tv Bloomberg Markets European Open Bloomberg February 16, 2022 3:00am-4:00am EST
executive of minutes from now. the market is focused on what happens in ukraine and the focus is on the fed tightening and how the re-prices on some of the stock markets overall. we're looking at not only some of the havens but also those that have moved in terms of volatility. what that does to markets and what that means for the ratios out there. my chart of the day looks at chinese equities. the ftse 100 is out flat. the good thing to look at is always oil. gas getting 1.5%. oil still above $92 for wti. some of the havens i am looking for our's arm -- are some of these like gold largely maintaining the losses but they are not accelerating.
the ibex also gaining some 0.2% higher. if you look across the assets, some of the things we need to watch out for, and the biggest inflation print in the u.k. so that seems to handle or support the narrative we see in the markets that the bank of england will increase rates. nymex at 92. the u.s. 10 year yield at 2.04, and one of the things we try to figure out is the misnomer on the markets and there was a lot of chinese data. there are also a lot of things coming from the president so let us look at the shanghai valuations. they are saying that if you look at some of these valuations, it is too soon to call for the stock market in china, but if you look at the multiples, they may learn back some investors. this is the ratio.
they are seeing a flurry of speculative buying looking at these shanghai valuations. this is not one that we always look at. it is 18 times that of the shanghai compass it, which is at 11 times. traders are specifically looking at chinese markets. let us also get to our bloomberg mliv managing editor mark cudmore who is looking at the outperformance of stocks in latin america. mark: i am and it is similar to you looking at the asian stocks. i do like that shanghai composite. it is better led through hong kong stocks. we're looking at the chinese mainland economy. but that is a debate for another day. i want to test latin american stocks. this is the ratio of the msci latin index compared to the s&p
500. the tightening conditions there and latin america stocks are surging. the ratio is up 20% year-to-date, and that matches the outperformance within the latin american msci index. this looks like an extreme move. 20% performance is quite impressive. i think of this dynamic has much further to go. i want to draw your attention to this chart for the longer-term 30 year horizon to see how a longer move looks. that is that 20% to cup in the ratio. you do not even see it. latin america has been concerned about the political situation and they have been worried about their external balances. there has been a lot of negative stories. it has been all about trading the big cap names and u.s. tech.
but i think it is about to change. this dynamic from the mid to thousands of commodity super cycles and inflationary environments, that is the one that we are more close to now. it might not get quite to this level of outperformance, but there is a lot of opportunity for latin american stocks to outperform u.s. stocks for a period of time. francine: thank you, mark. there is also the avocado situation, which we joke about it, but we see the story from mexico as they try to negotiate was the u.s. our bloomberg mliv managing editor, mark cudmore. president biden said a russian cap on ukraine is still possible. they discussed the prices. and the kremlin has repeatedly denied plans to invade. maria tadeo is there.
they are looking for proof of de-escalation. where do we go from here? maria: that is the focus point in this meeting. the fed ministers from nato will meet with the secretary general a few hours from now and they say we want to see proof. what is happening in reality is the opposite of what russia is saying, so we want to verify it. a lot of the focus now, so we are pulling back on paper but we want to see it in real life. the diplomacy is the way forward, but the secretary general says that russia still has the invasion of military equipment and the troops that could lead to invasion. if you go behind the scenes, many will tell you that this is a tactic for russia. they do one thing but there is equipment that they leave behind that could be quickly reinstated in the future if there were to be a future invasion.
francine: maria, russia still doubling down on concert he -- on security concerns. is this an excuse to do something on that link? maria: if you look at the market yesterday, there was a relief rally. president clinton said that a war in europe is not something he wants to see, but he changed his docking -- talking points. russia continues to feel threatened and we look at the situation in eastern ukraine from russia in the eyes of the russian government, what is going on there is a russian genocide. this means that they would walk back on the minsk agreement, but russia is not moving away from its demands. francine: thank you. maria tadeo from nato headquarters and we will have
stories on the ukraine situation. let us get to that key market drivers with ven ram. thank you for joining us. there are local concerns between russia and ukraine but also russia and the rest of the world. what does this mean for cross assets? reporter: we are seeing it play out in the chat, but the longer-term applications are on the ecb because of how closely the region will be impacted. even tensions that were on the rise earlier this week, we saw market prices and rate hikes weren't coming along. if anything, it is likely to put the ecb back in the ecb having to hike rates here. francine: do they actually move markets, there is already so much tightening? ven: absolutely.
there is a lot priced in. i think it would take a lot to price in because the markets are kind of overtaken what we already know about the fed january meeting, particularly from bullard. are we going to get a 50 basis point rate hike? that discussion will be key to the market and apart from that, there is also lingering chatter about whether it will be out of air and out of sight policy hikes. if the fed does not do one in years and decades and flattens out, questions are being asked. if you rewind the tape back to 2020, the markets were treasury yields are plunging and the fed rate was much higher than the treasury rate, so that came out
on march. buy another 100 basis points a few weeks later. now are they going to move in a similar fashion? francine: talk to me about the ck inflation overshoot. it adds a lot of pressure on the tank of england. does that mean that a second hike is a done deal? ven: i think it is a done deal. there is no question about that. but also the question of a hike by march. i think that is a point of 30 basis points because inflation concerns were deep and if you also look at cold print and the principal measure for bond investors, that is going up as well and that shows that inflationary pressure is not changed at the moment.
there is plenty of catchup to do. they are worried about whether the economy can withstand it and i think the u.k. economy is pretty resilient. they need to go sooner than later before inflation expectations get even more entrenched and that drives it even lower. francine: thank you. our bloomberg mliv strategist ven ram joining us. coming up, heineken is about to get more expensive. they are passing on higher material costs to consumers. the chief executive officer, dolf van den brink, is with us next. and the ambassador to the mission of the oecd will also be with us 20 minutes from now. this is bloomberg. ♪
print stronger than expected. we see russia pulling back troops on the ukrainian border. heineken says the longer-term outlook has become cloudier. the world's second-largest brewer says that shipping costs will rise by 15% this year. there continuing to target 15% of the market -- margin in 2022. right now we are joined by the heineken chief executive officer, dolf van den brink. thank you for joining us. people are wondering how much you could raise prices by? dolf: good morning. then you for having me. -- thanks for having me. there is a lot of focus now on the pricing and the inflation. i would like to start by saying we had an excellent year last year, a big ounce back, 12%
revenue growth and profit growth. this year, we still believe there are upsides on the revenue side and there is still a cycle in covid amid the lockdowns in 2021, but the big unknown is how much of pricing are we able to pass through? over time what will be the impact for the underlying consumer demands? so far, they have been quite resilient and as we saw in our beliefs this morning, we are ready to raise 11% in the second half. that is the highest pricing we have seen in a generation. we have held up pretty well. we are cautious in our outlook because we do not know how long this will last and this is unprecedented right now. francine: it is 100% unprecedented and you face a lot of rum material price pressures and it is not easy. how do you see the price increase that you can pass on to
consumers without hurting too much demand? how do you think about it? dolf: we try to find the right balance. we are clear that the absolute price increase, we try to pass along the pricing as we have done is in the second half of last year, so this year. it was happening in the fourth quarter of last year. we were able to get the pricing and the volume to remain resilient. the pricing for 2022 is already locked in and negotiations with major retailers are prompting this. everyone is facing the kind of same input cost pressures. so far so good, but we are to blur -- we are deliberately being cautious on the outlook. francine: currently it is up 1.8% on the prices, but it is interesting to think for you where you can increase prices. we look at craft beer which is close to people's hearts.
could get -- could that get wiped out because of inflationary pressures? dolf: our premium grants -- brands are rowing at the highest rates for our total portfolio. our premium beers were up 10%. heineken was up 17% on seven, and out of 60 countries across the planet. we are also seeing that with strong brand equity and power, we have quite a resilience even the pricing environment. so far we are not concerned about a major down trading happening. it is more of a concern on the broader resiliency with consumers as their disposable incomes will be impacted by energy costs and the general inflation. francine: in the u.k., inflation could hit 7%. that could also hurt how much
disposable income people have. do you increase prices in other parts of the world and subsidize the u.k., or do you raise prices on a premium brand in the markets where inflation is increasing? how do you think about that? dolf: what we are looking at is the input costs. the input costs affect different countries in different ways. you have the markets where you also have currency exposure to have higher increase in the cost -- the input cost inflation, therefore taking more pricing historically. we also expected for this year emerging markets like brazil and nigeria, the rest of the european markets will be lower than that. the principles we are trying to offset are the absolute input cost increases country by country in absolute terms. francine: wendy expect the nightclub tried to recover in europe? dolf: first of all, i am a happy
man today because last night the french government announced that trade announcements and restrictions were lifted. the trade has been bouncing back last year but across europe, about 30% still down low covid levels. we still expect it to be down for this year versus 2019, but sequentially to improve. the outlets have reopened. it will take a bit of time but the directional level is positive. francine: could we go back to some of the price increases? we saw that with your rivals including consumer goods, but unilever saying that inflationary pressures will impact possibility for around two years. do you see a similar kind of longer-term impact and in the immediate term, could we see
premium brands or certain sectors go up 10%? dolf: we have good visibility on the input cost development for 2022. that is why we are getting more specific guidance on the market expectations for this year. there is limited visibility of input costs for next year and that is exactly where we are cautious. there are different hypotheses out there. what we are starting to see because we are hedging our exposure is that we are starting to also see inflation happening for early next year. again, we would rather be cautious and wait until we have higher visibility on that. francine: what does that mean for the m&a front? i know you are looking at the south african rand. -- brand. and the other opportunities around there because of the inflationary pressure.
the prices on raw materials, but do you actually scoop up bargains? dolf: we received very good news yesterday. the shareholders voted in favor of the deal, so we are excited. hopefully in the second half of the year, we can get regulatory approval and we are excited about what this can bring to our business given the wine and spirits portfolio. i do not see a correlation between new m&a opportunities in the terms of inflation. we are always looking to strengthen our footprint as well as what we did with ubl in india in the middle of last year. francine: thank you for joining us today. the heineken chief executive, dolf van den brink. great conversation on inflation and raw materials going up. coming up a little later, we
we are seeing gains across the board with the stoxx 600 gaining 0.8% in the ftse 100. the focus not only on geopolitics, but certainly markets are not that worried about heightening tensions in ukraine. president biden did say that they are still verifying moscow's movements, but the focus will now be on the fed minutes and the potential hiking cycle. also worries to the potential disruptions to commodities and supplies. we will talk about those corporate stories as well. let us get to the bloomberg business with laura wright. laura: -- extends fourth-quarter trading that exceeded estimates. a resurgence in vacation demand is driving short-term bookings despite travel disruptions caused by omicron. the company sees that people are staying for longer periods.
there were stays of a week or longer. >> even if people do, a lot of people return to the office, all you have to believe is that we are not going back to five days a week, but we do think more people will work mostly over the summer. we also think that we will have three day weekends more frequently for people where they might work from an airbnb and go away from that weekend. laura: roadblocks shares tumble after it missed estimates for the fourth quarter, reflecting a retreat from the pandemic inspired boost. it saw much of its growth come back from countries in asia and latin america. more than half of their user base is now over the age of 13. that is the bloomberg business flash. francine: thank you. laura wright in london. we are looking at some of the unknowns and valuations.
francine: welcome back to the open, 30 minutes into the european trading day. the threat remains, president biden says the u.s. has not verified a pullback of russian troops. geopolitical risks, global trade and recovery from the pandemic, we will discuss that with jack a. markell, ambassador, u.s. mission to the oecd. chinese inflation slows, giving the pboc more room for policy action. january cpi is harder than expected. straight to the markets.
i'm looking at the vix, volatility is one we need to watch out for. if you look at the volatility gauges, they are sitting above the 12 month moving average. traders remain on edge about risks including the ukraine standoff. you can see a list with equities on the european stocks 600 gaining. oil, $92 per barrel. traders try to assess the worries about potential disruptions to commodity supplies. let's get onto other things we are watching, a nice sector move for the european stoxx 600. central banks across the g10 delivered a half percentage point increase in the average benchmark that rate traders had priced in. perhaps stocks need a modest pace to rally this time.
telecoms and consumer goods on the downside with a nice lift off or chemicals beginning 1.3% on construction and technology. this is a little different but given the news on the pboc and china, i thought it was perfect to look at today. we took it from the mliv blog, which i urge everyone to look at. it looks too soon for china's fragile stock market. we did see a softening in multiples during back some investors -- luring back some investors. the shanghai composite is at 11 times with both numbers below the five-year averages. it can be a gradual process. you can see some things we are watching out for. that is an inflation slow, that we will talk about more. my next guest is a recently appointed representative to oecd. jack a. markell was a politician
and served two terms as delaware's governor, and served as president biden's afghan refugee lead. welcome to bloomberg. i know you know the president because you are both from the state of delaware. it is a pleasure to speak to you, ambassador. you are a long way from delaware, but conversations about relaunching the economy including inflationary pressures is at the forefront of what you were trying to do. what is the biggest surprise for you and some of the challenges the economy is facing? jack: good morning, great to be with you. i'm still quite early, i started last week. i have been getting to know the team at the oecd. we are a terrific team, and excited about the opportunity to work on one of the most important multilateral
organizations anywhere. we think this is a terrific moment in time for all of us, all of the members of the oecd to prove we can deliver for our people. francine: a lot of criticism has been made on multinational corporations, something about the wto and others. can you confirm the u.s. commitment to those? jack: absolutely. i met with president biden a couple of weeks ago, and had a conversation with our vice president, vice president harris, and they like all of us are committed to multilateral diplomacy. this is a particularly important moment in time when democracies and market oriented economic systems can prove that we will deliver for all of our citizens. there are other models out there, and we have to show that like-minded countries like ours will get the job done for the
people who live in our countries. francine: you were key in trying to help with the afghan refugees. i do not know how you look at the situation now in ukraine with the possibility of a huge influx from ukraine into neighboring countries. if something ugly were to happen. jack: this is why the president has been so clear that we are pushing for a diplomatic solution. also, it has been so clear he has been working energetically, as has our secretary of state, secretary of defense is in brussels today to work with so many members of the international community. it is such a good example of why these multi-lateral organizations are so incredibly important. when we think of the issues that we need to solve, whether it is the work done last year on global taxes, whether it is the
work on climate change, these are not problems that can be fixed by one country alone. this is exactly why we are so committed to the oecd and other multilateral organizations as well. francine: what do you think the biggest blocks are to get past jurisdictions within the oecd countries? jack: the good news is that so many countries signed on, and that represented enormous work by the terrific people at the oecd. i have had an opportunity to meet with the secretary-general, who is a terrific leader for the organization. so many countries work very hard, and the hard work in each individual country. i'm optimistic the u.s. will do it has to do to pass the legislation, but we are all very well aware this is a big
undertaking in many countries across the world. at the end of the day it is the right thing to do. it levels the playing field and provides more certainty to global businesses. it really is these big, tough issues, whether it is taxes, climate change that organizations like the oecd are really well-designed to take on. francine: is there a danger the tax agreement could fall apart entirely? jack: we are optimistic. if you look at how much work so many countries, including the united states, put into making it happen. obviously secretary yelling from the department of treasury worked very cooperatively -- secretary yellin from the department of treasury worked very cooperatively to make it happen. the first step was getting
pillars one and two signed on, and many were has to happen across the world. we in the united states are committed to make sure we do our part. francine: what are your other top priorities as top representative to the oecd? jack: as i mentioned earlier, one is to prove organizations, countries like ours that belong to the oecd that value and respect human rights and democracy, transparency, market oriented economic systems can deliver. number two, i firmly believe american workers and businesses can compete with anybody so long as there is a level playing field. i believe the oecd is one of the most important organizations in the world when it comes to making sure there is a level playing field. this is for things like intellectual-property, antibribery, anticorruption.
the oecd has long been a leader, and i look forward to work with the other ambassadors, the members of our team, and the members of the secretariat as well. i'm excited the oecd is so well-positioned to take on these big, difficult issues such as climate change. particularly where one country solving the problem is not going to be enough. there are so many problems bigger than any one country, and when we were together here in a collegial way with countries representing two thirds of gdp, setting best practices other countries can sign on to as well, this is an exciting opportunity. francine: last time i was at the oecd was six months ago what we had an interview with secretary blinken. it was on submarines. is that over now that the relationship with france in the
u.s. has been fixed? jack: i will let the french speak for themselves, but i can tell you the president, secretary of state, all of us understand what a valuable relationship we have had with france over centuries. it is certainly 10 look forward to building on. i sat down with the french ambassador to the united states before coming over, and we are very excited to work with the french. the u.s. has a brand-new ambassador to france, who was a terrific ambassador, previously served in belgium. i know she will do a great job, and i will do everything i can to support her. francine: thank you so much for joining us. jack a. markell, ambassador, u.s. mission to the oecd joining us from paris. coming up, u.k. inflation unexpectedly accelerated in january, adding pressure for a boe rate hike. we will look at the numbers, next. this is bloomberg.
15 minutes ago stocks were rising. traders are weighing the impact of reducing tensions over ukraine with the prospect of tightening global financial bank policies. the impact of rising inflation on policies is key to the markets. we have the fed minutes a little later and data points. there was a landmark ruling from a court in poland and hungary facing an important ruling from the eu top court that could lead to both countries losing access to billions of euros in budget aid. the countries had challenged last march things we heard from the bloc because they wanted to introduce tough new powers linking payments to the rule of law. the top court saying they have backed the eu and their ability to cut funds to poland and hungary if they do not respect the rule of law. it does not mean anything will be cut now but the eu says they have enhanced powers to link it
to the democratic standards. onto inflation in the u.k., unexpectedly accelerated for a fourth straight month in january, piling pressure on the boe to deliver an aggressive rate hike. given the cpi data that beat expectations, what drove the inflation data? >> it was not even expected to accelerate in january. it was driven by clothing and footwear, because the discounts in the january sales were smaller than any time since 2005. retail is trying to claw back of their losses. higher energy prices. secondhand car prices, same as previous months, somewhat offset by hotels and transport. it just be expectations by a beat, but it piles pressure on the bank of england to go big in march. francine: we have a great chart
charting inflation in the u.k. i do not know if that will change with it bank of england does. in interest rate hike seems like a done deal. lizzy: if it is 50 basis points, it would be unprecedented in the bank's history. this figure compounds the data we already have. the gdp figure stronger-than-expected. the jobs data showing the labor market might be tight but is not delivering real wage growth. that pressure is there. we were so close to it. four already voted for a hike last time. bloomberg economics sees 25 basis points in march and may. francine: bloomberg economics, the only one that was right for that november meeting. what does it mean for sterling? lizzy: it really depends on whether we get 25 or 50, but it will be interesting to see how the markets react. francine: thank you so much,
lizzy burden. we will have plenty more on the pound. the one thing we need to look at is differentials between the bank of england and the fed. we will have plenty more on inflation worldwide, and we will look at the impact the liquidity from the central bank has on markets including stocks. this is bloomberg. ♪
francine: welcome back to the open. we are 49 minutes into the european trading and stocks are rising. traders are weighing the impact of diminished tensions over ukraine, while at the same time trying to process this inflation print in the u.k., and what it means on central bank policies. let's get to the first word news. laura: president biden says a russian attack on ukraine is still very much a possibility, but diplomacy should continue. germany's olaf scholz met with president vladimir putin for three hours of talks in moscow. western allies reacted cautiously to a russian statement that it was pulling back some troops. russian troops have repeatedly denied an incursion is planned. senate republicans blocked a vote on president biden's fed nominee in a dispute over raskin's nomination.
they say raskin has not adequately addressed questions about her role as a board member of a fintech company. mitch mcconnell says biden should find a better or more mainstream nominee. prince andrew has agreed to settle a lawsuit in which he was accused of sexually abusing a 17-year-old girl introduced to him by jeffrey epstein. court documents show prince andrew will make a substantial donation to the charity of his accuser, and declared he never met to malign her character. he has consistently denied the accusation. global news, 24 hours a day, on air and at bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. francine: thank you very much, laura wright. eyes on china to see how they will navigate their economy. consumer prices went up more than expected in january.
the chinese governor said the central bank stands to support the economy. >> they will keep monetary policy flexible and a proper rate, and increase support for key areas and weak links in the economy. francine: let's bring in bloomberg's china economy editor. thank you for joining us. unlike elsewhere, we see chinese inflation coming down. the policies of the central banker so widely different from the fed. what does this mean for china's economy? james: one of the problems china had last year was the high producer prices we saw in the second half, coal prices, iron ore prices, gas prices. the thing other nations are struggling with is what china is struggling with. those are hurting smaller companies. use a big profits in the mining
sector and a lot of losses in the companies that use the coal being mind, so the slowing down we are seeing now is good news for the industrial sector. we will see lower costs, and a slow down cpi inflation is a good news for households. most of that is coming from food prices which continue to fall. household spending has been one of the week sides of the chinese economic recovery. francine: i find this incredible that they are moving this, can we talk about decoupling? for investors and traders, it changes how you play this in terms of differentials. does china not import some inflation from elsewhere? james: they import commodity price inflation. with oil prices rising, that is a big concern for the economy,
but it is reasonably self-sufficient. it is very self-sufficient and cold. -- in coal. oil and gas are a little different. the inflation you see in manufactured goods overseas and other countries is not transferring to china. they do not import a lot of those things. as commodity prices go up, other foodstuffs will transfer through to the chinese economy, but nothing else will matter because they are not importing those goods. francine: talk to me about the policy, we heard from president xi, we understand he told authorities in hong kong to do what is necessary to keep covid under control. what does that mean? james: that message is that the province next to hong kong, it is telling the government to put out all the stops to help the people of hong kong. there is no sign the government in china will relent on the covid zero policy this year or into next year.
hong kong is part of china, there is no sign the government in beijing will allow hong kong to relent on that. they need to do more to help hong kong deal with the problem they are facing. there is a shortage of hospital beds. if they have to do lockdowns, there will be shortage of food supplies and ways to get food to people. it is a laissez-faire those service government that does not have the resources to deal with the problems they are suddenly facing. it leaves the mainland government with the problems and they need to step up support. president xi was saying no change in the policy of covid zero, but other people in china need to step up and help the region of hong kong. francine: bloomberg economics is studding problems in china, and think that china will have a growth rate of 5.5%. how difficult will that be to achieve? james: that will be very
difficult to achieve this year. you are looking at very weak consumer demand. consumer demand has been weak since the start of the pandemic. consumers took a hit from the slow down, and as industry came back, consumption did not come back. all the covid restrictions have stopped people from going to restaurants, tourism, so domestic spending has been weak. there is no change in that forecast this year. those restrictions will hit domestic spending. you have the housing market slowdown. if you are not buying an apartment, you are not buying curtains or furniture, so the demand from the housing sector is slowing down. these are problems the government is facing, and they are not going away. the housing sector appears to be getting worse. while the industrial sector will do good, relying on that one engine may not enough to get it to 5%. francine: thank you very much.
>> they will keep our accommodative monthly policy flexible for key areas and weak links in the economy. >> the fact we are hearing that some troops are being withdrawn is definitely a good sign. pres. biden: we are ready to respond decisively to any russian attack on ukraine, which is still very much a possibility. announcer: this is "bloomberg surveillance: early edition" with francine lacqua. francine: good morning and welcome to "bloomberg surveillance: early edition." i'm francine lacqua in london. president biden says the