tv Bloomberg Daybreak Europe Bloomberg March 15, 2022 2:00am-3:00am EDT
market territory. below $100. traders break for a hawkish fed with the markets already pricing seven rate hikes 2022. dani, good morning. there's something very strange happening in the oil market with sub $100 is that angst about china growth, or is that perhaps the beginning of the beginning of the beginning of some kind of off-ramp in geo politics? dani: it seems oil encapsulates everything we see in markets. it's a risk going forward. manus: this is how the hedge funds quite literally rolled, ramped and then disappeared from the mark. this is one of the fastest liquid days since 2008 --
liquidation since 2008. this is what you call rinse and roll. dani: you're looking at oil and i'm looking at stocks, manus because it's not great news that despite the fact we had oil prices come down dramatically that stocks are take aback. a lot of it having to do with what's going on in china. but tech taking the beating. nasdaq 100 falling into a bear market. now, if history is any guide, we could be near a bottom. we're about three days away from the longest stretch for a correction on record. so history says we might be near a bottom. but manus, the risk assets we're looking at, the geo political strike, a fed about to raise interest rates doesn't paint the most positive backdrop. manus: not at all. and the market is seven rate hikes from it. let me show you what is going on. this is 10-year paper.
2.136. you're looking at gold for a third day. we have inflation expectations since 1998. so this is part of the explosion that you're seeing in the bond market. dollar yen is close to a five-year high just as the hedge funds cut their short positions on that. and be wary of a rampant dollar. we've analyzed the data going act to 1949. and at every pretty major hiking cycle, you've seen the dollar roll over. is in the beginning of of the peak as we go into the eye of the storm? dani? dani: the yen is struggling to act as a haven. we have posted the worst stock for u.s. stocks the fourth worst start. a bit of a tongue twister there. europe was closed when markets started to turn. so europe may will playing catchup to the downside. down .18%.
we were positive about 0 .01%. now, the s&p 500 futures. nasdaq outperforming. and russell 2,000 futures. manus, it's the economically sensitive equities yet again underperforming in the u.s. premarket session. >> the quarterly rewaiting have their boom in stocks the team is standing by. let's go to our asia anchor. maria, our european correspondent is in brussels with the very latest geo political lines. so dani, that's the state of play. dani: let's kick it off with stocks in asia. a little bit weaker as a robust economic data ease some of the gloom. but chinese whip sawed in volatile trading after a
historic plunge. for more we're joined by rish. we had to selloff about 3% for china tech stocks. that's nothing compared the huge losses we had earlier this morning and even yesterday. >> you know what, dani what, we have now are just these really violent moves. you said 3%. it's 5% down. we started with a 3.2 deficit. huge delta back down 5%. there's auto play for the moment. levels not seen since 2016. it's concerns about inflation. it's concerns about regular changes. h chairs traded here in hong kong placing that decline. the decline is actually getting worse after the lunch break. in fact, we saw some of this going to the downside.
as we look at the hang seg tech, 29% of something or 30% in the last few days. and you've got to ask yourself some of these are very good companies. are they a screaming buy? many people we've been interviewing and indeed the days before said yeah, if you're in for the long haul. we've got alibaba trading at 9.5%. the novao 6.5%. -- novo6.5%. 11 times p.e. ratio here. certainly, it is one work. volatility is just -- just -- just at the moment two-year highs or thereabouts. certainly when will this end? and does this signal capitulation? that's the question that many people are asking out there.
manus: the question comes next of what will be next for the pboc? will this support stocks or is it go going to be a pboc move to support for monetarily policy? >> well, strong economic data this morning. it was industrial production retail sales or bidding to the outside and perhaps that's why the medium term lending facility was left at 2.8%. strong data. how does it end through the bond yields in over a month for china here as well. we're looking at the possibility that this is just a pause according to bloomberg intelligence that we could be seeing an easying cycle. and we could triple that in the am of money that banks must hold in cash. that is something which is going to be watched very much. but it was seen as a disappointment when the m.l.s. was left unmoved there. roll on to the loan prime ratio in about a week or there abouts. all of this about what they will
say. the economist projecting seven rate hikes this year the question has to be then what, does jay powell say? and that's one commentator has said this is perhaps the most important speech of his career. manus: china wants to avoid being caught up in these u.s. sanction imposed on russia for its invasion on ukraine. and it comes as beijing and washington have talks in rome with both sides describing these as positive constructive discussions. maria tadeo has the read ooh -- read dite? >> this limit less friendship between russia and china does appear to have limbs. i'm sure you'll remember vladimir putin went to china for
the olympic games. he met with the chinese leadership. in our friendships there is no limits. if you lock at the readout from the chinese phone call with the spanish foreign minister, they make it clear one that china is not involved in this, excuse me. and that it doesn't want to get get caught up in the sanctions that if it were to circumvent the sanctions from the united states and russia because of the invasion of ukraine. you do need some context. this is happening a few hours after united states intelligence pointed that russia had asked the chinese for help particularly when it comes to military assistance and drones. it doesn't mean that china is going to agree with it. the two sides have denied that this is the case. but nonetheless it does show that this is pressure growing on the chinese to not get involved and to not tip the balance of russia in this war in ukraine. we're in day 20. s that war that's extending in time for russia.
and it's beening very complicated to fight on the ground. of course, the more it lasts in time, the more expensive it's going to become for the kremlin. we know they're in a precarious situation with half of the reserves frozen in g-7 jurisdictions. dani: the e.u. is adding to the list of sales banning russia. what does it include? maria: it touches everything. it's a real moneymaker for europe. as you know, this isn't made in germany or france. it could touch everything from makeup, handbags to very expensive cars. we're expecting the package to be agreed today by european union officials and will target oligarchs. yesterday, whener spoke to a european officials he told me no one is untouchable. and that's the message we want to send. but the big question is energy. what to do with it yesterday, i spoke to the german
finance minister. i asked him what is it going to take to ban energy from russia? >> all options are on the table. but we will have to profusely consider which puts pressure on putin and which mean could harm ourselves more. this leads probably to a differentiated approach concerning the energy imports to european union and the u.s. >> and that of course is christian lindner in brussels thinking we need a different approach when it comes to energy. the situation in europe and the united states is very different. but dain what is clear now is that in the european union the 27 countries there are three camps. the polish, the balticsings the czech, the slovenians want to go
hard. and everyone else. that unity that europeans have underlined for weeks you do see that when it comes to sanctions. there are some cracks in this debate. manus: thank you very much. maria. maria tadeo tracking the latest in the russia war. let's get you to the news. >> lockdowns stemming the spread of covid in china. disrupting businesses with 45 million people restricted from living their home. they have halted operations at three plants. iphone production suspended. three sights in schenn zheng that as china cease more than 5,000 new infections for the first time challenge its strict covid strategy. bloomberg has learned that it's part of an effort to reign in spending and focus on fewer
projects in a member to staff, the cambridge chip designer says it will shed stocks to focus on fewer projects. currently owned by softbank prepares for an i.p.o. british property developer nick candy has held discussions with potential partners about forming a consorcium. global news 24 hours a day and bloomberg "quicktake" power bus 100 journalists and analyst in more than 120 countries. this is bloomberg. manus, dani. >> laura wright in london. dodge up, u.s. corporate bonds on tap for their worst quarter since 2008. we're going to talk the risk
♪ dani: i'm dani burger with manus cranny in dubai. manus, we are headed for the worst credit for credit since 2008. an opinion is concentrated in u.s. investment grade. i have a chart of the bloomberg index of spreads so far year to date spreads have widened by about 50 basis points. there's the fear of slowing growth and the feds will they choke off the economy?
we're nearing 100 bases points that many market participants say it's danger zone for investment credit. but does the next guest think we're in the danger zone? vick, to do you think we're at worrying level given the fed is about to start a hiking cycle? >> not yet. but it is interesting because right around these levels in early 2019, fed -- jay powell and the fed actually abandoned a rate hiking cycle. it's clear that at these very same spreads today, they have absolutely no touch intentions and are just getting started. i don't think it's a dangerous credit in a fundamental sense that we're going to have a default cycle quite yet. because there are quite a few shock absorbers left in the
corporate state since covid. if you think about things like corporate due during a downturn, it's raised liquidity and profiles and so forth. they're all still pretty good. after less than two years after the covid crieses. same thing you can argue on the u.s. excess savings those two 12% of g.d.p. so if we are going into another slowdown corporate and household for doing so with a bit better shock absorbers than they did in previous downturns. that suggests that there is less of an eminent default bridge on the horizon. what -- what i do think -- manus: if that's the background that there are shock absorbers in the system for this time around, it's different. i think the point that you make is we are in a credit sort of --
a mini credit moment of what we reflect on credit. but it's not a default cycle. what does that mean for bank credit in your view? because the equity side has been quite literally di mollished on recession risk? >> yeah, and actually relatively speaking bad credit has underperformed, corporate credit almost to the same degree it did during march 2020 in the midst of the covid crisis. but this is much less likely to be a solvency event much more likely to be a p.n.l., an income event. it's much less likely that we'll have anything representing skipping coupons and so bad credit especially european bank credit starts to look quite attractive here. russia is an exposure that needs
to be taken seriously. but there are only a handful of banks. and even for those banks it's a p.n.l. event. >> so victor, given all of that, could we, how do we judge the widening of credit spreads we've seen this year in investment grade? it is just rate concern versus default concern? >> i think we're at the point those 150 basis points that effectively say if we go wider from here, it has to be about the market pricing in. discounting the beginning of a recession and a writing chance to evade a deeper cycle. where does the fed step in? where does the fed put? it's probably right around here. but now, we're in an inflation
environment -- manus: do you think that's driven by the explosion in equity market or the explosion in credit spreads? >> say that again. manus: do you think that the feds put is driven by the collapse equity rather than the move higher in credit spreads? >> they obviously look at financial conditions more broadly. i suspect they would be at some point worried about tighter credit conditions and the risk of refinancing that comes from that. so i suspect that they do take -- pay a lot of attention to the credit market. but the problem that we have today -- manus: go ahead. finish your thought. sorry, vick tomorrow >> the problem that they have today is they're fighting two battles. not just the risk of a recession, but also inflation.
and when you look at the fed's reaction function in the 1980's, it looks different than what it did over the past through years. back then, usually willing to tolerate a much higher implied risk of default in order to stem inflation and bring inflation back to where it was. and i suspect that's what they're going to have today. that's why the fed is further out of the money. on our estimates on your estimates it's closer to 250. manus: we've got more work to do. viktor hjort amount bnp parry back. russian fears. and will it be in dollars or ruble? that's next. this is bloomberg .
♪ >> it's daybreak europe. dain burger alongside me in london. russia stated that the due bonds coupons due this week in which has become the most watched debt settlement. the payment may put the nation in course for defall. what does that mean. viktor is our guest. it's not 1998. a technical default by russia won't have any impact? do you agree that thesis? >> i think the impact would be fairly contained. if you look at the exposures that western europe has primarily the financial channel, it's really only a handful of
bags that have direct russia exposure. and even if they end up writing down all over the russian assets that is far from their capital ratio triggers. so for the banking system it's a p.n.l. event. russian companies have continued to pay and service debt even in foreign currency. so my guess is that the broader ramifications would be fairly contained. dani: i've got to say, you know, it's always lovely talking to an optimism. you're not worried about russia defaulting or default risk in credit. what are you worried about, victor? >> i'm worried about the demand for credits, the demand for corporate pause.
deflation means that ultimately the value of owning any kind of bond and corporate bond security is just a lot lower. and one thing that is very, very clear is that in periods where central banks remove q.b. like the fed has already done like the n.t.b. is about to do, you've seep our flows from the credit mark and now outflows obviously represent a demand that we suspect will be persistent throughout most of their -- of this year. in europe that is a particular problem because having gone q.e. over the last six years has managed to crowd out a lot of the original private sector demand for european corporate ones. when they walk off the stage, we don't actually know who's going replace them. that's is the biggest one the
♪ manus: this is bloomberg daybreak. in london, these are the stories that set your agenda. >> substantial and constructive. china says it wants to avoid u.s. sanction over russia's war. washington warns beijing not support moscow. the china tech star continue as as the nasdaq 100 slips into a bear market trading below $100. traders trade for a hawkish fed.
market fully pricing in seven rate hikes this year. manus, the whip saw of this market action continues. the whip saw in commodities, the whip saw in stocks. easy capitulation levels when you're look at the fourth worst starts to u.s. stocks in history. the superlative, they are stock you -- stock up. manus: absolutely. we're back below $100. that's the stock story. you've got your fact of the day in terms of the demolition that took place in 2018. i won't steal it. but i will troll chart over and show you what's going on in the oil market. don't ever say -- don't ever say i take the bread out of your mouth. there you go. there's the oil mark. this is a moment when the hedge funds quite literally, rinsed, ramped and roll this market higher up to $740. and we've had our profit. they slashed their bullish bets.
they slashed their net loss by the most since 2011. and it's biggest reduction since 2018. so this is fast money quite literally scamming the market. you have the biggest turnaround that i've seen in the oil mark apart to when it went negative. dani? >> i feel like who has the head-to-head who has the most breath-taking superla tiffs. i have to say i now. we are three days away from the longest correction in the nasdaq. the longest correction was 2018 when it bottomed at 23.6%. we're down 21% now. so are we near the bottom? history might say yes. that's history. let me show you today, manus. we are looking at european stocks slumping. they gained yesterday during that selloff in the u.s. maybe it's a little bit of catchup. down .9 of a percent. back and forth between the s&p 500 futures. nasdaq outperform. tech was hit most yesterday.
still small cap down about .2 of 1%, manus. manus: maybe zero growth could have a much bigger impact. the bond market exexplosion in yields. expectation -- explosion in yields. this is an explosive bond mark. we're down for a third day in a row on the gold mark. down over 1.8%. in part it's because of the dollar that's lighter at 1205. we've seen the dollar peak and roll by about 4%. everybody is going to call it into seven hikes expected from the federal reserve. five-year low on the yen. the longest losing streak in the yen since 2021. as they say inflation expectation, bonds 2.13 the highest since 1998. >> where do you hide in this
market? it's certainly not chinese stocks. let's get into that, manus. stocks in asia. they first paired loss when we had robust economic data coming out of the region. but look at the picture now. the pairing of losses is gone. we are down more than 5% in hong kong. eight shares down nearly 6%. we are looking at historic levels of a plunge here. let's bring in rashad sal action m -- sal at -- salamt. >> i question that because i was talking to broker three or four days ago attend of the last week. he says he doesn't get any calls from people interested in buying hong kong. hong kong is just not on the radar right now. they're living in droves. we've got countries that have go close ties with russia
we've gone an extreme covid with the virus spiraling. perhaps it hasn't peaked. we've got a lack of clarity with the crackdown that we've been witnessing tool on top of that, bit buying. when is the dip? when are you going to catch a falling knife. 75% fallback from the peak here of equities for chineseer quities. hesitant to dive into this week and even those valuations look very, very compelling. looking at for instance, alibaba trading nine and a half terms. it is managers saying i'm not ready yet. you could well see a herd mentality as well is what many people are forecasting here too, guys. manus: and the pboc, where are they on accommodations.
it goes from targeted relief let's say in rates to something much bigger. what's the thinking, rich ard? >> we're in pause mode and an ease cycle could con. we were a bit perplexed this morning when the medium term lending wasn't. perhaps they knew something we didn't. and that was that we had this economic data which is way better than expected in production all beating and beating by a zero margin there as well. we did see the bond yields as you're seeing yields rise by more than most of the month or there abouts and we also saw weeker than expected fix for the yuan. certainly the national team for the pboc, during the pboc job disarming a 10-year yield climbing for the first time in two days. the interest rate in two days. the mlf.
it's a little bit of a disappointment right from the get-go. seeing the price swings, they're quite extraordinary here. take a look at the hang seng. it went to a fall of a .1%. and it went positive now trading with a deficit of again over 5% so volatility is not the right word to be using in these really, really quite trying times. of course, we've got the fed to look after as well and naturally, is it the ukraine, which is at the moment causing these ripples rights across the world. guys? manus: rishaad, thank you so much. china wants to avoid getting caught up on the sanctions in russia for its invasion on ukraine. and one of beijing's most explicit statements yet on
american penalties, the foreign minister said that china is not party to the crisis and doesn't want to be impacted by sanctions. joining us now, we've got a special guest in dubai. is it or senior editor ross mathison. the language on the readout between europe and china was substantive and constructive. what does that translate to? what was your takeaway? >> they both sounded positive. what we're really seeing through this and especial think comments from the chinese foreign minister said there's a high level of concern in china of getting caught up in this either by russia or the u.s. they don't want to support russia. at the same time, they don't want to condemn russia for its actions. but they don't want the u.s. to turn its glare. hang on.
if you're not really condemning russia, you're supporting it. therefore we're going penalize you. there's a high level of concern. and that's really crucial to ping. he's seeking an unprecedented third term. he needs the economy doing well. right now, the challenge for the economy are piling up. the last thing you want to do is add further u.s. penalties to china to that pile. >> roz, we've had a number of headlines coming out on russia asking china for support according to u.s. intelligence, you have china saying yesterday that that's fake news. a new report the u.s. telling european allies that you are russia has asked china for armed drones. how do we interpret this back and forth? >> well, these" >> made at the very start of the war. so several weeks ago. they're not necessarily a reflection of how the war is going at the moment for russia. but what it does show is that russia is expecting this could
go on for quite some time what we saw in response from china over the past 24 hours to this becoming public was quite a sense of alarm. they don't want to have to be make a decision of sending weaponry to russia especially if that's going to go into ukraine. that's a military intervention on the part of china and something they don't want to do. they always take a stance in these moments official neutrality whether that's neutrality in marks or something else. that's they're saying we're not going to get into this fight. this is russia's thing. not ours. very much through this publicity they might get drawn into it. very strong statements from china saying in no way are we considering this. this is actually misinformation. >> roz, thank you very much, bloomberg's roz mathieson. laura wright joins us in london. >> ukraine's president makes an address to both chambers of congress in the yeast.
united states. zelensky is expected to ask for more aid. agitating to extend more help for ukraine. the no-fly zones unlikely to be met. lockdowns look to stemming the spread are affecting businesses with more than 45 people restricted from living their home. halted operations at three plans with iphone productions suspended at three fox sights in schenn zheng. china sees 5,000 new infections. challenge its strict covid zero chat industry. >> heath row airport british airway and virgin atlantic are dropping mask requirements. despite the new flare-up in omicron cases the u.s. is drop testing requirements for unvaccinated travelers as well as the passenger located for inbound travelers. global news 24 hours a day and
progress or is the progress on the cease-fire between ukraine and russia. let's bring in the team. we have our economy reporter, she's on the ground here. we have our energy and commodity team leader cole wallace. the politics and markets meet together. great story, i think which brings together his oil marks with your politics which is the uae has the power to perhaps make new demands on the united states because side by side with them is israel. >> yes. >> take me through the mill political nuances. >> they're very unhappy in the past few years when it came how the u.s. has been disengaging from the region they see this trend carrying on. and the latest attack back when we saw rebels target them with
missiles. they thought the u.s. was very slow to react in trying to help them and therefore, there seems be a lot of resentment that carried through and took us to that vote where the u.a.e. abstained in the u.n. the first vote happening in the ukraine. so it chopped a lot of u.s. -- >> what is the souring of relations mean for opec as a whole but perhaps more specifically u.a.e. oil production? >> hi, dain, the story revealed the political backdrop to what has been going on with the u.s. and also europe and opec. and europe and the u.s. want opec to increase production to help bring down prices which are now around $100 a barrel but
were as high $140 soon after russia's i vacation of ukraine. this story suggests that the u.a.e. is using high oil prices or that's it thinks that it can use as leverage to try to get the security guarantees that they want. it's difficult to see the u.a.e. in and of itself making much of a difference to oil price. it would need saudi arabia to come onboard too. but if those two said they were going to increase production that would make some kind of difference to prices for sure. >> it was a very interesting moment last week when the emirati ambassador said there was an open. then bang, the oil minister said no, that's my job. you stay in politics. in terms of the response from the emiratis this is the most significant moment. they did not condemn the onsets of this war. tell me why and where we've got
to. >> so privately, they keep telling us, look, this is not a vote on the current world order. we benefited from that. we definitely believe this this world based order. they say this was meant to show the displeasure with the u.s. foreign policy and in a way they think it's a foregone conclusion that it would be vetoed anyway. you know that -- that one in terms of you know that vote. but the one thing that they're looking for, they're looking for more intelligence sharing more missile capables. they want the u.s. to formulate a security plan should this withhold iran deal happen. and they want to insure that the u.s. committed to staying in the region and looking after those lives. they've been building up bridges with russia and china looking for other security partners because they felt the indication signals from the u.s. over three successful administrations were -- were -- where we got other
fish to fry with china and asia and so on. >> well, all of that has come together to a market where hedge funds are bail out, the biggest reduction of loans in 11 years. thank you, manus for that superlative and you have the market at 100. is it enough that it's the geo politics causing this? or are there liquidity issues that is fueling this whip saw in this oil market? >> i mean, the oil market has been incredibly volatile. i think last year -- sorry last week we had the biggest trading band for brent the 1980's. interesting as you said, hedge funds and other -- and other investors similar to them have actually been cutting the exposure that's to brent in the last -- in the last week or so.
and they've -- they've been decreasing the net long -- net long positions. it's difficult to see why this is happening. i mean, that's contributed to the rundown in oil prices. w.t.i. is now below $100. interpret is below $100 that we've seen in the last week or so i think some traders are seeing signs of a de-escalation. they also -- some of them don't see that much disruption to russian crude exports but there are plenty throughout that say falling prices in the last trading sessions is optimistic. that we could edly get -- easily get a runup to 150. >> china's zero covid policy is not helping the situation either in terms of that. great to have you both here. it's good that we can do that around the desk together as a team. from london and dubai.
♪ dani: welcome to "bloomberg daybreak: europe" with manus cranny in dubai. hong kong stocks have had a nasty habit that after the lunch break falling even more that's exactly what we are seeing. they got a better lift. but tech regulations forming this picture for you with the hang seng that is more than 28% of -- after of its peak.
manus: and of course those golden dragon index in the united states collapsing yesterday. the nasdaq index down by 12%. j.p. morgan said some names are uninvestable. no growth this quarter some investments in china. so fund managers are still not convinced at jumping into this deeply this kind of market. are they? dani: no, they're not. it is interesting seeing this spillover effect. but they entered a bear mark. let's stick to the u.s. sarah bloom's nomination is? jeopardy. manchin will not back biden's pick given broad republican opposition. joining us now is bloomberg opinion columnist danielle musk. is in the end of the line for raskin? >> to all intends and purposes
is it. it's important to remember that the administration has other fed fish to fry. there are a number of nominees. the banking come committee chairman has not pushed through because he wanted to do it in a package. meanwhile, this guy called jay powell, kind of has an important thing to do on wednesday. he's awaiting confirmation as is leo branarg is nominated for vice chair. and there are two governors that are up for senate consideration as well. manchin is not budging. you're offered a deal. you take the other four but take sarah bloom raskin off the table. if you're the white house right now, you've got to be thinking about that. >> ok. it's all about the barter trade, isn't it? should the democrats call a vote on powell. jefferson and coop, will they all get through it anyway? >> most of them would get
through. go back to the confirmation hearings. little opposition to anything that powell said or that brainard said. jefferson didn't cause any ripples, nor did cook really. you just need to get these people through. some important context, this vice chair position was created by dodd frank way back when. it's only been filled one by randy quarrel who is was a trump appoint yee so for most of its life as an leggive entity this job has stayed vacant. let it stay vey captain for a few more months. manus: thanks to you, daniel moss there with the reality. you took us through the agent markets. u.s. and european mashes lighter on the feet this morning as we go into the bloomberg markets european open so you are just seeing this -- the risk across the market.
your bottom line is always top of mind. so start saving with comcast business mobile. flexible data plans mean you can get unlimited data or pay by the gig. all on the most reliable 5g network. with no line activation fees or term contracts. saving you up to $500 a year. so boost your bottom line by switching today. get the new samsung galaxy s22 series on comcast business mobile and for a limited time save up to $750 on a new samsung device with eligible trade-in.
IN COLLECTIONSBloomberg TV Television Archive Television Archive News Search Service
Uploaded by TV Archive on