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tv   Bloomberg Markets European Open  Bloomberg  January 21, 2022 3:00am-4:00am EST

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pay a heavy price if it moves into ukraine. we are live in geneva. francine: let us take a look at the futures. we had moves on the back of those earnings. netflix and peloton also were less then what we were expecting, so if we are adjusting to the new normal, cryptocurrency is down and oil is down. it is a massive selloff. tom: it is that narrative that earnings are going to push forward in 2022. it is mixed in terms of what we have. netflix with that disappointment in numbers. let us see what is playing out on the markets open. the ftse 100 is down 0.1%. the play across is a bit of a concern for policymakers over
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this crunch for the boe and its rate hikes. the spanish ibex is down. the french cap is also down 100 points for france. the sentiment is carrying across these european spaces. there are more of supports from officials in china for banks. the focus at the moment is concerns about earnings and the risk off of buying. let us see how things are playing out across assets. the focus is remaining on tech. that is where we got the most volatile action yesterday. futures pointing to further losses, down 0.6% for the nasdaq. we have the japanese yen at 1. 77. brent down 1.5%.
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they may speed up the acceleration of some of their reserves getting onto the markets. richter is under pressure. -- crypto is under pressure. bitcoin below $39,000. francine: you take all of the cryptocurrencies and they amount to $1 trillion, so that is a significant amount in asset class losses. we have a lot of selloff of consumer stocks. basic resources leading the losses, down 3%, and travel and leisure is the second worst performing. a bit of geopolitics is also in their. the fed, we have been talking
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about the fed moves, and we are having those shaky numbers from peloton. and netflix had the slowest start to the year. they are wondering if they need to reprice because we could be moving from pandemic to endemic. tom: that is what we received from netflix and peloton. in terms of -- supply chains and margins have downgraded the forecast for siemens energy for the revenue of 2%. that stock is down now by 5%. they are saying this is essentially not investable. royal dutch shell is down 0.5%. they comment on releasing additional reserves. and >> blockchain -- argo
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blockchain is down almost 10%. it is a paying point for crypto as the stocks drop. let us get with leigh-ann gerrans. leigh-ann: netflix shares have dropped as much as 20% on the ricoh side of growth -- weaker side of growth. they expect to add just 2.5 million customers in the next quarter, blaming the follow-up from the pandemic. russian central bank has proposed a blanket battle on all cryptocurrencies. the country has sworn off being one of the biggest crypto mining countries in the world. they ban the use of crypto to make payments.
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serbia has vetoed rio tinto's plans for a lengthy a mine -- a lithium mine. they say this would become an environmental issue i head of serbia's coming election. that is your bloomberg business flash. francine: thank you so much. so much going on in the world of markets and business. joining us now to talk about the markets is richard dunbar, investment director of standard life investments, as well as our kristine aquino. this is a bit of everything. there's concern on geopolitics and worried about what the fed will do, but there are also shaky earnings which points to a different economy. kristine: absolutely.
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it is fascinating because you can see the shift in catalysts and what is driving markets. earlier this week, we were talking about the big bond selloff driving. catalyst has shifted and we have these negative earnings report overnight, the tech selector slowing through everything else, and the shift tells you what the market anxieties are currently and how the markets are now going into this new era, the post-pandemic era. what does this look like and which ones will be the winners and losers? we got a clear picture of that yesterday from netflix and peloton. tom: richard dunbar, thank you for joining us. when it comes to earnings, the netflix and peloton stories, to what extent are they
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idiosyncratic and to what extent should be -- they be red across the broader tech sector? richard: as christine noted, this is not just the slight rising for bond yields or future earnings. with these earnings from netflix, the 2.4 million subscribers, they continue to grow weaker. last year, we were expecting commodities from the pandemic that there were fears that netflix would become its own stock and continue to deliberate.ed becoming back to normal, so they should monitor the next few quarters and we will see if this is a change in behavior. we will see if this is something of the past rather than the future. francine: i am jumping in because it reminds me of the early 2000.
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i wanted to recall the home stocks. we need to make a difference between the big apple of this world and the stay-at-home and whether at the moment investors may confuse it. richard: when you look at something like netflix, we decided it was a stay-at-home stock. it was one of the better stocks when we were not stay-at-home, and it is also despite lower than expected cash earnings, it still has significant cash yields, and that yields giant profits, versus peloton which has not lasted. this is for all of us to do the homework so you do not have bonds going to cash flows on
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significant levels. we note the stronger dollar has competition, and these are abnormal things that we should be looking at that signify items that shift their value. tom: some pressure on the back of those netflix results. but there are also opportunities in india and elsewhere. let us take it back to the broader picture around the equity markets. it seems like it is selling for the rallies. kristine: absolutely. that is very much the shift we are seeing this year. even last year towards the end of 2021, we were already starting to see crack's in the strategy. yesterday's move was a great example of this idea that maybe
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we are past the era. this sort of brought out is very fierce. the stocks are seeing a gain into the day, and they suddenly happened once last year, a couple of times in 2019, and this is more akin to what we saw with the world still grappling with the uncertainties of the height of the pandemic. there is a shift here. this is probably the best way to describe it at this point. francine: there are the fed worries and there are these shaky earnings. is there something else we should be looking at? richard: it is that combination of many things. the economists are downgrading them and we are expecting a couple of years going forward, but it is lower than what we expected a couple of years ago.
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we are nervous on inflation, and we are still seeing those inflation numbers kicking in higher than anyone expected. we talked that there are a lot of things to worry about. also valuations during the year, but certainly not cheap valuations, so we are not being protected by cheaper valuations or earning expectations which give us a lot to cover when we were speaking a year ago. tom: some of that cover still sticking with us. that was richard dunbar, still with us, and kristine aquino, breaking down the market. netflix plunges after its outlook of subscribers disappoint. we will break down what will happen with netflix and what this means for the broader tech
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sector. this is bloomberg. ♪
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francine: welcome back to the open. i would say tgif, but given the selloffs with the shaky earnings from peloton and netflix, but also the concern about geopolitics around the world,
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and also the fed, we expect them to break more than expected, we see the pressures. the dax is down 1.4 percent, and similar numbers across the board. we do not know whether the investors will build across the dip, or resell their losses. tom: we talk about netflix disappointment around subscriptions. shares of netflix falling sharply late trading coming up short of subscriber estimates for the fourth quarter. the streaming giant forecast that it will just add 4 million subscribers in the current quarter. that is way below expected. they report that it is temporarily stopping production of its signature products for peloton, given the declining nature of consumer demand. still joining us is richard
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dunbar. alex, talk us through what we heard from netflix and peloton and a sharp reaction from markets. there was always going to be some takeback. reporter: there was a problem they had over lockdown so they were not able to make as many shows, films, and the leisure content was dropping down from the uptake. there was expectation that this would bring subscribers in a more organic expectation, not just one driven by lockdown. this is not the outcomes that they expected. ella ton said they stopped production on the pushback of that. the demand is there, but it just dropped forward quite a lot. francine: 2.5 billion more
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subscribers is not too bad. i do not know if they are modeling on something that is unsubstantial -- unsustainable, or whether there is concern about too many streaming services. reporter: the market is a bit saturated already in terms of where netflix is. we really look at the growth there. looking internationally, but also whether they can increase subscriptions in asia. tom: richard, we touched on this, but it is an important story around technology. is this an opportunity -- do you make a cap tech on the back of a reaction of selloff in tech, or is there something more fundamental at play? richard: netflix was talking
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about worries about the strong translation impact and the competition that you just touched on from disney and others, but there is also a lot of content offering and demand, so those are things to look out for in terms of determining whether stocks are good or bad. venues and margins -- revenues and margins in asia are not so much about the growing of the values, so a lot more were saying that we have that a little bit more. it is not just the forecast but also the working moments. that could lead to long-term valuations circles and prospects coming into play. francine: i was thinking about the fact that alex has hbo max.
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there is not even any politic news on there. 20 look at what the analysts are doing -- but when you look at what the analysts are doing this morning, are we just too optimistic? how do you try to do that efferent -- different? richard: netflix missed for their quarter that just past, but for the quarters ahead, they are talking about increased costs in production and concerns a route the broader economy on the higher growth areas for the session that they are having again. looking at the expectation and their robust expectations, the risks arrive with the expectations of the fed. we have been here before. netflix is not just a work from home stuck.
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-- stock. it has prospered in other environments. tom: i want to look at the emerging markets because there might be a point where if you get a stock with the dollar, that could be ahead of the fed, if china stocks will support with more stimulus. are you looking for an opportunity with em? richard: we are looking for more opportunities with em in the asset class and other areas. the dollar is generally palatable and the central banks are hopping ahead of the curve. they have been much more ahead of the curve than we have seen. they are behind the curve in a few of the developed world. this is an opportunity for central banks and emerging markets. there has been some
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idiosyncratic weaknesses with the emerging markets, the latin america markets, so there is some opportunity there. there are better values than other areas of the emerging markets, and that protects the needs of a volatile environment. francine: thank you very much. that was richard dunbar, and our reporter alex webb. tom: we look at succession. francine: we will discuss at -- discuss it on social media. the ipo for the dollar, coming up next. this is bloomberg. ♪
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tom: welcome back to the open paid 24 minutes into european trading day. losses across the board. u.s. futures toyed -- pointing down. basic resources and autos, everything is in the red this morning. francine: cvc is lining up for a potential ipo, so it is being
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valued at over $20 billion. joining us is our very own dani burger. it is amazing how many equities have done this in the past. dani: if you want to be the blackstone, they have gone there a while ago, so definitely. that is our region's private equity giant. if you want to feel like a big player, may you have to go public. we did see epb in europe, they are a little smaller than cvc, they have done well and they went puppet -- public. why not join the market? tom: it is not just your regular spat, but it is all about pets. dani: pets do not necessarily make people feel calm. you guys will not know it, but
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if you guys drive around in the u.s., you go to petsmart for your pets. kkr reportedly is in talks to acquire them through a spac. it is not just something that is pumping off to cool off a bit, but it is also that they have pets exploded during the pandemic. valuations are really high, so they must believe that it can do even better as a public company. francine: i am here for the pets conversation. i also recently got a pet, and when you look at prices, i look into the cheaper one, and you really do not get the best deals. dani: i have to say one of my favorite quotes was the ceo of a
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pet company in the u.k., and saying how pets are the baby-boom of now. francine: thank you. dani burger joining me on spac. coming up, we talk about the future of tech. this is bloomberg. ♪
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francine: welcome back to the open paid 30 minutes into european trading day. here are your top stories. sentiments on stocks overall, treasuries sweep. netflix plunges after a scribe very -- subscribers disappointment. plus u.s. president biden says that russia will pay a heavy price if they move into ukraine. they remain talks in geneva today.
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it is geopolitics and what the fed does in terms of interest rates, and now they are shaky earnings from peloton and other companies. tom: the data is a whole mix of elements that we are discussing. the high yields around inflation, what is happening around tech, and the concern of the stay-at-home stocks with earnings mixed. and they geopolitics when it comes to commitment from the u.s. and allies if it punishes russia if it does indeed move into ukraine. losses of 1.5% across-the-board, and the u.k. consumer sentiment is very weak. estimates suggesting there is a challenge for the u.k. coming up. we are looking at the fed rates and the boe. we have oil playing out in the news and adventure ease coming out higher.
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they might be able to step out the release of reserves. they wants to get inflation down and that is a key policy of the biden administration. that is coming into effect today. basic resources at the bottom of the list followed by travel and leisure. investors do their part to take a step back and think they might be able to get there opportunities there, or whether there are too many risks as we navigate the challenges of inflation and geopolitics. francine: we do not have that many technology streaming services in europe, but it does not set -- help with that selloff. also the cryptocurrencies we saw across the board would have been a haven. tom: crypto sells off and sodas tech. when tech sells off, sodas crypto.
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-- so does crypto. the broader regulatory impact in china, we will talk about the influence of the tech companies and rooting out the corruption did -- corruption. they signal an expansion of their regulatory crackdown, which is raised that $1 trillion of market value. joining us now from beijing is kendra schaefer, a tech partner for trivium china. we look at how things are shaping up for the regulatory environment in china. kendra, where are we in this shift and what has really -- what have we seen from officials for these broad changes at play when it comes to technology? kendra: never a dull moment in china tech policy. it is a fast and furious for the china tech companies.
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anywhere from data security to online gaming, you name it. investors are still reeling from the beijing center and where we go now. luckily, we may have some clues. two days ago, president xi jinping released a regulatory to do list for what beijing expects to see from its tech sector and how text -- tech regulation is doing. anti-monopoly pushes not going anywhere. the competition drives are here to stay for 2022. they will intensify for and all signals are pointing that way. so far, no breakups have been reported. what we are looking at this year, we expect regulators to review the uber merger and we will see what comes out and what
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beijing decides to do. we are also looking at another round of regulations for the business tech sector, particularly nonbank claimant -- payment platforms like alipay and wechat pay did -- we chat. that is really what we are looking at going forward. tom: there is a lot to unpack their. you talked about dd there, because dd had valuations over in the market. they went through a barrel of -- a barrage of regulatory changes that have been impacted them. we have seen voices saying that chinese officials will take a closer look at investments of these companies. do we have any clarity on that? kendra: there are a couple of things going on here.
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number one is the state administration of regulation, which is responsible for the reviewing of m&a, is going back through their antimonopoly drive and reviewing every m&a that has gone under the radar over the last four years. one that is under review is the uber merger, but there's nothing to break up this point. we expect that there will be some brig funds leveraged and subscriptions put on where they are allowed to expand in terms of future acquisitions. in terms of -- francine: if you look at the policy that the party put out, it is to break the tie between money and power.
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we had a regulation in china last year that unless they break up these companies, what more can they do? kendra: what they are doing is putting bounding boxes around what businesses are allowed to do and behave in the market. it is corporate behavior control rather than simply cutting the loss at the well limit. one of the most interesting policy shifts in beijing recently is that they expect platform companies to invest heavily going forward in hard tech r&d. they want to put investment into foundational research like semiconductors, ai, agriculture. the idea being that that forms have an incredible amount of wealth and power. they should not be using those resources to disrupt pizza delivery or optimize bicycles.
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what they should be doing is helping china be -- reach its international strategic goal. tom: could they pressure these companies to follow these strategic policy goals of beijing while avoiding killing the goose that lays the golden egg? kendra: that is a good question. we do not really have a good view on what the result of all of this is going to be except for looking at how much money will be wiped off the books. over the long-term, beijing is not thinking in terms of investment cycles. aging is thinking about laying the foundations of its tech sector over the next years. when you do not have an election cycle year, when you do not have to worry about one administration going out and the next one not following along with the past administration's policies, so beijing is setting
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down some framework that will last over the next several decades. tom: kendra schaefer, with great analysis on china on the potential implications of that tech sector ramp. francine: we have the chinese communist party saying that they have no tolerance for -- sends chills down your spine. we look ahead to the european sector, and we are looking at the elections of the president in italy. we will be speaking with octavio marenzi and get his views ahead of the election as voting starts on monday. this is bloomberg. ♪
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>> you have to be competitive and pay people. >> we will be competitive pay, and if that means things off the shelves, so be it. >> we are committed to rewarding top talents in a competitive
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labor environment. francine: brian moynihan, jamie dimon, and dennis coleman talk about banks. the big wall street names released results this week. we are enjoying -- joined by opimas ceo octavio marenzi. does this mean we will be seeing more or less because bankers will not be paid as much? octavio: we see the inflations in the u.s. bank earnings, but the point now is what is uniform across the earnings which seems to be that banks are not spared of that. there conversation costs did not go up as much as others did. you saw wells fargo actually did well, and that was because they
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reduced the headcount. it is not uniform across the u.s. banking sector. while universal banking sector earnings went up, that is not the truth. tom: does this suggest that the wage inflation we have seen in u.s. banks is temporary? octavio: i think it is going to be pronounced long-term. i do not see the fed getting general inflation under control anytime soon. the fed will raise rates may be three or four times this year. it is not really going to get inflation under control, so we are going to see wage inflation, but it is not uniformly distributed across the sector. we see far less inflation in some places, and other places
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like the u.s. banking sector are seeing far more inflation. francine: overall, you look at some of the prices for the bankers at j.p. morgan, it still makes sense that you get the best of the best, otherwise the employees change shop. octavio: but some banks did not pursue that strategy and did quite well. goldman sachs did well on expiring valuation, so they have much more limited increases. not every bank is assuming that strategy, and i agree with jamie dimon saying that you have to pay people to get good talent and that is the right thing to do. however, some banks are getting away with not doing that, so that is something to watch out for and see how it evolves. i think inflation will continue and accelerate in the banking
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sector for 2022. we will see what happens. it will be much more difficult in the coming year, particularly with income trading to be highly profitable. banking is big backed deals into the first quarter, that seems to be slowing down as well. they are under rising interest rate increases and the equity markets under pressure, they are going to want to go public, so the public banking site is under pressure as well. tom: what about loan growth? is that starting to pick up? octavio: bank of america is very strong, and their earnings are about six or 7% over the past year. but certain banks, depending on their portfolio, the small number of growth is going down a little bit as well. if you look at home lending, you
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see decreasing interest rates. you see far less refinancing taking place, so that lending portfolio depends. it's depends on what the portfolio is. credit cards seem to be doing well. housing is down, so it is mixed. francine: overall, there has been assumption over the last couple of years because of tax and interest rates that it is easier to make more money at the bank in the u.s. rather than europe. are we going to see cross board -- cross-border activity? octavio: i think the regulators are not quite ready for that yet. they are taking a break on the large bank emergence from a year ago. the firms and banks that will do
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really well are the ones exposed to wealth management. those have not been hit hard at all, so the swiss banks, they are acquiring a lot as those business plans do well, and the more exposed you are to the bread and butter corporate lending, consumer lending, the more flat your earnings and revenues is. the mark difficult things will -- the more difficult things will start in 2022, but the u.s. banks had a strong quarter there. the trade is changing. tom: octavio marenzi, ceo at opimas. thank you for giving us a preview of the european ax. francine: coming up, trying to decrease military conflict. u.s. diplomats hold crunch talks with the russians in geneva.
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we have that story next. this is bloomberg. ♪
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tom: happy friday and welcome back to the open. we are 50 minutes into european trading day.
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every single sector is in the red. a sick resources are down by 3% and autos are down by 2.4%. crypto and the sell off their at 39,000 four your bitcoin, down by more than 5%. talking about crypto, former speaker of the houses of parliament calling for order. francine: speaking through twitter. i had to stop scrolling because i had to get to bed, but there was video of john barco on twitter, so i tweeted at the crypto company, and there was something called cameo. you can go onto --
3:53 am, and you can see john bercow. i do not know if this is wrong or not, but you can pay them up to 2000 pounds and they give you 40 seconds and they just read it off. tom: who would you want to call off for your birthday? we should get you on their, fran. francine: this is amid the controversies we have seen with the u.k. politicians. tom: oh yes. order. calling out celebs before your birthday. what is make note of that one. let us switch over to geopolitics, slightly more serious. efforts to avoid military conflict in ukraine. u.s. diplomats are set to meet with the russian foreign minister in geneva. >> he has to do something.
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>> in this circumstance, you have to be ready for everything. >> the russian side is aware of our determination, but they also realize they games of corporation outweigh the rise of conflict. >> in the use of force in ukraine, we will be using -- there will be severe consequences and russia will have to pay the cost. >> it will be a disaster for russia if they initiate anything. >> we do not threaten anybody, but we do address threats to us. tom: maria tadeo is on the ground in geneva. the u.s. says they're still work to be done. if there is one, what is it? maria: i wish i had the answer
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to that question, but we know there is a meeting that will happen in two hours. the idea that was repeated by the u.s. administration is that russia will has to yes: rate -- to de-escalate. overnight, we had a number of documents from the u.s. government saying they want to make it clear that russia is the aggressor. ukraine is trying to survive, and russia has been engaging in major disinformation when it comes to ukraine. when you look at what is happening here, this is a tricky situation for denmark, but what you have right now is russia saying, we want something on paper that tells of the guarantees that ukraine will never join nato. when you look at the demands that are being put forward by what they want to see, the
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problem for vladimir putin is that would look like a defeat. the way forward here looks unclear, and he is speaking some of the russia threats here and it is an interesting perspective. they say they are not expecting much out of this. francine: i wonder if the real question is that the west will bundle down. if they do not feel threatened by nato, they would not feel threatened by the west. maria: and that could be one of the issues here. that the united states is not going to go to war over ukraine. the europeans are not ready to do that. they have an energy crisis at the point. the nord stream 2 pipeline is weighing on this point. when it comes to nato, you could also argue that there is no point when it comes to going on a major war over russia. that is essentially the question
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that vladimir put in -- vladimir putin will have to answer to get a political win or not. tom: maria tadeo on the ground in geneva, thank you. coming up, we speak to matteo renzi, the former prime minister of the italian party. this is bloomberg. ♪ every day in business brings something new.
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>> if any assembled russian units move across the ukraine border, that is an invasion. they will be met with severe and coordinated economic response that i have discussed in detail with our allies. >> we are trying to pinpoint what that is. it is tough to say exactly why our acquisition has not recovered to pre-covid levels. it is probably a bit of overall covid overhang. >> we will have to be competitive. people don't want to


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