tv Bloomberg Markets European Open Bloomberg April 28, 2022 3:00am-4:00am EDT
barclays traders post a surprise jump in trading. we will break down the numbers this hour. francine: i'm counting 39 companies reporting earnings, a lot of this is the boost we got from facebook, meda, in the end, a reminder that there is out there in global markets as it continues to sink. tom: the fed out of the shadows for today, you have -- nailing down his message there's going to be a need for continued persistent reasoning, the japanese economy is in a different space. the double down, i'm jgb's. you will see the on the end, crossing 130 for the first time since 2002. how things work for the market open, these will gain in the first few seconds of trading,
earnings front center. the picture looks bright across most of those corporate's. the tech gaining more than 1%, ftse 100 up .6%, spanish ibex gaining 58.7 .7%. china saying they're going to do more to support the unemployed. they do have tools in their back pocket, but will be enough? we had up to the opening stateside, look at futures how -- look at how futures is going up. yesterday, make, after hours, that boost from mesa -- mita. there's futures looking at gains of more than 1%. here's the japanese yen, 1.6% in just a session today. the verse from its present level since 2002.
the yield differential pressuring the japanese currency. bold also under pressure amidst generally high yields. down .2%, 188 on the yellow -- rent down .6%. -- .7%. when it comes to the european decision -- germany prepared to reduce its exposure to russian oil. francine: this is the picture for a lot of the sectors. this is the beauty of the blue burn -- bloomberg, looking at what the sectors are doing. i'm seeing travel and leisure, auto parts and technology on the way up. most of the stocks are gaining in terms of sector levels apart from health care, down .2%. i'm going to check whether there's a discrepancy, overall, it's a tale of whether earnings are disappointed or not and what that means for forecast.
we had a good conversation with unilever about price pressure. the companies they can pass on some of these inflationary pressures without hurting demand will do better than others. tom: unilever saying they expect inflation and cost prices to increase, they came out with earnings, update -- .8%. a on inflation of what that might do for profitability in the second half of the year. place, a string of wins across the banking sector, credit suisse is the exception. as a prize barclays when it comes to trading within the fixed income market, gaining 1%, they do say they want to be returning cash to shareholders at the appropriate time. glencore gaining 2%. they benefited by commodity prices, a bit of a fly in the ointment when it comes to -- they had to reduce production,
and zinc and copper. francine: let's get over to our bloomberg managing editor, mark cudmore. mark: yes, francine, obviously the boj taking back. that is of major move in dollar-yen. it is all over the tech's of the move in yen has opened up broad dollar weakness. while the dollar yen is a big move, the dollar you on move is as comparable if not bigger on the day -- dollar yuan. when the yuan trend changes a bit changes for the long term. it actually has higher correlation than the 2012 currency. it trends more than any other currency. you can see that if you look
through july 2005, in the last 17 years, there was one big trend of depreciation, when a false, that we've got the depreciation, when trump became present, we thought you on appreciation again -- yuan depreciation. since the pandemic, appreciation again. now we start this near vertical you -- move. i think seven is in play for dollar you on later this year. >> seven nameplate, keep an eye on that. our managing editor mark cudmore. let's get in so some of the other key markets. let's start with this strength we are seeing in the greenback.
my comes to equity, there is no alternative. the greenback -- francine: when you are looking at the broad currency, we are seeing weakness across the board for different reasons. marcus is talking about what we were seeing in china. a function of what we are seeing in the chinese economic outlook, which is not great. there is the end story, which is playing up -- yen story, which is playing out today. they're still quite dovish compared to the rest of the global central banks are moving toward heightening. the rest of the other regions in europe, we saw the euro take a beating yesterday, because of the latest russia developments, with russia upping the ante on gas supplies. amounting to a lack of alternatives in the currency world beyond the dollar. >> i love the top -- the fact
that he did that without taking into it tina turner song. i would love to see that. your favorite song, let's talk about china. if you look at the earnings, it has -- china could discover the good wishes while these companies. >> i think they are aware of that. whether you're looking at bank earnings or the consumer focused company, they are all clearly worrying about the china outlook in the next few months. there daybreak earnings from some the banks, benefiting of the trading boost in the first quarter. a lot of volatility, money changing hands, there are still worried about the outlook for china, especially if the lockdown continues. the economic situation not necessarily taking a turn for the better yet, there is going to be a lot of caution on the china story moving forward. something investors should remember as well, even if they
are looking at better earnings this season. >> some of the other events across the world, may be reacting on the ground in china, what means for those european coffers. when it comes to the bond space, we did not manage to break through 3%, we got close to it. he seen that move lower today of 2.8 basis points, is the next fed meeting, have we capped out in the percent in yields. >> the fed is going to be the next one to watch, we do have the big meeting coming up next week. this is the one where we see, is the fed going to deliver it what they say they are, which is 50 basis point rate hike, something we have not seen in a while. how that is playing out in bond markets, we know they have anticipated that well in advance. that run in yields has been driven by that repricing from the fed. we could see this, as soon as the fed meeting hits and we get
that 50 basis point rate hike, marcus -- market participants expect we could see a relief rally, because we finally got there. the argument has been made that this is a great level for by dutch bond buyers to build back in. potentially, this could set up bonds for a bit of a rally in q2. >> finally, maybe, possibly. let's also look at what the governor is telling us is a bank of japan sparking the short side in the end by doubling down odds promise to defend its rock-bottom field target, the dovish outlier. it is a divergence play. >> it is incredible. 1.5% drop in the end, they government doubling down on this message.
it is remarkable that the inflation to my neck -- dynamics in japan remain so disconnected. >> they are the ones that ignored market chatter, they are not afraid of what the market is expecting of them, unlike the other central banks. let's get some earnings news, meta, this comes after results which were dragged out by you to -- what were the key takeaways? >> investors were assuaged that led to a surge in broad trading of more than 18%, with a fractional miss in advertising revenue and overall revenues of the majority of the headwind -- the work in ukraine, competition from tiktok, that is what you see that, also we've seen a decline in average revenue per
user, the lowest this quarter since the third quarter of 2020. but that is because platforms are pushing advertisers toward reels, a challenger platform to tiktok, millennials are fighting back. facebook saw an increase of 31 million daily active users in the third quarter. you mentioned the concern of declining the growth we saw in the previous quarter. >> i don't know that many people that use facebook anymore. >> i feel like i'm the millennial user. i'm back on facebook. >> will check in on the fact you have the privileges, instagram, what happens with the platforms then? what are we looking at? >> sheryl sandberg sees the future very much in reels. 20% of time spent on instagram is on instagram reels. now the push toward the metaverse. that will take a significant
proportion of investment and spending, zuckerberg prevailed he thinks he could be 10 years before the metaverse races -- which is profitability. the headset was released last year, facebook all right has eight virtual reality work headset, he says it could replace the traditional desktop computer. >> is like a hologram, isn't it? >> as a whole different universe. maybe next quarter will be speaking to each other through virtual headset sunset. >> or not. medassets of new innovations coming down the pipe, -- meta. unilever has beat the average analyzer estimate. we hear from the ceo. this is bloomberg. ♪ g. ♪
commodities, pension chemicals, freight distribution, energy, labor. the majority of the sectors growth and our growth is coming from pricing. at the moment we are not seeing down trading. on the trends, we have a portfolio that typically offers a good, better, best, we cover that risk a little by having offerings at the lower price points, or people are feeling the pinch from inflation these days. >> it's a changing consumer habits, do you see any patterns of people buying some of the more expensive, premium, but more of the cheaper offerings? >> we are sensitive to the pressure budgets are under now. we are seeing both things happening. there's up trading going on as people treat themselves to a little luxury. when they don't have the ability to invest, in a renewable good,
some down trading. it has been in latin america and a little bit in europe. overall, we are not seeing huge shifts in consumption other than having to carry the inflationary costs there being pastor. >> how much more do you think inflation can go up? what does it mean for your input costs? >> we have guided one quarter ago, that we saw input costs for the year, increasing for 3.6 billion euros, we've upped the estimate to 4.8 billion euros for the year. we are largely covered on those costs. but i don't have a crystal ball on what the future holds. i'm not sure when peak inflation will be, we are setting a higher priority on agility and our
ability to respond than unpredictability. >> how long do you think you can put prices up for it? >> i think at the moment, we are at a period of extreme inflation. we will continue to take some price through the rest of this year. our plans beyond that are for much more moderated pricing. i don't think we see in the end of price increases from us or other players in the industry for 2022. >> why are you currently doing in russia? what is a situation like on the ground? >> our first concern is for ukraine, they are all safe and accounted for, and quite remarkably, they've got our business back up and running in ukraine. as far as russia, when comes to russia, we want to be part of international sanctions. we have ceased all imports and exports of products in and out of russia.
we curtailed any further capital investment into the country. we stopped all advertising spending and we will not profit from our presence in russia. frankly, our only concern is not a commercial concern, it is to secure the safety of our people on the ground in russia as well. russia represents 1% of unilever's turnover. this is about complying with international sanctions and protecting the well-being of our people. >> have you had any discussions with russian authorities, what they would do with your operations? we are hearing that they could put some of their own chief executives in charge of some of these -- your operations in russia or nationalize them. >> you are right. the russian authorities have been clear that companies operating in the country have three options, the first is to continue operations. in our case, on a very curtailed
basis, the second is to transfer ownership to a russian business. the third is that any kind of exit will be seen as abandonment and the russian authorities have indicated they will seize and nationalize not just physical assets, but also intellectual property. for us that means our brands. oddly enough, the way we are best able to protect our people and maintain pressure on the russian economy is by maintaining a minimal presence in the country. >> that was unilever ceo, we talked about russia, inflation, at some point, if you put the prices too much, in certain parts of the world that they will go to cheaper brands. that is the main conundrum for unilever moving forward. >> as consumers look to reduce costs, particularly in the case of the cost of living, those for
corporate credit as well and how vulnerable certain parts of the corporate space are as financial things star is a macro level. this chart shows what's been happening in terms of high-yield investment grade, we will start in 2020. it comes down. the white line is high-yield, the blue line is investment rate. it is starting to edge up. the question is to what extent corporate credit has pricing the moves around the asset purchase program from the ecb. they said they are going to end the program. we had officials coming out saying they're going to be looking to raise rates back to zero, possibly by the second half of the year. financial conditions will be tightening within the euro zone, what will that mean for the corporate credit space, how much of this is been pricing? let's bring in tatjana greil
castro, what is your take, to what extent are the moves we are seeing, particularly this have been priced into the credit space. >> good morning everyone. app is coming down. it was up in response to the pe pp being -- in march. we've seen this rise in your terms, at the same time there's an expectation it peeked over the summer. it could be june or july, most market participants at the end of the summer. you think this has been anticipated already a few weeks ago, even before, but what we see is as the ecb is stepping back on bond purchases are getting smaller, app is in --
declining, we now see the impact. >> what kind of levels are you looking for yields? when it is fully priced and or the market shifts cap though -- market shifts? >> we have seen a widening over the last few days. it doesn't feel to me that we've reached the wise yet. there's a lot of market hesitancy to base european estimates. in the near term, there could be continued pressure, this price sensitive market, continues to pick up about 50% at the moment.
it's presence is still felt. i would see continued near-term pressure that we have seen significant widening over the last few days, i think we are not quite there yet. >> which sectors are most vulnerable at this point as we face up to slow growth in europe? >> with the app, and as you pointed out, -- it has an indirect impact in terms of revenue, a lot were pushing to quickly exit. the impact is there on municipal bonds, there are longer being bought. we expect the whole market is impacted by the retreat or ecb
leaving the market. it should have wide impact. they are clearly based on earnings, and the dutch how affected they are, how a niche they can pass on to their -- >> how much more constrained you see and how much will that be for market? >> we are very focused on the lockdowns in china. in china and high -- and shanghai, it has been in place for a month. it could take another month of severe lockdown, where people are not allowed to leave their homes, or they are locked in the offices. to the extent that it requires them to be out and about because they are not service driven but product driven, has a negative
impact. we can see already, other cities are preparing for lockdowns. this harsh lockdowns china's implementing. that will have an impact. clearly, as we discussed, with unilever earlier, the impact that had on the supply chain. they rely on the overhanging issue, will there be a cut of gas, european union is dependent -- will stop oil and gas from russia. that would be a huge impact. overall, it is probably prudent is to be cautious around demand. >> thank you. coming up, you prepares its
>> welcome back to the open. 30 minutes into european trading, here are top stories. friends with facebook and meta shared after hours -- sword after hours. yen slumps, the currency slides of your jake down on bond buying. traders walk -- look for talk of intervention. germany is ready to back a ban on oil from moscow. they are fascinated with the yen
reaching 130 dollars per barrel -- per dollar. the government same they are continuing along their path. >> save me. >> japan's a big importers of oil, that is why they persist, 138, as the first time since 2002. products look at him, saving me every day, every hour. >> there's been a choppy week in these markets. how you get a grip across these equity markets. very solid gains, the seeing a move out of treasuries, out of european sovereign debt, you are seeing this yields coming off stub the equity space, the yields are coming off -- i am confused. equity markets performing well, gains more than 1% across the benchmark. the dax, up by 1.5%.
when you focus on earnings, just look at the likes of barclays and unilever, just a few of the names that reported today, they have their oh idiosyncratic story, the overall story remains the earnings are beating the estimates, seemed to be giving some relief to these markets. we continue to keep an eye on china, also ukraine. let's see how -- every sector in the green. at 2.3% gain, technology also high, the parent company of facebook up by 2%. at the bottom of the list, when it comes to media is retail and health care, some the more sensitive sectors, health care being -- that is how things are shaping up 30 minutes into this trading session. >> the reichsbank making one of the most dramatic monetary
policy shifts, since it took -- the riksbank will race to 0.25. it will raise it a further two to three times this year. economists reluctant to go ahead with this, a lot they did because of inflation. less than three months ago, officials stood out from typing trends by global counterparts by actually interest-rate hikes before 2024. investors saying they've also had to align themselves. within the context of what we're hearing from the boj, it just got a lot more interesting. >> checking in on the end, 138, of 35. one a half percent. the riksbank coming out this move at a time, we heard from ecb officials, turning more hawkish. we would just talk about tatjana greil castro about the end of
that purchase program. as you move to a rate that gets to zero by the second half, according to some officials. this is -- the rates will be raised two to three times as your. >> the curvature on the back about surprise rate hike. the eu is preparing its response to russia's threat to cut off further gas supplies to europe. they want companies not to pound to moscow's demand to pay for gas in rubles, that would be a violation of sanctions. join us now, our year correspondence of i'm hearing a lot of companies say it is unclear whether there is a workaround that we can pay and rubles, they're asking for clarity from the commission, they say we've been cleared, do not pay rubles. >> yes, you can see why this is confusing for everyone. the reality is, russia is using
gas a geopolitical weapon, and this conflict with the ukraine. when you look at the reality on the ground, and the paperwork is of the lawyers are going to have to work overtime. when you look at the commissions , richer sanctions of anything that facilitates rubles will be a problem. for companies, if they -- they say if we pay -- there's a lot of confusion here. i don't think it's easy for companies to navigate this. there's pressure not just from companies, but also officials. european ambassadors had amazed -- meeting here in brussels, they urged the commission to issue new guidance. the idea is in about three hours, there is an expected, -- crafts conference. she is believed to come up -- press conference. i don't think anyone has an
answer at this point. >> do we have a clearance if this is pro embargo on russia? >> this has formed him to brighten tension between countries that say we would pay and rubles, hungry has come out on the record saying many times it would not be a problem. note for potential buyers look at those types of accounts. in reality, you are helping russia to not just pump up there currency as a reserve, this is creating tension between the eu 27, russia during divide and conquer between the member states. it does bring a good point, is see you -- is the eu going to do an embargo before you cut it off, keeping in mind there's a deadline coming up or do they wait for the russians to make a
move and then respond? the key issue is russia has a successful -- to test the limits of this partnership between the 27 members of the european union , which until now has been very united, and put on an effective front. >> testing the initiate of -- unity of europe. joining us now, julie norman, codirector of the ucl center on u.s. politics. thank you for joining us on set. what -- there is a view amongst some that this invasion would never happen because it would be against putin's on economic interests. , and that kind gas supplies wouldn't happen because it is against their interest. have we misunderstood the non-economic motivations of vladimir putin and the russian people? >> just from the start with known that the reliance and will dependence on energy between russia and the eu was going to
be weaponized at some point. it was more a question of when rather than if, even at the beginning, they didn't see this coming. as we heard from the start, a lot of discussion on if there's going to be an energy embargo. that is something there's been reluctance to do from the european countries. 50% dependent on russia, we have seen the last few days, it is the next level of needing to make that this -- decision. russia cutting off poland and bulgaria, who can handle this better than say germany and italy. can we prevent that in some way. >> is a difficult question. is testing the resolve of european countries, but also russia. can russia sell the same when asked, is there anything u.s.
can do to support your? >> russia needs the revenues as well. that is something to keep in mind. what we've already seen from the u.s., is trying to shore up alternative supplies for europe to be able to make the first step to put putin on the back foot, rather than the other way around. the u.s. has started trying to supply lng to europe. all that is going to be a more time-consuming process of those conversations are happening and have been for a while. >> went from set embargo, the needle is moving closer to a full energy embargo, if not now, the maiden -- maybe the medium term. this -- the history of sanctions and embargoes, the bank of japan, world war ii, the implications of the sub-to what extent are brussels policymakers grappling with this issue? >> in the short term there's the urge to do everything we can to
stop this $1 billion a day going to russia. at the same time, sanctions to have long-term effects there often counterproductive and can strengthen the state, and an autocrat like putin, taken increase his popularity. it can push states to create their own industries, or turn to another country like china. >> the biggest problem is not russia, but china, how did they try to get china and make sure that there's is not a new block forming, which is antagonizing against the u.s.? >> great question. china has been such a wild card throughout this conflict, whichever way they lean, that could be a game changer. china has been trying to slow walk this to some degree. u.s. has been putting pressure where they can.
there's been some discussion of secondary sanctions, i think that would be difficult to implement with china, it is being discussed. china -- there some interest for china not to completely jump on the russian bandwagon either. they need leverage also. >> there was a discussion at the beginning of this conflict, they would have to provide an offramp to the russian president. it seems that offramp has disappeared. the discussions have dried up. as a sell something that is needed at this stage of the conflict? has there anything set that she that could provide that. >> initially we were trying to find an area for a diplomatic solution, for some kind of compromise for putin. the stakes have been raised by russia's own actions, the atrocities and war crimes are seen, but also the continuing. western states have been trying to divert to ukraine with how much to push russia on diplomatic effort.
putin is not interested in negotiating. any of the off ramps that were on the table are not being taken up at the moment. that said, i think we need to keep some long-term compromises in mind. ultimately, there will need to be some kind of resolution to this, probably the further rather the near future. there will need to be considerations regarding territory, membership in eu if not nato, and security agreements. all those are being discussed. >> and the longer-term concern from the u.s. is companies, countries that could have difficult relation with the u.s. sub-and by less treasuries because of sanctions. we haven't understood the longer-term effects, what it means for the world? >> i think that is one reason why the u.s. is been reluctant to push too hard into secondary
sanctions just yet. because russia is such an economic superpower as well as political, they are so intertwined to have half the world needing to go against some their current economic interests to line up behind the u.s. could create difficulty for the u.s. as well. >> and so much for as always. she is the codirector of the ucl center for on u.s. politics. rounding up subs so busy this year is out -- this week, head of european banks research at morgan stanley coming up next. this is bloomberg. ♪
>> welcome back to the open. let's focus on bank earnings. we heard from a european lenders this week. barclays, credit suisse, let's break down those results from the sector with magdalena stoklosa, head of banks research at morgan stanley. we can break down the region, even if we look at the swiss banks, very different if you are a ubs or credit suisse. who will benefit the most from this environment going forward? >> i have to say that the banks trade is all about future strength versus credit cycle, different regions are going to react differently. the regions -- slowly we are
getting those results. our spain, particularly domestically, the u.k., swiss banks, wealth managers -- global wealth managers are going to benefit quite significantly from u.s. rates. we are slowly starting to get increased target from the perspective of messaging, in the second half of the year, for them as well. >>, also benefited, this is been reinforced from what we saw from barclays today and deutsche bank earlier, from a pickup in trading, do you see that sustaining through the rest of the year? >> yes. good point. particularly within the income trade, that macro effect commodities as well. i have to say, the numbers, out of barclays, georgia work strong
in this work -- barclays and deutsche bank work strong in this regard. had to say, we have to assume that the volatility remains for the foreseeable future. it will continue to be supportive of those macro trainings business. i believe there is some longevity there. >> magdalena, do you see the difference between the banks for the retail investor and that ones that have investment bank capability? >> yes, fundamentally, why look at the banks, let's say three quarters forward, i have to say that i do prefer retail banks as an investment here. there are likely to benefit from the interest rate side. i believe the consumer, despite
the inflationary pressure is likely to hold reactively well from the perspective of the quality. on the investment banking side, we are going to have more cyclical economy in those revenues. we are likely to have the continuation of let's take strong fixed income trading. for example, equity trading, or the investment banking volume, particularly in equity capital markets have been very weak, literally, the volume are down more than 70% year-to-year. that is unlikely to change. i have to say it, if you are looking for quality, volatility and -- less volatility in earnings. i would sweep -- stick with the retail banks.
>> is this senior when european banks can make up that market share they lost of their u.s. rivals? >> it is always an interesting question. i have to say, throughout 2021, market share in general between u.s. and european banks have stabilized. it is a huge restructuring in credit suisse. we wouldn't have -- we would've seen it even slightly flowing back, that share. i have to say, it is been 12 months where the share remains stable. >> stable is as good as we can get with european banks and market share. excellent insight, thank you for your time. had of european banks research at morgan stanley. coming up, we break down the collapse -- he was arrested and charged with fraud.
>> now, accused of -- bill hwang has been arrested on a 100 billion dollar bond. he denies any wrongdoing. joining us now to break down all this is bloomberg's managing editor for ame a finance. is something out of a jean novel -- john like a rate novel. >> it shows that the banks were pretty unaware of the -- they each thought we are the main player here. when you put it altogether, it was a huge exposure, bigger than anyone knew. 160 billion dollars worth of exposure to stocks, starting out from a fortune of about a billion dollars. massively leveraged, continued
as the stocks went up. >> what we know about the charges from u.s. prosecutors for bill phuong -- bill long. >> big charges all carrying big sentences. it mostly boils down to fraud, market manipulations of those were the two major themes of all the charges. saying he was trying to pump they stocks up and he lied to the banks to get work leverage. >> where was compliance in this? he is misstating the value of the assets. where is compliance checking? >> there certainly were bank compliance lapses. we saw that, credit suisse did their own report last summer on how they lost the most money. there were numerous failings there. he also, according to these allegations, had archegos lying
to the banks about how invested they were. >> if you look at the numbers, they had positions of 160 billion in stocks, how did he think this would then? [laughter] that's the big question. how could it have ended any other way? from the documents, it appears that right up until the very end, they were continuously pouring every cent they made back into bigger and bigger that's. >> amazing. >> we should reiterate, they have pleaded not guilty. thank you. >> let's switch to european open, surveillance early addition next, we look at all the currencies and how that plays out. 19 companies reporting earnings, we will look at banks, unilever and more.
>> i think at the moment we are in a period of extreme inflation and we will take some prizes to the rest of this year. our plans are for much more motivated pricing but it on think we see the end of this from us. >> it has clearly increased and that will of course reduce confidence that will lead to some time where we will expect to see lower growth. >> we face expected headwinds re