tv Bloomberg Markets European Open Bloomberg February 15, 2022 3:00am-4:00am EST
let us look at the futures. it will be another day for the markets. you are seeing pressure of 0.2% down for the euro stocks. the dax futures are also the future -- ftse 100 futures. the chinese shares to support economic growth so we are seeing a bit of that positive news filtering through asia to some of the equity indices in europe. officials did come up with another round of views on the policy outlook. inflation expectation, let us look at where the price of oil is right now. it is clear that the tension in europe is keeping oil markets on edge. wti inching lower but remaining around $95 a barrel. a lot of cost to that could go to $100. we have a good calculation of if it goes up by another $25, that
affect it could have on inflation. and another thing we need to watch out for our commodity prices because it is possible for russian invasion, which they have the night, but all eyes are on right -- moscow today. and what we heard from the fed and james bullard. pressure on the ibex, the dax, the cac, also down some 0.4%. and we have corporate news today from glencore and we have airbnb roadblocks. the pound and sterling, you can see it at 1.30 five. this swiss franc unchanged. this is the market check. the sectors always give us a good indication of how supportive are not the technology sector is. this is a big one we were watching yesterday where the nasdaq brought back from a volatile day. this is without a doubt lighter
throughout the day. we were wondering if there would be wage growth in the u.k. and what that means for that statement or whether we look at this one. this is one we got from one of our mliv strategists and it is a great look at the euro-dollar. this is a further sign that the federal reserve policy era in the making could be shifting quickly because there are more bets on the central bank said -- rate hikes. if you look at the debt -- euro-dollar, this is something we have not seen in the last two weeks, it suggests three hikes for 2023 could result in a rate cut for 2024. that is interesting. looking at this compared to some of the previous ones we have had and how that has changed over time. let us get with a mark cudmore for what else he is watching in the markets. do you have your eye on iron ore? mark: i do love that chart.
i think it is remarkable that we are predicting a price cut for the u.s. we have still got wage confidence in the terminal for the u.s., but that is on topic for another day. i want to talk about iron ore. we talk about why this has happened and what happened in the rally. china talked about those speculators is in the market that are driving the prices. this is a bit strange because the whole reason we have this value announcement is precisely because everyone believes that china will invest in infrastructure this year to boost the economy. this is among china's investment to drive up the prices, but china's the one that is trying to clamp down. i think technically it can fall along way because the short-term dynamics, never mind the china
infrastructure, it is that we have short pull ply -- supply. this market is looking vulnerable. investors might see a negative sign on the chinese economy overall on the macro take away. francine: china was pretty tough on some of the iron ore producers. most of them calling that meeting from china. i want to get back to some of the calls. looking at the euro-dollar that week are now looking at a cut from the fed from 2024. do we need to sit up and pay attention to the fact that we will see a lot more volatility on these calls? mark: i think the problem is is that the market is looking for guidance across the dot plot. you had a crazy overconfidence in the terminal rate in the u.s. when we move forward with rate hikes, we are presuming that we are not going to see a higher
terminal rate. it just means we have to bring them back to that rate. i think that is the bit that might shift. probably at the march fed meeting where we will get an updated dot plot. he did not get a dot plot in january even though we got a massively hawkish fed. we could be set for a big surprise in march. that is one we will see a real shock to the markets. francine: thank you. mark cudmore there. we will have more on the price action of iron ore as well as the key mining earnings a few minutes from now. ukrainian president volodymyr zelenskiy spooked markets giving a comment about the rest of the world predicting a date of an attack by russia. he meant that remark to be sarcastic. let us bring in maria tadeo who is in brussels who has been covering this from the beginning.
24 hours of clarifications after a whirlwind date firm markets. -- day for markets. maria: what a day it was yesterday. that was after the message from the ukrainian president who has been informed that wednesday would be the attack, but in stead in ukraine, there was a lot of confusion as to whether he was confirming an attack was happening and in the end the ukrainian office explained that he was not confirming a date for anything. if anything, he was being ironic. they are very irritated about the dates that are being thrown around and they feel this has an impact around the country. what he was trying to do was to rally the ukrainian people in united states -- in unity on wednesday. we know we are going to be paying close attention to olaf scholz. he is on his way to moscow and yesterday he was asked what
happens if russia invades ukraine. he did not go into specifics but he did say that we and our allies know what to do. francine: aside that we have not seen before. he has been in the job for only a couple of months. maria tadeo there. thank you. joining us now is joachim klement, strategist of investment at liberum. thank you for joining us. how much are you concerned about runaway inflation also because of wti? it is just because there is not enough barrels but also the prospect of a possible russian invasion. joachim: yes. wti inflation is keeping us busy in these winter months and that was even before russia had the probability of invading ukraine. if it is going to happen, it is obviously going to be a major pressure on crude oil prices as well as natural gas.
but i think that once we end the winter season, inflation is starting to decline as energy prices will start to decline simply based on reduced seasonal demand. finally, if we think about as we had to the second half of this year, we have to be aware that there is a significant basis that is coming into play where we compare high energy prices at the end of this year with high energy prices at last year. francine: we just put out a note that was punchy, asking the simple question and a hard question to answer. what if central banks actually kill the recovery? is there a possibility that they hike too much and therefore kill off and sent us back into a recession? joachim: i have to say i like the chart you indulged in earlier because i think that central banks have moved forward
there rate hikes and the communication for the rate hikes, and rightfully so. the fed and the bank of england have fallen too far behind the curve and need to hike rates in order to keep inflation expectation under control and keep inflation from becoming sticky. however, there is something like a glass ceiling in interest rates. once we get closer to the 2% mark in terms of the fed fund rate or the bank of england bank rates, we will get significant decline in gdp growth. four rate hikes, which we expect over the next you meetings -- few meetings, reduce u.s. gdp growth at this point. that will already tell you that growth is falling for 2023. francine: thank you for indulging me because i love that chart. our managing editor from the
markets team came up with it so he should get the credit for it, but what does it mean that we price in the rate hikes now? do we price hike aggressively to frontload that now? joachim: i think the fed and the bank of england are right to hike aggressively now. and basically stand back in the second half and see how these rate hikes filter through to lower inflation. together with the base effect on energy prices that i have already mentioned, which end of itself should bring the headline of inflation to two percents this year, i think the case should be made to stop hiking rates in early 2023 and leaving it somewhere around 1.5 percent for the bank rates before you make a further decision on whether to hike some more.
open. 13 minutes into european trading day. we are seeing support after futures were pointing to a downward move. you can see the european stocks gaining some percent. in the ftse 100. a couple of things to watch out there. we did have reports of chinese stocks because of what the pboc has been saying. in the last couple of minutes, there could be indication that there is a de-escalation. there could be a de-escalation to ukraine and russia. the interfax news agency says that russia is returning some troops to bases after the drills. some western armies are to returning to bases. you can see the dollar-yen reversing some of those losses. it could be short-lived but it could be something that could lead to the fall. the nasdaq also falling after
the high of today's trading session. glencore says they will return some $4 billion to shareholders. it reports record profits for 2021 for certain commodity prices. meanwhile, -- has a drop in profits due to iron ore prices. >> at the end of the day, iron or price will be determined by supply and demand. given the strong outlook we see for the demand side of the equation, steel production in china and the supply side constraints, we think there is a measure of support to pricing. francine: let us get more with will kennedy. he is our editor for energy and commodities. i am so excited you are back in the studio. first, from glencore. key takeaways are from dividends but also they have legal trouble that they're trying to put to end. reporter: they are being
investigated by the public justice in washington and that has been regulated in brazil about allegations of bribery and corruption. investors didn't know how big that settlement might be to get rid of these legal troubles. it might cost $1.5 billion to settle these probes. this is a serious company that is having to pay an a massive fine. investors will be relieved that this is happening and how big it is. it might be less than they had feared. francine: we talk about iron ore. at the same time, china's going after some of the producers and a drill over. reporter: china can't seem to make its mind up about iron ore. they floated back on some of the
environmental targets for this week, seeing optimism on the market this week. it is a key commodity for the chinese economy and that is doing well under inflationary pressures. the overall picture is that bhp continues to make huge amounts of money from the iron ore business. given the confidence to pay a record dividend in terms of that. the big story there, glencore bhp, iron ore, but natural producers of copper and oil and making billions of profit and giving it back to investors. francine: and of course the trillion dollar question is on we transition more into a greener economy, we will take the linchpin as the world's biggest commodity to what? reporter: i think that is what glencore will take. it is not the big iron ore
business that bhp has paid copper and nickel are both important to the energy transition. it is going incredibly strongly and profits were more than 104% last year. francine: and investors will take a closer look at that. will kennedy there. back with us is joachim klement, head of strategy at liberum. i don't know what we should do with these big miners because of the transition and investors taking issue with coal. joachim: indeed it is a bit of a double edged sword, which is why we like to focus on companies like glencore. that is one of our top tics in the mining sector at this moment. kind of the multi-commodity player but very exposed to the iron ore trade in that respect
where we are still mostly positive. also being a key ingredient into key energy, but you are right. collect as well as other whiners coup -- other minors that are adding to the climate greenhouse gas emissions are in a tight spot, even if their products are crucial ingredients into building windmills, electric motors, etc. francine: i you know you like certain parts of the u.k. recovery story. what do you play at the moment? joachim: at the moment where playing two stories. we mentioned earlier today that inflation is going to be a problem in the next couple of months as the central banks are hiking aggressively. that is something we think will support traditional lenders in
the u.k. in the sense that we prefer companies like -- that like banking but more actually the small and medium-sized banks which have traditional lending businesses and benefit from higher interest rates. where we are a bit more cautious about banks that have a more diversified portfolio is because in this rate hiking environment, you see markets go up and down all the time like we what -- like what we saw in january and february and that reduces trading revenues. the more you have exposure to asset management in trading operations, the more watered down lending profits get. francine: how much do you play all of these divergence of the central banks, asset classes, but also individual countries through their currencies instead of stocks? joachim: at the moment we don't
play too much in the currency space. what we expect is that as the banks hike interest rates, the carry trade which has been a miserable lace to be over the last decade with everyone in the western world running zero interest rate policies will start to come back to life again. that should support. in -- that should support. that should support full sterling. we don't see a message trend there. francine: thank you so much. joachim klement, head of strategy at liberum. we see a reversal of stocks. this is where we see geopolitical risk receding after headlines from interfax easing. there saying and reporting that
some of the russian troops have been returning home after the drills. it is unclear if it was the belarus drills that we have been talking about or whether it is some of the southern and western armies that are returning today. we will keep a close eye on it but it is clear that on the back of that, with futures in the u.s. rising, and also the russian index gaining 2.6%. coming up, u.k. incomes see the biggest increase since 2013 as inflation bites. we will break down the numbers next. this is bloomberg. ♪
francine: welcome back to the open. 24 minutes into european trading day. we are seeing a reversal with the european stocks gaining some 0.9%. it is clear that there is more optimism on the markets. that geopolitical risks are receding. we will have to see how the meeting between vladimir putin and olaf scholz gets on as they meet in a couple of hours. the u.k. sees wages rise at the highest pace. joining us now is lizzy burden. this morning's data underscores
that the country went too far and asking workers to not ask for a pay raise. lizzy: you can see that wages declined by real terms in december. it underscores that even though the economy is recovering strongly, that tightness in the labor market isn't translating into wage growth. the market is tight. you have got wages at record highs again, you have got -- again because people are declaring themselves long-term sick, but given that inflation is running at a three year high, it is not a surprise that you have got this sweep. that only gets worse when you have the taxes and energy bills increase in april. i asked -- they say that today isn't going to do much further boe rate hiking in march. francine: at the same time, these tend to be theoretical.
francine: welcome back to the open. 30 minutes into european trading day. here are your top stories. joke backfires. the ukrainian president jokingly set the date for a russian invasion. over at the fed, bullard repeats calls for a fed hike. plus the world's richest man shows he did $6 billion of tesla shares to charity. we started the day off with
gains. european stocks going to session highs. the other thing i am watching out for which is a good indication of the reverse losses that we are seeing is what we are seeing in yen. the dollar reversing some of the losses. interfax reporting that russia is returning some troops to bases after the drills. stockmarket market increases across assets would be a good look at the way we are seeing this. also the dollar strength that 1.2%. oil extending declines to the session. you see the ruble going to 7 5.64. futures on the move. the nasdaq yesterday despite the volatility we saw in markets finished off the day higher.
health care on the way up. out of the 20 groups that make up the index, all of them are rising. travel and leisure, the ones that are --, are still gaining some 0.3%. resting the guard has repeated her stance that officials will not rush to move stimulus. she spoke to the chief parliament yesterday. >> inflation is likely to remain high in the near term. energy prices, as you also highlight in your report, continue to be the main reason for the elevated rate of inflation. francine: joining us now is althea spinozzi, saxo bank senior strategist. they can for joining us. we look at the diversion of the ecb interest rates. there walking back and that sees the interpretation that we saw on the price conference, but many more are saying there behind the curve.
althea: at this point we can say clearly that the ecb is sandwiching between an aggressive federal reserve and an aggressive of england. it does not have any other choice. they are hiking rates and being aggressive as well because otherwise it would weaken the euro and result in more inflation, that is something that they do not want to do. if the ecb becomes aggressive, those bond stocks are ecb proof that will own back of the aggressiveness of the ecb. we see the periphery in general and it is widened. francine: how much will they widen and if the ecb grows
uncomfortable with that, will they then walked back the markets? althea: yes, we think so. we think that the ecb will prepare and they will spread the rates over 200 basis points. that is to the area, but it is one it is more than 250 basis points, that is when the ecb will start to be worried and concerned and will start to slow down. in order to fight inflation. francine: talk to me about u.k. guilt. what is there take -- what is your take on them right now and is there a move to the markets right now? what happens in the second half of the year? althea: we believe that with the jobs data, it is clear that the labor market is tighter than even the real terms.
salaries are around negative and they are still contributing to more inflation in the u.k.. it is fair to expect that they plan to hike rates in march. the question is by how much. we are seeing that four members out of the nine will not -- that 50 basis point rate that we think that is not possible for march. in the 60 years of inflation that inflation is anymore in the u.k., that moves in the euro and in the u.s. we have inflationary pressure coming from brexit that gives inflationary pressure from the post-pandemic. francine: so what is the possibility of a tantrum being played out in the bond market? if the bank of england or the
u.k. guild market, the one that is at risk? althea: definitely because we are seeing the end curve with a danger inflection point, spreading from the tenures to the two years guild, anything could be reverted. it -- in probably one year time, it could create that volatility in the short term. we are more concerned for the u.s. corporate space because we are seeing real yields accelerating their rise and we start to see this trend. we have seen junk and investment rates widening. now investors are starting to stock junk in order to find higher pricing credits. that is a sign that it is time to ramp up. francine: we also talk about u.s. treasuries.
how much flatter and we are getting some news of russia and it seems that some of the troops that were doing some of the drills have now returned to the base. the markets believe that the de-escalation of ukraine could -- again and we do not know how this geopolitical risk factor plays out. are you expecting the yield curve to flatten even more in the u.s.? althea: we believe that regardless of a war in ukraine, the u.s. yield curve would be reflected on that report and would accelerate that trend because long-term yields remain in the front part of the yield curve would have faster because sanctions on russia would increase the energy prices. that indicates -- the case of a non-war event, we will see that it will move at a slower pace
and even though the flattening of the yield curve, that would constitute that we are problem for the assets. it is really the real yields that are going to rise with that. they're going to a vocal problem and expend the chance with the credit markets. francine: thank you so much. althea spinozzi, senior fixed income strategist at saxo bank. coming up, the german chancellor is set to meet vladimir in moscow. we got reports that he just landed. we heard reports of russian troops that will start returning to permanent bases after completing drills. the markets understand that there is possible de-escalation. this is bloomberg. ♪
francine: welcome back to the open. 41 minutes into european trading day. we are seeing a nice lift from these markets. the european stoxx 600 gaining some 1% after the russian defense ministry announced the call back of some forces after drills that raised alarm about a possible military assault on ukraine. the market taking this under stride as encouraging news. the president has consistently denied plans of attack on
ukraine. world leaders have been waiting on this. >> we want peace and we want to settle all of the issues through negotiation. >> we want to pursue the path of diplomacy. we hope the russians have a similar willingness. >> there is always a choice, and that choice is for vladimir putin. he needs to understand that there will be severe costs if he invades ukraine. >> there will be consequences to that, to the united states and other countries as well. >> possibility of talks are far from being exhausted. i would propose to continue and expand the talks at this stage. >> the territory of ukraine is nonnegotiable. therefore we are leading to russia for de-escalation. >> the time as noted de-escalate actions. there is no time for incendiary talk. francine: joining us now is
wolfango piccoli, copresident and director of research at teneo intelligence. i grew up in moscow and if there is one thing i remember, it is that you cannot double this as russia's and game. what do you think vladimir putin will want from now until the end of the year? wolfango: good morning. i think it is too early to see whether de-escalation is actually happening from the ground. we should not expect any kind of breakthrough anytime soon. what we are looking for even into this meeting with putin and olaf scholz is the continuation of talks. as long as they keep talking, it is all good. meanwhile, we need to see what
is happening on the ground and get a sense of de-escalation that is happening. in our view, one thing to monitor is the end of drills in the middle of russia in the 20th of february to see if this will lead to a return to the base and only from the root source -- results of the meeting was russian president vladimir putin, we will see that later this week. francine: it is the only question worth answering. does vladimir putin want to you invade -- want to invade ukraine and is there anything the west can do to deter him from? wolfango: i think neither side wants a war. i don't think the ground invasion of ukraine is in the cards. what he is trying to achieve is try to change the security
architecture in europe. that conversation is moving very slowly. it is a delicate conversation, but putin has been able to bring the conversation to the agenda. it is getting plenty of attention was all international leaders visiting in moscow as well. the question here is whether they would be able to exert more pressure on the ukrainian government in terms of finding a settlement between russia and ukraine. it is going to take a very long time. the worst case scenario for us at teneo is a limited operation most likely in eastern ukraine where underground pro-russian troops are already present. on this front, what we will have to see is over the last -- next
few days, we have seen a new focus on the republic of the lower landscape. francine: so russia, according to interfax, returning some troops today after drills. what is there bluffing? how can the west ensure what the plan is over the next couple of weeks? wolfango: there's not much uncertainty. at the end of the day, the decision is taken. what they are doing is looking at the deployment of troops, the kind of logistical support that they have been deploying along the border with ukraine. that is what we will monitor. whether that is a return happening, what kind of scale, what kind of timeline, and so on. the main risk would remain some sort of provocation is mainly on ukraine that could create some
limited operation there. francine: i do not whether that -- i do not know whether that timing is interesting because that german chancellor is about to go to russia. what kind of relationship do these two leaders have? will olaf scholz say that we know what to do if something happens, will that be a deterrent for vladimir putin? wolfango: the relationship between scholz and putin is one that is in the early stages here and it is important to see that scholz can make his trip to moscow. that is a job for him. they have already been putting that expectation over the last 24 hours about this meeting, but it certainly needs to keep the conversation going on without breaking the unity of the west. and without raising the issue of nord stream 2, keeping that away from the conversation.
does olaf scholz have the power to deter vladimir putin? i do not think so. francine: will run nato -- will nato get their act together? if they give russia a green card, could that mean that china becomes more aggressive as well? wolfango: when we look at the american statements, on their side, there concern is about the invasions happening today and tomorrow, whatever they mentioned. what is more interesting for us is that no american soldiers will be sent to fight ukraine, which is physically saying that ukraine is not part of our scale of plans and therefore we can
find a diplomatic solution around this. this was mentioned yesterday by olaf scholz where they have been clear that ukraine is not on the agenda for nato plans anytime soon. so any diplomatic channels are still open their. that is basically what we want to see continuing and we are still seeing -- waiting for a written reply from the kremlin to their proposals coming from the west. that will be a document sent sometime this week or early next week. in terms of china -- sorry, go ahead. francine: go ahead. wolfango: i do not think the west, even if we go through the worst case scenario, the west, the only thing they can contemplate is sanctions. more or less depending on the alliance.
simply that we are not talking about anything on the military front. that, i don't think will be a huge deterrent when you look at it from the current perspective. francine: we don't often talk a month -- enough about the demise six situation in russia. the higher price of oil might be -- whether vladimir putin can afford any sanctions from allies. we understand how the kinds of military drills does to his electorate and his base. it would still be nationalism. wolfango: absolutely. when we look at the polls, we looked at one last week, and it was 65% for russia -- seen ukraine as a threat. nationalism is turbocharged by domains from state media to
deploying troops on the ground. what we have seen from putin is this venture, if i can call it that. they are clear in terms of the polling here. we saw that from their operations in 12,008 and there are petitions -- operations in crimea in 2015. if you look at the short-term, we have to go back from daylight even for the russian population paid -- population. francine: thank you. wolfango piccoli there. coming up, elon musk makes donations to charity. this is bloomberg. ♪
francine: welcome back to the open. 54 minutes into european trading day. we started off at the low. we are one hour in on a high. european stocks futures rising on this treasure -- russia reports that we have de-escalate intentions in ukraine. french crude not losing that much. the russian index now gaining some 3%. u.s. 10 year yields above 2%.
i am looking at it and i am always not shocked. i take stock of the u.s. 10 year yield. you unmask reported that he gave $6.5 billion worth of tesla shares to charity. that makes it one of the largest charitable donations in history. joining us now to discuss all of this is our bloomberg global editor. thank you for joining us. this is a huge story because there are so many questions about what drove him to make such a large donation. reporter: it is interesting. clearly must -- musk cares about being incentivized. he had the most interesting and attentively -- we have thought about his pay package that tesla put together for him years ago and that moon shock package. he went out and did it. i think he is both interested in
being rewarded for the job he has done and also deeply uncomfortable with the questions that get asked and things that get asked as a result of him pulling that off. he was art by the criticism he was getting the last couple of years. he talked about selling all his homes and sparred with senators like warren and sanders last year over the wealth tax and inequality. this is perhaps a gesture that is coinciding with a time that that was on his mind and has what become a trillion dollar carmaker. he was getting a lot of praise and heat for that. francine: when i look at the story, i thought it was incredible given how critical he is and how much he tweets per day. we know how many shares he is left with? reporter: he sold more than $16 billion worth of shares just in the last couple of months of last year. a lot of that was to cover a
>> the talks cannot go on. >> the territorial affinity of ukraine is non-negotiable. >> we were told that february 16 was the day of invasion. that would make it a day of national unity. francine: good morning and welcome to "bloomberg surveillance: early edition." here's what is coming up. russian media reports that some units near the ukrainian border will start returning to their permanent bases after completing their dr