tv Bloomberg Markets European Open Bloomberg January 17, 2022 3:00am-4:00am EST
scandal. francine: there will be things going on today -- the u.s. equities will be closed today because of mlk -- martin luther king day. they are in a quiet. this week. tom: there were eight basis points moved on friday. others start to discuss the possibility of a 50 basis point hike since march. the shock in ore is what bill ackman is calling on from the fed. unilever chair and also what is happening with credit suisse. the spanish ibex gains. we start to price in political
risks given boris johnson's position. let us look at what is happening on the cross asset board. it is that martin luther king holiday stateside, so no u.s. trading equities today. the aussie tenure is up six basis points, building up on that move from the u.s. on friday. brent and oil are up 0.4%. this is more upside on the oil space. i keep going to the interview i had with jeff a week ago, where structurally, you should go high because they cannot produce enough one demand is stretching. iron ore has that cut in interest rates from the pboc for the first time. it coin is -- bitcoin is at
42,000. francine: if you look at the sectors that are moving the most, it is the industrial from the financials. specific points to watch out for our unilever. i do not know how it is opening at the moment, could -- but it could be priced in the sector. any other major central bank is trying to have a warm up as it braces some differentials with china. of course, utilities still gaining. tom: almost 5% selloff in terms of unilever. gsk rejected its offer for a consumer health care division. we have an update in the last hour, saying they will come up with a plan and focus on high-value parts of the business including health care and hygiene. having to respond to this
rejection from gsk, both companies have to come up with plans to monetize these parts of the business. airbus is gaining on the back of this saying that it's space business did very well. clinic and is down 2.4%. credit suisse has ousted its chairman after an investigation found he broke covid policy rule. just nine months ago, he was brought onto steer the bank through a series of scandals. joining us is marianne. what a shock for credit suisse after just nine months. >> ed was a terrible 12 months and it is not over yet for credit suisse. they have now lost their chairman, who resigned after the board investigated reports that came out last month's around his
breach of quarantine rules in switzerland and the u.k. his resignation was a bit of a surprise. we were not expecting a full oust given that they have had huge restructurings over the archegos scandal. they have replaced that person with axel lehmann, who was a risk manager and that could be good. francine: a lot of shareholders will be asking questions. he was set to save the company from previous scandals. what do we know about the style of management of this new chairman? >> we will have to see how investors take this news. chairman antonio horta-osorio was the guy who was supposed to save the bank. we need to see if axel lehmann
continues the strategy that antonio horta-osorio announced last year. it is unclear for the moment, but it seems they were set on this strategy and will continue with that. that being said, axel lehmann, he had a long career at swiss banking and he was an executive for a long time, so he certainly knows the world. the one drawback is that he is not well known outside of switzerland, so it will be hard for outside investors to build yield. tom: marion was is a story on that and how the bank adjusts to these changes. let us get more on what is happening with the market with kristine aquino. we have been reprising these bonds again.
-- repricing these bonds again. you have got bill ackman saying that there will be 50 basis points in terms of the eight hike in march. what is the reality of the fed? kristine: it is definitely something that is starting to rattle bonds even more. even on a day when it is meant to be a u.s. holiday, there is that global impact reverberating across the markets. now that we have gotten used to the idea that the fed will start its rate hiking cycle this year, the question is around how much they will be able to do and how quickly. all of these discussions around what is more than we have priced in markets at the moment or perhaps the possibility of a bigger than expected rate hike in march. francine: that is what bill ackman was trying to push for.
at the same time, the pboc is easing. what does that mean for global markets? kristine: this is also the big question. it is fascinating watching the roles between the two biggest central banks in the world who are going in a hiking cycle in china, going the other way. direction -- the reaction we saw was an adhesive reaction. the bonds were rallying less than expected, given the bigger than expected cut from the tiny central banks. that shows you where the balance of power lies at the moment. there is gravity higher for bond yields globally at the moment. tiny bonds are getting swept up in that, and investors are saying they might want to see
more from the smaller central banks. tom: within the equity space, focusing on earnings, we had some bank earnings on friday. what would you say about this from goldman sachs? leigh-ann: -- kristine: it will be important to see the expectations for higher rates playing into these earnings expectations for banks. it is good for them, the idea of rate ride -- rises. looking forward to these other rates was companies reporting and definitely keeping an eye out for how this plays to margins as well because inflation is very much in the discussion at the moment. are they going to be able to cope with higher costs going forward and how much will be passed on to consumers? tom: kristine aquino will stay with us.
we will get more on the markets that we are watching after the break. i will also touch on unilever and glasgow's next clients as well in terms of that deal. it is not yet the price for credit suisse and we want to see this on the terminal. 1.2 percent on the back of that news for the chairman. francine: i spoke with the chiefs -- chief executive a month ago, and he was a talented man. there were a lot of shareholders expecting price around the scandal, but there was also rumors that they could merge and sell off assets. tom: that is a pricey story to say the least. in terms of what glaxo's has declined, and unilever, some of
open head 12 minutes into european trading day. it is a u.s. holiday, which means that the u.s. equities are not training -- trading. we are looking at prices for bond yields, and we are looking at china. what is important for bill ackman is the timeline. he says what the fed should do is more on the timeline. they're playing along with a lot of prices. tom: whether that means they can go lower and take their time in march, what's that will mean far equity markets is that the reality of investments needs to adjust. let us talk about the china rate cuts. china cut its key interest rates, and that is the first time in two years. the economy slowed last year on the back of those covid
outbreaks. joining us now is bilal hafeez, the ceo and founder of macro hive. good morning. what is your take on the decision by china to cut more than what has been expected? 10 basis points does not sound like much, but we have got it for the first time since april 20 20. does it suggest that policymakers are on top of it, or does it suggest that the growth is slowing faster in beijing than expected? bilal: i am more inclined to the latter. we need to look at context, which was that last year the authorities were trying to stamp down on the property sector. now we are concerned about the slow down and what we have seen in the economy, the retail sales
domestically are week. -- wea. k. this comes at a time where most central banks around the world are hiking rates. francine: i am digging your mike sucker berg -- mark zuckerberg vibes. there was concern that because the pboc was not easing, that it would put a damper on them as they pursued their zero covid policy further than the rest of the world. kristine: it was an interesting read across. they are particularly worried about growth and implementing covid zero on top of the growth slow at the moment. that could have big implications on demand. that is something we will be watching for the commodities space, especially because there is hope that demand was going to
be shored up this year and we were going to be in a situation before the pandemic where demand was collapsing. the other thing to watch is the interplay in risk assets for all of this. the idea of china easing and the fed moving to tighten is a sweet spot for some emerging markets, in particular the local dollar bond sector is getting revival. there is an idea that the -- because they got ahead of the fed rakes and china is easing and they are exposed to that story, it is the making for good companies for a bit of a rally. tom: bilal, do you agree with that? do you expect to see exposure their? bilal: there will be some
exposure, certainly on the bond side. we could see bond yields and hit lower and the sovereign side, and the other bit of trade is the valuation being low in sectors. there are sectors that look attractive. we continue to see stimulus for the balance there. francine: we are looking at credit suisse down 2% after the chairman had stepped down because of the scandals of breaking quarantine. i do not know if there is a read across or whether you like financials because there could be consolidation. that is something we should look for in 2022. bilal: the credit suisse story is more a story to do with
credit suisse. i do not know if they have done so well over the past six months, but in general, the environment where the bond yields are getting should be supportive of the financial sector. we are in this zone right now which should lead to investors moving into financials. tom: financial bank stocks in the europe are the best performing sector today. stay with us. bilal hafeez will still be with us. let us get the bloomberg business flash with laura. laura: central banks have the key interest rate for the first time in two years, following the momentum from a covid case outbreak.
they say that gdp grew 4% in the fourth quarter, higher than the 3% forecast by analysts. unilever is promising a major restructuring and plans to selloff as it may's -- makes -- this comes after glaxo says over the weekend that it has not rejected this from unilever or the business. unilever says it will announce the restructuring later this month. cpi fund management made billions for clients last year, leading some of the world's biggest hedge funds. according to estimates, the top 20 hedge funds. -- hedge funds generated billions after seeing games last year. that was a 5% return on assets.
francine: welcome back to the open paid 22 minutes into european trading day. a lot of this has to do with the repricing of treasuries on friday. today is a back holiday, so a lot of the u.s. treasuries are not open. credit suisse is costing -- ousting its chairman. this is a big turnaround to the company. he has been replaced by axel lehmann. we saw shares slumped the most in 2020. wells fargo also grooves in the fourth quarter saying that the fundraising's are expected to increase this year. still with us is bilal hafeez, chief executive of macro hive. when you look at european banks,
the valuations are more attractive than the u.s., but they also make less money. bilal: that is true, but the question from the european side is if we do see higher yields, whether that will be enough in the margins to pick up and potentially more upside around interest rate cycles. on the u.s. side, u.s. earnings are larger and geared towards trading activity by investors. tom: i love this. we have a quote from one of the european articles saying that the ceo of phantom square mansion saying there is life in those old stocks yet, referring to the ing. bank of america now has an estimate with an increase of yields. you can see some euros added to earnings. as the window still open to get these stocks out, or to what
extent is this already priced in? bilal: there's more to get into these sectors in europe, because on the cyclical side we could see more things on the upside in the economy, but you also see what is coming up with the delta and omicron waves in europe. on the ecb side, while they have moderated this somewhat, we could see them try to bid mobile , which could see yields moving higher than what we have currently. there is enough in the background for banks. they also have more risk appetite to expand their loan growth, so the europe index in general has been performing a valuation by a few points now. francine: is it the u.k., the european, the swiss ones?
we are still on banks and what does that mean for the banking sector? bilal: on a structural side, it is true that there are not that many banks in europe, so there should be consolidation. the continual challenge with europe is that despite having a common market, it is difficult for probable m&a to happen in the banking sector. the structural story is negative but the cyclical story is positive. the euro area banks in general, not necessarily the u.k., have the upside, because i think the euro area cyclical story has more upside and valuations are more attractive as well. tom: more upside for the european banks on the back of that cyclical. bilal hafeez, ceo of macro hive. thank you.
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and boris johnson faces another uncertain week amid the party gate scandal. it is also january blue. the monday blue. the hardest monday overall. market seems to be repricing but we are seeing with treasuries. and the pboc seems to be easing some conditions. tom: for the first time, the pboc coming in with a rate cut. this is about concern among officials. it points to their worry about the trajectory of growth. and you go data out of china. gdp -- the most important number to me was the retail sales number. the chinese consumer is still a ways away from pre-pandemic levels. you have cases of omicron in beijing. the concern around the health of the consumer -- a read across to
chinese equities and europe as well with exposure to the world's second-largest economy. the dax is up 0.2%. the cac 40 is up 25 points. oil is higher today. 0.7 percent. take a look across the sectors. basic resources gaining more than 1%. at the bottom, losses in terms of real estate, travel, leisure and consumer consumption. unilever and gsk. no deal for now. and you have the fate of credit suisse. that company, shares under pressure on the back of the chairman stepping down. this swiss bank can get rid of their chairman. not so sure about boris johnson and his transactions or stepping
over the line. over to credit suisse. francine: it has ousted its chairman after an investigation found he broke covid quarantine rules. he was appointed nine months ago to steer the bank passed a series of scandals. an incredible story. were we expecting this resignation? >> i kind of was, to be honest. in the last few months, there had already been question marks about his performance as chairman because he has not managed to rescue the banks share price and the strategy that was unveiled in november -- to be charitable, it was spoiling. things were not going well. and then in the midst of a global outcry about some people trying to get around quarantine rules, we find out that the chairman of credit suisse has
done it not once but twice. so, that seemed very difficult to 19 credibility afterwards. tom: is this a decisive move by the bank and what does it mean for credit suisse going forward? jeff: it looks like credit suisse will maintain or carry on with the strategy changes they had announced in november so that is putting more focus on wealth management in asia, cutting back some of the riskier businesses. they have to continue with that. and lehman is on the face of it a seasoned risk manager. he spent 20 years at a zürich insurance company. it looks like they are going to try to buckle down, pushed through these changes and tried to recover confidence in the bank and recover the share price. tom: ok, bloomberg's european
finance editor, jeff black. and the ouster of the chairman and what it means for the bank going forward. russia warning that time is running out to secure a deal that guarantees nato will never admit ukraine. something the alliance rejects. speaking at the end of a week of diplomatic missions, lavrov said moscow will not wait endlessly for an agreement. >> we will not wait forever and the plans to drag their heels over this are in place. this depends on the u.s. francine: ukrainian probe has concluded that all evidence points to russia being behind a cyber attack that has disabled several government websites. >> we need to work throughout your view shim. this is part of the russian playbook so this would not surprise me. and yes, of course, if it turns out the russia is pummeling
ukraine with cyberattacks and if that continues, we will work with our allies on the appropriate response. tom: that was jake sullivan. for more, we go to our european correspondent, maria tadeo live on the ground in brussels. the mood in europe is still somber over this issue though diplomatic efforts continue. are they in vain? maria: today we have the german foreign minister going to ukraine. she will be in russia tomorrow. this morning, the german foreign office put out a statement saying we want to have stable relations with russia but the list of conflicting issues is growing and we are determined to reactive russia goes down the road of escalation. bringing up the double approach that the germans like to go with, caret and -- carrot and stick.
this brings up the ambiguity of german foreign policy when it comes to russia. some would argue they are still very lenient and providing vladimir putin with a platform to act more aggressive when it comes to ukraine. francine: i think there are seven or eight new ministers in the europe group so how will that change the tone of what is being discussed? maria: we are here in brussels for another europe group. there are a lot of new faces. and the german finance minister is here making his brussels debut. the dutch and the austrians. this could change the balance of power around the fiscal union and framework. there was a very fiery debate about what to do with the debt to gdp. this morning, the french finance minister saying they are obsolete and we need to work our way forward and the timing is
critical. the european central bank is likely going with a program and the focus will be on the fiscal side when it comes to the european economy. francine: maria tadeo joining us from brussels. let's get into the european economy and joining us is anna titareva. the concern is inflation. how does the china policy, the pboc help the economy? anna: when it comes to european inflation, we have seen 5% rates just in december. our baseline expects this to mark the peak of the inflation profile and we do expect a gradual decline in inflation over the course of the year. given the continuous upside, we think inflation will remain uncomfortably high and our baseline assumes that we will return to 2% only by the end of
this year. but we also flagged near-term risks. tom: with the upside forecast for inflation, does that box in the ecb? can they hold the line on the commitment they have made to not raise rates this year? anna: that is in line with our call at the moment. the call was given -- a relatively hawkish outlook for the meeting. we now expect the ecb to wind down its purchase program and the first quarter of 2023 and then we expect they are likely to start hiking the deposit rate in mid 2023. it is in line with no hikes this year. francine: we have a lot of political risks that could come
to fruition -- the french elections and a number of other things. will that hurt economic growth? anna: at the moment, the main downside to growth remains the outbreak of the omicron variant and restrictions. on the back of that, we have lowered our growth expectations for the fourth quarter of last year and the first quarter of this year. we expect the mobility restrictions will be significantly eased by the end of january which should open the way for economic rebound towards the end of q1 and more significantly in the end of the second quarter. we don't incorporate any significant damage from political risks but it remains something that we are closely monitoring. tom: we were just on the ground in brussels at the euro gr
oup meeting. how much more fiscal dry powder? anna: in the last two years, we have already seen significant fiscal stimulus being delivered in 2020-2021 and now we expect some decline in the fiscal stimulus. our baseline assumes contraction on the ground of 1.9%. that is based on the draft budgets that were submitted by mid-october last year. but the key factor there is that a lot of this pullback comes from a reduction in spending. it is largely reflective of getting out of the pandemic phase rather than any significant spending in the private areas. in that sense, we think european economies will be able to withdraw and withstand the
pullback appeared at the recovery fund is already seeing some funds distributed which should provide support over the coming year as well. tom: there is still some fiscal powder that can be used up. you have a forecast of 4.2%. anna titareva from ubs, thank you. orest johnson facing growing pressure to step down after the latest revelations of parties at 10 downing street. can the prime minister survive? that is next. this is bloomberg. ♪oomberg. ♪
francine: welcome back to the open. we are 44 minutes into the european trading day. the big stories include what happened on friday with treasuries. the focus will be on what the pboc said. growth, better than expected at 4%. the corporate story of the day without a doubt. credit suisse and the banker tasked with fixing the scandals resigning. credit suisse down 1.4%. tom: in the debate continues over rule breaking in a lockdown. the labour party would say the prime minister did break the rules.
that's get the latest. boris johnson facing another bruising week as there is a furious backlash over so many parties inside 10 downing street. so many rumbles. i am sure you are exhausted. it seems it continues. tory mps, what have they been saying and how much pushback and anger is there? >> good morning. another week, probably somewhere revelations to come. we don't know yet. they had been in there constituencies all weekend talking to their agents and people on the street. immense public anger over these stories. one mp had the word "liar" scrawled on his door twice now. they are back in westminster and
they get to talk to each other and compare notes. that is not good news for the prime minister. francine: it is pretty incredible that none of us or the non-experts cannot remember having parties. how can porous johnson --how can boris johnson survive this? >> he can survive it by the inertia of the party. there are several ways you can get rid of the prime minister. the one that is most likely to work is a if 54 mps right to the party big wake and he keeps a list of who has submitted a letter of no confidence on the prime minister. we keep a running tally on how many letters have been submitted. six or seven have been publicly submitted. probably quite a few have been submitted not publicly.
the other way he could go is if someone in the cabinet resigned and they don't have confidence in the prime minister. this cabinet though owes its success to boris johnson having said that, right a lot of mps are holding back waiting for a report to be published about the parties. we expect that this week or next week. there is quite a lot of debate over whether she will provide the final blow to boris johnson. she is a civil servant. it is more likely she will set out the facts of the case. a party on this date, a party on this date and then recommend any disciplinary action. if i -- tom: ok. >> i would expect disciplinary
francine: welcome back to the open. we are 51 minutes into the trading day. stocks on the up. the focus, repricing, what is happening in treasuries. treasuries are closed because it is martin luther king day. if you work in london, here is a way to get a pay boost. quit your job and get a new one. financial services workers in london secured an average 19% pay raise. joining us is tom. it did not feel significant apart from the fact that we are in the middle of the pandemic. >> i think it is more a sign of how hot the job market is as well as the salary uplift that you see. there is also a huge number of available jobs. messages come if you are in
london and in finance, it is a good job market. tom: the demand for talent. how are things changing inside the u.k. financial services. let's focus on china. the economic growth slowing as consumer spending took a dive eating the central bank to cut its key interest rate for the first time in almost two years. let's bring in james. the economy grew faster than expected but the pboc surprised by cutting rates and deeper than many expected. what is the rationale within the official policymaking of the pboc at this point? james: as you said, the gdp grew faster than expected but retail sales was much weaker. the rate cut the pboc brought in
is meant to assist the property sector and also the investment in this corridor. so, even though we had better than expected data, going forward, the economy will be weaker and we need to boost in 2022 which, as you know, is important politically. they need a stable economic growth. francine: does the world need to get used to a lower growth rate from china? james: that has been the expectation for a while now. the government -- economist expect the economy to grow about 5% this year which is lower than historically. the pboc with their action today showing they don't want anymore slowing then they had in the fourth quarter and they would like it to pick up a little bit.
we won't get back to the growth rate that we saw pre-pandemic. i think they would be happy with 5% or five point something percent. tom: what are the main headwinds to this economy right now? is it all about covid and restrictions? james: that is part of it. you are seeing the restrictions in retail sales and good luck going out to restaurants. the chinese new year is coming and the government is telling people not to travel. this is normally the biggest season for travel. people will not be going out and those restrictions will bite immediately on private consumption. people go home and they go to banquets and restaurants. that won't happen. the other factor is the property market. we are still seeing all of these
defaults, problems with the property market. there is no sign of it picking up. they have covid in the property market. these things combined are really undercutting growth from the start of 2022. francine: thank you so much. the big corporate story is credit suisse after the surprise announcement at midnight london time that the chairman of the bank charged to fix credit suisse was leaving because of his own scandals. we have been speaking to a number of people on the ground from his style was very to the point. it was like to buy some and disliked by others. this is a great bloomberg story we have been covering closely. this thrusts credit suisse back into the spotlight. tom: the scandals around archegos and he had a background of turning around lloyd's so it seemed that the bank was safe
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>> inflation is very high. >> 2022 may be the year the pandemic enters an endemic phase. >> this is "bloomberg surveillance: early edition" with francine lacqua operating francine: -- francine lacqua. francine: guess what's coming up on today's program. turmoil at credit suisse. the embattled bank ousts the chairman after just nine months on the job.
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