tv Bloomberg Markets Bloomberg February 21, 2022 5:00am-11:00am EST
>> it is 10:00 a.m. in london. i am tom mackenzie and welcome to "bloomberg markets." russia says there are no concrete plans are for a summit between president biden and president putin cu. that is after the white house supported reports on that meeting. foreign ministers are meeting in russell's to discuss the tensions on the ukrainian border. u.k. is set to him -- announced the end of restrictions, a day after the queen tests positive. a new report says that credit suisse managed via clowns -- managed the accounts of clients that were involved in human rights violations. stateside, you will not be getting any action across the
u.s., because of a holiday, but they were looking positive. in europe, there up by 0.2 percent. that is despite the open and they were coming down on the back of the meeting between biden and putin. the lockdown has led to some pairing of the gains now down 0.2%. the euro-dollar is up and that is the case through services and pmi. suggesting that the recovery in europe continues. when we get more clarity, the expectation is in terms of how they buy back some of those asset purchases and what it means for rate hikes. markets now pricing in rate hikes by december of this year for the ecb. the german bund up in terms of the yield, so selloff when it comes to the german bund. and brent gaining some 0.3%.
that comes after the geopolitics on the macro front and on the micro front, you see jp morgan. now straight to the markets. two hours into your european trading day. we are going to get european bank earnings from hsbc and barclays. boris johnson has mentioned planning to scrap self isolation rules if you test positive for covid-19. we are going to get u.s. retail earnings for macy's and alibaba reporting its earnings results on thursday. that on the back of banks in china told to check their exposure to financials. let us get back to the picture of the political story. our top story. russia says there are no concrete plans for a meeting between the two presidents.
that is hours after the white house said they will have a meeting to result -- resolve the standoff over ukraine. maria tadeo is in russell's -- brussels where they are meeting. on the back of this summit that was engineered by french president emmanuel macron. maria: we have seen the french president hitting the full meeting on sunday. he had two calls with vladimir putin. he had one on moscow time and back and forth with european allies and the u.s. coming out of the phone calls is this proposal for this meeting. the russians saying it would organize the -- france saying it would organize the meeting between the two leaders, but the markets are seeing the whiplash. it seems the usual operand us of
the russians. they go into the details, so i want to rule out that there is a meeting where it will happen. there is some cold water into the headlines, but this is the way that russia tends to operate. first you have it with lavrov and then you take it to president putin. tom: you see it is difficult to see this down, and we have the warnings over the weekend when president biden said he suggests that president putin has already made his mind up. what have you heard from the foreign ministers on the ground in brussels? they are saying these sanctions would be tough but they are not giving details at this point. maria: they are not and this is something we have heard for
weeks. there was to be something from the european union and the united states that there would be a swift and severe package. boris johnson saying this would open another box of sanctions, but this is where the data on the talks is. you have the foreign ministers meeting and you see big divisions between the big european countries and keep the russians guessing, and the parties that are very familiar with russia and are familiar with russian tactics should have already triggered sanctions. what if an invasion, you have over the weekend over 2000 reports of cease-fire in the don bassett region, so we might not see a declaration of an official war. we see cyberattacks but also
other attacks in the don bassett region. open up the eyes of the west in a way that those invasions might have already started. tom: the divisions among european leaders on how hard this goes with the sanctions paid let us bring in the senior european rates strategist at tdb bank. thank you for joining us. let us start with the fed. when it comes to the fed and their decision raking -- decision-making on the rate hike cycle. >> they have to listen to the central bank, but i do not think so. probably there is pushback from central banks, especially when we saw bullard last week and more in-depth on inflation, so
we how much further they can hike. we could actually see markets getting that 50 basis point hike, but i think 20 basis points hike looks from a fed estimate is pretty familiar. we have got a hawkish fed and inflation remains a key aspect that they need to give more confidence for their credibility. tom: you see a 25 basis point move march from the fed. what what does move mean across the exits -- assets? pooja: in case we do see things moving, we could see a 25 basis point hike. in part of the market reaction,
they could see a rally, given the fact that we have a lot of the markets are pricing very hawkish. we are seeing this move across central banks, so we could see that this is a curve of steepening given the fact that the markets are tightening in expectations so they are getting that back. it could be they are more spread out, but i don't think markets will move much for 2022. tom: jp morgan estimating about nine basis point hikes. does that seem overdone to you? pooja: i think that is about -- we are also looking for 25 basis point hikes in 2022. in terms of fundamentals, the economy is at a good stage.
it does ensure that inflation will go down. you see reduction in terms of the inflation pressures. we could see less hiking taking place in terms of 2022 being a more active fed. that is what got through them in the last couple of meetings. we will hear more insight into the market on 25 basis points or 50 basis points. the fed does call out for the race. tom: we hear about the geopolitics and the potential of a russian invasion of ukraine. when that factors into the ecb, how do you expect that to affect the way that banks and christine
lagarde are looking at those impacts. versus inflationary shock that could come about as a result of that kind of action? pooja: definitely europe remains in the sweet spot. we have not seen that kind of concern from the fed members paid how much we get depends on russia. once the ecb message has been changed in the last couple of weeks is that they will try to give proper guidance to markets. inflation expectations to hamper them and not to give too much to the expectation for what will be negatively affected. you could possibly see another big inflation at least in march
ahead of the meeting. they will try to provide some guidance. if they give us a proper path, that should at least answer their credibility. a lot of markets are pricing aggressively hikes for the ecb shows that this is something we do not really understand given the fact that we are only shortly after the hikes. the ecb is a central bank that is not uprooted. they believe in gradual moves, and we trust them. markets will definitely pushback a december hike to march, but where we are in europe is gradually ending qe. that could be taken just above. tom: so possibly december for
the first rate hike. still trusting in christine lagarde at the ecb despite that turnaround in terms of the more hawkish fed we got earlier this year. when it comes to italy, the pressure point when it comes to the spread of italian bonds over the german bund, we are closing in at 2% on the italian 10 year. what is the pain level for the ecb when they factor in some kind of support from the italian group? pooja: i think markets have reacted widely after the ecb meeting and that sees pushback from the members. it wasn't what the ecb did in the meeting because we did not have a guide until december. what they can do now is they can take all of the measures in a systematic way without tightening financial conditions. we have investments that can be used to achieve any spread, so
in terms of levels, i do not see that further widening is expected. you can see that ahead of the march meeting, but they have improved and credibility even during the crisis. they have financing from the ngo funds, so they have those funding needs. for this year and the coming years. by those measures, we are already different from what we saw from the euro crisis in 20 oh -- 2011. tom: what is your favorite trader at this point? pooja: i like the french whether it is in the euro or -- just because prices for the market have gone up. i like there futures because they are tightening but not too
tight. that is a good hedge even if anything happens which would affect europe. any european political stress, that would be bolstered by the form. the 10-year is delicate because we have duty fares as well. tom: thank you very much. pooja kumra with td bank. coming up, tobias ellwood is a us at 10:30 a.m. london. we talk geopolitics and he is deep in the insides of foreign policy. stay with us. this is bloomberg. ♪
tom: this is "bloomberg markets ." i am tom mackenzie. let us switch focus. the french finance minister talked with francine lacqua about france's easing role. francine: the role that france is trying to play in easing the tensions. first of all, what kind of impact with sanctions on russia have on the french economy? >> it would have big impact on russia, from
ipúráháime for diplomacy. theraú$as been a major having the meeting between presidenf putin and president ì(lc% the!dwo leaders agreed on the and i think that we should e& maktkd89 emmanuel macbo francine a diploa]ic átj■ç■ç not work, what kild@= átj■ç■ç not work, what ■ç■ç>>■ç■ç■ç■ç■ç■ç■ç■ç if we■ç■m efficient, we!xave■ç■ç■ç■ç■ç tor the sanctions when ipúrj■ç■ç tio ì(lc%
rtssia to■ç■ç■çt of■ç■ç■ç■ç■ç■ç sanctions that cr russian■ç■ç■ç■ç■ç■ç people,■ç■çn state, and"t francine:■ç■ç■ç■ç■ç■ç how long■@ nd gas?% ore subsidies can youa■■ç■çput?m political tensios)in■ç ukrainac@ and■ç■ç keepyn there is a■ç■ç■ç■ç■ç■ç &ai=9 recovery in thw united■ç■ç■ç■ç■, in eurtjipì(lc@&h(lc% %-çotherwise, we would all■ç■ç■r ■ç■ç■ç■ç■çit was a great■ç■ç■ç■ç
■ç■ç■ç■ç■çthe■ç■ç■ç■ç■ç■ç■ç otì% ■ç■ç■ç■ç■ç■s prices to go■ç■ç vh$=uhrá @ ench government has increaw" the cap at 4%. %9 crisis. ■ç■ç■ç■ç■çis something qáh&ong e needed.# ■ç■ç■ç■ç■ç■ç■ç■ç■çit seems■ç■ç■ç markets with bondholders looking fórd!■■ç debt. ì(lc% ornund■ç■ç in paris. ■ç■ç■çthis is !oomberg. ♪■ç■ç ■ç■ç■ç ■ç■ç■ç■ç■ç
tom: welcome back. this is "bloomberg surveillance: early edition -- this is "bloomberg markets." let us get the first word news with leigh-ann gerrans. leigh-ann: the kremlin says there are no concrete plans yet for a summit between president putin, but reports of a deal has been reached in principle for the meeting. moscow has said it doesn't
intend to invade ukraine, but u.s. officials say they have intelligence showing that putin has already given the order. more trouble for credit suisse. a new report says that the bank that manages accounts for clients are involved in human rights violations and drug trafficking. the accounts altogether hold $100 billion. credit suisse rejected the allegations and says they were largely historical. 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. i am leigh-ann gerrans. global news, 24 hours a day, on air and at bloomberg quicktake, -- this is bloomberg. tom: plenty more coming up. this is bloomberg. ♪
if you're a small business, there are lots of choices when it comes to your internet and technology needs. but when you choose comcast business internet, you choose the largest, fastest reliable network. you choose advanced security for total peace of mind. and you choose fiber solutions with speeds up to 10 gigs to the most small businesses. that's virtually everywhere we serve. the choice is clear: make your business future ready with the network from the most innovative company. comcast business. powering possibilities™.
let us check in on the market. we woke up in the u.k. and we looked at headlines suggesting there were to be a meeting between president biden coup and president putin. in europe, this talks 600 encz mike is down 0.5%. -- the stoxx 600 is down 0.5 percent. the benchmark currently at 0.21. brent is higher just by 0.1%. futures pointing to losses of about 0.2% on the nasdaq and the range bound on the s&p futures. let us get back to the geopolitical story at the moment. the kremlin saying they do have
no concrete plans at the moment for the summit. this is on the effort of the french president emmanuel macron to get the two presidents to meet find a solution. let us bring in some insights on the geopolitics of ukraine and russia, certainly the intent by nato and the west on what they see as aggression from the russian side. the russians have consistently said they have no plans to invade ukraine. tobias ellwood, u.k. conservative mp, is with us. good morning. we're trying to see on whether we will get a meeting between the two presidents. what is your sentiment on where we stand? some have suggested this attempted invasion has already started by the russians. what is your assessment of the
data and information at your disposal? tobias: that is a good question. i would like to make a wider point and it is important to place this into context on how unstable our world is becoming. the threat of extremism aside on a state level, we have had a relatively peaceful few decades. but for those of us who are member the cold war, we know how fragile our peace is. it requires defending, it requires the west to be resolute. we have a duty to explain to a new generation to understand why we should be getting involved in supporting ukraine. the long-term consequences of us doing too little at the moment, the threat of war in europe is large with huge consequences for security across the continent.
oil and gas prices will jump f and takes place, as will supply prices as well. we are now seeing russia follow a very familiar playbook and developing its own narratives to provoke ukrainians into conflict. putin himself is actually enjoying the limelight here. i am not sure how much we will get into this dialogue. of course we should continue pursuing all avenues, from from -- but from where i sit, i think an invasion is likely. tom: what would those sanctions look like in practice? tobias: good question. we need to recognize that putin exploits weakness, but you have got paris, berlin, london, and washington all looking at
slightly different directions, not necessarily working together on a strategy to handle russia. then i am afraid we are not going to be working as well. i believe we have the best military alliance. we have the bench of that capability around supporting a democracy that is under threat. perhaps we are exhausted because of what happened in afghanistan and iran, but in context, this is about preventing an invasion and supporting a democracy. stopping an aggressor from crossing a border. from an international perspective, we need consolidated leadership, we need a direction to travel. we had it. they sent a purpose for those with and nato, but the challenge here is what do we do about ukraine? what do we do about russia? and a bigger question about this
new alliance that seems to be wearing -- forming in front of us between russia and china. tom: i want to get on that russia-china relationship shortly, but i want to get back to the rally. you talked about -- the italians have made clear they are concerned that the sanctions will hit the energy sector, they and others will be impacted. what are you seeing in terms of the concrete steps being put in place in the u.k. and by the eurozone partners to build out some kind of defense around the vulnerability to energy? tobias: this is where the stakeholders need to come in. there is a national -- natural reaction that when a country does something wrong, we impose sanctions, but those sanctions if they are articulated will
hurt us as well. let us get ourselves into the head of putin. where does he want to go? why is he doing all this? in my view, he has made a calculation that he can't bounce a country reform wise. he wants to align his country with another country that takes a bit different view of international rules and also has a dislike for the west as well. so to align russia with china. therefore, if nord stream 2 is canceled, if any sanctions are imposed, there is a lifeline there as well. we need to think this through. we need a coherent strategy to stand up to russia. tom: we will be watching this
very closely and seeing the implications with taiwan, but we also know that the chinese government dislikes instability. how can we ensure that beijing is staying comfortable with this and that this alliance is as strong given the historical tensions? tobias: i think china is also enjoying this relationship. china thinks in the long-term that they will become a formidable superpower economically, militarily, and technologically. they don't like taking the limelight themselves. they are happy for russia to seek the international spotlight the way that he does. i think it is a dangerous relationship and is a geopolitical transfer of power
over the next few decades and something we are not woken up to as all. it is something that the west needs to address because i do believe we are in a junction, a turning point in our modern history. what we do over the next few months and years will determine how the next few decades play out. tom: what is the face-saving measure we can give vladimir putin at this point when we look at the diplomatic path, however small that path is? tobias: that is an interesting question. how do we do escalate this -- how do we de-escalate this? it is the capability when you put all of the western countries together and the gdp is greater than that of russia or china. but we are not working together as one. what we need to do is de-escalate this by showing
absolute support for ukraine. that means we need to work out and ensure that the russian people recognize that there long-term future should remain looking to the west rather than the east. this is a complex situation that we face of the moment, but right now, there is pressure on ukraine, and that is where our support should be. an intervention is quite likely, but what we can do is provide military support in ukraine and they get so miserable for russia to take over any part of it that they will realize the consequences of what their intentions are. those are conversations that still need to be had by the west. tom: the international arena for u.k. politics. you have made it clear that there are questions for the leadership and boris johnson. do you think the u.k. prime
minister survives on the back of his role geopolitically with the ukraine crisis? what is your view on the abilities of the prime minister to lead the country? tobias: there was not any particular event that made me submit that letter. it was the absence of all of that leadership, that normally when a nation, if it retreats back from an international status, it is written that then steps forward. it was clear over the last few months that it wasn't that statecraft that we would normally be able to exhibit, that power that can rally all of the nations to look at the same direction. if you have the right people around the prime minister for advice, taking the rest of the nation with them as well.
tom: the ceo of vitol there. brent trading down by 0.01%. german chancellor will speak on the phone with vladimir putin later on monday. that is according to a spokesman for the german chancellor. let us get now to the market moves. charlotte ryland, ccla investment manager joins us. how do you -- how difficult is it to price in these geopolitics to the markets? charlotte: good morning. you cannot precisely predict what is happening, particularly with the ukrainian situation. it has an impact on the euro markets.
we see oil at $90 levels if we do see sanctions coming in, you would expect the oil crisis to remain in the short-term. in terms of the markets for natural companies, i am not sure if the tensions will have a significant impact on the companies' earnings. tom: in light of the tightening cycle we are expecting from the fed and other central banks and geopolitical risks, two pay leases -- two places to be our financials and energy. charlotte: it has come a long way already. it was $30 and back down during the pandemic. it has already moved back to pre-pandemic levels. a lot further, you would need to
see a dramatic increase in demand. a lot of that reopening is already happening. we also see supply. supply can come through on u.s. shale and increased production. opec and produce more than they are. for us, we think that is inviting oil companies to come in. we would not expect oil price to continue on that strong upward live -- level that we have seen so far. we see the banks and markets pricing in the interest rates moving up in the interest margins moving up. that is already priced into the bank evaluations and stock in the u.s., less so in europe, but in europe there is less tightening. the ecb has been much more dovish than the u.s. tom: you are cautious on the rotation into growth, and that
is around valuations. charlotte: i think it will continue to be a difficult market with valuations. we are now in a tightening cycle and we are still debating how much they will be tightening, but that is very loose monetary policy that comes to an end. you need to be careful for what to pay the stocks, but this the chance to go and load multiple stocks. we see a number of companies that are still vulnerable. we wouldn't want a company to have their balance sheet that is priced in as they are, and we want to focus on companies that can cope with a more inflationary environment which have got pricing power. that is much more toward the quality end of the market than the value end. tom: quality and pricing power are key as we look ahead.
we had something last week that suggest that u.s. global equities may just be getting started. do you have a regional preference? what is your regional preference at this point? charlotte: for us, we don't make regional calls. it is more based on the underlying companies and not in particular on where they are located. but, yes, in the u.s. it is dominated by the big tech companies. they have some valuations in tech and we see those zero profit tech companies have a poor start to the year, but i'd -- that doesn't mean that all those companies have low value. we have the cloud stories, some dove stories, they still seem to be compelling. for those valuations, we think
that is in their own interest. tom: is there anything in the credit market you like? historically it is still many -- a comfort zone for many. charlotte: we are still cautious on the bond market entirely. if we do move in the second half of the year and growth begins to slow down a little and we see some companies in shock from the inflation, we need to be watching the line of the numbers as well. that is us on that track. tom: thank you, charlotte ryland of ccla for those insights. coming up, we speak with sebastien galy about the fixed income space. he might have a different opinion on fixed income and the bond market. stay with us. this is bloomberg. ♪
i am tom mackenzie. that's get to the tech space in china. we have new announcements from officials over the last few days and concerns that beijing may roll out more restrictions for the tech sector. that has affected chinese markets overnight. services seized for delivery -- services fees for delivery companies are ordered to be rolled back. what do we know about these measures and where we stand? >> on the latest headlines today, my colleagues reported that all of the exposure on the group. it is not clear what prompted this action, but it is reportedly the bureau investigation into this regard, so that is hitting tech stocks today just when everyone thought, can you get even more -- for chinese tech stocks at this point? tom: and it has been quiet so far and there has been some
debate about china and where we are in this. maybe it is the time to bite chinese tech because of the back of this. this is a reminder that they are far from done. >> and it is not just the news today. just last week there was a report about china cracking down on food delivery fees, and we have also heard reports that china is also concerned about the legal fundraising activities around the metaverse and that has been an area that they have been focusing on. on top of that, tencent was also hit by online rumors that there was going to be another crackdown. in the pr has to come out and say that is not true, which is a rare reaction from a big chinese tech company. tom: the officials already lining their sites up on meta and the exposure tencent has to that exposing space.
there cracking down on those sites. do we have any sense of where this goes from here on the back of these moves on friday? justina: it really is a reminder that china has not relented on cracking down those risks, even though people are saying they should be focused on bolstering economic growth right now. it is remarkable because i saw this line from bloomberg report last week that the valuations on a company like alibaba is even lower than utility stock in hong kong. it really is still an open question on whether that warrants investors coming back in at this point with such a cloudy outlook. tom: we have got earnings for alibaba coming out shortly. that will give us some clarity on how they stand. they are trying to invest among others to align themselves with the policy direction of beijing.
we saw arguments from some of the investors on the show thing that the hard tech on this universe are trying to avoid software. is that the clarity we need when we talk about semi conductors and ai? justina: we have this global trip shortage and the priority in china right now are for those of the economy rather than to let these stocks grow bigger and bigger. it really seems like investors are struggling to find the bottom here in terms of the software stocks. tom: justina lee, great insights. thank you. the evolving regulatory picture for chinese investors coming for alibaba. the markets in europe coming down by 0.5%. stay with us. this is bloomberg. ♪
tom: it is 11:00 a.m. in london and 7:00 p.m. in hong kong. our top stories this monday -- joe russia says there are no concrete plans for a summit between the vladimir putin and joe biden. foreign ministers are meeting in brussels to discuss the tensions on the ukraine bourdier. sanctions against ukraine -- ukraine border. sanctions against russia remain on the table. living with covid. covid is said to -- brendan is -- britain is set to announce
the end of restrictions. we had a statement earlier to suggest that the french engineered a meeting between the presidents of the united states and russia. russia said " not so fast. we have no concrete plans." we know olaf scholz of germany will be having a phone, with -- so call -- phone call with pu tin later today. you are still seeing elevated levels with the euro-dollar. in terms of the pace of
reductions of rate prices and where that leaves us. brent is rage band now at $93 a barrel. $100 will happen. the geopolitics well play into any elevated prices. opec-plus has struggled to get an additional supply onto the markets. let's take a look at what is ahead this week. it is back to earnings. we will get hsbc and barclays amid what is expected to be a heightened market. regulations will be removed and we will get u.s. retail earnings
for lowe's and home depot. alibaba is reporting its earnings results after they were told to check their exposure. on friday we will get some u.s. data, including personal spending. russia says there are no concrete plans for a summit between joe biden and vladimir putin. they agreed to a meeting in principle. europe's foreign affairs ministers are meeting in brussels today. what is the latest? what are you hearing on the ground from foreign affairs ministers as they try to coordinate on the response to russia? >> there are two things
happening -- one is what to do about sanctions. europe is saying that sanctions will be severe and swift but there are still questions about what that could entail especially in the energy sector. i spoke to the lithuanian foreign minister he said that he believes sanctions need to be triggered now. the issue very much dominating the agenda here is the meeting between vladimir putin and joe biden. the russians are saying not so fast and that has turned the mood down. it does make sense not to put a date on this meeting. on thursday the russian foreign minister will meet face-to-face.
it does not mean this meeting is not going to happen. tom: that important detail around the prospect of a meeting. when it comes to the question of energy, maria, and the implications for europe, whether it leads to divisions are not among european leaders, the italians are concerned about the energy sector. what is your take on where things stand when it comes to the piece on energy? maria: we are in the winter. this is the time of year when europe is the most vulnerable to changes in supply when it comes to gas. ursula von der leyen said gas
prices were acting in strange ways. russia's reputation had already taken a big hit. and it comes to italy, there is reason to be concerned. this is a bigger conversation happening in italy. europe is very much so exposed to russia and needs russian gas. this green transition takes time and money. if you go to the opposite extreme and you have the ukrainians being concerned about the gas sector, ukraine really depends on that outcome and those pipelines. if we do see confrontation in ukraine, pipelines could be hit and you could see revenue go down for ukraine. tom: we are speaking -- were
speaking to bruno le maire earlier. let's bring in sebastian -- sebastien galy. we will start with the bundesbank and germany. they saw a first-quarter tightening. let me start with the geopolitics. when you are looking to find shelter -- sebastien: shortened, relative value, covered bonds is one possibility. the idea that you buy a low quality product, you are seeing
that right now with covid-19. that is another way to do it. the short trade is also doing well. it is a demand for quality and a period of uncertainty -- in a period of uncertainty. eventually you go through that relief rally, which will take two to three months to peter out as uncertainty moves through the system. there are a lot of issues with the valuation. some of them are temporary. the united states is a more fundamental unstable trade. dreams are not really
sustainable in the long-term and they are being challenged by the fed and by the uncertainty coming out of ukraine. tom: you say more of your clients are putting cash on the sidelines. what would be the catalyst for them to deploy that again? sebastien: one way they have been doing it, they have been reducing short durations. something people have been doing over the last few months is buying a very short duration. they have been positioning themselves relative to quality, things that are well-managed in a fixed -- not in a fixed way but with the algorithm adapting
in an intelligent way. people are becoming more sophisticated on their view of duration. flexibility is steadily rising through the years. tom: let me bring you back to that line that crossed to the terminal, the bundesbank saying germany will go into contraction in the first quarter. we know that they french economy is ticking along nicely. what is the sustainability of the economic recovery in europe and how that folds across the hsbc decision-making? sebastien: pmi and germany were
very healthy. they were driven by the reopening of the trade as the health crisis steadily ebbs. we have seen a strong head from different health measures from supply chain issues that have hit germany. february is looking good. we are going in the right direction. the question is whether this matters for the ecb. there are supply constraints and they cannot do much about it. it does not matter for inflation dynamics. inflation dynamics are not looking good by way of the eurozone. it is not the only thing. demand is strong on a global basis and that means the ecb eventually needs to act.
the question is how much and how fast the ecb needs to act. in march everybody expects a turn. we probably will not get as much as we expect. tom: the views from some -- sebastien galy will stay with s. coming up we will get his views on the bond market. stay with us. this is bloomberg. ♪ >> i'm leigh-ann gerrans. the kremlin is casting doubt on earlier statements from washington say gang there are no concrete plans for a summit
between president biden and putin. moscow says that it does not intend to invade ukraine but the u.s. has intelligence that put in has already given the order -- putin has already given the order. the recent surge of people crossing into mainland china highlights the city's appeal. i'm leigh-ann gerrans. this is bloomberg. ♪
tom: until -- >> until the tanks are rolling we will use every opportunity to see if diplomacy can still dissuade president putin from carrying this forward. president biden is ready to engage president biden in any format -- president putin in any format if that will prevent war. tom: sebastien galy is still with us.
we talked on geopolitics before the break. the rotation from u.s. stocks into european has been a call from a number of strategists out there. does it still hold? sebastien: the question is is there still a better way to do it? u.s. stocks are still really expensive. european stocks are cheap. going into within these european stocks helps you to leverage that but you can do that to some extent in u.s. stocks. we are used to doing fraud emphasis. the reality is we move to another level of sophistication . there are etf's that exploit them.
that is probably the way to go going forward because we are still dealing with a u.s. stock market that is expensive and will have difficulties getting off the ground. tom: the pressure on the stock market in the u.s. has been well recorded. we have gotten some calls from people on the show saying " you have to scrutinize and you will find opportunities. -- and you will find opportunities." unpack that for us. sebastien: if you look at the universe in which you exist, there is the future and the future is either optimistic, but there is an another one that is
more complicated. green transition, less disposable income, displacing services that are inefficient. that means more pressure on part of the population. if we are focused on big tech, it is a dream. some of these dreams make sense. these are the people delivering earnings such as apple. it is an absolutely great company. the question is, do you want to buy it. it depends upon belief. it is our belief in that future stable or unstable. you can see monetary policy becoming tighter. these are still very local interest rates.
the ability to sustain a story is pretty good. there is discrimination as everything prices out from peloton and meta but you should be aware that you are buying a, over time as earnings are delivered, you may have some difficulties but there are some places such as apple where you always want to be. tom: real rates remain negative in many parts of the world but earnings have tended to surprise on the upside. that proves supportive for equities and arguably there is an opportunity to buy the dip. sebastien: there is one particularly in the likes of climate change.
we need a transformation fundamentally on where we produce energy. these changes will be in the big names that you know. but also in smaller companies, some of which got rusted. some will do extremely well in the coming decade. a lot of analysis by you as you read through the earnings, but it is a great environment for an analyst. tom: are you finding alpha? sebastien: you always try to find alpha. also a is what happens when you come under stress. this is where most of the time we see our portfolio managers shine. tom: let's move from the u.s.
tech sector to the chinese tech sector. we have seen that in alibaba and concerns about banking sector exposure to that part of the allah bobby -- alibaba. sebastien: of course they are being cut down to pieces because there is a perception they have become too strategic in the chinese economy and they do not fit the narrative set by the government. they will mutate and change and change the way they are doing. they will do very well because they are national champions. china is a competitive economy but it is mostly an economy of
champions. in five, 15, 20 years will they be there and as important? probably. tom: chinese champions and how they may evolve. thank you for those insights. let's check in on these markets then. you are still low across the european benchmark. geopolitics still front and center, the kremlin saying there are no concrete plans for this meeting between president biden and president putin. your dollar is low by 2/10 of a
tom: welcome back. this is bloomberg markets. i'm tom mackenzie. hong kong will mobilize police far covid-19 mass testing. we know the chief executive of hong kong says she plans to mass test the entire city. it is china's worst outbreak. european stocks trying to lower. let's get in today's market moves with christine keene. it is so difficult to pass the
geopolitics. maria has been pointing out to us on the ground in brussels, they will probably lay the groundwork but the market's websitein -- the market is whipsawing around this. >> what we are seeing in terms of market moves is intraday volatility but not a lot of longevity in terms of trends investors can much on two. tom:tom: it has taken the focus away from the rate hikes where are we in assessing the rate of hikes and how the geopolitics
fold into the fed's decision-making? >> jp morgan is more punchy than what we are seeing priced into markets, which is six fed rate hikes this year. there is the idea that the fed is behind the curve on inflation. they are less focused now in terms of a supersized rate hike in march. that has a lot to do with the fact we are seeing geopolitical tensions play out. it does not reverse the direction of yields, but it has certainly slowed that move higher. tom: we have been squarely focused on what is happening in china.
it has reminded us that the risk around the property sector in china. where do we stand on this and our markets accurately pricing the risks? >> catching -- technology has definitely something catching investors' eyes at the moment. long gone are the days when technology is being treated as a homogenous trade higher, especially during the pandemic years when there is support for -- we have seen that divergence. it is not about " if we see some positive news out of big tech in the u.s., it is automatically good news for china as well."
it will be about idiosyncratic stories. tom: thank you. let's get to juiced bowman -- joost beaumont. how are you thinking about the plight of ukraine? joost: it is one of the dark clouds that has been added hanging above financial markets. i am not a geopolitical expert so it is going back and forth, but definitely the key for investors is it creates a lot of uncertainty on top of the
uncertainty central banks are already creating. that is not good news for markets. given how big the issue is it is unlikely that these worries will go away soon. i think we have to put the geopolitical worries in the basket for this year as a headwind for financial markets. tom: does the u.s. still have that safe haven status for investors from japan if things continue to deteriorate? joost: u.s. treasuries, japanese treasuries and bonds are typically a safe haven. 10 year bonds have performed quite significantly. they still continued to be the
safe haven. tom: can we look through yield curve flattening in the u.s. or is it pointing us towards a hard landing for the u.s. economy? some within the markets are predicting rate cuts in 2024. joost: i just heard the story about jp morgan. we are predicting 10 rate hikes, not in a straight line. the risks are that the rate hikes will be a straight line as it is very clear that the u.s. fed is facing an inflation problem here. in the past a central banks were hiking rates because they were
preventing inflation from rising. currently the situation is different. inflation is spiking so the fed really needs to tighten policy to get inflation under control against the background of an economy operating almost at full capacity. if you look at the basket of items in the inflation basket that are rising by more than 5%, the majority of items are rising at a fast pace. inflation was triggered by demand from consumers as they benefit at the moment more than 6% wage growth on a quarterly basis. that is making me very worried
about inflation. they will take some collateral damage if they stop hiking it . tom: why do 10 hikes over an extended period of time? why not frontload them? joost: in the recent decade when they started hiking there has never been a big step so we expect them to slow the path -- follow the path they have been following in the past. doing smaller steps, they can pricing. why 10 rate hikes?
that is related to what you said earlier in the program. it real rates are likely to become negative. if you want to fight inflation, real rates need to get positive. inflation is likely to be lower under the new have positive real rates, which is needed to get inflation under control. tom: that takes us from the fed to the ecb and mixed messages from the european central bank. come september is when the affect purchases and. does that align with your views? sebastien: we are a bit more dovish about the ecb to be honest than markets are
currently pricing in. we expect asset purchases to end by september and we see a 10 basis points hike in december followed by another 10 basis points hike in q3. if we are in december, it will face a backdrop of inflation already coming down significantly. economic growth slowing as purchasing power has been hit by higher energy bills. the global financial conditions will tighten given actions by the fed. backdrop of starting to hike rates is not great for the ecb and we wonder and we think it will be a close call whether they will hike at all. tom: if you take all of these
factors into account then, what are some of the key traits for you at this point? joost: it is clear that the volatility that we are seeing is unlikely to go away anytime soon markets are very nervous and that will lead to wider spreads the tightening of monetary policy will lead to higher rates . that will lead to the discounting of equity valuations . that in itself will filter through to corporate space where we expect spreads. euros are already 60 basis points wider than at the start
of the year. financial markets are taking their toll. the best way to -- investors we speak to indicate that. tom: joost beaumont, thank you for those insights. coming up, dr. joshua sharfstein will ring the latest on where we stand in the covid-19 -- bring us the latest on where we stand with covid-19. i'm leigh-ann gerrans. here england boris johnson plans to end -- >> i'm leigh-ann gerrans.
here in england boris johnson plans to end covid restrictions. the u.k. continues to see tens of thousands of covid infections every day. deutsche bank is warning its employees not to delete whatsapp messages from their phones as parts of efforts to clamp down private communication channels. u.s. authorities imposed $2 million in fines on jp morgan for communicating over whatsapp. i'm leigh-ann gerrans. this is bloomberg. ♪
in our tourism industry. in sydney airport we are reopened fully to the rest of the world. it is great to see the excitement. i think it all goes well for our tourism industry rebounding strongly. tom: that was the australian minister for trade. he had the tamtams in one hand and the koala and vegemite in the other! joshua sharfstein joins us now. herein the u.k. we are waiting for boris johnson to announce we will be scrapping all measures. in hong kong, they are wrestling with the worst outbreak china
has had. where do we stand in tackling covid-19 and how much division is there? dr. sharfstein: it is different in different parts of the country in the united states. what is different is the state of the pandemic as well as the way leaders and societies want to go about fighting it. as things are generally getting better, different strategies are being approached. i think some things may be premature. while we still have very high numbers of hospitalization here in the united states, throwing caution to the wind does not make sense to me. the uk thang is a little confusing because we want to limit -- thing is a little
confusing because we went to limit exposures. tom: how much has been built up within the health care system -- much resiliency has been built up within the health care system in the u.s.? dr. sharfstein: health care professionals are exhausted. many have left the profession. people are wanting to pretend that covid does not exist. it has been difficult for people. there have been many health care heroes. the health care system has stood up to every challenge but it has come at a cost. there is a a lot of work to do on covid even as restrictions are getting lifted. we need to do better at linking
testing to treatment. we need to combat misinformation around vaccines. tom: it is that multi-pronged effort. you talked about one of the pills that is available. it is the pfizer pill. where do we stand in terms of those treatments. when will they be readily available? dr. sharfstein: i do not have a great sense of the supply. there is a lot of work to do between now and then. the vaccine effort in the united states has done a great job at getting to communities who are left out of the health care system. i was vaccinating in south baltimore over the weekend with the city health department.
if somebody is sick without a doctor of their own, how do they get that treatment within the first five days? that is a great question to grapple with also we will have the same level of severe illness in communities that have been hit the hardest. while we are not totally frantic over the number of cases and hospitalizations, we need to build resiliency for what is coming next. tom: when it comes to omicron, and the data we are seeing whether or not this is the variant that calls time on covid-19, do we have any clarity on that? dr. sharfstein: there is another
variant of omicron that can spread within omicron. we have to assume that omicron will be around for a while. if not, something will come and take its place. we do not know how long immunity to omicron lasts after an infection. there is every reason for us to be working to strengthen our covid resilience. we can help people with sick leave stay home from influenza. hopefully in the end we are stronger and healthier. tom: before i let you go, we talked about the divergence, the disparity in terms of how different nations are dealing with this. many nations on the continent of africa have a very low
vaccination rate. where are we in terms of being able to vaccinate developing nations? dr. sharfstein: that has to be a huge priority. it is getting vaccines there, helping with the misinformation. there is just a lot more resilience and self-sufficiency in those countries. that should be a real focus of developed countries helping with intellectual property and other restrictions that are keeping countries from being able to do more themselves. tom: joshua sharfstein of johns hopkins and the continuing work that needs to be done. let's check in on the markets.
feeling the pain in france -- the ftse is lower by more than 1%. the ftse 100 has in the one major index that remained in the green. that has changed. when the markets reopen you are looking for a loss of 3/10 of 1% . your bloomberg dollar index is lower. the u.s. 10 year is not trading today. crude up 7/10 of 1%. coming up, we will be talking about central banks, geopolitics , inflation, and where james thinks we should be positioning amid these times. this is bloomberg. ♪
if you're a small business, there are lots of choices when it comes to your internet and technology needs. but when you choose comcast business internet, you choose the largest, fastest reliable network. you choose advanced security for total peace of mind. and you choose fiber solutions with speeds up to 10 gigs to the most small businesses. that's virtually everywhere we serve. the choice is clear: make your business future ready with the network from the most innovative company. comcast business. powering possibilities™.
♪ >> it is midday in london. i'm tom mackenzie. welcome to "emerge markets -- "bloomberg markets." the prospects for a diplomatic meeting between president joe biden and vladimir putin. we will have the latest. plus, france's economy minister says sanctions against russia remain on the table, but won't say if they will include energy. bruno le maire indicated europe must look to be more independent in the long term when it comes to energy. just as the u.k. is set to iraq's covid restrictions, australia opens its doors -- to
relax covid restrictions, australia opens its doors to tourists. it is a sharp blade lower for european stocks. we woke up in london to news that the two presidents could be meeting, biden and putin, but nothing has been set in stone. we know the foreign ministers are set to meet. whether or not they confirm up the idea of a meeting for the two presidents will be something investors will be watching very carefully. it is the geopolitics front and center. the stoxx 600 down by 0.6%. is its -- it is presidents' day and the u.s., so no trading there. euro-dollar at 1.13, still elevated. services was above forecast. manufacturing for the eurozone was slightly lower, but still comfortably in expansionary territory.
we are looking ahead to the ecb when we get more clarity on what the plan in terms of the end of asset purchases and rate hikes. some of the markets pricing and a rate hike from the ecb come december. the 10 year yield on the german bund not doing much. a little bit of a bid for that safe haven. the focus on russia. look at the impacts on the equity markets, currently down 6.5% in moscow, and the ruble under pressure by 0.8%, currently at $78. what a change in fortunes for the yen. the geopolitics is front and center, but it is also all about central banks as well. jp morgan saying they have now seen nine hikes of 29 basis points consecutively. let's take a look at the risk radar because we've had this change in fortunes. treasuries not trading today, but the bond futures are looking like that, soy bit of a bid.
gold, which has been above $1900 announce -- $1900 an ounce, currently off. let me check the price for spot gold. the bloomberg dollar index is currently softer by about 0.2%. so reading the geopolitics and the tea leaves is very challenging indeed. the yen had been a safe haven. not much of a play currently. you are looking at gains for the u.s. dollar of about 0.1%. that is as we weigh out what is happening on the ukrainian border. the kremlin is now saying there's no concrete plan for a summit between the u.s. and russia. it comes just hours after the u.s. tentatively agreed for the meeting with some caveats. for more, i am joined by bloomberg's maria tadeo in brussels, where u.s. foreign ministers our meeting. i know you have been
following this throughout this crisis. the back-and-forth between moscow and washington for a summit, a meeting that had been coordinated by the french president macron, what is your take on the latest? maria: i think we do go back to yesterday night. there was diplomacy happening between a number of countries, including the french, but also the germans, ukrainians, russians, all of those hoping to avoid a war in europe. at about 1:00 a.m., french president emmanuel macron was on the phone with vladimir putin. the idea is that both president biden and the russian leader had agreed in principle to a meeting. that meant the biggest condition was that there would be no invasion, no attack on ukraine. today, the kremlin is saying it is going to put a date on that
meeting, but i would be careful to read this as there's going to be no meeting. the reality is we always knew that a lot of this would depend on the meeting between tony blinken and sergei lavrov, the respective foreign ministers. if you look back at previous meetings, it is always the way the russians like to do it. they send their foreign minister. he preps the grounds, takes notes, tests the waters, and then goes back to moscow. so we have seen this choreography before. i would be very careful to just say that this means there is no meeting at all. tom: how much unity as they are on the ground when it comes to that response? maria: we are about to find out because the reality is foreign ministers have been meeting here in brussels the entire morning. we did hear from the top european diplomat, saying that he is working on this huge sanctions package and will put it on the table to vote when the timing is right. right now, there's two big
debates happening. one is when do you trigger sanctions. when you say russia has invaded ukraine? if you speak to some of the nations behind the scene, they will tell you when you are cyberattack everyday, when you see fighting happening in eastern ukraine, that is in some ways the start of an invasion. the other one is with sectors to include the italians come on friday saying that perhaps getting the energy out when europe works to bring down energy bills could be on the table. that could be problem out for a number of european nations who say, if anything, but we should be doing is going after russian gas. tom: that brings us on to germany. we know olaf scholz is planning a phone call with putin. does he have that connection that angela merkel had with his russian counterpart? maria: it is a funny question. she had a very unique
relationship with vladimir putin. i'm not saying it was good or bad, but clearly they had a connection in the number of years they were in office. they had a connection when it comes to the language. they had a connection in terms of the amount of times, the beatings they did with -- the meetings they did with each other. they could see i to i. that may be a good thing for olaf scholz to distance himself from angela merkel. a lot of commentators and officials behind the scenes tell you part of the problem we are seeing right now are because of angela merkel and the appeasement she had over 14 years on russia. the nord stream 2 pipeline. this was not olaf scholz who agreed to it. this was done under the angela merkel government. the fact that he is in many ways different to angela merkel, has a different relationship with vladimir putin, but has also come under big stress to distance himself from russian appeasement could be a good thing for those who view that germany has to be much more hawkish on russia. tom: great stuff.
bloomberg's maria tadeo on the ground in brussels at that foreign ministers meeting. let's discuss the market impact of the geopolitical tensions with aberdeen investment director james athey. he went from long russian assets too short. what took you there? james: it was a difficult decision, obviously. the circumstances are always difficult to analyze. i try to look at this through the lens of incentives. i'm very much a proponent of if you showed
will show you the outcome. it did not look like there was incentive for putin to invade because essentially, the threat of invasion is a more useful negotiating tool than the actual invasion would be. for that reason, i was comfortable holding on. but it became clear to me that actually, western leaders were seeing this is a rather convenient distraction from their domestic problems, and therefore the rhetoric was not going to be coming down easily. now we have ourselves in a situation which feels increasingly like a mexican standoff, so for the portfolio i run that has russia on its benchmark, i went from being long based on domestic fundamentals, the rate hikes that were already baked into the cake, the low debt to gdp, and really can't easily see a route to where the parties in this standoff can back off and save face, and that makes it difficult see a near-term resolution. tom: are you looking for safe havens within equities, whether that is financials or energy? james: this is one of those situations where, while specifically in relation to my
russian position, this outcome is in the opposite direction, broadly speaking, to what outlook to our position is more in keeping. we have been cautious and defensive for a people -- for a period of time now. we fill the u.s. dollar will benefit from a hawkish fed and a purple of risk off, and the yen we think is under owned and will benefit from risk off flows at this time of heightened volatilit. -- heightened volatility. in terms of the u.s. yield view, to me this exacerbates the curve flattening trend. i don't think anything we are seeing in russia is going to perturb the fed from doing what is necessary for the next three to six months. they need to get less behind the
curve or even ahead of the curve, but it is another big negative growth shock, another big sentiment shock, and that should support duration at the long end. tom: i think it is fair to say you've been pretty critical of the central banks and how they have adjusted to the new normal. in terms of your level of confidence that the engineer a soft landing, where does that stand? james: even if i had not come from a position of highly critical, which i have, i have been very critical of their actions. isaac they have been working from a rather out of date textbook and trying to shoehorn the modern world into an obstructed view of the global economy and the global financial system, with some increasingly dangerous looking consequences. but even if that had not been the case, the chances of engineering a soft landing are very low indeed.
i think the particular trade-off they face in terms of growth inflation, the type of inflation we are seeing, and the extent to which it is increasingly entrenched, the path forward for them is perilous. if they were to be able to tread that middle ground and take just enough out other economies to dislike those inflationary pressures in a gentle fashion without disrupting risk assets which has been as expensive as at any time in history with leverage in the financial system , i would be forced to doff my cap because that would be in crazing at -- would be an incredible outcome. tom: coming up, part of francine lacqua's conversation with french finance minister bruno le maire. james athey is short france. we will have to find out why later. we will hear from the finance minister bruno le maire on all things energy, geopolitics, and
the outlook for the french economy as a country gears up for elections come april. markets across europe looking at losses of zero point 7%. the bloomberg dollar index softer by 0.8%, euro-dollar at 1.13. you can see a move by one basis point higher for the german 10-year gilts. futures stateside pointing to losses of 0.3% this president's day, when the markets are closed. there is volatility. there is anxiety in this market off of the geopolitics. wendy more to come. stay with us. this is bloomberg. ♪
tom: this is "bloomberg markets ." i'm tom mackenzie in london. french finance minister bruno le maire spoke with francine lacqua . take a listen. >> party politics is dominating with the huge role france is trying to take. what kind of impact would sanctions on russia have on the french economy? >> it would first of all have a
really deep impact on russia, on the russian economy and the russian interests. but it is time for de-escalation. it is time for diplomacy. there has been a major -- last night, thanks to the effort made by president macron, there's the possibility of having a meeting between president putin and president biden. the two leaders agreed on the principle of a meeting, and i think that we should all make the best efforts to make this meeting a reality. once again, president macron played a key role to trigger this meeting between the two leaders. >> so you put all the efforts diplomatically, so if it doesn't work, what should we look at? >> i don't want to give too much details on these sections because if we want the sections to be efficient, we have to trigger the sanctions when it is
time to trigger the sanctions. but one point must be very clear. if there is any attack from russia to ukraine, we have a set of sanctions that are still available and that would hit the russian people, the russian state, and russian economic interests. >> how long be using these elevated prices for gas and oil will stay? how much more subsidies can you put in place? >> i think everybody must be aware that there are some geopolitical tensions in ukraine , and taking into account the fact that there is a very strong economic recovery in the united states, in europe, everywhere in the world, which is good news for all of us, we will have to face a good news and energy -- a rise in energy prices. tom: let's bring back in james
athey, aberdeen investment director. i inadvertently cut you off before the break, but we want to get your thoughts on france. give us an explanation, why are you short france? you've got political stability. they've got the elections in april, but it looks like macron is going to be reelected. what don't you like about france? james: don't worry, you are not the first person. we are short the high beta names in europe, full stop. bristol stickley -- realistically, the main force which have kept european bond yields and check has been the ecb, and in the stance is that we are seeing and expecting through the rest of this year, the ability for the ecb to justify ongoing support via bond
purchases and possibly being forced into hiking rates, this is an environment that should reinject risk premium back into some of these bond markets. if you look at the debt to gdp debt dynamics, structural growth dynamics, political dynamics, and weigh those against the additional yield you own relative to germany or swaps, it really does seem like a particularly bad trade. france, italy, and spain we believe are the weakest links in that chain, and we are happy to be short in various bonds. this is definitely a higher-yielding environment. tom: what about the eeoc chrissy's of the u.k., where the bank of england has hiked a couple of times, and yet u.k. equities have outperformed their u.s. and european thousands?
does that continue? james: that sort of central bank balance sheet expansion argument for equity performance is most obvious and most powerful in the u.s. we really don't observe the same dynamics anywhere else really. we go back to the peak of equity markets in the first quarter of 2000. the performance of markets is negative, pretty much flat since then. you've got the u.s. with a roughly 250% gain, and a chart that shows you the federal reserve balance sheet versus equities makes it look like that is a very close correlation. the reality is the ftse 100 makeup has been one of the main reasons for that. tom: james athey, we appreciate your insights, aberdeen investment director. short france and russia,
and the central bank storming far behind the curve. coming up, the crown gets bigger. we hear from the ceo of the world's largest and the bennett oil trader about just how long it could stay in triple digits. that is next. this is bloomberg. ♪ >> keeping you up-to-date with news from around the world, with the first word news, i'm leigh-ann gerrans. the kremlin's casting doubt on earlier statements from washington, saying there are no concrete plans yet for a summit between presidents biden and putin. france reported the deal had been reached in principle. muska -- moscow says it does not intend to invade ukraine. in new zealand, prime minister
jacinda ardern says she will start to ease covid-19 restrictions after the current omicron outbreak has peaked. that includes removal of some vaccine mandates that are the main complaint of protesters occupying parliament's grounds. our during said today the government -- ardern said today the government expects the wave to peak in three to six weeks. alphabet has reached a settlement for an undisclosed amount with a woman who said she faced this cremation by the search giant after she became pregnant. she sued google in 2020 after she claimed her repeated efforts to report pregnancy disc, nation or ignored. google has not commented on the settlement. 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. i'm leigh-ann gerrans. this is bloomberg. ♪
tom: this is "bloomberg markets ." let's check into the markets for and a half hours into the trading day here in europe. the u.s. closed for presidents' day. you seen a leg up for european equities. the criminal coming out with a statement that is far more cautious on this apparent planned meeting between president biden and president putin, saying there are no concrete plans as yet. currently the stoxx 600 is digesting that, down 0.8%. teachers stateside pointing to losses of 16 points. euro-dollar stronger by 0.2% at 1.13. your german 10 year is up by one basis point. let's see how things are
playing out for the russian market. we are trying to pass the messaging out of the -- trying to parse the messaging out of the kremlin. russian stocks down almost 6%, and the ruble also under pressure, down by close to 1%. closing into 78.3 on the ruble. that is the state of play in terms of the markets in russia on the back of these geopolitics , and futures stateside pointing to losses of around 0.4%. that's bring in the cio and portfolio manager at barrette asset management, which has $2.9 billion in assets under management. thank you for joining us this presidents' day. how are you and the team at barrett looking at geopolitics, and is there still a case to be made that the focus has to be on fundamentals as you look through the noise of these tensions?
amy: thank you for having me. i agree with your question. just focusing on geopolitical events, looking at the market over the past several decades, we have seen over 20 geopolitical events impacting full markets. we also find that these events and the market reaction to these events tend to follow a very similar protocol where there is an initial reaction, usually negative because of the uncertainty of the situation, and in due time the markets tend to digest whether or not these events impact the market over the long term, impact fundamentals over the long term. if the intra-do that -- if the answer to that is no, the markets tend to digest that and really move on. that is the initial reaction we are experiencing right now. when i say in due time, it is typically varied, but we have found on average that market reaction can last one to a couple of weeks, and the market
tends to come back to that precrisis level, typically between the 30 to 60 day period. of course, when we think about the situation today, the market is also being pressured from the standpoint of very high inflation in the united states and uncertainty over the fed, so those numbers that i just pointed out could fluctuate again because there's obviously a lot of other things impacting the markets. the second part of your question -- yes, tom? tom: i just wanted to jump in because i wanted to unpack some of that because it is important. in terms of looking at the fundamentals, we know that there is the importance of focusing particularly on pricing power amongst these companies. but do you need to build in some contingencies as you look to the markets? amy: we are not putting on the
second derivative hedges. we continue to feel constructive on u.s. equity markets relative to cash, as well as fixed income. we find that the stock market tends to be in the long run a very good hedge against inflation, although there is volatility built-in. i think for us, it is more about asset allocation, not necessarily putting on protection puts and things of that sort. for us, as we are managing money for a lot of individual clients, it is all about can we really have this kind of exposure in portfolios, and i think to us, that tends to be the better recipe in terms of managing, and really, the key for us is fundamentals, knowing what you own. you mentioned pricing power. that is very key for us right now in terms of finding companies that can operate in this type of environment, that can pass on the higher material costs and input costs to the end consumer, making sure they can pull the operating leverage ratios to make sure that they
can operate in this environment. tom: part of that is going to be down to the strength of the u.s. consumer. what is the data telling us about the resilience of households? we have been told that they are sitting on healthy a month of cash on aggregate. does that continue to be supportive that these corporate are still able to raise margins and pass that cost on, or is the consumer starting to fray? amy: just looking at the past corporate earnings season, which we are at the tail end of this moment, i think companies have continued to be very strong in that regard, being able to pass on that higher input cost, and profit margins did not get impacted during this last quarter. it is hard to say how that unfolds for the remainder of this year. we are seeing that expenses as a group is now growing at double digits, and that is a concern for us. with regards to the consumer, a kind of think they are continuing to flex that muscle. i think americans, whether happy
or unhappy, continue to shop, and that is a great thing in this kind of environment. we have seen the retail sales continue to show strength in this choppy environment. in terms of the household balance sheet, that is still sitting on excess savings. right now we are seeing that those savings are still north of $2 trillion, and that is a very good tailwind in terms of thinking through retail spending over the course of the next couple of quarters. certainly, consumer sentiment is low, but we are also seeing offsets to that. for example, wage inflation is a very good barometer in terms of health of the consumer. it is now north of 4%, which i think is a very good metric to rely on. i'm willing to bet that the consumer spending pattern we have seen continues, although there could be certain fluctuations. but it is likely to move in a positive direction. tom: amy kong, barrett asset management cio, thank you for
your insights. that's get to the question around energy and oil. a prolonged purple above $100 a barrel and a surge in demand for the second half of the year. those are some of the forecasts by russell hardy, the ceo of the world's largest independent oil trader. we caught up with him on friday, and here is more of what he had to say. >> we now view we will see a prolonged period of perhaps $100 plus at some point in the next six to nine months for yet it is very difficult to be precise about the exact timing, but demand is going to surge the second half of the year, provided there is no additional worries about the pandemic and provided travel resumes to something like normal. >> do we know what kind of processes destroy demand? we have seen prices higher than this, haven't we?
>> i think you are right. we were $100, $110 range, so we have seen these prices before, but i think when that occurred, we did not have the coincidental explosion we have today, so customers are getting it from all angles, which is not a good thing, and demand will at the margin be lost, because price, the price of elasticity is there as it gets expensive at the pump. >> we have mentioned how supply is tight. one thing that could change that to some degree is iran and whether conversations with iran is old in a romney and fuel coming back -- whether iranian fuel comes back to the market. >> all of the parties have been talking this week, and it sounds
like there is an agreement beginning to form. this has been a long pass to get here, so i think the market is assuming something will get done in the next few weeks, and probably the market needs that oil. the second half of the year would benefit from that additional supply, just from a consumer point of view, that the market would be a little easier to balance. i think most people have got that factored into the second half of the year. most people expect an additional volume from iran. clearly they are producing oil and consuming oil themselves today, so the extra supply they could send out to the world would probably be about one million barrels. >> do you have any sense of how much she of little premium there is in the oil price? supply and demand would suggest that oil prices stay elevated even without that geopolitical risk premium. what would you assume would come
out if we see these tensions ebb away? >> i don't think the geopolitics specifically account for a huge amount of the price premium at the moment. >> that was russell hardy, ceo of vtol. here to discuss some of the fundamentals is bloomberg's will kennedy. what you make of this? the prospect of $100 a barrel. how do we fold in the geopolitics with opec+ attempting to get more supply onto the market? will: what is interesting is he was playing down the role of geopolitics. clearly we can see from the swings we have seen this morning and last week that day-to-day moves are driven by the latest headlines from russia. however, his message is very
clear, that demand recovery as we come out of the depths of the pandemic, as people start moving around again, is very strong, and supply is failing to keep up. that is why he is seeing this prolonged period of $100 a barrel. tom: where do we start in the iran discussions? there was reporting last week around what was happening around vienna, may be the needle being moved on and attempt to get a resolution with iran. but some have already priced this into the markets for the second half. will: clearly this is one of the biggest political unknowns the market has to calculate, and it is one possible bearish counterbalance to the very bullish story, that we may get more iranian oil. what the market is not sure of, how much oil it is exporting right now. it is hard to track iranian oil experts because some of them happen under the radar, and how
much extra oil could they produce, is it up to one million, as i think it is a really important question for the market to understand. we will not understand the answer until there is some kind of new deal in vienna. tom: is $100 a barrel oil in have to get u.s. shale production back? will: last week we had a lot of the shale producers presenting their results, and the message from those publicly listed share producers -- listed shale producers is that no, they are fully on board with this idea that they will main production discipline, that they will ensure maximum returns to shareholders. shareholders, investors are punishing any shale company that says we will spend more money and increase production. the message is very clear. that said, there are whole numbers of smaller shale producers who are not listed, and others who will increase
production. it is just a question of how fast, and many people think because of that discipline, it will not quite be fast enough to keep up with demand. tom: thank you for breaking down some of the key things in these markets. coming up, british prime minister boris johnson set to end england's covid restrictions today. we will have an update after the break on where that leaves the u.k. amid the live with covert attempt and plan from the u.k. your markets currently lower by 0.9%. u.s. futures lower between 0.4% and 0.8%. this is bloomberg. ♪
the kremlin's casting doubt on earlier statements from washington, saying there are no concrete plans yet for a summit between president biden and putin. france also reported a deal had been reached in principle for a meeting to ease tensions around ukraine. moscow has said it is not intend to invade ukraine, but u.s. officials say they have intelligence showing that putin has already given the order. people are leaving hong kong in record numbers. nearly 28,000 people left the city last week, the highest number since the asian financial hub imposed trick quarantine measures at the start of the pandemic forget that is according to government data. the recent surge in people crossing into mainland china underscores the city's fading appeal. metropolis health care -- the
decline picked up after the december quarter earnings trailed analyst expectations. more trouble for credit suisse. any report says bank management involved in human rights, corruption, and drug trafficking . the new york times says the data covers accounts opened as far back as the 1940's. credit suisse rejected the allegations and said they were largely historical. 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. i'm leigh-ann gerrans. this is bloomberg. ♪ tom: we have some additional lines crossing the terminal when
it comes to russia and ukraine. this is from the russian news agency ifx. russian military prevented a border violation from ukraine. also, citing the russian armies southern military district, russia killed five people who tried to violate the border yet again, from the russian news agency ifx. the focus on the tensions on that border, and the prospects of a meeting between residents flat them up -- between presidents vladimir and joe biden. we are waiting for more details on that as tensions at the border remain very elevated indeed. let's get back to the covid-19 situation and omicron, just one day after it was revealed that the queen in the u.k. contracted covid. u.k. promised her boris johnson is announcing an end to covid-19
regulations. for more i am joined by bloomberg intelligence's sam fazeli. i've heard different things from different people with any medical establishment here in the u.k. regarding these efforts by the administration of boris johnson to roll back essentially all of these restrictions. we are waiting for the details on that later today. we are expecting this to come through. what is your take on whether or not we are indeed positioned in the u.k. to be able to do this? sam: the issue here is a lot more to do with the reality as opposed to whether it be in the right place or not. if the u.k. was in a situation where people were testing themselves, seeing they are positive, not necessarily reporting it, and then hopefully self-isolating, than the rule that requires self isolation is probably not necessary.
guidance is probably the right thing to do. and also, you're seeing a reduction in the number of cases. you are seeing a reduction in hospitalization. certainly deaths. all of the directionality suggests that it is probably the right thing to do right now, but i also never one to your for many pump -- from any politician -- want to hear from any politician that it is done. tom: are you seeing any variants out there concerning you at this point? sam: we kind of have to keep an eye on ba-2 because it if is more transmissible, the subvariant of omicron, that means we are still wound to have a larger number of cases, especially if you have taken all the requirements away, rely on people to do the right thing is one thing.
it is possible that you get another wave of infections, and that will be visible in the number of hospitalizations. tom: so keep watching that data as the u.k. pairs to remove the bulk of its restrictions, possibly announcing that later today. bloomberg's sam fazeli, thank you for that. australia is reopening its borders to double vaccinated visitors after almost two years of very strict travel bans. as of today, tourists who have received their boosters will be allowed to enter the country. bloomberg's paul anna has more. >> today, they are open again to anybody who is double vaccinated and has the correct visas. they are now allowed to entrust really without quarantine. even those who are unvaccinated can enter australia and only quarantine for seven days in a hotel, so this is a big step forward. the first flight from los
angeles today was under the new conditions, and there's a real party mood here at the terminal. we saw gifts being given away, miniature jars of vegemite. -- was in a good mood. this is what he had to say. >> it is tremendous for australia. obviously it has been a very difficult two years, but it is party central here at sydney airport as we reopen fully to the rest of the world. it is great news, and it is great to see the excitement. i think it all goes well for our tourism industry, rebounding very strongly. >> he also conceded there were going to be challenges around the reopening. can never be quite certain what the coronavirus is going to do next, but he was confident that with australia having vaccination rates well above 90%
, the travelers could come here with certainty and not have to worry about getting trapped or conditions changing. there's also going to be challenges for the tourism industry itself. with such a tight labor market, there's going to be some difficult is around attracting staff back and scaling up again. to are tourism markets as well to make the long journey to australia. before the pandemic, australia's biggest source of tourists was china. the australia-china relationship has soured somewhat since the pandemic began. so the train minister -- so the trade minister confident all that can change. the new south wales premier said earlier this is what the new world looks like as we transition from pandemic to endemic. at sydney airport, i'm paul allen for bloomberg. tom: that was bloomberg's all
♪ anna: i'm anna edwards. welcome to "bloomberg markets." european stocks in the red as traders question the prospect for a diplomatic meeting between president joe biden and his russian counterpart vladimir putin. we will have the latest on the diplomatic effort. we'll whipsawed as investors -- oil whipsawed as investors weigh
the outlook. we will have the latest on those oil market moves. british promised her boris johnson said to put an end to it england's covid restrictions. we will hear from the prime minster hours. first, let's check the markets. welcome to the special program. it is president's day in the united states, which means we have plenty of politics to talk about, and plenty in markets today. we started the day in positive territory. there were talks that the biden administration said yes to a proposed meeting between putin and biden. that talk did not add to risk appetite as we did not get much from the kremlin on that front. the kremlin said there were no concrete plans for the two to meet, the -- for the two to meet, so we have seen it in
markets. this is lifting the oil price. we have seen it really whipsawed earlier on when we saw assets looking more attractive. we saw the oil price dropping, but now we see with tension ongoing between ukraine and russia, we see brent prices up. a little bit of dollar weakness still the case, although moving closer to the flatline in europe. with what we are seeing in markets in mind, we have been waiting for much of this morning in the european time zone for an update from the kremlin on their perspective of whether president biden and putin were going to meet. we heard there were no concrete plans. now we are getting more detail from the foreign minister in russia, sergei lavrov. he is saying that he needs to
know what the possible summit outcomes would be. this is according to the russian foreign minister in moscow. this is clearly in of the big factors driving markets now. will this meeting take place between the presidents? we just have a meeting between foreign ministers? another big occupation in markets is what is going on with the fed. of got one chart to show you this morning to mixer you understand we have not lost sight of that particular conversation. a key obsession around markets, whether the fed is going to tighten too much and then lead us into some kind of recession. what the fed do that? we usually look at the twos-tens treasuries spread. i got the twos-tens overnight swaps curve looking at one year. so what do we know now? what has been pressed into markets about where the curve will be in a year? this is another way of looking at the market sums and that perhaps the fed is going to tighten too much and send the
u.s. economy into recession, even though we have heard a little bit less about the need for a 50 basis point height -- 50 basis point hike from fed officials. let's get back to our top story, whether we will see a meeting between the presidents of russia and the united states. russia is backing up report plans for a summit with the u.s., saying there are no concrete plans, from the foreign minister sergei lavrov. it comes hours after the u.s. tentatively agreed. thus get to bloomberg's maria tadeo in brussels, where european foreign ministers are having their own meeting to discuss the way ahead here. good to see you today. the latest headlines coming through from sergei lavrov, sort of pouring cold water were at least putting a pause on any plans we might have two mark and our calendars a meeting between the presidents of the u.s. and russia. maria: yes, and there's one thing that i keep hearing, which
is that there was to be a diplomatic resolution to this, the meeting between president biden and vladimir putin. this not some the good sergey lavrov and antony blinken can fix by themselves when they meet. the kremlin says they need to know they go into this meeting, what is it they will get out of it? they have complained for weeks that none of russia's security demands have been considered seriously by the united states. in terms of whether this means the meeting is completely off the table, what i would say is officials are telling me this is the way russians like to operate. they like to prep the ground with the foreign minister, take notes, perhaps test the waters, and then decide whether or not they want to engage in something bigger. in terms of the meeting happening here in brussels, the conversation is really shifting entirely to what to do with the sanctions. as you know, for weeks, the european union and the u.s. have had this package that would be huge, so the question now is
when to trigger it. we are seeing divisions particularly from baltic countries that are saying ukraine is a country that has been under attack, also under cyberattack. what will decide that this is the right moment? anna: interesting that we are seeing some spread widening around some of those eastern european debt markets. the focus for the ecb might shift eastward. maybe that is the new periphery we need to think about. that is how the market is perceiving this. where you are, where the foreign ministers are meeting, is there a big division east and west as to how tough these sanctions should come down? amy: it is a --leigh-ann: it is a --maria: it is a very difficult question because we don't know what these sanctions are. the germans to some extent, two to hold debate this ambiguity,
this is the right way to go ahead. but if you look at what the ukrainian president said saturday in a very impassioned speech that actually got a standing ovation at the munich security conference, he said we need the sanctions now, and we need them to be big. what good is it to section russia once they invade our country? at that point we are talking about war. it has been echoed by countries like latvia and lithuania, who say the position of ukraine is very precarious. we know the economy is hurting in big ways as a result of the tensions around it. we also know the russians have said they don't want to invade, but the intel from the united states points to something else. at the same time, we are seeing a lot of cyber damage being done to ukraine, so there are countries, particularly the baltics, who have seen we know how russia operates and it really is time now to trigger those sanctions. anna: and other countries no doubt saying we need to keep the sanctions as something that act as a disincentive to attack ukraine. we will see where this goes.
thank you very much, maria tadeo in brussels. let's get a market perspective on this. the bank of america private head of cio portfolio strategy joins us now. really good to speak to you. when you are trying to put together strategies that last over a considerable time horizon, how much are you focused on the day-to-day geopolitics? this is quickly becoming the main thought for market but the bins, whether we will see it coming together, the rear going to see actual war in europe and an attack on ukraine. >> it is very hard to base a strategy on geopolitical events. clearly this is a big geopolitical risk, and the markets are being held hostage at the moment. from our perspective, if we do see an escalation, the biggest impact will first be in the energy markets. you will probably see oil prices
spike higher. you will probably begin to see growth estimates for many regions across the globe, and it really depends on how long it lasts and what is the nature of this conflict. you will see rising risk mems across different asset classes. what is interesting also is the primary driver of the markets if you think about it over the next 12 months, it will be inflation and economic growth, and if there's higher inflation on the upside and downside pressure on growth, it just come put the job of central bankers trying to bring inflation lower and keep the business cycle moving along. it is a big risk, no doubt, but it is hard to really change your investment strategy in a dramatic fashion. i think you need to focus on staying balanced and staying in high quality investments. anna: does commodities seem like a good place to be get this point? is commodities don't to get
pushed higher by geopolitical tensions, and also be one of the beneficiaries from a higher inflation environment? niladri: we think so, not because of geopolitical tensions , but also fundamentally the outlook for commodities looks quite good. when you think about energy as economic reopening's happen, as more and more demand comes through, you will see that upward pressure on energy prices as well, and supply as we all know is quite constrained here in the u.s. shale companies are not drilling as much as they used to. they are all about capital discipline and returning capital to shareholders rather than putting more money into the ground. so there's the prospect of supply not being there is much as it is being used to in previous years, and then obviously, where the geopolitical situation could be an issue where supply is constrained from russia into
europe, as more and more countries reopened their demand for energy will be there. we expect commodity prices to stay elevated. that puts upward pressure on food prices as well. pretty much across the world, whether it is energy or food or base materials, you see supply shortages coming through. but in an environment where nominal growth is running at 8%, 9%, that is a recipe where commodity prices do pretty well. anna: link for me now, if you could come of the thinking around the fed and this geopolitical risk. it seems as if with more geopolitical risk, a lot of people say maybe this stops the fed from hiking 50 basis points, which is a talking point in march. if this turns out to be inflationary, could that result in more requirements for hikes? talk about the links between the two. niladri: it certainly could, and
that is the risk with russia and ukraine. i think it is unlikely that the fed will start with a 50 basis point hike. i think you have seen a little bit of pushback by some fed speakers over the last couple weeks on that front. the fed rarely starts a hiking cycle with a big move like that, so it is likely that the fed hikes by 25 basis points and then continues on the path to hiking, and that the market is pricing in something like six hikes. we are at seven hikes. there's lots of other economists across the street calling for even more hikes, but it very much looks like we are in a different regime now. we have been in a regime where money supply growth has risen here in the u.s. by about 40%, and it is still rising with the fed in the ecb putting more liquidity into the markets. the regime now is of tightening financial conditions. the fed will also possibly shrink their balance sheets as
well, so that has unintended consequence on financial markets, on risk premium. it is a different environment for investors, and they will have to position differently going forward. anna: thank you very much. stay with us. niladri mukherjee, bank of america merrill lynch had a portfolio strategy, thank you so much. fears of a tech crackdown in china. they have been rattling markets for months. they continue to do so. we will get to that conversation next with bloomberg columnist alex webb with us shortly. meanwhile, here in london, european equity markets nearing the midpoint or at the midpoint of their trading day, and european equity markets trade to the downside. this is bloomberg. ♪
anna: this is "bloomberg markets ." i'm anna edwards, live in london. just past the lunchtime mark in london. let's talk about what is going on in china. a big story over the last one to four hours, concerns that beijing may roll more restrictions for the tech sector weighed on chinese markets overnight. alex webb, bloomberg businessweek columnist and watcher of alls tech, joins us on set in london. good to speak to you. how significant a step up, because in some senses we have been worried about beijing and the government clamp down on tech stocks in china for many months now, what has happened in the last 48 hours or so? alex: basically, a lot of
hearsay. there were some un-contributed posts which suggested there would be a new clampdown coming. they were pretty quick to respond to that. companies like tencent have invested in epic, for instance, a big pillar of the metaverse. if people think there's a crack down on metaverse stocks, the stock is therefore punished. anna: we also saw ant group really in focus. people familiar with that story talking about increased scrutiny there. how much is that a focus? alex: ant group is at the center of a lot of tech investment. it is a holding company now, and it has stakes in a lot of other meaningful tech companies in the region, which means if the regulators are looking at the
links those companies have to ant group, that is clearly a reason for concern. if you look at the valuations, tencent is valued at about 27 times forward earnings. we are not anymore in this era of tech stocks in china being massively overvalued compared to u.s. peers. it is pretty much in mind. it trades at a premium to the likes of google and facebook. people are getting very skittish about chinese tech stocks, and that is already reflected in their valuations. anna: thanks for the update, alex webb with his focus on technology for us. let's talk about opportunities globally and the tech sector. nilandri is still with us, bank of america merrill lynch had a portfolio strategy. we have talked about the geopolitical tensions which may give people cause for concern. so you go looking for bargains in china, or does this
latest news flow make that less likely as well? niladri: that is less likely, i have to say, because china has made it very clear the new common prosperity policy is really their governing philosophy, their economic philosophy right now, and they are going to continue down this path of putting pressure on their mega cap big companies, which have a lot of heft and they are strong in their own industries. they will put pressure on them to be a little more socially inclusive. that just means there's going to be downward pressure on their return on equities. even if some parts of the market may start looking cheap, i think that valuation discount is worried because of the fact that there is less transparency on their business model. i have no doubt that china will do extremely well in the area of technology, and they believe in this concept of national
champions. these companies will thrive in the next 10 years, but it seems like in the very near term, there are some risks that one needs to be cautious on. i do think the technology sector is becoming more attractive going forward after the selloffs. anna: do we not know enough about common prosperity and what space there is for profit-making to get excited yet about where that leads us? tell us more about what you see in the u.s. tech space. geopolitics very much to the four, and nasdaq futures down one point 5%. what do you see in tech that excites you? niladri: whenever with ink about forward-looking prospects for any kind of investments, we have to look at where we are coming from. over the last 10 years, technology has been extremely welcomed to the broader market because the profit situation has been very good, and cash on balance sheets has been extremely good for technology,
but also valuations are a little bit more stretched compared to the broader markets. the way i think about the technology sector is it still has very good fundamentals compared to the broader markets because the economy sector is leveraged to the transformation of the economy, to future industries like artificial intelligence, robotics, automation, cloud, etc., so the earnings potential of technology stocks is extremely good going forward, but in the very near term, the market is trying to floor -- trying to find a floor for valuations as interest rates are rising and financial conditions are tightening. investors have to pick their spot. if you look at areas within semiconductors, which is a building block for every kind of device that we have in our pockets these days, i think that is interesting. certain areas within software also make a lot of sense to me. anna: inc. you so much, the bank
of america merrill lynch cio and head of portfolio strategy. technology is the worst performing sector in europe right now, down by 3.2%, just as we see a headline that tells me the stoxx 600 drops 1.5%, the lowest since october. coming up, we get a view from brussels on how the russian aggression is being viewed from neighboring latvia. the presence of russian troops on the ukrainian border, how is that being viewed? this is bloomberg. ♪ leigh-ann: keeping you up-to-date with news from around the world, i'm leigh-ann gerrans. details are still emerging, but russian forces say they have killed five "saboteurs" and destroyed two armored personnel carriers on the ukrainian border, according to the
southern military district. the incident happened early this morning and russia's raw stuff region. boris johnson still intends to end remaining virus restrictions here in england or in the prime minister said it was time to see state mandates pledging to lay out a plan this week for living with covid, despite opposition from some public health experts as the u.k. continues to see tens of thousands of infections a day. johnson's comments came hours before queen elizabeth tested positive for a mild case of covid-19. china is planning the country's biggest state owned companies to check on their ties to ant group. multiple regulators have told the institutions under their oversight to closely examine all exposure they have two aunt -- they have to ant to subsidiaries
anna: this is bloomberg markets. i am in edwards. -- i am in edwards -- i am anna edwards. down 1.5% on the stoxx 600, dental levels we have not seen since october last year. we started off in positive territory and now moving lower. that positive territory driven by expectations of a meeting between vladimir putin and president biden, now the russian side suggesting they need to know will be achieved by such a meeting and that is what triggered this risk off we are now seeing. the cac 40 down 2.2%. the german market also under pressure.
some of these markets losing big percentages in terms of the trade. we also have the euro and brent, two other assets on the move. brent crude whipsawed by the latest the geopolitical back story. $94.20 is where we trade. i talked to russell harvey who is talking about $100 a barrel shortly. we will get to that interview later in the programming. the euro holding onto its earlier gains. we have seen yields back into positive territory in february. we talk about the ecb and when will see the first hike in that cycle. that talk pushed to the sidelines by the geopolitics. once again we are seeing bones -- we are seeing bunds catch a bit. let us get more perspective on where we are with these markets. david sowerby joins us now.
good to speak to you. let me ask you the big picture question in we dive into the specifics. there is so much geopolitics and i know for many money managers trying to focus on fundamentals and value come this might seem like a distraction, but it seems to be permeating into all aspects. how much can you stay away from the geopolitics? how can you protect your portfolio? david: it comes down to markets do not like uncertainty. tensions with russia and ukraine create uncertainty. we could talk about the south china sea and the middle east. at the end of the day you have to recognize what you can manage money for and i cannot manage money trying to predict global politics. i promise you i will be painfully wrong. it comes down to what is the fundamentals of the company i own can they create shareholder value. anna: what are the best
opportunities you see in this market if that is the holy grail? david: i will say quickly it is interesting, i came on listening to the conversation. people are claiming to be worried the fed will overdo it on the tight inside. money supply has been growing, the fed has not even taken the playing field yet with a tighter episode and we are talking about whether it will be too aggressive. we have to still worry about inflation as the biggest threat to markets because at an inflation rate persistent at 4% to 4.5%, it becomes problematic for stocks to be your best inflation hedge. anna: how many hikes are you factoring in from the fed? the other possession of markets
is whether the fed will play this right. how many hikes are you factoring in piven you think inflation is the big focus? david: other possession of marks is whether the fed will play this i will say again. i will be wrong. we have this conversation a little more than a year today will be talking about a fed funds rate closer to 2%. even with an inflation rate in the 2% range, real rates will still be negative, and in that backdrop where investor sentiment in the last few weeks has gotten much more bearish, if i look out six and 12 months from one bearish sentiment starts to get problematic, stocks are usually 7% to 8% higher six months later, more than 10% higher 12 months later. the average is quite good. i still want to own cyclicals in my portfolio that lead to the consumer side. housing will stay strong. travel continues to pick up. travel lodging names like windham and marriott represent
potential for the shareholder in the face of uncertainty. the valuations on the stocks relative to the cash flow you're generating is still quite appealing. anna: let's dive into some of those individual names. just to say you have still owned these companies. no more stimulus checks from the u.s. government, or at least a big reduction in that and that driver. is that going to be something that hurts this business? david: home depot, they own the best real estate. maybe less stimulus checks, but if you look at the health of u.s. consumer, their balance sheet is in good shape. housing demand remained strong but supply is still limited. that placed whether it is a new home you are putting home depot
stuff or you are just repurposed thing. that plays well and i feel good about the u.s. consumer. that is why a mutual fund i comanage, i meaningfully overweight consumer today. anna: let me ask for about the u.s. consumer and its strength. a lot of people talk about the pricing power they have, and that goes through the supply chain. that results in consumer price inflation. how close are me to the point where the consumer is the part of that that breaks? when do we get to that point? or is the fact that we had all of that savings through the pandemic, is that cushioning us from getting to that day? david: we have seen consumer savings go up significantly during the pandemic. throw in the stimulus checks and you are still looking at a
cumulative two year run where growth has been healthy, balance sheets are strong. i think we will still underestimate the health of the u.s. consumer. out of this earnings season ec many consumer related stocks in the tone from the company management is quite positive as they look forward into the rest of this year. anna: the tone is quite positive. where does this lead us on the financials? i know discover financials is one of the businesses you like. what is the key driver for you? is this a value story or a pandemic story? what is the key driver? david: i've a good waiting in financials, mostly banks or discover, which is a consumer credit play which goes to my belief on the health and consumer balance sheets. i am looking at banks as dividend yields are better than the 10 year treasury at 2.5% to
3%. they are growing the dividend quite healthy across banks. discover is one of the companies they like -- one of the companies i like. the average income of discover reddit card holder is $100,000 in u.s. dollars. it is a good sign the health of the consumer will generate good loan growth in their credit conditions are airing to the better side, not to getting problematic or overdone. anna: what about demand for credit in the u.s. economies? if consumers have these piles of savings they have accrued, where does that leave opportunity for lending? david: i think it bodes well for the banks because interest rates, while they are headed higher, are still quite low. if you think about something as simple as the housing market, while prices have gone up significantly relative to income , the deciding factor is still
mortgage rates are quite low and i think that continues to propel demand for the borrower, both at the corporate level but also at the household level. anna: another stock you like is broadcom. why this one? why is this the one you want to play that story? david: is a semiconductor. they have also moved into software with acquisitions of symantec and consumer associates. they are the formula i want to fight in the 34 stocks i own. they are growing the dividend better than 20%. the dividend yield is close to 3%. they are good generator of cash flow on the semiconductor side with the software bias. when we talk about pockets of tech being expensive, broadcom cells and a price-to-earnings ratio of 17 times forward earnings. anna: and we have heard from
intel recently -- the management there talking about its investment opportunities in the united states and in europe. a sense that maybe nationalism in the sector and a need to shore up supply chains domestically will be a key driver. how much of that is the focus for you in the tech space? david: i think it is in the semiconductor space. i do not own intel. i thought i would rather own names like broadcom or texas instruments. broadcom being the biggest weight. there micro challenges facing intel. in the tech space you could be overweighted. as long as you're doing your valuation on the free cash flow basis you can find in the tech space and the software space. anna: thank you so much for your time, we appreciate it, especially on this public holiday. now let's get back to the
geopolitics. tensions continue to mount between russia and ukraine. the euro zone's most eastern nations are carrying the blood of the risk. let's get to maria tadeo in brussels. we were showing a chart of eurozone peripheral spreads, focus on the eastern european side of things rather than the southern european spreads we focused on in 2011. take us to eastern europe in that perspective on the pressure building on the ukrainian border. maria: we are actually going to the baltic because we are joined by latvia's foreign minister, thank you so much for joining us on bloomberg. you just had a meeting discussing the situation in ukraine. the big question is when to trigger sanctions on russia. in your opinion is it now? >> i do believe the time has come because of two reasons.
the first is we see -- frankly i do not buy all the propaganda we are hearing from russia about ukrainians trying to invade russia. it would be not good for those directing this movie. the russians are still in belarus. we do not know when they're going to leave. i do believe we need to start not only talking, but having the first steps. maria: you say what russia is doing at the border is a propaganda operation. you call it a movie, what they are trying to do. on that note, the situation on the ukrainian border is very serious. the question is what is an invasion?
in 2022 a we say in invasion has officially happened. in your view has already happened? >> it is happening as we speak. i apologizes for saying so much movie, i think people are thinking it is tanks rolling over, planes bombing and so on. what we are seeing currently could be the first step of the larger invasion or could be already the operation that one could describe as incursion. if we are not stopping there now, not sending the first signal through sanctions, we should not apply the whole package we had discussed for the major invasion, but still we need to send a signal. i believe in coming days we will see work more attention. we are seeing not only
diplomatic efforts, which i applaud, what president biden has done in germany has done, at the same time russians only understand a strong message combined with diplomacy. maria: you're saying it is time to speak the language of power. on friday there was a document that italy said we have to be careful when it comes to the energy sector because this could be a problem. is that shortsighted, what italy is doing? >> i never comment on any leaks. this is a complicated process. i believe we can have for the first package such things as technology transfers. those are something my contacts have opposed.
i do not think we need to apply the whole package that is in the making. we need to make very clear that we are serious, not only in our statement. sometimes we are famous for deeply concerned statements. this time i think they need to work out something. today we had a very good discussion not only about sanctions but also about having a council meeting in kyiv. maria: you're going to ukraine. from now until friday you expect there could be a war? by friday is still your base case we will not see full fighting? >> i very much hope there will not be an escalation for a war. very much hope diplomacy will work. but we have to be prepared for all eventualities. i cannot make any predictions.
politicians making predictions can lose his job. our focus is diplomacy. we need to be united, we are united. united and showing a strong resilience. maria: minister, thank you so much for joining us. that was the foreign minister of latvia. the baltic countries are always saying trust us, we know how russia operates. anna: maria tadeo in brussels. russia continues to say it has no plans to invade. there is considerable presence of the russian troops on the ukrainian border. as we heard the from the latvian foreign minister, the time has come to sanction russia rather than wait for invasion. let's keep you up-to-date with the news from around the world. here is leigh-ann gerrans. leigh-ann: good afternoon.
details are still emerging but russian forces say they have killed five "saboteurs" of the ukrainian forces who try to violate the russian border according to interfax citing the russian army some of their military districts. interfax says the incident happened early this morning. no casualties were reported on the russian side. meanwhile the kremlin's casting doubts on whether statements from washington saying there are no concrete plans for a summit between president biden and vladimir putin. france also reported a deal had been reached in principle for a meeting to ease tensions around ukraine. moscow has said it does not intend to invade ukraine but u.s. officials say they have intelligence showing vladimir putin has already given the order. china's latest bid to gain control of soaring iron ore prices is a plan to make level suppliers negotiate sales to the
world's biggest market through a centralized platform. bloomberg has learned beijing once all purchases of the steelmaking material conducted through a single state back platform. the broader focus is boosting china's influence over the price of commodities. google has faced an undisclosed settlement after a woman said she faced harassment by the search giant after she became pregnant. she says her repeated claims to report pregnancy discrimination work ignored. google has not commented on the settlement. global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. i'm leigh-ann gerrans. this is bloomberg. anna: thank you very much. let's get back to commodity markets. a prolonged period of oil above $100 a barrel and a surge in
energy demand in the second half of the year. those are just some of the forecast for the energy sector by the ceo of the world's largest independent oil trader. we caught up with him on friday and here is more on what he had to say. >> we now view we will see perhaps a prolonged period of 100 plus at some point in the next six to nine months. it is difficult to be purse ice about the exact timing. demand is going to search the second half of the year provided there is no additional worries about the pandemic and provided travel resumes to something like normal. anna: we know what kind of prices destroy demand? we have seen the prices higher. >> i think you're right. 11, 12, 13, we were in the $100 to $110 range, so we have seen these prices before.
when that occurred we do not have the coincidental gas price and coal price explosion we have today. consumers are getting it from all angles which is not a good thing. demand will be lost because the price elasticity is there. as it gets expensive at the pump people do less driving. anna: we mentioned how supply is tight. one thing that could change that is iran and whether conversations with iran result in iranian fuel coming back to markets. what is your expectation? there do seem to be some expectation that will happen this year. david: -- >> all of the parties have been talking and it sounds like there is an agreement beginning to form. it has been a long path to get here. i think the market is assuming
something will get done in the next few weeks. probably the market needs that oil. the second half of the year would benefit from that additional supply, just from a consumer point of view. the market would be easier to balance. i think most people have that factored in for the second half of the year. most people would expect additional volume from iran. clearly they are producing oil and consuming oil today. the extra supply they could send out would be about one million barrels. anna: you have any sense of how much geopolitical premium there is in the oil price? from what we have discussed supply and manned dynamics would suggest oil prices stay elevated without the geopolitical risk premium. what would you assume would come out if we see these tensions apple way? >> i do not think the
geopolitics accountpremium. what would you assume would come out if we -- the russia ukraine conflict -- i do not think that accounts for a huge amount of the price premium at the moment. anna: that was russell hardy speaking to me at the end of last week. here to discuss more is bloomberg julian lee. we are talking about $100 oil there. we have already seen that in the physical market, this is futures . $100 is not that far away stop he is suggesting we go up there and stay there. what would be the driver? even without the geopolitics of the fundamental such we will see oil above $100? julian: it certainly seems possible. the primary driver is recovering oil demand and particularly recovering demand in the transport sector. we are seeing people coming back into the office. that is inevitably going to lead to more road traffic. as people come back into the office, we are starting to seep people wanting to meet
face-to-face again. that means we may get a pickup in business as well. if restrictions continue to be relaxed as they are being of the moment, we are also likely to see a boost in leisure travel, particular he over the summer. all of those are going to push demand higher. at the same time we had the opec-plus producers who are being very cautious about how quickly they had supply back onto the markets. anna: one of the other key is iran. even on days when the geopolitics dominate other assets, the oil price does not seem to -- does seem to be moved by that story as well. julian: there is and there is very little clarity on precisely when negotiations are with iran. the iranians are clearly very cautious about signing up to a deal that may only last as long as the current u.s. presidency. they are very concerned that if
there is a return of president trump in 2024 this deal may disappear again as early as the beginning of 2025. they are very cautious about giving up the advances they have made with their nuclear technology for a deal that will only last another two or three years. anna: one of the other things i talked to russell hardy about what shale and the different role shale is playing and capital discipline and other factors and actually a labor shortage causing them to not invest the way they have previously. is that something we continue to see? julian: it certainly appears to be. there is a labor shortage. there is cost inflation. the cost of labor when you can get it is going up. there is cost inflation. that is nowhere near making breakeven prices anywhere near
the current level of oil prices. companies have adopted these financial discipline. shareholders have come to expect it. those companies that move against that fiscal discipline are being punished in the share price. anna: thank you for your thoughts. julian lee joining us with thoughts on oil markets. that is it for this hour of bloomberg markets. this is a special edition because it is president day in united states. no u.s. markets to talk you about today but we do have european equity markets in their trading day. european equity markets feeling the pressure of the geopolitics. down 1.5% on the stoxx 600. the ftse doing better as a result of its sector exposure. the cac 40 and the dax down more than 2%. substantial losses in big markets in europe. it would look at the sector breakdown we see no sectors in europe are in positive territory.
technology and auto parts are the worst performing sectors. it is the picture across european equity markets. geopolitics in the four. we will continue to provide you with the latest twists and turns come the allegations and counter allegations with regards to ukrainian border. i am anna edwards in london. this is bloomberg. ♪
anna: live from london, i am anna edwards. here are your top stories. we'll bring you the latest on the developing situation in ukraine as the kremlin says there no concrete plans for a summit between president biden and vladimir putin. we will break down how geopolitical tensions are impacting market tensions -- market sentiment. aaron kennon joins us with his perspective. and we will bring you the spacex launch live and talk with chad anderson. welcome to the program, welcome to bloomberg markets. this is a special edition because it is the u.s. public holiday. 2:00 in london, 3:00 in continental europe. a lot earlier than that in new york. geopolitics in the driving seat today. stoxx 600 down 1.4%.
no sectors in your been positive territories. major markets down more than 2%. the cac 40 and the dax both down more than 2%. the ftse 100 down .5%. u.s. futures down .7%. we try to get our heads around the state of geopolitical risk at this point. we had a better environment for risk-taking earlier on this morning. we heard talk of her french proposal that the two presidents of russia and the u.s. would get together for a meeting. the u.s. delegation confirmed it was interested. the russian said there were no concrete plans. then we heard from sergei lavrov who said you need to understand more about what the aims of that meeting were and we are now hearing lines from vladimir putin which we will get to in our next conversation. aaron kennon joins us. very nice to speak to you on this u.s. public holiday. no holiday in the geopolitics.
we are hearing from vladimir putin saying we should discuss separatist recognition today. ukraine does not plan to fulfill its minsk agreement. they are talking about recognition of russian backed separatists in eastern ukraine's, the donbas in that region. how impossible is it to ignore geopolitics with geopolitics evenly guiding many assets at this point? aaron: thanks for having me. over the long run geopolitics tends to have less of an impact on markets. looking at currency crises, the 9/11 attacks, and the life. clearly this does feed into the narrative that we are in the midst of a period of greater volatility that is not only monetary driven, i.e. higher interest rates, not only driven by the fact we are seeing less fiscal stimulus in the united states.
that has essentially evaporated after the massive amount we have witnessed in 2020 and 2021. now this geopolitical uncertainty. at the end of the day the should not be a great surprise. vladimir putin, after all, went into georgia in 2008 under the pretext he was trying to prevent genocide. this morning we are hearing the same lines out of the kremlin. i unfortunately think this is still simmering to the top rather than coming off the boil, which is very unfortunate for markets and for humanity. anna: absolutely. and we do not lose sight of the humanitarian side. the russian foreign minister saying the west is not ready to discuss our core security demands. we are going to see the foreign ministers meet towards the end of this week. whether we get the presidents meeting is very much an open question. some of the rhetoric and the
lines coming up from the russian side do sound as if they are upping the ante, that the risk is to the fore. how do you think markets are positioned if we do actually see an invasion? what kind of response would you expect to see in markets? how much of that is already priced in? aaron: on the one hand this would be the most significant incursion since world war ii we have seen in europe. if it is something we do see where they tried to move into notches just the eastern flank of ukraine but kyiv. markets are not going to like this across the board. sure there will be a flight to quality on the fixed income side. so u.s. treasuries would probably rally in price. we will probably see a further continuation of the recent goal rally we noticed of last couple of weeks. equities woods often.
equities have been in a downtrend for several weeks if not months where yes the mega caps are preventing the equity market from moving into a full-blown correction period, but what we have seen as the midcalf and small-cap segment of the markets under significant pressure, where the nasdaq is now down about 10% verso year to date. we have the russell 2000 down 11%. the advance decline lines clearly look week. if you look at companies hitting 52-week lows, not highs, that is at an all-time high within the last several years. certainly concern for caution if you are a long only equity investor without the ability to allocate to other asset classes. anna: a need for caution there. the other preoccupation of markets away from the geopolitics is how much tightening we will see from the federal reserve this year and
beyond. you think it is possible we see tightening from the federal reserve that leaves equities "intact," defined that as you like. what kind of hiking cycle are you factoring in and how will equities perform? aaron: if you look at the consensus, i guess they are calling for a total -- i looked at fed fund futures it looks like the market is pricing unit 200 basis point move over the next 18 months. that is 6% -- that is six or seven rate hikes at 25 basis points apiece and a few more next year. that is a bullish scenario given not just the geopolitical uncertainty but the prospect that inflation will come off nicely from the current peak levels as supply chains normalized, but also growth. growth will shift in a
decelerating way quite dramatically in the back half of this year as we see things playing out. growth last year is about 5.5%. we could see growth this year at 3% with the last quarter looking less rosy than that. i do not think slow growth is necessarily low equities, but in a higher volatility environment it is difficult for price-earnings multiples to expand. our ultimate view on the fed is they will move less than 200 basis points. i do not know how much less. i do not know to some extent they make a mistake and move 200 basis points like they did in 2018 where they moved and had to backpedal. it would not surprise me if we saw some of that occurring. i think the fed will prove more dovish in march than the market things. 25 basis points and not 50 as they see some initial indications of inflation
decelerating. anna: things could change very much into the second half of the year. what are the chances, not to echo the words of team transitory, but what are the chances inflation does start to subside? some of the difficulty is some of the chinese covid policy and some of the geopolitics all have inflationary dynamics to them, not the opposite. aaron: there are a lot of crosscurrents for sure right now. here in the u.s. we have had higher inflation than in europe, although europe has certainly had it as well. the uncertainties around geopolitics certainly have some impact on some components of the supply chain, project lee agriculture. ukraine is not a huge manufacturing base, neither is russia. less concern on the margin there, but the trickle-down impact of an energy crisis in
europe due to a longer-term incursion, ukraine is something we are keeping at the forefront of our thought process we are monitoring very closely. anna: aaron cannon, ceo of clear harbor asset management. just to give you update on the headlines. we are hearing from the ukrainian military russia's border violation claims are fake. this in the context of russia suggesting there been incursions over the border. we have heard claim and counterclaim from both sides of her recent weeks. we'll be hearing more from sergei lavrov. the russian foreign minister saying the u.s. is trying to cherry pick from russian security proposals. he previously said he wantss to hear more about what a meeting between president putin and president biden would mean for agreeing one should take place. sergei lavrov also agreeing diplomatic efforts should continue. that being one of the more
markets a special edition. i am anna edwards live from london. let's check in on bloomberg first word news and get an update on the top stories. angel? angel: the from one is casting doubt on earlier statements from washington, saying there are no concrete plans for a summit between president biden and vladimir putin. france had also reported a deal reached in principle for a meeting to ease tensions around ukraine. moscow has said it does not intend to invade ukraine but u.s. officials say they have intelligence that vladimir putin has already given the order. sergei lavrov is speaking and saying the plan to meet with anthony blinken is set for february 24. people are leaving hong kong in record numbers. 20,000 people left last week, the highest number since the start of the pandemic. the recent surge in people crossing into mainland china
underscores the city's fading appeal. deutsche bank is warning its employees not to delete whatsapp messages from their phone as part of efforts by the german lender to crackdown on private communication channels amid a u.s. crackdown. it december u.s. authorities impose 200 million dollars in fines on j.p. morgan chase for use of whatsapp and other private email accounts. global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. anna: angel, thank you very much. let's get a briefing on the latest in ukraine. plenty of headlines from the russian perspective. let's get a bloomberg's henry mayor who joins us now from moscow. very good to have you with us. we are seeing live pictures of the russian foreign minister and the russian president and plenty of news coming through. sergei lavrov say we will continue to pursue nato eastward
expansion hold, giving a date for the meeting with anthony blinken on february 24, saying the talks should continue but there is a flurry of communication coming across. what stood out to you? henry: i think we are reaching the climax of this crisis that has been building up since november. russia has these extremely sweeping security demands it has been making. up until now it has not received assurances it will get those demands. it is clearly increasing the pressure every day. now you have the possibility russia could recognize these breakaway areas in ukraine. the diplomacy is continuing against the backdrop of increasing threats from russia. anna: it seems russia is looking
for a change in position from the united states without that happening they're less likely to agree to a summit between biden and vladimir putin. president putin says the position in the talks has changed but macron could not specify any change in the u.s. position, russia holding out for any sort of change in the u.s. argument. henry: definitely. what they're looking for a some kind of ironclad guarantee ukraine will not get into nato. whether that comes from ukraine's position shifting or something nato does, that is something they're willing to accept. we have no indication either nato or ukraine are willing to provide that insurance. secondly they want to see movement on the midst agreement, which currently has not been fully implemented. those two things are very difficult questions, but clearly
russia is determined to try and put as much pressure as it can on the u.s. and its allies and on ukraine to give in. anna: we see claim and counterclaim about the ukrainian border. a breaking of the truce seems to be something that does happen on a regular basis, but there's a big focus on it today. we heard earlier from a russian news agency that separatists have asked russia for cooperation. they want to be recognized. previously vladimir putin has suggested this was not going to happen in the short term. bring us up-to-date on the role of recognition of russian separatists in donbas. henry: we have seen this happen before in georgia in 2018 when there was a war that took place in russia recognized the separatist region there. this has been used before.
clearly it is branching as a threat. you are right the russians have indicated they will go ahead with this for now. we will see with the outcome of today's meeting is. they are discussing it as we speak. it is hard to make forecasts in this situation. the indications are still this is a threat rather than something they would actually implement. anna: you started this conversation by talking about how we seem to be getting to the culmination, to some sort of climax, things moving very quickly. we look for a meeting between the foreign's taking place on thursday. other than that, the big question remains when we will see a meeting between the two presidents. henry: that meeting between antony blinken and sergei lavrov is intended to pave the way for a presidential summit. a presidential summit would be the opportunity for a deal to be struck.
that would be the final phase in this. we are getting pretty close to a situation where we either manage to resolve this crisis or it could spin out of control. anna: we see pictures of the russian chief donbas negotiators speaking at the security council meeting. you see pictures of sergei lavrov and vladimir putin. thank you for bringing us the latest from moscow. coming up, my conversation with russell hardy. we talk about where oil prices get in the wider conversation weighs in on the role of shale and iran. this is bloomberg. ♪
to $100 per barrel. i spoke exclusively with russell hardy to discuss the possibility of oil pushing higher from here. russell: we touched 100 on brent on monday. it is not a new phenomenon. we look at the supply demand factors that have been affecting markets for last couple of years, demand has recovered two about the level we were pre-pandemic. it is going to exceed the level we were pre-pandemic in the back half of 2022 and into 2023. supply needs to catch up. i think what the market is worried about is how much supply there is available in the second half of the year into 2023. weight will now see a prolonged period of 100 plus in the next six to nine months. it is difficult to be precise about the exact timing, but demand is going to search the second half of the year provided
there is no additional worries about the pandemic and provided travel resumes to something like normal. anna: are you expecting the supply situation to remain constrained? we have incredible backwardation in the markets. is that something that is going to persist? russell: it should persist. opec is wrapping up $300 to $400 a month. more supply is coming. eventually we will run out of spare capacity and that is what the market is trying to work out , how worried to be about that scenario. one of the short term solvers is u.s. shale. u.s. shale is increasing in production, but not increasing as fast as it did in 2014 to 2015. there's is a lot more capital discipline, a lot less general capital available to throw at the shale industry. it does not look like it has the
capacity to grow as fast as it did in 2014 or 2015. anna: we know what kind of processes destroy demand? we have seen prices higher not all that long ago. russell: i think you are right. 11, 2012, 2013 we were in the $110 range. we have seen these prices before. when that occurred we did not have the quincy dental gas price and coal price explosion we have today as well. i think consumers are getting it from all angles, which is not a good thing. demand will be lost at the margin because price elasticity is there. as it gets expensive people do less driving. anna: we mentioned how supply was tight.
one thing that could change that is iran and whether conversations result in fuel coming back to markets. what is your expectation? there does seem to be some expectation that will happen? russell: all have the parties have been talking this week and it sounds like there is an agreement beginning to form. it has been a long path get here. i think the market is assuming something get done in the next few weeks. probably the market needs that oil. the second half of the year would benefit from that additional supply just from a consumer point of view that the market will be easier to balance. i think most people have that factored into the second half of the year. most people would expect us -- additional volume from iran. clearly they are producing oil and consuming oil themselves today. the extra supply that could send out to the world would probably be about one million pounds --
one million barrels. anna: you have a sense of how much geopolitical premium there is in the oil price? supply and demand dynamics would suggest oil prices stay elevated even without the geopolitical risk review. what would you assume would come out if we see these tensions go away? russell: i do not think the geopolitics account for a huge -- talking about the russia ukraine conflict -- i do not think that accounts for huge amount of the price premium at the moment. anna: that was my conversation with russell henry. a discussion taking place in russia, the russian and his foreign minister. this is bloomberg. ♪
switching wireless carriers is easy with xfinity. just lean on our helpful switch squad to help you save with xfinity mobile. they can help break up with your current carrier for you and transfer your info to your new phone. giving you a fast and easy experience that can save you hundreds a year on your wireless bill. visit your nearest xfinity store and see how the switch squad can help you switch and save. switch to xfinity mobile and get connected to the most reliable 5g network. talk with our helpful switch squad at your local xfinity store today.
picture on the first word news stories we are covering. let's get straight to angel this afternoon, european time. angel: let a mere prudence is the situation in ukraine -- vladimir putin says the situation in ukraine -- ukraine does not plan to fulfill the minsk accord, meanwhile survey lavrov says the west is not ready to discuss the core security concerns but that diplomatic effort with the u.s. should continue. -- that includes the removal of vaccine mandates that are the main complaint of protesters occupying products grounds -- parliaments ground. she said she expect a wave of omicron to expect a population in three to six weeks. u.k. prime minister boris johnson tends to end remaining
virus restrictions in england. he said it was time to seize mandates to lay out a plan for living with covid despite opposition from some public health experts at the u.k. continues to see tens of thousands of infections a day. the comments came hours after queen elizabeth tested positive for mild case of covid-19. china is telling the countries biggest state owned banks to start a fresh round of checks on their financial exposure, renewing scrutiny of billionaire jack ma. regulators told institutions under their oversight to closely examine all exposure they had. sources tell bloomberg is unclear what triggered the new scrutiny. global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. i am angel feliciano. this is bloomberg. anna: thank you.
just one day after it was revealed the queen contracted covid, boris johnson is expected to announce an end to virus restrictions. trade unions are challenging the plan, saying the prime minister should put public health first. bloomberg intelligence sam fazeli joins us now. very nice big do you. with the u.k. reopening plan in the context of other steps towards normalization or steps towards trying to live with the virus, we are seeing that in other places as well. the u.k. set the stage because the news flow is expected this afternoon. what you make of the u.k. reopening plan? sam: when you look at the numbers in terms of cases, hospitalizations, icu, deaths, they are all going in the right direction for this decision to be made. in my in favor of telling people
to stop wearing masks? as a rule, no. mi i in favor of telling people they do not need to self-isolate if they are sick, no. the question is how much you rely on people's common sense in knowing exactly what is at stake with the virus versus having a hard rule which i'm not sure how you were enforcing anyway. pragmatism perhaps is winning, but we need to see the cases remain on the downward trend. anna: the argument in the u.k.'s we need to get to a point, maybe the timing is the question, get to a situation where you treat covid very much like you treat other infections. if you do not feel well you stay at home and you do not go out and socialize, but then when you feel better you get back to work, you do not have to wait to be tested.
is that accepted is where we are trying to head to? it is a question of when we are able to do that. sam: exactly. what they we should have learned is there are no hard and fast rules. the virus is looking great, with the current variant, with the vaccines, we seem to be able to be managing the severe outcomes. that is the way people are feeling positive right now. we should not assume it is the end of the pandemic or the end of the problem. covid is not a common cold. we should still be humbled we got to that. today we can celebrate the downward trend of the icu, etc.,
but i do not think this means it is over. anna: and you have been following subvariant's. what is the subvariant we need to be watchful for? sam: be watchful of rather than concerned is the ba2 subvariant. it does not seem to be escaping vaccines anymore than the omicron ba1. it does not seem to be causing more severe -- more severe disease. it is more transmissible. if it is more transmissible, there is a risk we see another taking off of cases when everybody is open and running around without masks and not necessarily self-isolating, hoping that will not be the case. anna: what we know about omicron and the way interacts with other variants and the level of immunity we might get. many of us know people who had delta and then got omicron.
we know delta infections did not stop you from getting omicron. we hope the vaccines are keeping the worst of the symptoms at bay. what we know about how the various variants are evolving through what kind of immunity we get from having one against variants we have not seen. sam: i've seen data that suggests if you've been infected with omicron you do have immunity from other variants. the basic situation seems to be in people that have been vaccinated. your immune system has already seen something that looks like the variant. it is very well trained to manage it it has a more evolved immune response which is seen in a study that is published recently that in those cases have hybrid immunity. you even have the ability to neutralize the first sars virus.
that is good news. i wish people do not have to get the hybrid immunity, but to a degree that is probably inevitable for most people. anna: we are seeing reports from wuhan, a place that will be synonymous with the virus, saying they found four covid cases, which by global standard sounds like not very many, but we know china is managing this differently and has much lower levels of transmission up to this point. what are the chances of china sticking to covid zero or variations of covid zero? sam: that is pretty tough. these are four cases. we probably have had more than four cases in the past 10 minutes in the u.k. the issue with omicron is how transmissible it is. the issue is you have high transmissibility while you have the symptoms.
it is the invisible value rest. it is the case with the other variants, but this what is highly transmissible. give 24 to 40 hours you can be infecting people without knowing it, and a lot of the symptoms are like the common cold. even when you have symptoms you are not sure if you have it. that is the problem. and it infects other hosts outside humans. i think it will be tough to keep a lid on it. china has managed so far. let's hope they manage to keep going without hampering their economy. anna: sam fazeli, thank you for joining us. on this program, we are looking for the launch of the spacex falcon 9. looking at live pictures of the preparation. it is said to deliver over 55 internet satellites into orbit. more on the lodge in the future of spacex next. this is bloomberg. ♪
anna: prop up to bloomberg markets. this is a special edition of bloomberg markets because it is the u.s. public holiday. we are seeing reaction in the russian stock exchange. the stock index following the most since march 2020. there are other stories to talk about. i wanted to alert you to an event outside of markets. space-x is sending 36 internet satellites into orbit. this launch was delayed from yesterday when it was postponed due to the weather. the launch is occurring at cape
canaveral, florida. joining us to discuss this event and its broader significance, chad anderson space capital managing partner and founder and investor in all things space, including space-x. thank you for both joining us. matt, what is the importance of today, or put it in context for us, the satellite delivery? matt: this is a starling launch, it is a space-x broadband internet system it should be a fairly routine launch. the last launch in early february they lost most of the satellites. they are putting this into a high orbit to avoid those issues repeating themselves. they're aiming to get to that 12,000 satellites over the next two years. they have launched over 2000 so far, 15 or 16 of those are operational. the routine launch improves the capability capacity and coverage.
anna: your thoughts? just another launch or something more? chad: it is another step towards getting the commercial service of the starling satellite system operational. this booster has blown 10 times before. this'll be the 11th time the rocket booster has taken humans and cargo to orbit. that is pretty important. that is one of the reasons space-x has such an advantage. this booster has been depreciated to zero many launches ago. there extent -- they are getting launch and with zero marginal cost. from a business perspective it is very interesting. we are going from satellite communications being a niche product accounting for 1% of global broadband top to one third and next three to five years. anna: let me erupt greatly
moments ago we throttled down the engines by decreasing the flow of fuel to the engine. there is in preparation for maximum aerodynamic pressure. we are coming up on maxq in a few seconds. >> max q. >> and there is that call. we do have four events coming up in quick succession. the first will be made engine cut off. the second engine start one, then faring deploy. the main engine cut off is where all nine of the engines shut down to slow the vehicle in preparation for the next event, which is state separation. this is where the first stage separates from the second stage. after state separation the first date will start making its way back to earth for landing.
why were able to land the first stage both on land and at sea -- anna: we will monitor the pictures and leave them up for you so you can see what we are talking about. let's get back to our conversation. we have passed through max q, the moment of deep mechanical threat on the rocket but things look as if they are going smoothly. matt, we were just hearing from chad about the number of times this booster has been used already in the reuse of equipment that sense satellites into space or other deliveries into space. that is a big game changer in the last decade or so, i suppose. matt: massively. space-x has been at the forefront of that. they have transformed the business model of space. it is quite incredible to see the launches come back down to and quickly turned around to reuse them again. the next five to 10 years we
will see a complete transformation of the number of rockets going into space, also taking how much it costs. i think the future will be quite exciting. anna: you made the point about the reuse of the boosters. this helps the finances. matt was also talking about how some time ago they saw prior launch satellite into space where they lost some of them. these are going into higher orbit. there is clearly a huge risk for the equipment despite the trend towards reuse. chad: you have to check the weather report. today the launch window was instantaneous, meaning if they did not launch at 9:44 eastern time they were not going to launch. the event when they lost the satellite a couple of weeks ago, that is a stigma event. they are aware of the risk and decided to take it.
i think a lot of that has to do with the fact they have lowered the marginal cost of launch in their mass-producing the satellites have brought the cost down of the satellite manufacturer as well. because of the way they approach business and their innovative business model that allows them to take these kind of risks -- to predeath! -- to put an exclamation point on what matthew said, last week space-x re-flew a booster 100 times and they have done this before anyone has done this. space-x is clearly the apex player in this category. anna: and chad, telus or about the expectations around starship. he described how space-x is out front on this but starship has the potential to make that even more so, i suppose. chad: we are only speaking of space as an investment category
because of space-x. 10 years ago they fundamentally change the economics of getting to orbit with their falcon nine rocket and ellen starship coming online, this has the potential to have another step change. we are entering a new paradigm where this vehicle is the largest and reusable. they could launch 100 times to low-earth orbit. they could launch hundreds of startling satellites and the capabilities for this system are endless. it will unlock all types of new investment opportunities and give categories and new market segments. anna: that is your expectation. your expectation, matt, around starship and its significance? matt: i agree with chad. it is a game changer. they have had a few pickups in terms of developments, but we
are hoping to see the first orbital test mission this year and that will be a launchpad for them to then take it on and start offering commercial service, both for the starling program but also for nasa and third parties that want to get their equipment into space and beyond. anna: chad, how concerned are you about space collisions with space junk, but this gets talked about a lot. what is the top in the industry about how this is tackled? chad: there's certainly a lot more activity today than there was in the past. the number of satellites launched in 2020 was 20 times more than a decade prior. there are 3000 to 4000 satellites in orbit today and that is expected to grow between 50 and 100,000 in the next 10 years. that is a lot more satellites and a lot more business being conducted in orbit. there is 100 times more debris and objects in low-earth orbit than there are satellites.
these are old satellites, rocket bodies, debris from collisions and weapons test. we are seeing more attention put on this. it was the key topic out of the g7 summit. space is big. the technology we are using today is much better than what we've used previously. the portfolio company of ours has ground-based radar networks allowing us to track objects that are two centimeters in orbit and it is feeding in to space-x's starling operations and it is powering their collision avoidance. the technology we are using is a lot smarter than it was. anna: a lot smarter and i suppose there is a lot more focus on it if we are going to see private space stations been something people want to go and visit, then getting a handle on space jump in the risk associated with it becomes more a priority. chad: it absently does.
starship is one of the capabilities -- one of the capabilities it has because it is so large and so reusable, it has the potential to be a space station itself. we know they have this aspirations because they recently put in a bid for a contract to do just that. it is very interesting to think about a vehicle that is this large and if it launches for just the cost of fuel, that is comparable with a single seat in the space station today, you can now launch an entire hotel. anna: something else is happening at the front, private commercial moon missions will stop what you think will be the goals of those kinds of missions to start with? chad: this is a big year for lunar transportation and moon missions. we are hoping to see two of the
first commercial missions to the moon. these are part of the artemis program designed to get humans back onto the surface of the moon. these missions today and over the next couple of years our robotic precursor missions to go in scalloped the terrain and understand where the water is to see if we can harvest the water ice and split it into hydrogen and oxygen. anna: thanks to chad anderson, space capital managing partner. staying in the family of companies tied to elon musk, tesla faces a review in germany over an autopilot feature. bloomberg's craig trudell joins us. what can you tell us about this probe? craig: this is being done by germany's authority.
tesla has approval with the different authorities in europe in the netherlands and that is how they've gotten approval to put features like autopilot on the market in europe. notably europe has been more restrictive than the u.s.. you have limitation in terms of what autopilot can do and what features they have made available. one of the features that has been around -- allowed is off to stop -- up to snuff for your. this will be a matter for germany and the netherlands to work out because tesla did not go to germany for approval for this. it is another indication of greater scrutiny on autopilot. anna: when are we looking at mass use of this kind of technology? what kind of time horizon? craig:one of the in terms of hil functionality i think it will be
longer in europe than in the u.s. for functions like self-driving, which is beasley controversial in the u.s. already. anna: thank you ray much for taking us through that tesla story. let me get back to the markets. the geopolitics they can fast today. the russian stock exchange following the most since march 2020. now their worst day since 2008, down 12%. plenty of headlights coming through from the foreign minister of russia from vladimir putin himself. we will keep you on these developments. this is bloomberg. ♪
anna: live from london and anna edwards. welcome -- london, i'm anna edwards. welcome to "bloomberg markets." the latest situation in ukraine as the crimmins has there are no concrete plans for a summit between biden and putin. how geopolitical tensions are impacting market sentiment. plus, the latest on lifting u.k. covid restrictions as a standoff delays the signoff. just past 3:00 in london, 10:00 a.m. in new york. special programming today because of the holiday in the u.s. let's check where we are on these markets, down by 1.3% on the stoxx europe 600. nervousness around the geopolitics. we've heard a lot from the russian side today, a little from ukraine as well, little
from the u.s. because of the public holiday. but it is the russian thinking that is working its way into market, and there is the nervousness around that. we heard from the foreign minister of russia, sergei lavrov, talking about how there is a need to keep talking, and that meeting between him and antony blinken will take place later this week, but we don't know where that leaves any mating -- any meeting of the presidents. big markets in europe losing more than 2% in today's session. let's get to the polaris capital management portfolio manager. polaris has roughly $15.2 billion in assets under management. we appreciate your time with us today. we are focused on the geopolitics, of course, looking at the newsline coming through from russia today. the impact on russian assets very clear, down 10% on the russian stock market. how much is this geopolitical
story knocking your investments off track? how are you managing to make them stand up to the geopolitical threat? >> good morning from boston. we really think that some of the geopolitics israel. some of it might be the oldest page in the political playbook when things aren't going well at home. but clearly, the markets are down on the news. we actually have one equity in russia, a diamond mining company. we think it's got great value. that our view on it is that we just try to focus on companies that are generating a lot of good, strong cash flow. as long as they can do that, raise prices and keep cash flows growing in real terms, the short-term volatility of these things will ultimately pass, and then we will get back to focusing on real value.
anna: that is interesting that you have some exposure in the context of that russian mining asset. some people suggest that emerging markets will show stress in a time of geopolitical tension, but others say you need to be in commodities that might take you in and emerging-market direction. how are you playing the commodities story? >> we like to find low-cost producers. one of the things we have been cognizant of is they will whether the downturns and the short-term cyclicality of prices. we really like those kind of companies. we are a bit overweight commodities. we've got some concerns about the potential for slowdowns in the economy. there's a little bit of a risk to that. but on the other hand, we think that inflation starts at the commodity level, and we think that if we are very careful and selective buying into
commodities and assets where there is strong supply and demand balance in favor of the producers, that should really do us well. for instance, we like a green metal, not just the patina on copper when it ages, but the greening of the world economy, is going to play into the hands of copper companies. anna: i'm going to be interviewing the ceo of an tough gas. you seem to be excited by that investment story. what makes you nervous about it, or what could stop that investment case coming to fruition? what should i keep in my mind as i come ready to come -- as i get ready to come to the ceo? bernie: the biggest problems with copper or that the assets are typically found in political environments which are not particularly favorable necessary to capitalist production,
especially in latin america these days with things going more towards the left politically. more royalty taxes, more other taxes on these companies. of course, you've always got the and of it will problems with supply disruptions. mining is a difficult business. when we go into certain bodies, things don't go so well. they have challenges with respect to mining that ore. that is one good question for them. anna: the search for places to hide out from inflation threats takes us into commodities, takes us down the supply chain into where the supply chain starts with some of these metals and mined materials. where do we going the inflation fight from here? if we are thinking about how much pricing power all of these companies have, and all of the
companies in the supply chain, how much rising power they have, when do we get to a point when u.s. consumers say we are not paying up anymore? are you seeing any signs that the pricing power the companies you invest in is going too far? bernie: that is the $64 question because we definitely know that there will be some demand destruction. i guess there are two forces in that regard. one is clearly when prices go up and people don't have enough income, you're going to have a problem with people not being able to afford certain things. on the other hand, we still got an encoder ball amount of stimulus hanging around. if you look at the trillions of dollars that went into people's pockets the last couple of years , the banks still have close to $1 trillion of excess liquidity in the form of the stimulus checks sitting in back accounts. ultimately is going -- ultimately it is going to the federal reserve as deposits from
banks. that money is eventually going to be spent, taken away in higher taxes and paid for for all the spending. but we do think there's going to be some reasonably good growth going forward. but you have to be really careful and selective on finding companies that are going to be able to raise prices more than inflation, which we think is going to be here for a little bit longer for sure. anna: what have we learned from the 1970's example of fighting inflation that you think is important for us to think about now? because the parallels are not perfect. history doesn't necessarily repeat, but sometimes it rhymes. what do we take that that's what do we take from that experience that informs us now? bernie: fisher black, one of my professors, was fond of saying that inflation is what people think it is. so inflation expectations i think are high right now. we have been in the camp for the last decade or more that we were in a very deflationary environment based on the hundreds of meetings we have with companies every year. now when we have those same
meetings, they are no longer talking about fighting off input cost increases, but cost savings programs and productivity enhancements and so forth. we talked to them now and say, what are you doing about these cost increases? they say we are raising prices and we got a long way to go to catch up with the last six to 12 months of price increases. so we think there is an embedded, latent set of cost increases we are gone to see throughout 2022, possibly into 2023. anna: thank you very much, bernie horn of polaris capital management. you very much for your time. i just want to get to some lines coming out of the u.k. on the fight against covid-19. the u.k. vaccine panel backing a spring covid booster for the most vulnerable. by that, the mean those over 75 and those who are care home residents. the u.k. vaccine panel making a booster recommendation in a statement. just bringing up-to-date the fight against covid-19 here in the u.k.
keeping up-to-date with news from around the world, with the first word news update, here's angel feliciano. angel: russian president vladimir putin says he is considering official recognition from separatists in east ukraine , which would further escalate tensions with the west. russians -- to discuss the issue just after the military said it had killed five saboteurs and destroyed two armored personnel carriers. top operators metropolis health care and health labs have plummeted at least 30% this year. the decline picked up speed after the december quarter earnings trailed analyst expectations. deutsche bank is warning its
employees not to delete whatsapp messages from their phone, part of efforts by the german lender to clamp down private communication channels amid a u.s. crackdown. in december, u.s. authorities imposed $200 million in fines on jp morgan state -- on j.p. morgan chase for whatsapp and other accounts. a woman said she faced discrimination by the search giant after she became pregnant. she sued google in 2020 after she claimed that her repeated efforts to report pregnancy disc, nation were ignored. google has not commented on the settlement. 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. anna: thank you very much. currently there is especially called kremlin meeting of putin's security council taking
place. we have been following the headlines for the past hour or so. president putin saying he's considering an appeal for official recognition from separatists in east ukraine. the headlines helping to send russian stocks at one point to their lowest level since 2008. for the latest, we welcome bloomberg's mark champion. we are seeing this meeting taking place at the russian security council. headlines coming sick and fast from many different voices. crucially, president putin saying he is now considering recognition of separatists. bring us up-to-date because this has been something that the russian duma had already voted on, but he has not done it as yet. what is the significance of this? mark: this would make it relevant minsk peace accords that diplomacy has really been based around, the attempt to get implementation of the peace deals that were made in 2014,
2015, so it would really change the game because that would no longer be relevant. it would allow the russians to claim that these are now independent territories, and that they can have their own relations with them if they invite them in. this would be the russian argument. so it really does change the game in quite a number of ways. most dangerously, the extent of those territories at the moment is not the extent they claim, so more than twice the amount of area that they now control. it would open also the gateway to further fighting, but now with russian troops on those territories. anna: as you are describing it, and we are looking at these live pictures coming to us of the russian security council meeting, i am thinking of what we have heard from the u.s. in
recent days about russia creating the pretext for invasion. from what you are hearing today, all of the different voices speaking in russia, is that what the russians are moving towards? mark: they certainly wouldn't describe it as that. they continue to say they have no plans to invade, but they said today that they discovered and killed five saboteurs from ukraine who crossed into russian territory, that they destroyed two armored personnel carriers. if it is true, it would be incredibly stupid of them to make this move for the first time, taking the war onto russian territory just as russia has more than 100,000 troops assembled, so it would be extreme he stupid, but this is what the russians say have have -- say has happened. they are building a case to intervene. in what way they will intervene, we still don't know.
it may not be the full-blown attack on kiev that the u.s. has been describing. anna: president putin saying we are not discussing annexing separatist controlled areas, which perhaps is interesting in that context. we earlier heard from another russian voice saying that ukraine's zelensky will not fill the minsk agreement. where does this leave us? clearly the minsk agreement is the diplomacy of years past, and we are heading into a week where we might see another flurry of diplomacy. where do we stand on all of the diplomatic efforts currently underway? bernie: -- mark: these issues are unclear at the given moment. biden has said he is very willing to have a meeting with putin, another summit. this would be mediated by
emmanuel macron of france. but the russians have said no concrete date has been set for this. we want to first know what can be achieved. so we don't know if there actually will be such a summit, and it may be that whatever comes out of the security council meeting to decide whether it makes sense to have another stab at diplomacy. anna: thank you very much for your analysis. much appreciated. bloomberg's marc champion with the geopolitics. turning now to the economic reopening post-covid, australia is opening its borders to double vaccinated visitors after a two-year travel ban. wennberg's paul allen has the details from sydney airport. -- bloomberg's paul allen has the details from sydney airport. paul: the borders are once again open to anyone who is vaccinated
and has their visas. even those who are unvaccinated are only quarantined for seven days in a hotel, so this is a big step forward. the first flight from los angeles today was under the new conditions, and there's a real party move here at sydney airport's arrivals terminal. we have not seen this much action for just under two years. we saw them giving away miniature drawers of vegemite, toys and stuff as well. this is what they had to say. >> it is huge for australia. 606 2000 people employed in our tourism industry. obviously it has been a very difficult two years, but it is party central here at sydney airport as we have reopened fully to the rest of the world. it is great news and it is great to see the excitement. i think it all goes well for our tourism industry, rebounding very strongly.
paul: they also conceded there would be challenges around the reopening. you can never be quite certain what the coronavirus is going to do next. with australia having vaccination rates well above 90% , there's also going to be challenges for the torah ms. -- the tourism industry itself. it has been mothballed now for effectively two years. with such a tight labor market, there's going to be difficulties around attracting staff back. there are tourism markets as well. not only does travel have to be encouraged to mcbee long journey trust really a, before the pandemic, the biggest source of tourists was china, and the relationship has soured somewhat since the pandemic began. the trade minister confident that all of that can change, even know here in australia, we still record new cases of the omicron variant in the thousands per day.
the new south wales premier said earlier, this is what the transition looks like from pandemic to endemic. i'm paul allen for bloomberg. anna: are things to bloomberg's paul allen for filing that report -- our thanks to bloomberg's paul allen for filing that report. coming up next, we will hear from french finance minister bruno le maire. geopolitics not far from that conversation. that is next. this is bloomberg. ♪
tensions. first of all, what kind of impact would sanctions on russia have on the french economy? >> it would first of all have a really deep impact on russia, on the russian economy and the russian interests, but it is time for de-escalation. it is time for diplomacy. there has been a major -- thanks to the efforts made my -- made by president macron. there's the possibility of having a meeting between president putin and president biden. the two leaders agreed on the principle of a meeting. i think that we should all make the best efforts to make this meeting a reality. once again, president micron played a key role to trigger this meeting between the two leaders. >> so you put all the efforts diplomatically, so if it doesn't
work, what kind of sanctions should we be looking at? >> i don't want to give too much details on the sanctions because if we want the sanctions to be efficient, we have to trigger the sanctions when it is time to trigger the sanctions. but one point must be very clear. if there is an attack from russia to ukraine, we have a set of sanctions that are still available, and that would hit the russian people, the russian state, and the russian economic interests. >> how long do you think these elevated prices for gas and oil will stay? if it is a year, how much more subsidies can you put in place? >> everybody must be aware that until there are some geopolitical tensions in ukraine, taking into account the fact that there is a very strong economic recovery in the united states, in europe, everywhere in the world, which is good news for all of us, we will have to
face an increase in energy prices. anna: the french economy minister bruno le maire speaking with bloomberg's francine lacqua. let me tell you what is happen with russian stocks, filing by the most since 2008 as the russian security council meets. this is the intraday performance of the molex, the russian index, down by more than 10%. stocks sinking the most globally. the ruble also slumping, so attention very much focus on russian assets as we hear from president putin how we must decide on recognizing separatists. this would be a crucial departure from the minsk accord. putin saying we are not discussing annexing separatist controlled areas, but the role of the area clearly influential. this is bloomberg. ♪
- [announcer] imagine having fuller, thicker, more voluminous hair instantly. all it takes is just one session at hairclub. introducing xtrands. xtrands adds hundreds or even thousands of hair strands to your existing hair at the root. they're personalized to match your own natural hair color and texture, so they'll blend right in for a natural, effortless look. call in the next five minutes and when you buy 500 strands, you get 500 strands free. call right now. (upbeat music)
around ukrainian separatists and dependents today -- separatists independence today, of those breakaway states in eastern ukraine. russian backed separatists currently in control of those, and this will be racing for can if the russians did recognize these states' independence. that would go against the midst accord -- the minsk accord. we will continue to watch this. president putin saying he's going to decide today on whether russia recognizes the independence of these areas. the duma in russia, the parliament, voted to recognize them and called on the president to do so. so far he has not gone so far as to do so, and has previously said that they have no plans to invade ukraine. let us step away from that in geopolitics for the moment. a little closer to where i am in the u.k., let's talk about u.k. politics because the u.k. prime minister boris johnson is set to announce an end to england's
covid-19 restrictions cabinet discussing a so-called living with covid plan today as queen elizabeth tested positive for the virus, with the pala saying the 95-year-old monarch is experiencing mild cold like symptoms -- the palace saying the 95-year-old monarch is experiencing mild cold like symptoms. bloomberg's david merritt is joining us. there's been delays in all of this. we are expected to hear from prime minister boris johnson around now. what is the talk about the delay? david: it is a slightly strange spectacle this morning. we had ministers signing into 10 downing street, supposed to be rubberstamping this new plan to live with covid, and then it all sort of fell apart. it turns out they could not have that meeting after all. it seems there's a bit of a row that went on between the health secretary and the chancellor of the exchequer, about money, of course, about how much they want to keep paying for testing, which is costing a huge amount of money every week to provide
free testing for anyone who wants it. of course, the department of health would like to keep that going a bit longer. what was kind of interesting is that they had not ironed this out before they went to do cabinet. you would expect them normally to go in and have all those differences ironed out. maybe a small sign to get that boris johnson's grip on his most senior team isn't quite what it should be. anna: boris johnson is still prime minister, of course. let me just ask you, what were we expecting to hear today from boris johnson around this time, which we might still here later on today? david: it seems some agreement has been reached in the last few minutes, so we may hear from him this afternoon. he will want to say that britain is moving on from this pendant. i think symbolically it is rather interesting. you mentioned the queen, certainly living with covid.
she's tested positive, but mild symptoms, performing light duties. he said over the weekend in an interview it is time for britain to get back to work. he wants people coming back into city centers, shopping, using offices, all of these things, and feeling that we should be moving on. we heard this afternoon there's going to be a fourth booster jab given to anyone 75 or anyone who is vulnerable, another part of this plan to insulate the public from covid or any new variants and try to get the economy going again. anna: it is interesting timing, this announcement,'s to waiting for it to come through. it is delayed a little. instant that comes at a time when we have just heard that the queen, still the head of state in the u.k. and other places, has tested positive for covid. a
this year we are going to be set up writing 70 years of the monarch on the throne as well. david: it is also a reminder that this virus has not gone away. that is what a lot of people are also saying today, that the administration is moving too soon. everyone is saying we all want to get back to normal life, but this virus is still with us. if it can penetrate the bubble put around her majesty the queen at windsor castle, then everyone is still vulnerable to catching this thing. a lot of people are saying he's jumping too soon. we know his instinct is to try to rip up all these regular. a lot of his own backbench is one that is well. lots of opposition in saying maybe this is a convenient distraction for the prime minister, he big announcement when we all know the context of what is going on in terms of the investigation into those very same rules that he is alleged to have broken that he is trying to do away with. anna: we have seemed to have weeks of intense spec elation as to whether prime minster johnson
would survive. he has, in the near term. he's still doing that job. where are we in his fight for survival? david: yes, he is still there, and he refused to answer this question i think 17 times, where he just stonewalled the interview. he does not want to comment, to give any more airtime to this question of whether he did break these rules and if he was at these parties at downing street. but we know they have sent questionnaires to the people involved. so before too long, maybe within the next few days, we might find out the conclusion and the full sue gray report, the senior civil servant who is tasked initially to look into these events. we're going to be a lot more detail, possibly lurid detail. that is a moment of ultimate danger for the prime minister. can he then continued to brazen this out, even if he is slapped with a criminal fine? is it even feasible for a prime minister to continue? anna: meanwhile, many countries, nato members be focused on what
is going on over in ukraine and on the border in ukraine, focus on the press conference taking place in moscow at the moment. there will be a sense that many of these states and countries will need to have strong leadership in place. david: exactly. international tensions running very high. we have seen a flurry of diplomatic activity over the weekend from hesitant macron -- from president macron of france, trying to get a potential summit between the u.s. and russia. britain wants to be playing a key role geopolitically. boris johnson said that is what brexit was about in many ways. but it seems to have the opposite effect. all of this destruction at home of domestic politics is obviously stopping him from actually playing that key role. he was making a speech at the munich conference. he wants britain to be playing a key role as a key member of nato and the un security council, but all the attention seems to be elsewhere.
anna: thanks for the update, bloomberg's david merritt with the latest on u.k. politics. keeping you up-to-date with news from around the world, let's get a first word news update. here is angel feliciano. angel: russian president vladimir putin says he is considering an appeal for official recognition from separatists in east ukraine. his decision comes later today. it is a move that would likely further escalate tensions with the west. putin's security council just wrapped up a meeting that discussed this issue just hours after the military said it had killed five saboteurs and destroyed two armored personnel carriers that crossed into russian territory. the covid-19 outbreak is easing, but that is not necessarily good news for the nation's clinical laboratories and clinical many factors. top operators have each plummeted at least 30% this year. the decline picked up speed
after december quarter earnings trailed analyst expectation. deutsche bank is warning its employees not to delete whatsapp messages from their phones, part of efforts by the german lender to clamp down on private communication channels amid a u.s. crackdown. in december, u.s. authorities imposed $200 million in fines on j.p. morgan chase for staff use of whatsapp and other private email accounts. alphabets google has reached a settlement for an undisclosed amount with the woman who said she faced discrimination by the search giant after she became pregnant. she sued google in 2020 after she claimed her repeated efforts to report pregnancy discrimination were ignored. google has not commented on the settlement. 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. i'm angel for luciano -- i'm angel feliciano. this is bloomberg. ♪
♪ >> in our view, we will see perhaps a prolonged period of $100 plus at some point in the next six to nine months. it is difficult to be precise about the exact timing, but demand is going to surge the second half of the year presided -- provided there's is no additional worries about travel that resumes to normal. anna: that was -- the outlook for oil. j.p. morgan chase global had a commodities research and strategy joins us now. great to have you with us. i wonder if we can talk about
the geopolitical premium there is in oil markets or commodities more broadly. let's focus on the oil markets first off. what kind of premium do you think is in their geopolitically? if we see vladimir putin recognizing the independence of parts of eastern ukraine, upping the ante geopolitically, what kind of risk premium would we expect to see then? >> oil provides the largest risk premium if you look at the commodities being exposed to potential russian sanctions or some constraints from russian exports. so tight is the market right now in oil that we do believe if there is an iranian deal that seems to be reaching some level agreement, the market is so
tight that if there is an agreement with iran and it potentially subsides, we see the market actually reaching $84, 86 dollars to $90 per barrel with those two conditions. but at the same time, you are absently correct that the symmetry of the price is coming if there's escalation in the tensions in russia, even if the iranian deal produces prices that could easily go to $100 per barrel. the prices could go as high as $150 per barrel. that is what our forecast is pointing to. anna: so do you think that would be if we saw an invasion of ukraine? if we see russia invade ukraine, we go to $120 or $150 a barrel? is it possible to make those kind of simple links? if we do say that taking place, does it make a deal with iran more likely? natasha: clearly the uncertainty
in the market remains high. the main one would be the meeting between the russian foreign minister and the u.s. secretary of state, so from that perspective there is clearly a lot of uncertainty. but at the same time, the market is very tight. even the supplies coming from russia, russia is the number two producer. that would have a very material implication. from that perspective, we will be looking at something close to $200 in the worst case an area -- close to $100, and the worst case scenario wonder $50 -- close to $120, in the worst case scenario $150. anna: does that mean those in
the conversations with the conversations with iran will be more mindful to bring back those iranian barrels? natasha: clearly, considering where the oil market is currently, what we are seeing from our staff is that the prospect of reaching a renewed nuclear agreement are clearly improving. that is what we hear. the agreement is by no means complete. there's a clear two-sided risk to the oil markets. but in general, if indeed there is agreement, if sections are removed, we do believe that when we look at the prices fund mentally, this would be the average for the year closer to $90, even with the iranian agreement in place. but we need the russian tensions to be removed from the markets. anna: let me ask about gas prices in europe. the gas story really central, every time we see escalation in tensions, and some of the
diminished hopes of a diplomat solution, we see energy prices go higher, and here in europe we see gas prices go higher. it is the case once again today. we are off the highs we saw the fall and autumn of last year, but still a very strong move. what can you tell us about gas prices and where you expect them to head? natasha: you are correct, december of last year gas prices were trading at about 180 euros per megawatt hour. the wind generation across europe increased by about 50%. because of that, definitely the balance is softening. so overall, we think there is significant slack in buffering the european inventories, that the price will actually remain at the current levels. we do not believe the price will
spike higher. however, if there is escalation in the russian-u.s. tensions, within the risk premium will actually start appearing closer towards the fall and winter of 2022, 2023, because that is when the question about nord stream 2 will come. the market is pricing and that the pipeline will be approved sometime in september, october, and the flows will resume towards the winter, but clearly this will be a question if the risk premium will appear again in the markets. anna: and that is when the sanctions conversation will be brought forward. thanks very much, natosha -- natasha keneva. thanks so much for your timely contribution. we will get next to a conversation with the deputy chief economist at the institute of international finance as we watch russian stocks drop more than 10% in response to the latest political rhetoric, the lives political headlines.
♪ anna: live from london, i am anna edwards. welcome to bloomberg markets. 10 minutes to 4:00 here in london. let's focus back on the geopolitics. russian stocks are having their worst day since the heights of the pandemic selloff two years ago. tensions continue to rise. what does the future hold for the russian economy? let's talk now to elina robert cova -- two ilyna ry but cova -- all that said about the geopolitical backdrop, if we did
see any further tension, if we did see invasion by russia, what with that due to the reassessment? what would the pressure points be for the economy? >> i think it is very important to watch what the authorities are saying about the planned sanctions. we know that there's a package already prepared. i think there are two key element of that package. one is the financial sector. access of the russian banks to the u.s. dollar, i think that is key. the second one is financial controls. we know that s3 banks cover most of the russian pencil systems. it will definitely have an impact on central stability and growth. for now we have a growth forecast of about 2% this coming year. potential growth, 1.5%.
it may go to zero or maybe if a negative growth. anna: how damaging would it be if we did see banks facing difficulties in accessing the u.s. dollar system? when i have talked to russian executives in recent years, have been keen to emphasize the way the russian economy has been trying year after year to reduce its reliance on the u.s. dollar. elina: one is the integration with u.s. financial market. it is surpassed by gold, even you on -- even yuan. the russian system has gotten away from the u.s. jurisdictions. because of the 2014 sanctions, russian corporate's and banks were forced to repay debts, so they are not borrowing as much from capital market. that said, we still have about 35% in foreign currencies established in dollar, and it is
very important for global trade, specifically trade on energy and commodities that russia is export into europe. so they will have issues settling that trade as well. anna: tell us about the fallout you would expect to see and commodities markets if we did see further tensions here. focus a lot on oil, but it is not just exports of oil or gas. also, other metals and agricultural products if we are talking about ukraine as well. elina: absolutely. russian exports, more than 40% of european consumption -- we have other key metals where russia is a producer. so we need to watch out for that. indeed, agricultural products, especially in ukraine, ukraine is an important supplier to europe, but also countries in the middle east, egypt, lebanon. they rely on experts from ukraine. we are talking about agricultural products, but it is also food for the livestock, and
that would affect a broad range of product. with already high inflation, that will definitely have an impact on the global emerging markets. anna: you mentioned the area of the focus on sanctions is in initial services and export controls. where would you see export controls having the most impact? elina: export controls have an impact on russian medium-term growth outlook. russia will struggle to develop. it is already struggling to develop new fields in the oil sector. i think that will continue to weigh on productivity and growth outlook for russia. it could also force russia to mix more with china. china is trying to on sure a lot of their production. how much will china be enforcing
the input controls coming from the u.s.? anna: thanks for joining us. we appreciate your time. really good to get her perspective on the vulnerabilities of the russian economy and the global economy to russian exports and russian production. coming up in the next hour, chris williamson, chief business economist at ihs markit. we had data out a little earlier today. waiting for a confirmation of how the u.k. is changing rules with the guards to covid. we will also keep in mind the selloff we are seeing in global risk assets as a result of tensions around got -- around russia and ukraine. the ftse 100 a little more resilient, but some of these markets down by 1.8% or so. are we seeing diminished hopes of a diplomatic solution here? more on that next. this is bloomberg. ♪
if you're a small business, there are lots of choices when it comes to your internet and technology needs. but when you choose comcast business internet, you choose the largest, fastest reliable network. you choose advanced security for total peace of mind. and you choose fiber solutions with speeds up to 10 gigs to the most small businesses. that's virtually everywhere we serve. the choice is clear: make your business future ready with the network from the most innovative company. comcast business. powering possibilities™.
anna: live from london, i'm anna edwards. welcome to "bloomberg markets." tensions on the rise over ukraine as vladimir putin says he will make a decision today on official recognition of separatists in eastern ukraine. we will bring you the latest on the developing situation. as tensions rise over ukraine, russian markets take a hit, at one point seeing their worst day since 2008. we will bring you the latest as that situation unfolds. and we will bring you the latest as european banks -- on european banks as deutsche bank warns employees not to delete messages on whatsapp. all of that and more coming up this hour. let's check the markets for you. this is a situation across some key markets as we continue to focus on the geopolitics. the stoxx 600 in negative territory. started the day positively on hopes we would see president biden and putin meeting.