest of this year look like? >> i've learned not to make too strong of predictions when it comes to this virus, but i think part of the uncertainty is because we are in a unique position compared to some of the other countries that are already seeing a decline in cases. a pretty precipitous drop in the u.k. in portugal. omicron has spread to -- swept through a dozen causes much harm as we thought in the u.s. because we have much lower vaccination rates. it leads to a lot more uncertainty in the next few weeks. guy: in terms of the unpredictable course we are on, what kind of trajectory is the u.s. looking at? the u.k. numbers are coming down sharply, but the u.s. appears to be more of a series of waves
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breaking in different places. in terms of trying to segment that to its various component parts what do you think there? gigi: i think things are going to be quite a bit different for the people who are vaccinated and protected. we will see i told don who you are and where you are and what profession you are in. for the medical community it is still ongoing and getting worse. for people who are vaccinated, i think their lives will be quite different in a few weeks. omicron cases will come down, they are already coming down in new york and boston and washington, d.c. they will probably feel pretty comfortable. but still there's a lot of people who are susceptible and could have very serious consequences of getting the disease in this country. i think there's room for
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optimism buried the vaccines work. it could have been so much worse. omicron is evasive but is not completely evasive and it is milder especially for people who are vaccinated. guy: i was listening to what dr. fauci said talking about testing and down important testing will be going forward. u.s. is striving to make testing available to everybody on a relatively straightforward basis. here in the u.k., testing is free paid the availability of tests has been generally pretty good, most people have been able to access them but nevertheless we have seen a huge spike in cases. is this idea of trying to roll out testing in a significant way in the united states a silver bullet that may be everybody expected to be? gigi: testing is not going to stop cases but hopefully it will prevent a few. people make better decisions if
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they have that information. that's why the at-home tests are so valuable. so people can get an answer then and they can take action and isolate and follow what they are supposed to be doing. i think you are right, testing is not going to be the solution to the pandemic. only vaccination, that's definitely the and the endgame for the world. -- definitely the endgame for the world. guy: we have a highly transmissible variant. i look at what's happening with testing. that's one way of informing better decision-making. the other is to prevent people transmitting if they are not vaccinated the virus, even if they are vaccinated, from person-to-person. should we have a pivot towards masking and making sure that
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there is the available of good -- availability of good quality masks to make sure that people can access those then use them and therefore prevent transmission which may be a way of getting it normalized maybe a little bit more quickly. gigi: masks are really an important tool. we can emphasize one to the exclusion of all the others. i tell people all masks work, but better masks work better. n95, kn95, k 94, there's a variety of good masks you can get. masks are best when worn consistently. that's been the lesson for people. they need to have one that's comfortable so they can wear it during the day. >> in terms of what happens next
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, as we work our way through this year we are going to see a potentially greater divide between the vaccinated and those who are not. those who have their booster and those who haven't. do you think we are heading for another round of tension. do you think we will require boosters as we get towards the autumn? should we be preparing for that and thinking about public health implications and how to persuade people to get that shot. gigi: i think people, there are some people who are not going to be convinced but there are people who are reachable. it takes more work and we need to keep doing this. i worry we are going to forget that there could be potentially other variants and so we need to keep on the pressure of getting people vaccinated, creative
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ideas to get people to get the shot. but all the tests and everything else needs to be there for us should there be another variant and with so much of the world on vaccinated, we've a lot of transmission going on and a lot of replication and a lot of potential for the virus to mutate and another version to spread. guy: thank you for joining us. an important message to deliver. thank you very much. the johns hopkins bloomberg school of public health is supported by michael bloomberg, founder of bloomberg lp and bloomberg philanthropies. up next we look at the impacts on the gas markets we are seeing on the ukrainian border. gas prices a little bit lower today but nevertheless tension is high. we will speak to the ceo of
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ukraine's energy firm. this is bloomberg. ♪
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>> let's check it on the bloomberg first word news. for the fourth time this month, north korea tests missiles. the military says kim jong-un regime fired what appeared to be two ballistic missiles in the waters off the east coast. it could be their way to force the biden administration to come up with a new strategy towards kim. the omicron variant has spread to major cities in china. asian, china -- shanghai and
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shenzhen have cases higher in number. they are causing concern because of their timing. the lunar new year begins february 1 and it's marked by travel and the beijing olympics begin three days later. u.s. aviation regulators have cleared the way for some jetliners to operate. new 5g services will begin. plane makers have shown the mobile phone signal will not cause interference to critical aircraft equipment. a majority of airbus and boeing jets are subject to limitations which could lead to slight disruptions. bankers who changed jobs saw an average salary increase of $.19 according to -- 19 pence. after covid slowed down recruitment in early 2020. global news 24 hours a day on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more
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than 120 countries. i'm laura wright. this is bloomberg. guy: thank you very much indeed. the eu finance ministers gathering in brussels. this will be the first meeting of the new german finance minister. we have also got a showing from the new dutch finance minister as well. earlier they told reporters it's time to build a fiscal buffer again. we go to our european correspondent maria. we have a new german finance minister who in many reports is characterized as being hawkish. we have a new dutch find -- finance minister as well. how do they change the trajectory when it comes to the debate around the growth and stability. maria: that's a big question.
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the fiscal conversation and the fiscal framework. which the french in particular at the eu said it's completely up to them. today we did hear from christian who was making his big brussels debut a lot of the behind-the-scenes german government pushing back against this idea he is a scary hawk and is somehow going to take over the debate but he did say and made it clear i may not be a confrontational hawk but i believe fiscal responsibility is important. i'm going to go back to the normal fiscal rules as a priority. the flipside is the dutch finance minister. at one point they used to be the biggest voice and advocate these rules today. the new finance minister said narrative change, denying the mix evolve in the dutch are open
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to speaking about everything and with everyone. guy: flip this around to the other side of the table, of the french all rotating presidency, the italians are very keen on a change to the rulebook. they are asking for certain key areas to be excluded for instance green data. where do you see the compromise here? >> still very early days. for the french president looking at six months, this is an almost taking this to the end of the year. we not really expecting anything to happen in this french presidency. it's not really about that. it's about settling the debate. it depends on very early days. the message from the french as you get people responsible also project growth. that exclusion that's fostered
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or fueled to improve innovation to go green or and accelerate the european economy. what they also say as the market looks at it differently especially in the context where this is based on grants. >> are they going to be talking about inflation and if they are, what do you think the message will be? >> they will be talking about, this is i would argue the number one issue here. particularly in the energy crisis we see. the german finance minister always tends to have a clear line on that. he repeated that line. the dutch said the same in the austrian said the same. it is an election year. by the end of my term the purchasing power of the french
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citizen would go up the issue were bills that went through the roof that could be an issue in the election. everybody has a keen interest in making sure they are able to somehow contain inflation. right now it's not clear how they can achieve that. >> let's shift gears a little bit and talk about a related subject to what is happening with inflation. critical to this will be what happens in ukraine. we are watching carefully to see what russia does next. the foreign minister speaking about the fact that the two sides are miles apart. what is happened this week? are we expecting any progress? >> there are two things. she says they want to have a stable relation with the russians but there is a growing list of problems. we are not really expecting any
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major breaks. with a focus on the nord stream 2 height -- pipeline, whether or not germany would change their tune on that. there is an issue that's handled by the chancellor. she is among the hawkish voices but in terms of real power, the tone coming out of it is not really changing. in terms of the end of the week we know there is an energy ministerial meeting happening in france. another focus on that. as the german say you have to separate the politics from the trade in the energy policy. for vladimir putin, they are very much connected at a time when europe is vulnerable to changes in the gas supply. >> we will be talking about this next. thank you very much indeed. up next we will look at the impact of potential on the ukrainian border and what it's
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going to do to european gas supply. yuriy vitrenko is joining us next. this is bloomberg. ♪
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guy: european gas prices tracking lower today. they continue to grapple with the worst energy crisis in decades. yuriy vitrenko joining us now. naftogaz is a largest natural oil and gas company in ukraine. greatly appreciate the update to what's happening here. not booking extra capacity today. it didn't book any extra capacity on the pipeline for the whole of february. what can you tell us about what kind of supply europe can expect over the next few days and weeks and what prices will do over the medium term? yuriy: it seems like there
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speaking to their policy when they are delivering out of long-term contracts and decreasing volumes on the stock market. they do it deliberately. they increase their dependency on russia. at the same time they are pushing for this certification of nord stream 2 despite the fact it's not compliant. we can expect such behaviors to continue at least for a year. the only thing that can change it is the much more active position gum of the european antitrust authority and sanctions. >> may i ask the question everybody in europe must know the answer to. if there was conflict with
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russia in ukraine, what do you think would happen with a supply that comes through your country? yuriy: i would expect it would be affected. if there is a full-scale war and further invasion into ukraine. guy: can you give me details on how it would be affected? would it be cut off, reduced? would we jesse volatility? what kind of scent -- what kind of scenarios are you planning for? yuriy: if there is a full scare war -- in order for transit to continue there are technical and legal requirements and it is difficult to imagine how it will all function around a full-scale war scenario. guy: let's go back to nord stream 2.
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what impact would nord stream 2 have if it were certified. you expect that going back -- can you assume if there was conflict it would not be certified. >> i would say at least what we now see, that russia deliberately planned a scenario when they would have nord stream 2 operational. they would divert the flow currently going through. and then they will launch a full-scale war. they will further invade ukraine and at the same time energy trade with europe, it would not -- in such a way prudent would expect europe would express some deep concerns. but at the same time we will have to stop -- deal with this new reality. if you can see there's a part to
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his back yard. now this scenario cannot be realized because nord stream 2 is not operating for legal reasons. it is expected that at least process wise it will take at least half a year to get it certified, but in order to get it certified, they will have to change many things. it will have to unbundle. and then many other requirements. guy: there was a cyberattack at the back end of last week. were you affected by it, how hardened are your systems to prevent cyberattacks causing problems. yuriy: we are affected, but thankfully we are preparing. now it was rather insignificant. we were able to ensure uninterrupted supply to
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consumers. so from this perspective we are on the safe side i would say. guy: a great pleasure. thank you for updating us. we appreciate it. yuriy vitrenko, naftogaz ceo. we will talk more about these markets currently u.s. bond futures pointing in the direction of a fairly significant yield spike when cash starts trading tomorrow. markets are currently shot in the u.s., but nevertheless it will be a busy and potentially bumpy week. this is bloomberg. ♪
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guy: monday the 17th. what do you need to know? chaos at credit suisse. after only nine months on the joe, the cfo forced to -- on the job, the cfo forced to resign after breaking quarantine laws. analysts pour scorn on unilever's offer for gsk's consumer health business. the stock seeing its biggest drop in five years. in the first major move into years, the pboc dropped its one-year bank lending rate by 10 basis points as gdp data comes in of the weakest level since 2020. welcome to "bloomberg markets." u.s. markets closed today. we are observing the martin luther king jr. holiday, as a result of which, you would normally expect volumes to be quite light in europe, but that is not happening. european equities on the front foot. we do have quite a big move in
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u.s. on futures, -- u.s. bond futures, indicating we could see a fairly big yield spike with cash opens. as you can see, stocks taking it well. do we get a reaction with cash opens? euro-dollar trading around 1.14. fairly flat when it comes to the dollar. crude giving back some gains, but incredibly elevated. brent crude trading at nearly $86. the fed meeting next week. we saw the black period coming in friday. the fourth -- -- the blackout period coming in friday. before that, a chorus of fed officials warning about the spike in inflation. >> inflation is very five. we would not want to see it persist at a very high level. we have a 2% inflation goal, so it is very much on my mind and
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my colleagues' minds. >> i do see rate increases coming as early as march even. >> three hikes is still a good baseline. we will have to wait and see what inflation looks like in the second half of the year. >> we need to get inflation back down in the ballpark of our 2% object. >> are monetary policy is focused on getting inflation back down to 2% while sustaining a recovery that includes everyone. this is our most important task. guy: let's get perspective on what this all means. integrity asset management portfolio manager joining us now to give his view. i read your note this morning. you are quite cautious in how far the fed will go. you think three might be too much. what would it take to change that view? >> i think ultimately with the fed, what would change my view
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in terms of raising rates more than three times is if inflation does continue to spiral higher. we are in the camp that inflation, while it is very high right now and very uncomfortable , we are probably a month or two away from the next peeking on a year-over-year basis. we think that the fed won't see this, and what usually happens with the fed is they talk a lot more than they actually do things, so they have aggressively repriced inflation as far as interest rates go, at least for the first two weeks of the year. we think that market is going to do a lot of what the fed heavy lifting needs to do, so we don't think the fed will actually need to move more than three times. guy: there are plenty of well-known voices out there saying that the fed is still behind the curve, that while inflation may come down, maybe peaking soon, it is still going to remain elevated and stay sticky for some time.
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rents are going to have a long-lasting impact on this. bill ackman was out over the weekend, tweeting that we should even consider the possibility of a 50 basis point hike coming from the fed. if you were to see that kind of maneuver, if you were to see the fed being that aggressive, how significant with the repricing be? how much would you have to change your current portfolio? >> i will say, if the fed raises rates 50 basis points in march, that would be highly disruptive for financial markets because i think the market is not expecting that at all, and even with the fed's messaging, they have not communicated that, so that would definitely be somewhat of a black swan event, and i think you would see markets go a lot lower, equity and fixed income. we are not position for that. that is not our base case at all. i think the fed is very
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conscientious about market reaction and market volatility. guy: given all of that, and i hear what you are saying about maybe the fed potentially doing less as inflation may be under shoots expectations towards the back half of this year, how are you positioning for that? what is the set up right now? joe: what we like right now is the companies that make things we can touch. we are thinking about material stocks, energy stocks that have underpinned global growth. we like financials. that is probably not as contrarian as it was at the beginning of the year come at us because rates move so quickly, so fast. and we like industrials. we think that if you have over weights in those sectors, investors will be pleased with their performance because we are in a rising interest rate environment. there's going to be multiple compression, so the things that work last year won't necessarily work this year. guy: energy has been on a great
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run. financials have had a cracking start to this year. i appreciate that jp morgan, citi, and wells may be changed the narrative, may be more for jp morgan. do you think a lot of the good news is already priced into those areas? why do you think we could see significant upside? some of these financials have moved 10% to 20% already this year. joe: and granted, the market doesn't move in a straight line. we think that a lot of the financials were not really owned by institutional investors, so we think what we have seen in financials if you go from oversold to an overbought position, it probably makes sense that these stocks are going to digest some of the news now, especially with earnings season starting. we think that once the earnings,, that is a clearing event going forward. guy: where does that leave big
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tech? joe: i think that is a big question because we go back to what i said earlier, that investors have to realize the things that work last year probably won't work as well this year. so you have big tech, with high multiple stocks, and you have a rising interest rate regime, so historically those don't work well together. we think that big tech is probably used best as a source of funds. guy: what is your degree of certainty around this year? last year felt like a straight line. how bumpy is this year going to be? how difficult is it going to be to whether the volatility that is likely to come? joe: i think that is a great point. i think we really will have a higher volatility environment this year. we are not really expecting stocks to dramatically appreciate this year. it is tough to compound the year we had last year, so we think we
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are probably going to have lower or mid to double digit increase this year at best, and most of that likely will be just following earnings growth because, as we said earlier with the fed raising rates, multiples typically contract, so the baton is going to be handed from multiple expansion to earnings growth. guy: in terms of the role that omicron is going to play in your outlook, we are seeing fairly significant cases in areas around the united states, but if you look to where i am right now in the u.k., cases are coming down almost as quickly as they went up. joe: and that is what we are hoping we see in the u.s., is similar thing we saw in south africa, that cases were parabolic, and they dropped off substantially, similar to in the u.k. so that is what with ink is
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going to happen in the u.s. you have increased vaccination, increased boosters, increased therapeutics, so we think that alone would i dare say herd immunity, but we are getting to a point where cases probably will roll over, and at this point the market is kind of looking through the spike in cases, especially we get to the one million cases in a day, the markets still went up that day. i don't like to have analogies to financials, but i think that we had inflation, which seemed pretty hot. i think similar to omicron cases, the market is also thinking that the worst is behind us. guy: thanks for joining us on the holiday. we really appreciate it. joe gilbert, integrity asset management portfolio manager. what are we going to do next? we've got to talk about credit suisse.
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he's been forced to step aside from the business after evading quarantine rules. what comes next next for the swiss bank? we will talk about this. this is bloomberg. ♪
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laura: let's check in on the bloomberg first word news. for the fourth time this month, north korea has tested missiles. south korea's military says kim jong-un's regime fired missiles into waters off its east coast. the test could be a way to force the biden administration to come up with a new strategy towards kim. in china, the central bank has
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cut a key interest rate for the first time in almost two years. beijing is trying to bolster an economy that has lost momentum because of a property slump and the coronavirus outbreak. official data shows that china's gross domestic product rose 4% last quarter from a year earlier . that is the weakest since early 2020. the chairman antonio horta-osorio has resigned after just nine months because of recorded breaches of swiss and u.k. quarantine rules. even before news of the issues began emerging, horta-osorio's leadership style had been criticized. 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 laura wright. this is bloomberg.
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guy: thank you indeed. joining us now, bloomberg finance managing editor go more. i want to put to you the same question that i asked in the last hour. what happens next at credit suisse? how much more of this kind of scandal in this business take? michael: good question. in terms of what happens next, all the indications are that the new chairman is on board with the strategy they laid out just a couple of months ago, and that strategy is already being put into effect, so it is a little late to roll it back at this point. it seems like, and terms of the business, that is going to go ahead, but your question to the leadership of the bank, certainly they have a chairman and a ceo now who were both put
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in somewhat of emergency circumstances. they were quick replacements for leaders who ran into issues. so i think there are some investor questions out there about the leadership of the bank , about whether these were the right people for the job or the people who were available at that time, so i think there is some proving they will have to do it the strategy. guy: is it significant that they are both swiss, and does that telus may be something about what happens next -- does that tell us maybe something about happens next? michael: i think it is a moment of crisis that they are leaning on the familiar. so they are at least familiar with the local landscape and
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with the regulatory landscape as well, but the question is, as a sprawling global bank, are they going to be able to have risk in hand? i think that is one thing that axel lehman, as a former risk officer himself, has some background. guy: we heard what jamie dimon said friday, talking about the fact that he will do whatever it takes to get top talent and retain that top talent. where does that leave credit suisse with this kind of crisis rumbling on and on? michael: i think that is one of the big issues for the firm. they lost dozens of top investment bankers last year who did not want to stick it out through the strategy review and see where that left their business. we have not seen that come through in a huge way in the
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revenue numbers so far, but as they start to unwind the prime brokerage business, which was part of their strategy, as some of the newer m&a deals come to fruition and start paying those fees, that is going to be one thing investors are looking for. are they losing share in those wall street businesses? guy: how do you think regulators are going to view this, particularly the swiss regulators? they have kept a careful eye on credit suisse as they have gone through these scandals. i am assuming that continues. will be oversight be even more draconian as a result? michael: i think certainly the regulators are going to have a close eye on them. they said they have been in close contact with the bank throughout the last couple of months over this issue. you would have to think that they are going to be watching this closely. they're certainly in the last year has been speculation about a potential merger involving credit suisse.
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there does not seem to be any real traction there, so that is something that obviously the regulator would have a keen interest in, and we have seen how difficult any major bank deals have been in europe. guy: michael, always a pleasure. thank you very much, indeed. coming up, ben and jerry's maker once to add advil and sensodyne to its brand. investors say that is a bad idea. that's next. this is bloomberg. ♪
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laura: it is time for the bloomberg business flash. i'm laura wright. the fortune of billionaire hedge fund manager michael platt grew
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even larger last year. bloomberg's learned gains at his private investing firm woodcrest capital management were above 30% in 2021. that should boost his net worth to around $12.8 billion. amazon has made a last-minute reversal. it will not ban the use of visa credit cards issued in the u.k.. amazon previously said it was taking the steps because of the rising cost of accepting credit card payments. the ban was set to take place wednesday. amazon said it is working with b's on potential solutions. mark setting the stage for meeting its customers in the metaverse. filings show that the giant retailer is preparing to create its own cryptocurrency and non-fundable tokens. walmart plans to make and sell virtual goods such as electronics, toys, sporting goods, and personal care products. unilever plans to sharpen its focus on health and hygiene and plans to selloff slow growth brands at a time when the
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company is considering whether to increase its 68 billion dollar bid for glaxosmithkline's consumer unit. glaxo has now rejected three offers from unilever. that is the bloomberg business flash. guy: thank you very much, indeed. picking up on that last story, unilever seems to be wanting to shift strategy. once to focus may be more on health, hygiene, this is it ways making a higher offer for glaxo's consumer unit. let's talk more about this in a little more detail. joe easton joins us now. the story that really stands out to me this morning is the very strong response we have had from the analyst community. it does not like it. it thinks this is the wrong deal. it thinks there's a number of things that could go wrong. walk us through what we have been hearing from analysts vis-a-vis the unilever offer for
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this gsk consumer unit. joe: the reaction has been almost unanimously negative from the analyst community. really, it is coming down to the price. the price is quite staggering, 50 billion pounds, and given that that was actually rejected, three offers have been pushed back, that potentially means another 10 billion pounds, according to some forecasts. we could see around $60 billion. we are talking really high multiples at the moment, above 20 times earnings when a lot of the peer groups trade around $50 billion, and the price is the main thing. then you have the issue of the synergies. there probably isn't actually that much synergy across to
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product portfolios. unilever does have some health care products, but it is really mainly focused on food still, and ben & jerry's and some of those other brands we know. glaxo unit is still painkillers, still stuff that requires medical knowledge. so there doesn't seem to be too much synergy from either. two negatives, really. guy: let's talk about why this would improve things. those businesses aren't exactly high growth. why are we shifting from one relatively low growth business to another relatively low growth business? why is that a good strategy? joe: well, that is probably one of the reasons why unilever's share price is falling, because if they are trying to move into this area, how bad is the growth
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in the existing business? is it they are trying to almost distract and move away from the current business? there is still some growth in consumer health, particularly because of the pandemic. consumer health has been put to the forefront of everybody's mind were generally, and emerging markets still have really low penetration of consumer health goods, so a lot of emerging-market nations don't have the same access to over-the-counter painkillers and things that we take for granted here. so there is room for growth, but it is not the highest growth area of the market. guy: terry smith was talking about this business having lost its way. is it going to reinforce that is an idea among the analyst community? joe: i definitely think so because it is really raising questions now over the current business as well.
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we know from rbc, which is one of the most aggressive viewpoints, that they have and underperform rating. they say they could not to give anything worse for unilever to be making this kind of deal at the moment, and they are the ones really raising questions around confidence in the core business. it raises all sorts of questions , and we are still seeing the stock down heavily. guy: thank you very much for the update. next, we are going to talk about what is happening in the supply chain story. craig fuller, freightwaves ceo, joining us next. any signs of? . -- signs of easing? we will find out next. this is bloomberg. ♪
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guy: half past the hour. let's talk about what is happening currently with the
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supply chain story. data out of the united states this week could give us a picture as to where we are with the easing of supply bottlenecks we have all learned so much about. we are going to get empire manufacturing tomorrow. get philly fed thursday. should fill in a few blanks. that's fill in a few more right now. craig fuller, freightwaves founder and ceo, joins us now. he tracks all of the data around what is happening with the supply chain story. great to talk to you, as ever. thanks for joining us on a holiday. what are you seeing right now? craig: i think it is a continuation of 2021. we see pockets of stability and a lack of transparency and pretty debility and the supply chain. that story is going to continue through all of 2022. we don't think there's going to be any major reprieve i of market stability and pretty debility. having said that, i think a report card for the retailers was quite good during the fourth quarter during the holidays.
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they did a great job of handling a lot of pressure on their supply chains and responding to a lot of consumer demand at a time when things have been pretty disruptive. so i would say generally, the market is doing what the market should do, which is responding to these developments, but in terms of consistency and predict ability, supply chains are going to be stressed. guy: the big guys have the clout to be able to do that. midsized, smaller businesses, less so. are we going to continue to see a division between those that have the heft and the weight to be able to get what they need and those that don't? craig: it is a basically winner take all market, or the haves and have-nots, but we have seen that really since the beginning of quarantine or the beginning of covid, that the big-box retailers and the companies that have sophisticated, robust supply chains and the power over the carriers have done exceptionally well, and a lot of
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small businesses, manufacturers and industrial product operators that do not have that infrastructure have really struggled. certainly you have seen pockets where big companies have come out and reported they are having supply chain issues, but they are responding really doesn't go much quicker than what most small business because -- small businesses can actually do. companies that are making investments in supply chain and technology are doing much better than those that are not, because we track a lot of the individual companies, and we see the ones making those investments and have built robust visibility systems and resiliency in their supply chain are doing much better than what you see with those that have not made those investments. guy: what is happening with omicron? the numbers are very high-end terms of the case count right now.
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that is presumably taking people out from the labor market. how big an impact is that having? craig: i think it is inconsequential to predicting supply chain in the long run. it is just a continuation of covid. it is having small pockets of disruption, but this story feels like it is going to play out pretty quickly and be sort of a short-term. something that is longer-term is how do we get capacity, and if you are talking ocean liners, it is how do we get ships and the boxes which is going to take a couple of years before the market really brings enough capacity online to handle the volume. as it relates to the trucking industry, the question is how do you get truck drivers. this is an issue that the trucking industry is continuing to face, and they don't seem to have any real quick answers on how to address that, so it is going to be a systemic issue that is going to create high pressure on pricing throughout 2022, and really the only thing
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to solve for that is if we have an economic downturn, which really no one is predicting at this point. guy: in terms of china, what do you see there? the country continues with its zero covid policy. as you monitor events, what are you seeing coming out of china? more importantly, what are you seeing not coming out of china? craig: they are shutting down ports, shutting down manufacturers. we saw last year they were having pressure on the grid, pressure on energy, and they were forcing some districts to shut down or go to a more limited production cycle. that does have an impact. in some ways, if you think about the relief it provides to the north american supply chain, and some ways it helps because really, what is causing a lot of pressure in north america is the flux of products moving across the ports and into the shores. so when we see some level of slowdown, it actually in some
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ways relieves or could potential he relieve the bottlenecks that happen. so i don't think domestically that we are significantly impacted by the chinese story in terms of shutting down ports or shutting down manufacturing. i think the story as it relates to north america and europe is really what is happening in the country itself or in the continent itself, and really what we have is a lot of boxes or containers that are stacked at the ports. we have ships that are waiting to get to berth. we have warehouses that don't have employees to take those trucks and bring them down. there's just a lot of pressure everywhere, and i think it is more of a domestic story today than it is something that is global. guy: let's talk about the other side of the ledger. we talked about the supply-side,
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the availability of products, making the product available for consumers. what are consumers buying right now? are you noticing a shift in consumption patterns? craig: i think really, what we saw is a generational shift in consumer spending back during the early stages of covid, and that has continued to stay persistent. there have been short conversations about back to office, where you are starting to see people buy slacks to go back into the office, or clothes that would be more of an in office environment, but those seem to be really short-term and have not been persistent. so we think this spending pattern of consumers of buying more physical goods is actually something that is not going to go back to the way it was pre-covid, and we think consumer habits have permanently changed.
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certainly we have seen cities do better than what some people projected, that they would not go back to places like new york or london. that has not played out. we have seen a sort of resurgence in demand and people coming back into city centers. but a lot of this is living. they are not actually coming back to work on a regular basis. it puts a lot of pressure on people who provide service in those communities. but as it relates to physical goods, physical goods have stayed in high demand. we see consumer spending driving that. we also see this infrastructure bill and government stimulus driving a lot of additional demand. we think that story plays out for many years. guy: always so interesting and useful to talk to you, craig. we appreciate you joining us this holiday. thank you very much, indeed. craig fuller, freightwaves founder and ceo, thank you very much, indeed. a bit of breaking news, reporting that the u.s. and the eu no longer considering
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removing russia from the swiss transactions system. that will be in the event of an incursion into ukraine. we will continue to monitor what is happening there. we will come back to that story as we work our way through the program. what are we going to talk about next? how to do talent retention during the so-called big resignation. it is one of the key question ceos are grappling with right now. talking about strategies employers can and are using. that is next. this is bloomberg. ♪
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laura: let's check in on the bloomberg first word news. the omicron variant has spread to major cities in china, beijing, shanghai, and shenzhen, all reporting cases. while they are small in number, they are causing concern because of their timing. that lunar new year begins february 1 and is marked by mass travel, and the beijing olympics begin three days later. moderna moving closer to having a vaccine designed specifically for the omicron variant. the company's ceo says clinical develop and for the shots will begin soon. >> the sequence is developing an omicron specific vaccine. it should be in clinics in the coming weeks. guy: pencil -- laura: the discussion was moderated by bloomberg francine lacqua. business is in new york city reportedly offered most four
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times the number of remote jobs to applicants last year, according to "the new york post." the industries with the highest jobs in working from home included information and financial services. 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 laura wright. this is bloomberg. guy: office. much better.
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thank you very much, indeed. let's talk about how the virus is impacting the return to work, the return to normality. where are we in this process? let's bring in bloomberg's sam fazeli. the case count in the u.k. is coming down very rapidly. should we expect that to happen elsewhere? sam: well, it kind of happened in south africa with regards to, if you look at a 50%, a halving of case counts, but south africa and the u.k. have higher levels of immunity, which hopefully will be replicated in other countries and cities in the u.k. , the european union. the united states will have to wait because they have a lower immunity. guy: what do we know about what is working and what is not? the u.k. stuck with what is called plan b, which certainly wasn't as stringent as we have seen elsewhere. france, where you are now, loosening up some of the travel requirements, but tightening up in other areas. vaccine passes pretty much required for everything these days, certainly if you want to do anything interesting. it will be interesting to see how novak djokovic deals with this. what do we know about how we should navigate the next few months and what the policies should look like?
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sam: right now, i am just thinking through a whole bunch of research i have piled up in my inbox over the last few days looking at what is this lower severity that we keep talking about with omicron. how much is it to do with the virus, and how much is it to do with the immunity we have built up, going back to the comments made earlier? most of the data i am looking at is pointing in one direction, and the majority of the reason we are dealing with a much more manageable number of hospitalizations and deaths and icu usage, etc., is because of the immunity we built up. perhaps the virus is more sensitive to that immunity. but it is about the immunity. therefore, it is sensible to be pushing people to go and get vaccinated as hard as you can. guy: we will catch up in the
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next hour. looking for to that conversation. bloomberg's sam fazeli joining us on what is happening with the virus. let's look at how this is affecting the labor market as the support systems that governments are trying to put in place to support families, to support people returning to work. steven kramer, ceo of bright horizons, joining us now. bright horizons is one of the largest providers of employee sponsored childcare in the united states. thanks for joining us. let's get a sense of what the lie of the land is right now. how may people do you think that work are currently not because they are struggling with childcare? >> i think it is really clear that there are a significant number of individuals who would be in the workforce except for the fact that they are taking primary care responsibilities for their children. what we saw at the beginning of this pandemic is women in particular left the workforce
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most quickly, and they are also the ones coming back with the least amount of speed. again, this is not necessarily a women's only issue. on the other hand, we have certainly seen that in the data, and it is very concerning in terms of their ability to come back into the workforce because of their primary care responsibilities. anna: -- guy: the challenge is even more enormous this time around, just listening to what people are saying. would schools shut down, when bubbles get burst, when people are at home, that challenges enormous. trying to find somebody to fill that role seems to me to be significant and more difficult than a simple i've got a childcare problem issue. >> that is absolutely the case. what we have believed for many years and leading employers have also believed is that the employer can play an important
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role in supporting their working parents. as schools shut, as childcare centers become more difficult to find spaces, employers really have a responsibility to step into that. so through our backup care services, we have the ability to send a caregiver to the home or a child coming brought to one of our centers and ultimately solve that exact challenge you are talking about, which is this acute challenge of the individual needing to work, and at the same time having a breakdown in their care arrangements. guy: how much more difficult is it when it involves remote schooling? to be looking after a child is one thing. making sure that they are plugged into the right technology, that the wi-fi is working, that they are on schedule for dealing with that teacher or this teacher, just speaking from personal experience, that is hugely challenging and a completely different role than you would normally associate with this. stephen: there's no question
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that as there are breakdowns in schools and children are being forced to do their schoolwork remotely, that is a very acute challenge. again, employers have an opportunity to step in. we have virtual tutoring services that employees of many organizations, including mcdonald's, including others, are leaning in so that their employees can stay focused on work, and at the same time can learn and ably corrective way. guy: is it a struggle finding a workforce? stephen: absolutely, it is a challenging labor environment for everyone. that has been a struggle for many years, attracting individuals into early childhood education.
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that said, our best kryptonite to that is making sure that we are an employer of choice, and like other leading employers, we are really leading into not only wages, but also benefits, because we recognize our people also have many of the same struggles that those across the workforce have. so we are stepping in. we are making sure that we are helping them with their childcare challenges. we are making sure that for those who have school-age children, that we are leaning in and supporting them, and likewise, we are helping them to build a career. leading employers like us and others are making sure that they are allowing for ups killing and reskilling with employment as a basis of that. guy: what are the companies you are working with telling you about how long they think these challenges are going to exist for, particularly when it comes to managing the virus?
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is this now a permanent set up that you are planning for? stephen: i think that the clients we speak with, and we have over 1300 employer clients across the u.s., they are setting up systems and business continuity that is going into the future. this is not short term accommodations but they are trying to focus on. they are really looking at this is a longer-term challenge, and whether it be this particular variant we have today or whether we are looking over the longer-term, employers are really thinking about how do they create a sustainable work environment for employees, understanding that workers and parents have particular challenges, and the need to make sure over the long-term that they are selling those challenges. guy: thank you for joining us this holiday. we really appreciate the input. this is something so many people are grappling with right now. stephen kramer, bright horizons
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ceo, thank you. spain and germany talking right now. olaf scholz talking about what is happening in ukraine, saying that russia needs to de-escalate , talking about the fact that russia must take steps, all efforts must be made to avoid military conflict in europe. we will continue to monitor that press conference and bring you headlines. this is bloomberg. ♪
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laura: it is time for the bloomberg business flash. i'm laura wright. walmart is setting the stage for meeting its customers in the metaverse. they are setting up their own
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cryptocurrency and non-fundable tokens. walmart plans to make and sell virtual goods. brian cornell said americans will drive less and consolidate their shopping into fewer trips he also predicted there would be more eating at home versus going to restaurants. in london, bankers who changed jobs in the fourth quarter got an average sally greek -- average salary increase of 19%, according to recruiter morgan mckinley. pay hikes underscore the surging job market in london's financial district after covid slowed down recruitment and earnings 20 12. that is the bloomberg business flash. guy: thank you very much, indeed. two corporate stories dominating here in europe. the first one is lexa smith kline and unilever. the other is credit suisse. let's work our way through them as we come into the close.
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unilever looking to buy glasses with clients consumer unit. think advil, sensodyne. we are seeing lexa smith kline looking to offload that business. the analyst community is universally, it seems, against unilever making the it. a number of different reasons, price, growth options going forward, the ability to execute such a large transaction. unilever's stock price today down really hard on the back of that. glaxo is picking up. certainly there is an expedition that that business, that consumer business will list for acing fitly higher price than maybe the market is looking for. then you've got credit suisse. the new chair nine months into the job stepping down. we will talk about these stories in more detail next get the close is coming up next. this is bloomberg. ♪
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guy: martin luther king day in the united states. european stocks near session highs. you've got technology, media,
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health care leading. the countdown to the close starts right now. ♪ 30 minutes to go until the european close. normally on a day like today, you expect volumes to be light. the u.s. is out. volume is actually all right. this talk about the price action we are seeing. stoxx 600 up by 0.8%. health care doing well, media doing well. technology is having an ok day. take a look at what is happening with u.s. bond futures. the market is closed, so you can get an idea of what is happening with the futures. we are pushing down our price. yields are coming up. when cash opens, will we see equities reacting at that point? euro-dollar at 1.1401. brent crude continues to be elevated. yes, i know we are

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