tv Bloomberg Daybreak Europe Bloomberg February 1, 2022 1:00am-2:00am EST
$5 billion buyback. our interview with the ceo is in an hour. i want to recap the ubs numbers. they are updating on their financial target. significant updates on that and earnings. net income coming in at $1.35 billion. also planning to repurchase $5 billion worth of shares in 2020 two. strong numbers likely to incite markets. the one stick in the mud is more litigation provisions. these are french litigation provisions. updating their financial targets. much more ambitious than we have seen before. a nebbish is plan, perhaps the most so since hammers took over. we also are getting reports from a japanese lender. third-quarter income coming in
at a drop of 40% year over year. we are looking for a balance from the bank after a legal case that caused a 95% drop in profit from the prior quarter. there corridor income coming in at 63 billion yen, a drop of 40%. keeping on top of those numbers. stay tuned, manus is not with me because he got to sit down with the ceo of ubs. we miss him but he has more important things to do this morning. what he has missing out on is the start of the month. made it through january. most of us are happy given the volatility. deutsche bank saying the volatility is caused by market expectations and the fed and
leapfrogging over each other. have we gone too far. we have the rba decision this morning. they pushed back against the hawkish and is saying they are ending qe but they espouse patients when it comes to the direction and pace of rates. they had to recalibrate itself. three year on the aussie rates. a drop of eight basis points in the span of one minute. is this a preview of what we will see for the ecb and boe tomorrow? diving into the charts. we have a great one on what euro bore is pricing in. since the fomc, 20 basis points and extra tightening for september 2020 three. that translates into a whipsaw for the markets. have we gone too far?
are we about to see investors caught wrongfooted? the equity market -- yesterday, we saw the biggest today rally for u.s. stocks since march 2020. down about zero point 2%. small-cap futures faring worse. we have a commentary coming out from jp morgan saying to they priced into much recession. we did see losses in january sliced in half. and the aussie dollar went down by as much as 0.5%. prime minister boris johnson is facing fresh fury from his own conservative lawmakers after a report slammed failures of leadership and judgment. metropolitan police are investigating 12 gatherings in
government buildings including one in his own apartment. let's get more from our reporter. what did we learn from this report? parts were left out. >> this is an update because of the overlaps with the metropolitan police criminal investigation. the update was still highly critical. it found there were failures at leadership and in judgment with this behavior that was difficult to justify. given what was happening in the rest of the country at the time. the report did not name johnson or explicitly say he had breached lockdown rules, broken the law or misled parliament. where does that leave him? it was confirmed that the full report will be released in the police investigation concludes. and the civil servant in charge has signaled there is a lot more to come.
given these conclusions already being so big, if you dial them up, it may not leave a lot of wiggle room. dani: the prime minister kept saying that we have to wait for the full report. will it be enough to convince boris johnson's own mps he has to go? >> that line was repeated again and again. and an embarrassing moment was when his predecessor said he was stupid or arrogant. and then a series of tory mp's spoke. and a series of opposition mps arguing that he thought he was above the rules and he should resign. it does not look like he will do that but it also doesn't look like we will get the 54 letters of no confidence just yet.
johnson will trot out that line that they are prejudging the police report. dani: we cannot have you on set and not ask you about the boe. we have a decision tomorrow. what are the expectations? >> markets and economists are expecting a hike. that seems like a certainty. we are looking for how fast and how far the bank will tighten this year. we may get a sense about that from the inflation forecasts. we will also be listening to the governor's remarks. if he emphasizes the cost of living crisis, that might give us a sense. if he emphasizes inflation expectations, that could signal further tightening. if we get that, we are likely to get more of this quantitative tightening. dani: as always, a great update
on the drama in the politics on the economy. thank you. let's get over to the first word news with laura wright in london. >> antony blinken has met with -- will meet with lavrov later today to reduce tensions over ukraine. the un security council voted to hold an open hearing on ukraine despite moves by china and russia to block it. moscow has repeatedly denied plans to attack ukraine. the uae has dismantled its tax-free regime. it seeks to align itself with new international rules. the new 9% rate will come into effect june of next year. george soros says china's leader -- [indiscernible] he said the real crisis and
ineffective covid vaccines are a threat to the leaders efforts. [indiscernible] the new york times said it paid in the lows seven figures. the company has said it will remain free from new [indiscernible] 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, are you a fan? dani: i am full on addicted. laura: i have not played. dani: after the show, i will walk you through it or maybe i should not, it is very addictive.
i want to go back over some of the lines. investment management with the loan bright spot jumping 2%. posting a record profit. elsewhere, we saw pre-profit down at all three lines. that is the latest. coming up, the rba scraps its bond buying program. the aussie dollar bounces back after dropping on that announcement. we will dive deeper into the tech rally. this is bloomberg. ♪
dovish rate stance. the aussie dollar and bond yields fell as a governor pledged to remain patient in assessing inflation. mining us now is saed abukarsh. senior member at ark capital. some of the bank officials pushing back against this hawkish narrative. what extent can we look at the rba and say this is foreshadowing for tomorrow? saed: i think the rba is still trying to taper hawkish and is in terms of the speed of any normalization that will happen in the next few months. what we have seen especially with the fed is that the market is a bit divided. from my side, i think every central bank out there wants to hike as soon as possible but the problem is over the last few years we have gotten into the
mode of forward guidance. every central bank feels it has to have asked -- excessive forward guidance. we end up with a situation where the market begins to price hawkish in us but then some of the banks have to pull that back as soon as possible so they can manage --. it has been quite a long time. central banks are more inclined to stay a bit essentially hawkish in the sense that they will see how inflation will play out. there is a lot of uncertainty regarding how far inflation moves over the next few months and if an aggressive hike will be needed. dani: to that point, i like how deutsche bank phrases the push and pull we have been
witnessing. he said until the market and fed stop leapfrogging each other, the market will stay volatile. how do you judge this gap between the market and the fed? do you think for example it could narrow in march? saed: i think once we have more narrative from the fed members regarding how far they are willing to go in terms of hikes. 25 basis points versus 50. that is the issue. the issue is the pace. will it be fast or will we hike [indiscernible] i think it is an issue where we will listen for the plan. dani: it is remarkable because
as we see markets expect hawkish and is from the fed, it has gone global. for the ecb for example, libor futures signal a 20 basis point of hikes just from last week just from after the fomc decision. how much do you expect the ecb will push back on the narrative tomorrow? saed: the ecb is stuck in a hard place. the issue is you have two problems. the [indiscernible] the other problem is [indiscernible] on the one side, they have an energy spike.
and they could be facing an issue where they are hiking or committed to hike when the fed is almost finished hiking or at the backend of the hiking cycle. the ecb will be more defensive. they will taper down. i think -- or they could follow the forward guidance. from my side, i think the ecb is more defensive. they will try to muscle any hawkish and us in 2022. dani: i love what you write in your notes. you don't think the ecb position is as clear as most people would assume. saed: the ecb, the last time the fed normalized come at ecb was running 6-8 months behind. it is still at minus in terms of
rates. their problem is normalizing in the face of a slowing economy. that is a trick. dani: what about the boe? will the bank of england be able to be as hawkish as the fed? saed: i expect the bank of england to have a very straightforward policy in terms of their plan. the big issue is not whether they will hike or not, they want to hike and they want to aggressively hike. if they are too aggressive, the market will sell off. what they have to do is slowly hike in the face of rising inflation. it is a balancing act between the bank of england, the fed and the ecb.
no one wants to be blamed. they also need to normalize as soon as possible in the face of rising inflation. dani: u.k. markets have gotten very hawkish. saed, you are going to stick around with us. coming up after a volatile start to the year, the s&p 500 tends january -- ends january on a high note. this is bloomberg. ♪
dani: welcome back to "bloomberg daybreak: europe." january was a very volatile month for stocks. at one point, the s&p 500 was down over 5%. the nasdaq down more than 10%. the end of the month was the best back to back performance since april 2020. will february prove less volatile for equity markets? still with us is saed abukarsh
from arc capital. we were just talking during the break that we were moving back to equities. did that give you any confidence? saed: we had a massive rally in december which began -- we have a pipit with powell -- pivot with powell. there is definitely a bigger risk -- this in terms of rebalancing the books and moving away from tech and back into value. you have heard names like buffett getting back into value. this theme plays out over the
next month or two we see a rotation from tech back into value. the big question is will we see more hawkish is from the fed, the correction becomes more exacerbated. the less the -- [indiscernible] dani: within that, you talked about tech. i know you dislike tech. can you give us an idea of the size and scope of pain you are expecting in the nasdaq 100? saed: i think it is a play -- it is a long-term strategy. it is more a thematic play that we have seen play out in the
last two months. the more real rates bounce back up into positive territory, the more pressure we see. that is the catch-22 most banks face. they don't know the level of slow down. they simply don't know what will happen. from that perspective, i think the exposure to the tech side -- most portfolio managers be less inclined to be on that side. dani: let's play devils advocate. tech earnings -- alphabet reporting later. and a stellar performance from apple. a lot of money go into apple.
they have huge positions of cash on their balance sheet. can earnings save the picture for big tech? saed: i think -- right now, if burnings can save tech from a selloff, they have the ability to sustain drawdowns that we are in unknown territory. that is the play. from my point of view, the growth level they experienced over the last year -- i expect m&a activity to pick up substantially in the next year. dani: let me get away from the negative. let's talk about a story that you are buying. you like china equity.
what is behind that call? saed: it is simple. what we are seeing in the last seven or eight months is you see the central bank of china these policy -- ease policy. ha as we see a slowdown in asia, the bank of china will ease policy. i think that is what we have seen over the last few years. [indiscernible] dani: thank you for helping us navigate this pivot away from
>> good morning from bloomberg's european headquarters. i'm dani burger, this is daybreak era here is what you need to know. surprisingly patient, the rba shocks with a dovish view despite ending qe. aussie stocks jump. johnson under fire. failures over party gate, the prime minister faces growing tory fury.
a $5 billion buyback, our interview with the ceo of ubs in about 25 minutes. congratulations, you made it through an extremely volatile january, most people probably glad to see ourselves on the other side of that. we saw this massive today rally, the best since 2020, cutting losses for the benchmark indices in half. we are looking at a slightly weaker futures picture. down by about 0.3%. even more underperformance when it comes to small-cap futures. too much recessionary risk is priced in. suggesting buying small-cap indices. you are looking at a 10 year yield. aussie dollar falling 0.2%. that is following in rba rate decision where they ended qe, but they will be patient on rates. let's turn our attention to earnings and big tech. alphabet is set to report
earnings later today with meta and amazon due later this week. it will be closely watched as the sector helped to power a late recovery to a volatile january. joining us now is a senior equity analyst at hargreaves lansdown. thank you for joining us. you are perhaps a little bit of the black sheep over at your team because when it comes to alphabet earnings, it is not all about advertised revenue for you. what else are you looking at for the tech giant earnings later? >> good morning. for me, advertising is still technically the biggest part of the picture and it is incredibly important. for me, what i'm really obsessed about his cloud. they are edging toward profitability and i want to see how close they are to hitting that because it is a potential growth driver.
it is quite hard to understate how helpful that would be to the bottom line. you have seen what aws has done for amazon, so that is what i will be watching very closely later tonight. dani: when it comes to advertising revenue, when we hear from the likes of google, we kind of set our expectations for the facebooks of the world, what does the set up look like? are investors fairly enthused about what we might hear from google? >> yes, if we think about advertising is the main revenue driver, at the moment it is looking at, the market is expecting a 27% increase in revenue overall. that would suggest they are expecting strong double-digit growth in advertising. i personally think that is a reasonable expectation. i think they are likely to meet or even exceed that. the one thing i will hedge that with his they have an incredible beat last quarter, which means expectations are going to be very high. good is no longer good enough
these days, which is a real shame. dani: good is no longer good enough. that is one for the books definitely. dan himes calls this the most important quarter for tech earnings in the past decade. we do have a lot of headwinds at the moment. rates being one of them. do you agree with him that this will really set the pace for technology in quarters to come? >> that is a rhetoric we have heard some other ones in the past, and it is absolutely very important at the moment. if you look at the goings on in the wider macro environment, it is going to be incredibly important to help lessen some of the dips, further once i believe are coming. whether it is the most important, i don't know if i agree with that. this is not the last time we will see high drama in the tech space and even more important
ones are probably down the line. dani: can you work through the macro environment with me? when rates push higher, we tend to see these longer duration equity selloff, tech being one of them. how does tech fare in a high inflationary environment where perhaps these are exactly the companies that have the ability to raise prices and continue to improve margins? >> yes, so if you are looking at it from a product perspective, the operational run, and how the share prices are going, on paper high-growth stocks are the ones that people are edging away from. if you look at apple's results the other week, you are right, they are far better placed to do with inflation because dogmatically loyal customers are not just going to run away because they are feeling the pinch per month. the brand power will see a lot of them through. they are far more protected from
inflation when operational level, but whether or not that gets affected in the share price in the coming months, there is a disconnect there. dani: i've gotten used to coughing up a thousand pounds or more for an iphone at this point . we see them have this huge cash position on their balance sheet. what you looking for when it comes to the cash position and how these tech giants are going to spend it? >> aisleways describe what apple does as quite refreshing, it does actually return massive chunks back to shareholders and that was particularly impressive , what microsoft is done with that huge m&a announcement with activision. i do get frustrated with the level of cash we are seeing in balance sheets. i personally think we are going to see a big round of m&a over
the coming months, maybe year. but for me personally, i would like to see chunkier shareholder returns. maybe that is because i'm based in the u.k. because we love a dividend over here. [laughter] dani: i feel like it is hard to find people who don't love a little bit of a dividend. [laughter] you are thinking more, and a in the space -- m&a in the space. is that the play you are expecting? >> yes, whether or not to that scale, i'm not sure, but i would not be shocked if we see more gaming because that is becoming increasingly popular. the pandemic has pushed even more people into this incredibly popular past time. i think gaming and tech around that will probably be enjoying the spoils when it comes to the m&a front. dani: great for electronic arts earnings as well.
sophie, thank you. now, let's get over to the first word news. laura wright is back with us in the studio. laura: u.k. prime minister boris johnson facing fresh fury from his own conservative lawmakers after an official report into the downing street lockdown parties slammed failures of leadership and judgment at the top of his government. it has also criticized a culture of excessive drinking and says some events should not have been allowed to take place. the metropolitan police are investigating 12 gatherings and government buildings, including at johnson's own apartment at downing street. the uae is imposing a federal levy on corporate earnings for the first time next year as it dismantles its tax-free regime. the gulf nation seeks to align itself with new international rules on minimum tax rates for corporations. its new 9% rate will come into effect june of next year. australia's central bank is
scrapping its quantitative easing program. the aussie dollar and bond yields sort after they remained patient. 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: thanks so much. as europe waits for the omicron variant to peak, divergences growing among eu countries about how best to tackle the pandemic. austria is implementing a vaccine mandate that starts today. france has a timeline to ease restrictions from february. for more, we go to maria tadeo in brussels. vaccine mandates proved very controversial to put it lightly at the end of last year. how are they being implemented in real terms? maria: they were controversial and they continue to be very controversial.
i was in berlin last weekend this is still a major subject of conversation and heated debate in germany. but let's look at austria first. this mandate is going into effect today. vaccination becomes an obligation. everyone over the age of 18 will have to get the vaccine. if you don't get the vaccine, you could be fined up to 3600 euros. what is interesting is the government says they also have incentives, so there will be a lottery and if you get vaccinated, you could get your money back after you are find. this is being debated by the bundestag. it has not been approved. we expect this to go into effect sometime in march. the chancellor said he was in favor of a vaccine mandate, but there is a real debate in germany as to whether or not the government went from having an unclear line on vaccination to going for the nuclear option with the mandate, that a lot of this could have been resolved if
the government had pushed more for vaccines at the beginning, if they had been more clear for communication and there would be no need for the mandate. as ever, there are questions about when this goes into effect, how will you implemented in real life and what happens to people who say, i'm still not getting the vaccine? dani: that really does stand in contrast to what is happening in the u.k.. france looking to reopen. how are the numbers shaping up? does it look premature to reopen the economy? maria: when you look at the number of infections we are seeing in france, which went from record to record and now they are coming down, a year ago with fewer cases, france was going into a curfew and there were restrictions. this time, they are looking to open up. vaccination is proven to work. the second is you are looking at omicron being a super infectious
variant, so the hospital pressure has been manageable so far. three is that this is an election year in france and there is political calculus going into this. the government under emmanuel macron is betting that they will be able to say by mid february that the omicron wave has peaked, we have managed to keep the economy going, we are lifting restrictions, and vote for me because i'm running for reelection. [laughter] dani: politics never too far behind in the narrative. thank you so much, maria. coming up, despite diplomatic efforts to de-escalate the ukraine crisis, geopolitical concerns are increasingly cited for rising oil prices. more on that story next. this is bloomberg. ♪
intention of attacking ukraine again, but then the aim might be that he is just building up this capability and presenting ultimatums with this force, so we should definitely not fall into this trap. >> are you disappointed in the response we heard from germany? there was a huge controversy about sending helmets and not weapons. is there a sense of disappointment across countries? you are almost the first line. >> first of all, we don't have an official response from germany yet, and second it is up to every country to decide how they help ukraine. we will help ukraine with all the means that we can, political means, relations, but also the
capabilities that we can give to ukraine because we definitely see that the situation over european security begins with ukraine right now. >> of course, the other big question i wonder is nord stream 2. we have seen the huge dependency . i know this is a german project, but it does have implications, is it time to take a step back and look at this as a geopolitical weapon? >> we have been saying this since the beginning, that it is a geopolitical question. we have used all the means, all the tools to prevent that happening and to be voicing out dependency on russian gas is
detrimental to the energy security of europe. we have been very vocal about this since the beginning. dani: the estonian prime minister speaking about the ongoing tensions with russia over ukraine. diplomatic efforts are continuing to de-escalate the crisis, but despite these efforts, geopolitical concerns are being cited for rising oil prices. for more, we're joined by paul wallace. among these concerns and other factors, we start to hear people talk about triple digits on a barrel of oil. how likely is it we reach $100? >> if you talk to analysts and traders, it is quite difficult to find oil bears at the moment. most of them are saying oil prices can continue to go up from here and a lot of them are saying it is only a matter of time before we hit $100 a barrel
. what those people are siding is strong demand and they are saying omicron has not hit oil consumption that much globally and we have some supply issues. some of the world's major producers are struggling to increase output at a time when global inventories and spare capacity is fairly low. dani: how much of a risk premium would we attach to the ukraine-russia tensions? >> yes, that is another thing that is happening to the market at a moment. there is a higher geopolitical risk premium priced into crude at the moment. if there was a sudden de-escalation and it became clear that there would be no conflict over ukraine, i think oil prices would go back. that is what most analysts are saying. it is difficult to know by how much. whether we are talking five dollars a barrel, less, more. that would be something that would probably help push prices
down. dani: will tomorrow's opec-plus meeting be as quick as expected or is there any chance we get a surprise from them? >> opec-plus obviously meets monthly and tomorrow's meeting is one that most people in the oil market expect to be very quick and smooth. they think the group will ratify an output of 400,000 barrels a day from next month, but interestingly, goldman sachs put out a note saying there could be a surprise that because of the run-up in oil prices, opec-plus might be a bit more aggressive and do more than 400,000 barrels per day. that is not the consensus in the market, the consensus is very much 400,000 barrels a day, but the surgeon oil prices this year
is definitely something that opec-plus will consider. dani: some of the best performance for oil and decades or at least the highest prices since 2014. paul, thank you so much. coming up, boris under fire. the u.k. prime minister faces more fury from his own party. we are going to have more on the latest next. this is bloomberg. ♪
dani: welcome back to bloomberg daybreak: europe. i'm dani burger in london. we start the day after the best back-to-back gain for u.s. equity benchmarks since 2020. that means the losses we saw for january were sliced in half. so far this morning, giving back some of those gains. our guests earlier in the hour said he did not want to own more volatility, more bumps in the
road to come as we see tightening from the fed. it is this shift, this rebalancing we have seen away from growth. we see the selling of bonds go global. the hawkish and us getting priced in, but have we gone too far? that was slightly behind the narrative of the rba that pushed back against the hawkish nest, saying they would remain patient. we are looking at a slightly weaker aussie dollar. let's also get you set up for the rest of the day and some of the things to watch out for in a trading diary. we are expecting the euro area unemployment rate. we are going to have some u.s. data including construction data . hungary's prime minister will meet with russian president vladimir putin to discuss strengthening economic ties.
of course, it is also a big day for earnings. you have alphabet. we have heard from ubs and gm. some of the companies due to report, expectations are high. we also have austria's mandatory covid-19 vaccinations come into force. imposition of fines will not begin until mid-march. the other events we are watching, u.k. prime minister boris johnson is facing fresh fury from his own conservative lawmakers after official reports into downing street lockdown parties claimed failures of leadership and judgment at the top of his government. >> firstly, i want to say sorry. i'm sorry for the things we simply didn't get right and sorry for the way this matter has been handled. dani: let's go to our u.k. government reporter who is at downing street live for us. what did we actually learn from
this report? a lot of it was left out, wasn't it? >> yes, a lot of it was left out. i think the most significant thing is that 12 gatherings are now being investigated and one of them happened in the prime minister's own flat. that brings it to the prime minister himself. those general findings were still pretty damming, saying the failures of leadership and judgment, about as bad as it gets. even though we didn't have the details, it is still a tough day for the prime minister. we now wait for the findings of that probe. these are very tough times for boris johnson. dani: it is something we heard over and over again that we have to wait, but what does the mood seemed to be right now at the moment. does it seem like we are likely,
that this will likely convince more mps that johnson needs to go? >> yes, we sought in the house of commons more mps come out and be openly against the prime minister. people who are seriously against him. there was this meeting. the prime minister said, i am making changes, i'm listening more to your concerns, you need to give me another shot. the question is can it continue to hold when we get the findings of that probe, which could be pretty damming and the prime minister said he will publish the rest of the report. that could include all sorts of details. he is by no means out of the woods at this point. dani: another line that he went with his we have to deal with a
lot. there are russia concerns. how is that playing out that the government needs to be concentrating on some of these other issues that plagued the country. >> i think that is what the prime minister would like. he couldn't do it because he was in the house making a statement. as much as he wants this to go away, it is intended is affecting his ability to govern. this means there will be more and more weeks around the central scandal that have distracted -- detracted from his ability to govern. we have more of this to come and it has really pushed him off course. dani: joe, thank you so much. now, we have been missing a large presence on the show all morning, manus cranny, who is currently live in zürich. we miss you, but i know you
spoke with the ubs ceo. walk us through your first take of these earnings we heard from the swiss lender? >> these are pretty monster earnings. 7.5 billion dollars in 2021, the highest since 2006. the ceo has had a pretty good role in another first year. it is a deal to reveal the buyback. they announce the it tensions to be back in the market tomorrow with another 5 billion this year, so you are looking at a progressive payout last year. i asked ralph hammers about that and i said, is this putting a stake in the ground in terms of capital returns? ralph was very clear that it is a handsome dividend to take an
additional provision for the french litigation. you may recall, they are fighting litigation in french court. they have taken almost double the litigation provisions they had anticipated. that he says allows them to de-risk and be more substantive on the dividend payout. the dividends, the payout, and that buyback is going to be with the market focuses on. what is the reveal? the reveal is the new strategic target. this is where it gets more interesting. dani: walk us through that. we have these new targets, we were expecting some of the biggest changes in terms of strategy since he took the home of ubs. what have we learned? >> in terms of the actual targets, what we've got is a profitability target, which i challenged him on. i said, you are already at a 17%