of the concern out there on the markets. it is difficult to model. if there is a gas and oil embargo, it doesn't seem that european leaders are on the same page. they are forcing russia to choose between three options in terms of the dollar-bond repayment. what is the next step if there is an oil embargo, what does it mean for inflation and energy prices? pressure on these equity indices. futures are down. this is the commodities space. iron ore pretty much unchanged. it is how you model a potential sudden shock. you keep being told to wait until the summer months and the big concern is with her of this year. you can see whether there is a surprise that has not been telegraphed and it happens.

the read across to the foreign exchange with currencies that are stop -- commodity rich. this is your cross-as it. we have to look at oil one of the biggest movers when it comes to what inflation looks like longer-term. we have aussie dollar at a 76.20 three and s&p futures pretty much flat. for big question will be what happens with twitter with elon musk being the biggest shareholder. jack dorsey has stepped down from that role. mark cudmore always with interesting charts. you are looking at the outperformance in latin america. mark: yes, francine. good morning to you. what has been a big move in the u.s. session, almost every year it has been the brazilian real

up 30% year-to-date or latin american stocks so i decided to put this on a chart. this quarter has been exceptionally difficult, but not latin america. up 30% year-to-date. a very easy trade, what one minimal day. which is irrelevant. in contrast, here are the other two emerging market sectors, the bottom-line is the emea index, middle east and south africa. then we had the russian invasion of ukraine and that is staying in the doldrums. and i expected to stay there until we get some optimism of the peace in ukraine. the final one here is the asia pacific, just slightly down at 6% year-to-date. i think the covert impact on china means we will get more policy support and a lot of the assets in asia particularly that chinese hong kong stocks trade

off of the policy messaging. even if we get a slower growth story in the second half, policy support means asia-pacific stocks can start doing better and we might start seeing outperformance and let american stocks start to slow down a little bit. francine: great insight. mliv's managing editor mark cudmore with a look at latin america. let's get a look at that market drivers with kristine aquino and grace peter's of j.p. morgan chase bank. christine, talk us through treasuries refusing help -- how it russians can use their reserves, they either drained their resolves or risk default. kristine: three very hard options for russia, certainly not one they would want to take. it does raise a lot of questions over russia's ability to make

bond payments and how smooth that process will be. that was the initial concern when sanctions were being put in place in march. we have seen a rush at mate principal payments on its bonds that have been due over the past month. there was a feeling of a sigh of relief among investors that russia is continuing to make payments. they have not gone into default so far, maybe the situation is not that bad. this development from treasury really does up the ante on that situation and puts investors probably on edge at this point. francine: and grace, how should markets look at this because the pressure is being ratcheted up. we don't know where we go next, but this could actually be significant. grace: the mechanism you mentioned, with the context of the data over the last few trading days, the u.s. cap support and global pmi's last

week, all of this is leading in our minds to the idea that growth is going to slow meaningfully as a result of central-bank policy, particularly the fed. this year 2022 we think that growth will be above trend. but i think this will be the last year of the cycle that growth will be above trend before we have gdp of only 1.5% for next year. that speaks to moving through the business cycle at pace and to us being late cycle by the fourth quarter of this year. we don't need to settle risk assets or sell be equity, but it does mean there are quite detailed changes we need to make to the portfolio. francine: such as? grace: what do we do as we head toward later cycle, but first thing is to opt in quality. we can do that on a cross asset basis.

particularly on equities. we have had a meaningful rally in the last week. there is lots to do like sell cyclicals and financials, by into health care. growth at a reasonable price against technology. francine: if you are a stock picker, it is very different than if you are a bond trader right now. kristine: i think whether you're a bond or stock trader, at the moment it is assessing what we saw in march. and trying to figure out which trends we saw in the first quarter or the past month would potentially have room for some reversal. in the bond space we are starting to get questions being asked over have yields gone far enough? there is something that needs to be had for investors if they

pile into a 30 year treasury bond now. if you are a pension fund seeking for that yield, that could potentially be attractive and maybe take some attention away from the equity space that benefited from that bond selloff in march. it is a shift in trends and a question whether it is more of a tactical move or would they be brave enough to rethink the entire trend for the rest of the year. francine: what i'm trying to figure out which i find difficult is how you model a complete oil embargo on other side. russia is saying let's turn off the tabs. grace: it is the same view you mentioned, the shock factor. how long the shock hangs around for. when we look at that, we think if you disregard all the barrels russia produces you could be looking at oil north of $180

which would be enough to cause a recession in europe and is something i think everyone would be keen to avoid. we are looking to other sources of supply coming on stream. the release of the u.s. strategic reserve is a step in that direction. but that is only the equivalent of one million barrels over six months. later down the line we need to see some more supply or we need demand destruction from the oil price levels to start getting back into those more comfortable prices. francine: with the winter that could be a lot trickier. we will talk more about that and mark put together a great chart looking out things brush out won't want to do but might do coming up. that is grace peter's, head of emea investment strategy at j.p. morgan chase bank. we will look at the fallout of

the nickel price, and have an exclusive conversation with u.s. trade representative. this is bloomberg. ♪

francine: welcome back to the open, we are 11 minutes into the european trading day. a lot of equities are trying to find their feet. the next down .1%, that euro stoxx 600 gaining a touch. energy shares are advancing with crude also up. a lot of these stocks are raising -- erasing some of the sellafield by the war in ukraine as investors are lured by lower valuations. elon musk becomes twitter's largest shareholder and the world's richest person already has ideas for how to shakeup the social media platform. cathie wood weighed in on what this might mean for the company. >> this could be setting up for another leadership change at twitter. you never know and i'm not jumping to this conclusion automatically. i am saying it is one of many possibilities. it will either be agar wall changing the policy of the company to really open source

the censorship, or call people out on censorship. or it will be a management change. i don't know what is going to happen. francine: so with us is grace peter's, j.p. morgan private head of emea investment strategy. elon musk is fun to follow on twitter, and he is doing all these polls, should you have an edit button, will he change the social media platform? grace: when we think about the structural changes taking place across the technology sector, we still think that large-cap tech is the place to be. i mentioned earlier moving through the late business cycle toward the end of this year, and what we are looking for there is quality compounded. i think large-cap tech absolutely fits the bill. business models are evolving and this is a more mature segment, but we always want to tap into that maturity because of the

balance sheet strength and the potential to grow dividends and return capital to shareholders. and all of that is a great ballast as you approach a case where headline growth sinks below trend levels. if we think about the s&p which has got a heavy waiting to these large cap tech players, but we look at profits this year versus 2019, they are around 5% higher which means cash flows are higher and the potential for shareholder returns is much greater. valuations are compressed when we think about the moves we've seen in a long dated yields, we still think the direction of travel of the 10 year is up. but we are starting to get to levels where the symmetry of risk is starting to reach the upper end which benefits tech as well. francine: i think the biggest fault first them is something happening in china, if it is a crackdown.

they are fairly protected from some of the other things, inflation and everything else. grace: again with the issues we have seen in china that have seen that region underperformed materially over the last 12 months and particularly year-to-date, our sense is we are coming through the worst, we are closer to the end than the beginning. we do like investing in the china region with china seeing the potential for more fiscal stimulus and policy stimulus coming through at a time when the rest of the world is tightening on the monetary policy fund. that is where you are starting to see the credit impulse bottom out. and we think those are good lead indicators that chinese assets at-large. our preference is not so much in china, because there are still risks that could affect those profits and valuations, but we do light on shore chinese equities and we think that is a good way to play it. francine: it seems we are

redrawing the map worldwide. does china at the end of the day benefit because of the access to resources, or is there a danger of sanctions also against china? grace: those are possible but when we think about those lines being redrawn, and we think about the investment implications of that, we think that self-sufficiency itself is key as a post-pandemic fame. that applies around the world when we think about the destruction we have seen to the supply chains that are ongoing and likely to be impacted further as a result of war. self-sufficiency and infrastructure spending which could be digital infrastructure, physicals and green infrastructure spending would be two things we would .2 that are highly investable, but are as you say very different in the post-pandemic cycle and given all the geopolitical risks that are still elevated now.

francine: is there anything in europe you like right now given the proximity to russia and the hard impact throughout this region. grace: i mention this every time i am on the show but european luxury we think is a fantastic place to be. francine: even without the russian buyers? grace: there has been somewhat set about the wealth effect post-pandemic, where the people related wealth and where that has accrued. strong structural things are -- themes are coming through around casual eyes asian which luxury can tap into and absolutely fits the docket of compounding dividend growth with strong balance sheets or the ability to make m&a if there is a turnaround. francine: on the flipside, is there anything you sell right now or any sector that looks

mispriced? grace: we have been selling in financials, that is the sector that we were involved with. it is in that early cycle bucket , and as we take advantage of that value in markets, it is one of the sectors that we think is right to sell. francine: this is despite rising interest rates. grace: despite rising interest rates because with the slowdown banks are sensitive to the broader economy and balance sheets in the financial sector makes us but the emphasis on the curve rather than the slowdown of this time. francine: coming up, the natal squeeze continues to be felt among investors. j.p. morgan is reviewing its business with some of its commodity clients. this is bloomberg. ♪

francine: welcome back to the open, we are 21 minutes into the european trading day. markets trying to find their feet, the european stoxx 600 gaining .1%. the dax under pressure.

features in the u.s. pretty much steady. oil climbing as investors reevaluate the prospect of tougher sanctions against russia. that's got to the bloomberg business flash here's laura wright. laura: the u.s. treasury halter dollar -- halted dollar debt payments from a russia. bloomberg has been told the move is designed to force russia to either drain dollar reserves, spent a new revenue are going to default. a payment on the country's sovereign debt was due monday. airbus may delay production on the a350 widebody jet due to sanctions from russia and a legal battle with qatar airways. they are pushing from march to the end of the year.

the u.k. is to push ahead with the privatization of state-owned channel four television. they will let that channel grow and generate intellectual property. it comes alongside other broadcasting reforms by the culture secretary. francine: jp morgan is said to be reviewing its business with some commodity clients. a move that could drain more liquidity out of the sector. the bank is one of the largest players in the global commodities market. this comes after last month nickel short squeeze. jack, what does this move from j.p. morgan mean for a very turbulent nickel market? >> i think it is hard to overstate how important jp morgan is in the middle market.

there are not many banks trading metals in a serious weight, jp morgan is the largest by far. we were reporting the story this morning, they are doing due diligence on a number of commodities clients and looking at financing transactions. jp morgan says it is committed to the commodities business, they are not pulling out of commodities or anything like that, but nonetheless i think it is a sign that with the enormous volatility that nickel is the canary in the coal mine. you look at aluminum, zinc, wheat, commodities have been exceptionally volatile and that means it is more expensive to trade commodities. and what you are seeing is a huge reduction in liquidity in commodities markets. it may not be on the radar of viewers, but you have a

burgeoning financial crisis in commodities. bid ask spreads are widening, volumes are down, commodity markets are flashing some warning signs. francine: we could see big margin calls and someone could go under, what is the worst case scenario? >> as liquidity is withdrawn from the markets, if you have a big event that creates a big move in prices which is what kind of thing everyone is talking about with russia, new sanctions, some development in the war, that kind of thing that could cause prices to move dramatically when direction or the other. then there are fewer market participants willing to put their money on the table and dismay that prices. and so the price move could be even more extreme. francine: subject, -- so jack,

what are metal traders doing about supply at the moment? >> it is quite interesting with there being a big debate among metals traders on the alameda -- on the lme whether they should send supplies to russian warehouses. they have said they are not going to follow that and do whatever governments tell us to do. there is a divergence between companies saying when it comes to new business, we don't want to buy any russian metal. banks don't want to finance it anymore. but then when they have pre-existing contracts, most of russia's metal exports are sold on long-term contracts to people like glencore, those are still being fulfilled. francine: that was bloomberg energy and commodities reporter, and also author of a wonderful

book everyone needs to read, jack farchy. we will have the latest on the ukraine war and what new sanctions could mean for european energy. this is bloomberg. ♪

francine: welcome back to the open. 30 minutes into the european trading day. the u.s. treasury cuts russia off from making dollar debt payments to american banks. washington and brussels way more sanctions. we will have a conversation with the u.s. trade representative kathie t at this hour. ai jp morgan reviews commodity exposure after the nickel squeeze.

you can see the euro stoxx 600 up .2%. traders are trying to figure out the fallout from exercise and on -- from extra sanctions on russia. we had a talk with jack farc about things we should behy m- contracts on nasdaq futures little changed. let's also take a look at some of the sectors on the move. if you look at what we're seeing overall, it is clear that some of the market moves are continuing to be shaped by the conflict and tightening monetary policy as raw material costs are stepping inflation. auto parts on the upside, basic resources and travel and leisure are some of the biggest fallers. u.s. banks have halted dollar debt payments from russian

accounts at u.s. financial institutions after elected atrocities committed in the town of bucha were discovered. >> we have to gather all the details we can have a war crime trial. this guide's brutal, and what is happening in bucha is outrageous. i am seeking more sanctions, yes. francine: we are joined by our editor for international government and by maria tadeo in brussels. maria, let's start with you. condemnation growing over these atrocities. by the u.s. and europe are promising more sanctions. how effective can they be? maria: what is clear is that more sanctions are coming, this is just a matter of time whether it is today or by the end of the week. that moved by the u.s. treasury to force russia to either dispersed through reserves or default on payment. when it comes to the eu, there will be eight meeting up

european ambassadors and they will signal whether they are ready to touch energy. we know this is very divisive, the official line out of germany is that they are not ready to switch out from gas. but ultimately, the debate is if russia cannot pay for its debt, if they cannot make money out of oil and gas, is this the mother of all sanctions particularly in light of what we saw in bucha? it would seem know, but the political pressure is definitely increasing. francine: given what we heard from treasury overnight, are the sanctions working at all or is this just a way of saying enough is enough from a political and also humanitarian standpoint? >> they must be pressuring the russian economy. we are seeing that squeeze maria was talking about including the news restaurant if and that u.s. treasury department but it has not changed the course of the war on the ground. you are seeing russian troops

heavily in the east and south, the attacks are putting that squeeze -- putting the squeeze on big cities like mariupol. can they send in for their out totally to at least keep supporting the ukrainian forces on the ground. francine: a lot of questions which is we heard from sienna hello saying yesterday that this light what kind of research or who can give us idea of what russia's thinking is right now? >> it's hard to know what they're thinking, but you can see how it is being enacted on the ground. that is that the withdrawal from the north is not mean they have given up on ukraine. it means they are redeploying, what they probably want to do is carve out that eastern plaintiff ukraine down to the south. if you move further beyond

mariupol they would have a full land bridge, and you are anchoring crimea then to the russian mainland and that cuts out a lot of maritime activity and makes it harder for europe to get green from ukraine -- drain from ukraine. if -- drain -- grain from ukraine. francine: the u.s. is warning that russia planes to concentrate his forces on the east, where does this leave peace talks? maria: if they get control of mariupol that is the corridor door that russia has said it wanted to establish. a lot of forces are now concentrated their paid when it comes to the peace talks, if you look at what is happening on the ground it shows that these stocks are not really moving forward. they need a ceasefire but it is not going to happen and the fighting continues. it goes back to what refraining officials have told us repeatedly that they believe

that russia intends on occupying and gaining control of the east. with all that leverage they will get into the real talks. what it means is that this is a war that will continue potentially four weeks longer. -- for weeks longer. francine: is there a possibility that we actually get something? >> they were supposed to be video talks yesterday between negotiators in ukraine and russia. well they potentially happen today, but they are back at that negotiator level and they are going to try to get a ceasefire for at least 48 hours. ukraine's has given what they have discovered not just in bucha but possibly other towns and villages, they need to concentrate on getting a pause in the overall fighting so they can get a into these areas and people out. so it makes sense to keep talking on that. a peace agreement is possibly weeks or months away and ever

more complicated by the events on the ground. but you need to have a conversation to reground the terms for a short-term truce in the fighting. francine: that is our international editor and maria tadeo. with us now is chris weafer chief adviser at macro-advisory, with sanctions and slowly being ratcheted up, at some point will we have an oil and gas embargo? chris: i think that is inevitable if we continue to see the sort of pictures we have been seeing in the last couple of days. particularly germany will have no choice but to take a very tough decision and start blocking the import of oil and gas. as russia has said, once europe starts to reduce volumes, in other words moving away from existing contracts then russia may actually suspend all exports at that point.

we are definitely moving closer to the point that we were talking about a couple weeks ago. francine: how fast could this come? i don't know whether it is priced into the markets. if there is an oil embargo, what happens to inflation and gas supplies, what happens to europe? chris: it is not priced in. we are hopeful that situation will stabilize and we don't get to the point where we have an energy embargo. but it is becoming increasingly difficult to avoid that. if it were to happen, then i guess it is a balancing game. right now, russia's financial lifeline to the west is based on continuing energy and materials exports. and russia has designated gazprom bank as the receiving agent. essentially russia is able to collect the money from exporting

energy into europe, and that is enough to keep the economy afloat. if that conduit were to be closed, if the energy exports were cut off, then russia would be starved of that money and would have a financial crisis within months. but europe would have a severe energy crisis probably by next winter, perhaps with a lack of three or by from of the. so it is a game of chicken. francine: but can russia not actually sell some of the gas items applied? money cannot switch to china, but they will find buyers in asia won't they? chris: it is not easy because the infrastructure is not there. russia has diversified its trade. it is selling a lot of energy to china and that will not be disrupted by sanctions.

but russia cannot switch the gospellers. the pipeline simply are not there. they can only switch maybe a couple hundred thousand barrels. that's it. the infrastructure is not there to switch to other markets. if there is an embargo, russia will have a financial crisis within months. and europe will have an energy problem next winter. that is the equation you have. francine: chris, what does it mean for the european economy? we have a plan which is seems to be one of the only viable ones from germany saying if we have an oil sanction, we need to decide what to prioritize, basically rationing. the rest of europe have to do the same? chris: oil is the lesser of the two evils as it were. francine: guess is the bigger one. chris: gas is the bigger one.

europe will not be able to replace that gas for years without a replacement investment to do so. you are looking at anywhere between two and four years or you can start to source gas to replace the russian volumes. oil is different. you can replace oil and refiners can be adapted. more oil can be sourced. if the iranian deal were done, you could get more oil. opec could produce more, so oil is manageable. you probably would have some shortages and upward pressure, it would be a factor in inflation coming into the second half. but it would not be economically vertical in the same way gas would be for both russia and central europe. francine: what is the thought line next, is there going to be a splinter in europe? if you watched italian tv there are many commentators which is a surprise especially if you live in london that say we should not

sever ties with russia, it is still a strategic are and we should remain neutral in this. it is not that easy for a lot of the majors to get their population behind it. chris: right, there is a fracture beginning to appear against western europe then london which is aggressively idolizing -- isolated from russian trade. i think it is just a case of economic reality. the countries that are closer to russia's border are more dependent on energy and other materials whether it is electricity, etc. and those countries are the ones who are urging more caution. when you sit down and do the math, you realize fairly quickly that you can replace -- you cannot replace energy or

materials imports from russia, so why these baltic states are urging caution because they know they will not be able to replace lost russian energy. it is not the same are -- same for france or u.k. which is not in that situation. francine: what does it mean for china, what is their role in this and how friendly will that is russia -- they be towards russia? chris: china is suffering because of what is happening. on the economic side it is seeing higher input costs and higher gas and coal prices etc. because of all the price increases. and secondly, we hear from beijing that the chinese leadership is under pressure because they are being linked as a supporter of russia. the west is saying that china is

encouraging russia and therefore in some ways implicated, and that is something they don't like. but longer-term, china is the beneficiary and has gained a lot from sanctions in russia. it now imports a significantly larger volume of oil, gas and all directly from russia across land. that will increase. we know that china has set up a committee looking at opportunities to invest in russia as western companies pull out particularly in strategic industries. long-term it will strengthen their position, but short-term it is a problem. francine: coming up we still have our exclusive conversation with the u.s. trade representative katherine tai. this is bloomberg. ♪

francine: welcome back to the open. 47 minutes into the european trading day. more stocks support, fate euro stoxx 600 gaining .3%. the market is trying to price in extra sanctions. let's get to that bloomberg first word news with laura wright.

laura: research shows the earth may warmed by more than three degrees celsius which is twice the goals enshrined in the paris agreement. there are still unchecked emissions of greenhouse gas pushing through record levels. scientists say emissions must peak before 2025 to keep climate targets alive. shanghai has reported more than 13,000 daily covid cases for the first time as a sweeping lockdown and asked testing of its 25 million residents continues the outbreak in the financial hub. jp morgan is reviewing business of commodity clients after last month nickel short squeeze in a move that could drain liquidity out of the sector.

management has ordered fresh due diligence on clients including metal traders and refiners. it is one of the biggest banks in metals by far. elon musk has acquired a 9.2% stake in twitter, you will become the platform's biggest shareholder. twitter shares soared by as much as 31%, the biggest one-day rise since its debut in 2013. mosques filing with the sec suggests he intends to remain a passive shareholder. 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. francine: laura, thanks so much. the u.s. trade representative catherine tai says the u.s. is assessing the global impact of the were in pain. >> all eyes are not just on the

russia and ukraine, but on the rest of us in terms of how we are going to react and this conflict -- this complex set of dynamic certainly are in play on the economic and. francine: that was the u.s. trade representative speaking to haslinda osman. -- amin. coming up, russia's war in ukraine is wreaking havoc on the $120 billion global grain straight. that interview and story is up next. this is bloomberg. ♪

francine: welcome back to the open. 53 minutes and 30 european trading day. -- into the european trading day. we are still on inverted yield curves in the u.s. spanish asset managers are looking at reducing risk. and the italian 10-year yield down .063.

silos in ukraine are bursting with corn. the stockpiles have gotten increasingly difficult to get to buyers. after turmoil that russia's war has brought in the global grain trade. megan, so much to talk about actually. grain being exported from ukraine, is it still happening, is it a sliver of what it used to be our says it -- or has it just stopped? >> usually ukraine's corn would be floated on big ships in the black sea found for asia and other customers. they have been closed so that grain is now being railed to the western border to neighboring nations. and then it can flow into ports in romania or poland. but it is more expensive and takes more time, the volumes are smaller. and the track sizes are different in the eu and ukraine

which. problems of the border. francine: are there other parts of the world we need to look at to understand what happens next? >> the situation is having ripples all around the world. for example, india has become an increasingly larger weed exporter. prices have gotten so high that it is now competitive. on the imports i, countries like spain or like china that typically by a lot of corn are now turning to the u.s. instead. china is also looking at purchases. francine: will it be enough to cover what they are losing from the black sea? >> the international grain counsel is expecting a 12 we in ton decline this year -- 12 million decline this year.

francine: and if you are a country that can afford to pay more, then you are ok with it. but if you are a poor country, then you suffer. is there a fitting warren who gets grain from the u.s. and india? -- bidding war on who gets grain from the u.s. and india? >> it is competitive. the u.n. has expected that prices could rise as much as 22% from already elevated levels. it is high times in the grains world. francine: our editor taking us through the grains story. i will also push that out on social media. coming up we also speak to the chief executive of ukraine's largest sunflower oil producer. don't miss that conversation shortly after 9:30 a.m. london time. that's it for the european

market open, surveillance: early edition is up next. francis services pmi is in line with estimates. the regulator in switzerland is talking about swiss banks taking sanctions very seriously so we will talk about that as well. this is bloomberg. ♪

>> he is a war criminal. >> he is certainly making a statement and it is a statement about censorship. >> the russians obviously miscalculated the extent of ukraine's resistance. >> this is bloomberg: surveillance early edition with francine lacqua. francine: good morning and welcome to bloomberg: early edition. here is what's coming up on today's program. the u.s. treasury cuts russia off from making dollar