tv Bloomberg Markets European Open Bloomberg April 29, 2022 3:00am-4:00am EDT
and unexpected drop in the first quarter. we will speak with adam posen, president of the peterson institute for international economics this hour. and elon musk offloads tesla stock to help fund his blockbuster tesla deal. >> the ftse 100 futures and dax futures reported. china promising economic stimulus and traders looking to the crackdown on chinese tech stocks. they are it nor the troubles we have in tech u.s. >> chinese tech stocks are on fire on the back of that speculation that the regulatory crunch that is been pursued by policymakers in beijing will start to ease and the 24 men and one woman -- one woman of the polyp girl say they will hit the gdp goal this year. many economists have thrown
skepticism on whether that is possible as china continues to pursue its covid zero policies. we don't have the details yet but the fact that they highlighted it was enough to lift the assets from the mainland. we have data coming through from cpi from france. the spanish ibex is coming up 0.8% pure the cap 40 in france out. the latest prince coming in flash. that was a surprise. -- the latest prints coming in flat. that was a surprise. the ftse 100 getting 0.5%. moving on, we will see how things play out across these assets. a solid session on wall street yesterday and then you had the complexities of amazon and apple.
apple pointing to a potential hitch as a result of supply chain challenges linked to china. the futures showing losses. the benchmark for mainland china. gaining 2.4%. as the funk hit chinese equities hit an end, we are looking for more details. the u.s. dollar, look at the strength coming through on the greenback. you also saw that reflected in the chinese currency which has been under a lot of pressure. 2.83 is what you're getting on the u.s. 10-year. >> the funk is a level three. a technical term. looking at the sectors and most of them are higher. only one industry that is on the downside, real estate.
you have pockets of companies that are down but 18 industry groups are up here construction, chemicals, and auto parts. some of the stables we are looking at our companies that may not have done well on earnings overall what we are seeing a lot of positive move. tom: you have a number of stories today that we can unpack. natwest benefiting from a high interest-rate environment gaining 1.4% in the first few minutes of friday's open. positive results for natwest as it looks ahead to the rest of the year. astrazeneca lower by 0.4% despite the strong demand for its cancer treatments. bbva gaining more than 3%.
they beat in their earnings and said they will be meeting their ambitious goals and targets. positivity when it comes to b bva. francine: let's get to mark cudmore. you are looking at the dynamics in hong kong tech stocks. good morning. mark: tom is excited about hong kong stocks and so mi because this is the price action of a market ottoman ouch. it is really quite exceptional. the catalyst was the polyp girl statements. -- politboro statements. there was an extra message. the timing. the statement normally comes out at the end of the day after the markets close but they were worried that if they gave that statement on friday, there are
several days of holidays next week, they were worried that traders would not get the message. why not send the market into the weekend very positive. we basically recovered three weeks of losses in the space of about 40 minutes of trading pre-lunch break and about 10 minutes post lunch break. at one point, the tech index was up 11% for the session. at the moment, it is up almost 9%. that is a positive sign for hong kong's docs -- hong kong stocks and the greater china region. tom: thank you, mark cudmore for breaking down these extraordinary moves we are seeing across technology stocks listed in hong kong currently
gaining a .5%. technology stateside was also making headlines overnight. elon musk selling about $4 billion of tesla stock after clinching a deal to buy twitter. analysts speculate that elon musk may need to sell some stock to cover the equity portion of the transaction that he has personally guaranteed. we are joined by laura wright. how are things going for elon musk? how concerned should retail investors be? >> elon musk is selling 4.4 million tesla shares. it sends a negative signal for existing shareholders and implies a limited upside. and suggests he believes there is more upside for twitter stock. elon musk tweeting he has no
plans to sell anymore tesla stock but it appears the damage is already done. one says that elon's pursuit of twitter has become a --. francine: we have also had amazon and apple earnings out and they did not do too badly but the stock was down. laura: in spite of a record nonholiday quarter and share buybacks, it was the macro headwinds in focus which is why the stock was in the red after hours. supply chain congestion due to rolling lockdowns in china, inflation and the war in ukraine. but it was a beat for iphones and robust demand. it was a record quarter for revenues. apple pushing more people under the services ecosystem and content generation.
at amazon, the story was rising costs. it was a surprise loss for the quarter and a surprise forecast loss for the next quarter. how are they going to fund the extra costs is the key question. the upside for amazon was the cloud business. 37% growth. nice number especially for the market leader in the cloud infrastructure space. francine: laura wright with the latest juicy stories. how many imacs have you bought in the last two months? 50 euros for a charger. i use it every 10 minutes to make sure i have my money's worth. this is the picture for the tech stocks.
a nice lift. it is more about optimism. let's get into the key market drivers. tech is fine in china but getting slammed elsewhere. >> the apple results show how much of a wildcard china is especially for the big tech sector. it was a record in a lot of ways. the records -- the results are good but apple warning about a potential head from the china situation takes the wind out of the sails. and the china story is important for corporate earnings but for the macro picture as well. a powerful rally in the hong kong tech stocks good in the short term. a question of how much longer it can sustain and will it need continued support from the china politboro? tom: will that comment be
enough? is it a pivotal moment for investors looking for china exposure? >> as we have seen in previous bouts of stimulus injections, it is an addiction for investors. they are fine for now because chinese authorities have given a strong signal that they will be supporting the economy and the markets but it will only last so long. the impact fades eventually. will they be prepared to keep injecting stimulus into the market? and keep assuaging investors' concerns? we will have to wait and see but for the moment, it is a positive for sure. francine: let's get some other earnings action. mercedes benz expects healthy returns on car sales. the carmaker is beating supply chain issues by raising prices. >> we think that the
semiconductor shortage situation will continue in this year. in our discussions with our supply partners, it should start to ease in the second half of this year but it will be with us for the whole year. 2023 should be at a better level. francine: how much more can you increase prices by? >> well, prices are made to buy the markets. what is carrying our strong performance are the attractive products we have. we have a product per folio lineup better than ever. the demand situation is very strong. you can also see that in our q1 results with our strong pricing power. francine: given supply troubles, how would you describe how challenging the current environment is? >> it is a very challenging business environment. there are three affects that may
impact our operations. on the one hand, shortages of semiconductors. then we have new lockdowns in china, in shanghai and elsewhere which affects the business and also the supply chains in china but also globally. and the ukraine more. three challenges going on at the same time. having said that, our underlying business is strong. we have a full product pipeline. our electrification effort is full steam. it is a situation where you have very strong underlying business but facing a challenging business environment. francine: europe remains in the grip of the energy supply crisis. germany's dependence on russian gas at the heart of it. what is at stake for the german industry in general? >> we work closely with the
german government in terms of what is going on and they are making thoughtful decisions. germany can only be a strong partner and support partner if the economy is strong. energy independence is a top priority and that is being worked on. francine: what scenarios are you planning for? how would german industry whether a supply shock if russian gas is turned off? >> we have a level of uncertainty. it is difficult to say what will happen. what germany is doing is preparing. and diversifying. any and every company does that as do we. i guess we will have to wait and see how the situation develops. francine: that was the mercedes chief executive speaking about german luxury automaker. elon musk -- it feels like
everyone is trying to catch up with tesla. if you think of dvds and you want -- if you want a ev and you want a tesla, it is brand recognition. tom: the legacy automakers will have their own challenge of tesla. francine: the tweeting and some of the delays and delivering some of the goods. tom: let's bring back in kristine aquino. a lot of focus on the fx space. a lot of volatility. today is an exception, the dollar is off 0.4 percent. we have been talking about currencies. the upside is presumably this is a boost to those exporting nations. why is there less of a focus on that? why are investors more focused on the weakness? >> it really boils down to the
reason behind why these currencies are weakening. across the board, it has to do with the macro picture that is quite bleak. starting to deteriorate. coming down from the levels of growth that we enjoyed to the post-pandemic period. now the story is turning to inflation and how much that is hurting inflation demand and consumer activity and growth. we saw that yesterday with the u.s. gdp figures. it is very telling. listening to the mercedes-benz ceo. the concern about china and the overall outlook is not good. a weak currency should be good for an exporter but it is weakening on broad acro factors that are expected to continue, the outlook is not so great. francine: if you have an oil
shock or a gas embargo, we are trying to analyze it but what does it mean person stocks? >> the immediate reaction is probably negative. if we do get to that full embargo, a standoff situation, you would expect it to be negative particularly for equity sentiment. it is interesting. at the moment, especially in the oil prices, you are not seeing the immediate upside. we are talking about the possibility of an embargo and germany not opposed to it. i suppose that speaks to the factors we are seeing in the commodity markets. perhaps there is a question of failing tailwinds from the geopolitical situation. it is not such a clear-cut positive for the oil price drops because there is a ways to go between talk of a potential oil embargo and implementing one.
tom: we have talked about inflation and the ability of some of the companies to hold onto their margin. it seems like across the board it has been generally positive meeting or beating the forecast. what stands out to you? >> the conversation around rising crossed -- rising costs are still very positive. amazon is notable. it was a key factor in the disappointing earnings. we will be interesting to see how that plays out moving forward. i have been watching with interest which companies have been wielding the pricing power. we know that was a bean. perhaps less so now that inflation has revved up more than anyone expected. francine: i am not 100% sure
what to make of this headline. barclays halting its own debt securities. it is citing over issuance under the bank u.s. shop. i guess that goes to some of the issuance we are seeing. kristine aquino, thank you for joining us. we will dive into the latest u.s. gdp figures, we speak with adam posen. this is bloomberg. ♪
tom: welcome back to the open. we are 22 minutes into the european trading day. every major index gaining. over 1% for the dax. in terms of your sectors, only two in red. telecom is down 0.2%. look at amazon and apple come up because of what we are seeing in china and the expectations that the regulatory crunch might ease off. francine: let's focus on the
health of the global economy. u.s. posted a surprise contraction for the first quarter. we have had figures from france and spain this morning. france also stagnating while spain slowed more than anticipated. the president of the peterson institute for international economics joins us. there is so much i want to ask you about inflation. are we all getting it wrong? is inflation here to stay? inflation falls off a cliff in the second half? adam: i doubt it, francine. thank you for having me. i think the slow down or the short-term bump we saw in the gdp data for france, spain, and the u.s. is reflecting some of the monetary tightening and some
of the realities of the russian invasion of ukraine and i don't think we should read too much into it. what the fed has baked in for hikes through the rest of this year is not going to tip us into recession or if it does it will not be much. but it is necessary to keep inflation where it needs to go. tom: do you align with the view that longer-term inflation become structurally higher as a result of the globalization we are seeing? is that a thesis you buy into? adam: i do but five years down the road. because i think right now what you are seeing is a you will see much more of the disinflationary impact. when the fed and a little bit the boe and ecb tighten, and when we work through the bit of overheating we had particularly in the u.s., that will be a
downdraft, a meaningful downdraft. when we work through some of the supply chain problems, that is also going to be a downdraft. in terms of the longer trends, the globalization or the corrosion of globalization, energy as mark carney has talked about, those will take another few years to kick in, in my view. they are there but that is not explaining what is happening today. francine: we had a chart. it is a wonderful charge. the u.s. versus china. and the million-dollar question is, given where we are, what is being underestimated from some of these tightening's in these economies? adam: because of lack of information to the outside world. that is the downside risk from china.
i know i am not saying anything original. i think the second thing is to say that the international financial system in this instance is working correctly. the u.s. is overheating, tightening monetary policy the way others are not. and the u.s. does not have the downside risk like china from covid so it makes sense that these countries are diverging. two things that are being overlooked -- there was a lot of chatter in the markets about the yen versus the dollar. i think we should view it as more the yen and the yuan are depreciating against the dollar. that is a medium-term trend that i think is real. the second thing that is being overlooked is the productivity numbers that were in the u.s. gdp data which were very
negative. it is biased. it is one quarter. but going back to tom's point about inflation, i think we will fall back more towards stagflation because the productivity numbers are not good. tom: for capital flows, are we missing something? adam: that is a good question. there is a risk. i don't think it is for sure. there is a risk we are at the start of or in the early stages of a multiyear dollar appreciation. like in the 1980's with the dollar appreciates significantly against everybody. the policy makes we had in the 1980's was a loose monetary policy playing catch-up and that is how you get this rise in relative currencies. currencies -- to the degree
policy determines anything, we could be in a cycle like the 1980's. and similarly in europe, because of the invasion, if it falls into a growth problem, that will exacerbate issues. tom: adam posen, president of the peterson institute for international economics will stay with us and focus on the u.k. economy after the break. this is bloomberg. ♪
the crackdown on technology companies. tom: adam posen, president of the peterson institute for international economics is still with us. we left off before the break talking about japan. we know japan is stuck in a stagflationary slump but that has not changed despite the world we live in. is this demographics or psychology? and what is the lesson that china should be learning? adam: profound questions. in the short term, it is not clear what triggers the short movement in the yen over the last few weeks but as we were saying before the break, it is in line with the fundamentals. you will not have the tightening and overheating and japan that we have seen in the u.s.
and japan wants to be in parity in exchange rates with china. that is another reason to see the yen go down. i had to do a big mea culpa publicly if you years ago because i was one of many economists that used to attack the boj policies. it turns out they did it and it did not fix inflation. and we all should have recognized that the demographic effects are real. francine: does it change the global currency playbook? adam: on currencies, i don't think it is changing the playbook but i do think it is reinforcing at some of the forces that have been at bay since 2008 and 2009 where a lot of the major currencies were moving together, we are now
starting to see adjustments of the relative standings of these economies and that leads to big currency swings. francine: and the long-haul? adam: my wife sensibly is not traveling with me anywhere as near or as often. francine: room service,. . tom: from room service club sandwiches to brexit. the u.k. government said earlier, higher wages is what we are looking for. real wages are below. unpack that view of brexit on inflation. wages are rising but inflation is coming down. is that an impossible conundrum? adam: it is not impossible but it is not something the boe can get out of.
i made a colleague yesterday. -- they made a comment yesterday. the important point for your viewers to understand is that the primary driver of inflation in the u.k. right now is wages. and that is when it is serious. it is the most important factor. once it gets momentum, it is hard to reverse. the way to think about the rugs that affect is that there is u.k., the euro area and the u.s., they all have inflation. but the euro area has had no wage fluctuation and that is because they had a better approach than the u.s. keeping people in their jobs than the u.s. the u.s. had physical access briefly and wage inflation because we did have this mess of having millions of people become unemployed suddenly and having them look for jobs.
in the u.k., the u.k. is in between. it did not make the labor market mistakes that the u.s. did but it has wage inflation. francine: that is staff shortages. it is an offhand comment but the former pepsico chief said she could not get room service because the staff did not have enough staff. adam: it is in the data. you can take the ons data and you have shrinkage in the population and in the foreign burn workforce. -- foreign-born workforce. compounding it on food, even before ukraine, there were brexit affects. if you are not like the u.s. and messing up but you are in wages,
it is clearly a labor supply issue. tom: how many more do they need to hike to tackle inflation? is that the prescription? adam: i fear they may have to have a recession or the u.k. will have to accept a recession to get it down. this is the problem when you have a labor supply shortfall. you have to somehow get the demand to match up with the available labor. if you don't do anything on the monetary front, then wages keep rising but real incomes don't. what you care about, you care about inflation because you care about people's real incomes. in terms of hikes, i would take the over. three hikes canal+ a couple more will probably not be quite
enough. -- three hikes and a couple more will probably not be quite enough. the real income shock will push down inflation. you may get a real income shock but that will not push down inflation and that is why you need tightening. francine: is there fiscal policy that can help? in france they think it is incredible how few safety nets that the u.k. has. adam: that is historically the problem. the u.k. puts in a welfare state but has done little to expand the welfare state since then and there have been specific problems with cutbacks over the last few governments. that is a political choice. it is not the choice i would make. u.k. can afford to do more for
tom: welcome back to the european market open this friday morning. i am tom mackenzie alongside francine lacqua. francine: [laughter] tom: that wasn't me but it also was not me. francine: i love the voice. tom: do you prefer that boys? that was a deep -- do you prefer that voice? that was a deep fake. it's first commercial product launched in 2020. i think francine prefers the deep fake. francine: it was a smooth voice. tom: there was a caramel essence. these guys are leaders in the
space and they have raised a lot of money from google ventures. we are joined by the ceo of synthesia, victor riparbelli. why do we need big fakes in the commercial space? victor: what we see in the online world today is video audio has become the default. that causes a big problem for companies because recording video is time-consuming and expensive and does not scale. tom: don't tell our bosses that. victor: what we see here is not replacing video production but replacing text. our customers use this for training. instead of having that done with slide text, now we have a video which is a better format. francine: the caramel voice.
you have made my day. my tom mackenzie can speak spanish. can we have a look at that deep fake? tom: [speaking spanish] francine: gracias, tom. tom does not speak spanish. tom: i can say --can i have a ham sandwich? where is the beach? now, i have that new skill set and now victor can program my mandarin english -- mandarin chinese. francine: the problem is authenticity. we all have this compliance. is the most demand coming from that or is it chief executives saying i need to speak to my
staff but i don't have time? victor: it is very much about training. it is not trying to pretend that it is a real video. it is simply about utility. if you are a front-line worker and you need to learn something. as the student, you want to consume that by video. as the company, you want to make sure that your employees are trained as fast as possible and in the most efficient way as possible and this provides a solution. this is something everyone can do. it is not video producers. if you can make a powerpoint slide, you can make a video like this. tom: would you advocate for regulation to address deep-seated fares? -- deep-seated fears? victor: bad actors will pick up this technology. for a lot of the bad use cases
-- if i impersonate you and and email, then that is bad and i should be sent to prison for that. francine: i don't know if you do get sent to prison. what do you do with the data? tom recorded himself. i think it was a green screen. you now have this data and this image and the beautiful voice of tom mackenzie. do you delete it? victor: we store it safely. we have created about for -- we create about 50 of these every week. this is like any other service you use online. we are building all of these safeguards so no one else can use them. it is a private image you have.
you are always in control of your data. francine: this was pretty convincing. is there a secret? is there a trick when i look at that video that tells me it is fake? victor: it is a matter of time. the best in class technologies are with private companies. you should always be vigilant. one of the most important things about this new era that will be driven by ai is a you have to be vigilant. just like you have been able to fake emails or tweets, it will now be possible to fake video outside of hollywood.
the most important thing is education. and i think the most effective way of doing that is people watching the training videos. tom: how is demand changing? are you raising additional funds? victor: we are very well-capitalized. it is a force of nature in the market. people want this technology and they want it really bad. francine: i would love to dance as a ballerina. i don't know if you can do that next. victor, thank you so much. let's wrap this up with more virtual tom mackenzie. tom: thank you, francine. at was my creator, victor riparbelli, the ceo of synthesia . thank you, victor riparbelli for
providing the deepfakes for us. let's get to the bloomberg first word news now with laura wright. >> sadly, i did not get an avatar creation. president biden is seeking an additional $33 billion in aid for ukraine and new authority from congress to seize and sell property from russian oligarchs. a british national has been killed in ukraine and a second person is missing. scott sibley was believed to be fighting with ukrainian forces. british virgin islands premier has been arrested in miami. the criminal complaint issued by the florida court alleges he was trying to help a presumed drug trafficking organization smuggle thousands of kilos of colombian cocaine into the united states. the mayor of kyiv says authorities still cannot guarantee safety to residents
hoping to return after russian forces pulled back from the outskirts of the ukrainian capital. bloomberg television has been told that the exodus has already forced a hit of at least a billion dollars to the city's budget. >> it is at the genocide of the ukrainian population because our city is destroyed. and other cities have been destroyed. >> 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 wright in london. coming up, we talk about crypto
trading day. solid gains. the politboro of china saying they are determined to meet their growth targets. francine: as elon musk gets ready to take over twitter, he has another job and that is --. that is the latest conclusion of the bloomberg opinion columnist. he joins us from our paris bureau. it is a great piece. i had not thought about the crypto angle too much but it is also true that elon musk is constantly trading with crypto burros, -- crypto bros, for example, the founder of crypto does. >> you have raised the central contradiction of the dilemma. elon musk says he wants to clean
up twitter in terms of the scams and frauds. he uses twitter. he is very vocal. he has been dabbling in all sorts of crypto tweets that move the price of crypto coin and dogecoin. to frame the problem, remember that during covid, we saw a festival of frauds and scams on social media. there has been a boom. a clear problem. problem regulators are looking at. i think elon musk has no choice but to address it. the question is, can he? tom: a festival of fraud. what do regulators or what will they be looking at specifically? what measures could they be rolling out? how much will they scrutinize
elon musk at this point? >> part of this will be about platform responsibility. during the last crypto ico boom, we saw crypto's waking out. they restricted a lot of crypto ads. because there has been such a boom during covid, regulators are once again knocking on the door of social media platforms. in the u.k., there is new legislation being extended to social media platforms to make them responsible for ads. in europe, the ecb was talking about social media more generally as a feeder of hype and the fear of missing out and taking advantage of unsophisticated people. there is clearly a lot of her regulators to worry about and a lot for platforms to get ahead of in terms of responsibility
before it gets out of hand. francine: is there regulation coming? how will it affect twitter overall? >> i think this is the question. regulators are behind the curve or they feel they are behind the curve on crib no more generally. if you look at their share price of twitter next to a lot of the meme stocks and the stocks that benefited during covid, there is a section of addiction into social media. elon musk may want to change the model. the more he moves into this market, the more he will overlap with regulatory worries. tom: the central contradiction for air -- for elon musk as he looks to take over twitter. interesting to see goldman sachs offering a loan.
♪ >> now, we always have to be, take a look, and no one is predicting a recession now, some are predicting there may be a recession in 2023. >> i want to acknowledge the challenges we are seeing from supply chain disruptions driven by both covid and silicom shortages to the devastation from the war in ukraine. we are not immune to these challenges, but we have great confidence in our team, in our products and services and in our strategy. >> there no indicators that we are seeing a weakness in consumer
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