tv Bloomberg Markets Americas Bloomberg May 6, 2022 10:00am-11:00am EDT
>> it is friday, may 6. here are the top stories we are following. it was increasing by 428 thousand in april as we both moderated in an extremely tight labor market. markets sending a risk of message as the selloff continues and what has been a very volatile week. press shocks continue. lockdowns in china have left companies around the world in a bind. we will talk to kurt sievers , nxp semiconductors. a lot seems to have turned around or snowballed coming off
of this jobs report. guy: you look under the hood and it is terrible. the u.s. economy is employing a lot of people but not enough people. and there are bottlenecks all over the place in the labor market. you talked any ceo and they will say, i am struggling to hire people. employers added former 28,000 jobs in april, -- employers added 428,000 jobs in april. but here is my question -- look at the participation rate. it didn't go in the right direction. we were hoping that it would improve but it went the other way. why are americans not going back to work? let's bring in michael mckee who
is in palo alto, california. look at the participation rate. why are americans not going back to work? michael: i don't know what you are talking about because i was here at 3:00 a.m., but a lot of people dropped out of the labor force according to the statistics but it might be just a statistical discrepancy brought about might seasonal factors and one month doesn't a trend make. more than 428,000 jobs in a month seems like it is not that high anymore because we have had 12 months of people going back to work. at this point you become a nation of retirement, people in the baby boom were retiring. that participation rate has been going down for a long time, and just people who are deciding
they don't want to go back to work yet or dissuading for a better job. we are so hiring a lot of people, it is just that there are a lot more jobs open there had been four. kriti: there is a lot to digest in this jobs report. i am curious what the biggest thing to watch for. you're moderating wage growth but a labor participation rate that has changed. put it in some context for us. >> i think it is an interesting report with a strong labor market but i totally agree with michael that we are down from the previous three months in participation. we just stepped down by 2/10 of a percent. the thing to watch is wage growth and that will start to decelerate.
it is at this point where we will see moderation in payroll growth going forward and we will see participation gradually continuing to go up. guy: there are two jobs for every unemployed person in the united states. everyone has made much of that. i think it is what you say about wages peaking, why will they peak when employers are still so desperate to employ people? yelena: you have to be careful about the job openings. there is evidence they might be overstating the true picture of what is going on in the labor market. i think the fed, mr. powell, made it clear at the other day that they are intending to put pressure to cool down demand in
this way openings will go down. i think there is a good chance that participation will go up and bring the labor market more in balance and wage growth will remain strong, probably not as strong as we have seen in the last few months. kriti: michael, i am curious about the market impact here we are seeing a major selloff in the bond market. what is it that we need to be trading off. there was a time when the payroll number or real wages was the driver. i am confused at what the market is looking for here. michael: so am i. this is a conference that features a lot of people from the federal reserve and i was speaking to a senior fed official and i said, what is the
market doing? it appears what we are seeing is a realization that they be things were overvalued and may be world of higher interest rates, your discount will be different and you have to bring down the price a little bit and everybody is trying to do that at once and then throw in the confusion queue get from the automated traded -- trading these days and you end up with volatility around what is going to happen. it will take the markets a while to reprice and figure out what you should be making in terms of return when you are in a world of higher interest rates like we are going into. one thing i wanted to add that you had asked about what to watch in this report. we may be starting to run low on workers who are ready to go back and in certain areas with certain skills, one month doesn't make a trend, but only
2000 construction workers. is that because they are getting harder to find or because we are starting to see the interest rate affect and higher mortgage rates on the planet that builders are making for how much they are going to do going forward? guy: we will be talking to gina raimondo about are we starting to end up in a situation where we have a skills gap. cpi next week, the survey is 8.1, down from 8.5. what are people saying at the conference you are at about the trajectory of inflation and about powell's to take basis point off of the table? michael: nobody thought 75 basis points was a serious proposal. i think the market got ahead of itself in thinking that way. the fed does want to move
expeditiously and 50 basis points was a big change, especially when you are going to do it for a couple months in a row. i don't think that will be an issue front of mind but everybody is king that maybe inflation has peaked. headline inflation -- but everybody is thinking that maybe inflation has pete. -- but everly is thinking that maybe inflation has peaked -- but everybody is inking that maybe inflation has peaked. if core doesn't rise as fast as the headline, that would be after news on the inflation front for the fed. kriti: i to ask about the 75 basis points mike was talking about. is there any chance that the 75 basis points despite him saying it is off the table, that would bring it back on?
yelena: there is always a chance but i don't think it will. they will do the 50 basis points and then they will stop and evaluate and i think at that point we will see inflation has moderated. we think that the cpi has peaked. so i think 25 basis points forward is the scenario. guy: was powell hawkish or dovish this week? give us your sense of that. yelena: chairman paul was just honest in the sense that he said this is what we did and we are going to be data-dependent. he was as honest as he could
possibly be. i don't think he was very dovish or hawkish, he just told us the facts and the facts are that inflation may be moderating and they will reassess when we get to that point in a few months. kriti: thank you both so much. a really fascinating conversation on the fed and the jobs report. we will have more on that with matthew horn bok -- horn bach. this is bloomberg. ♪
>> the labor market is very, very strong right now. >> this is a strong labor market. >> this is an economy and the labor market overheating. >> the economy is red-hot and the labor market is red-hot. kriti: those are guests on the health of the u.s. labor market. let's get more insight from matthew hornbach, from morgan
stanley. it has been a rough couple of days when you look at the market, extreme selloff, stocks, bonds. i am curious where the labor question falls into and what are investors reacting to? is it the 75 basis points, labor partitioned -- labor participation rate? matthew: thank you for having me on and thank you to all of the mothers -- and happy mother's day to all of the mothers out there. i think what is coming next week is more important, the cpi inflation report. we have had a couple of inflation reports. i am thinking about the pce numbers we have gotten over the past few months and they have been more reasonable reports than what we had over the four months prior to that. i think ultimately it comes down
to inflation and next week's report will be key to markets going forward. guy: what do you think that number is going to look like? matthew: we think it is going to be a good number. ultimately the trend with underlying inflation in the u.s. are strong, particularly with the housing market. in the last segment i saw you talk about home builders. that component of inflation we expect to continue to be quite strong, so underlying inflation should hold up but it is really about all of the other factors that had been boosting inflation towards the end of last year, early this year. that is where the rubber will meet the road. kriti: i am curious about the currency picture. if many hop out of bonds and go to cash, is the dollar a
no-brainer traded? matthew: ultimately the dollar is rallying on accommodation of factors that it usually will move to. one is the policy divergence we see being put into place by the fed against the bank of japan, the ecb, against the pboc, china. you also have growth elements that favor the dollar currently, including strong growth in the u.s. economy, labor market report, hat tip to that idea but when you move overseas, you do see weakness in china. there are concerns about the zero covid policy approach in the marketplace and concerns about the growth expectation channel favoring the dollar. guy: do you still think we are underpricing the fed?
how far does the fed have to go. you have people talking about the fact that we need to deliver on the guidance laid out by chairman powell. how high do rates in the united states need to get in order to deliver the demand structure the fed needs to see? matthew: guy, that is a problem that is multivariate. if i just look at the u.s. economy, i think the fed could very easily get back to where it was in 20 18 without causing much command. morgan stanley is looking for the fed to go higher and it is appropriate at this stage. when you broaden the lens and look outside of the united states, that is where the waters get more money. the ultimately u.s. economy does operate more on an island in
other parts of the world. we get to see what inspires -- transpires with china and what is happening in europe then we will be in a much better place to know, does the fed have to go into restrictive policy territory or not. kriti: i feel that you hit on the key point that the u.s. does operate on this island. it is interesting you talk about the recession but it's almost of the feeling that a recession is in the cards for the united states unless the fed did something out of the ordinary. europe and china, export picture inflationary picture particularly out of europe is concerning. i am curious how much of that can drag the united states down as opposed to the other way around. matthew: that is exactly why we have to pay close attention to financial markets. the transmission channel tivoli
from outside the u.s. inside, exports, global trade is a key component of the transmission mechanism but financial markets are also a key contributor to that transmission into the u.s. economy. the equity market continues to trade on the weak side, which is what our equity strategist, mike wilson, is looking for, then that could have an impact on the u.s. economy earlier than any traditional economic analysis which suggest. guy: let's talk about the other banks. the bank of england signal the recession and rate hikes period anymore do you think that will have to deliver? we have inflation heading for double digits come emerging-market territory. the bank expects that inflation picture to soul -- collapse. in order for the bank to deliver on its mandates, in order for it to do the right thing for the
u.k. economy, what are you now thinking? what do you expect to happen and how do you position around that story? matthew: guy, the message from the bank of england sounded confused. i think it just reflects what most investors are thinking these days, people are very confused. we are expecting another hike but after that we don't expect much because we have growth coming down quite substantially. when you look at morgan stanley economics and the forecast for the bank of england policy? , we are way below where the market is currently priced at one of the things we are out is for investor to be in yield steepening and be long two-year persist short tenure, looking for that particular part of that
to steepen up and that is a key message from us can wake of that meeting. guy: great to catch up it always great to get your analysis. matthew hornbach, thank you very much indeed. yesterday selloff come all about etf's cashing out we are going to talk about the role they played and the story you see on the screen in front of you. that is next. this is bloomberg. ♪
shifts at under armour. the electric carmaker expects labor and parts markets when shanghai was hit by a coronavirus lockdown. a group led by the former guggenheim president is in agreement to buy chelsea, one of the most successful. the price is set at the highest ever bought for a club. he put it up for sale in march before he was sanctioned. kriti: it has been a volatile week. bloomberg news looks at how things played out in the etf space. katie: you saw it sort yesterday. use of the same thing in january and february paired this happens when things get hairy in the markets because etf's trade like water.
they are so incredibly liquid that traders gravitate toward these tools when there is the high volatility you typically see the big volumes but it didn't happen and it might not have been given the macro outlook which is putting a lot of investors off guard. a ton of money has flowed into junk bonds and into innovation etf's peer that added up to a lot of pain. we saw traders pull money from the ultimates short-term futures etf and that is surprising because it soared 30%. it is the best by a mile from other etf's. we will see if they follow. guy: thank you very much indeed.
i think we will see a bumpy week. price action i see all over the place. down hard and then bouncing back. we will talk about one of the components of the tech landscape. nft reporting strong results -- nxp reporting strong results for will take a look. kurt sievers is going to join us from nxp. the ceo of volkswagen is expecting things will improve. this is bloomberg. ♪
moves. ritika: we continue on the downward trajectory, clearly in the red, maybe erasing some losses but investors trying to find safety. they took little comfort from the jobs report. the labor participation looking like the fed will keep with the aggressive rate hikes. we were looking that we could be flat on the week but we will have to see how it goes today, looking like we are going lower. adding more pressure is the yield and the long end of the 10 year. continuing to move higher and we can't talk about a risk off day without talking about bitcoin selling off, 1.7%, trading in tandem with risk and the tech stocks.
focusing in on bonds, we talk by the selloff in stocks and treasuries as well when you see the yield of the 10 year on the long end up some 18 basis points, big moves here. investors not going into stocks and bonds, where they putting their money? perhaps cash and canadian dollar. the tech sector haven't bad day, a bad year. but what you can see is the white line in this is the chip makers and it drags the index lower on the year. he did have anastasia amoroso on the open this morning saying maybe with lower valuations that could be an entry point for the chip makers and i know you will discuss all of that and more. kriti: we thank you so much.
nxp semiconductors recorded better than expected results. kurt sievers, the ceo, joins us on set. it is a fascinating time to talk about chips. we have been having these chip shortages going on a year and a half now at least. i am looking at our f8 function on the bloomberg terminal, we are talking about covid lockdown restrictions in china, how much does the china story affect you overall? kurt: thanks for having me again this week. it is indeed a world in turmoil from a supply chain perspective good the latest addition is the situation in china. we do not see any demand impact in the second quarter. we do see risk on supply because some of our suppliers and covid
lockdown so we put some into that for that. it is not only the demand side, we have seen under shipping in the markets so people try to get everything we are shipping and there is no demand. we guided it strong for the second quarter with 26% year-over-year growth including china. let's -- guy: let's talk about the under deliverance. what happens in the second half of the year? volkswagen expects to get more tips. is he going to get them? he will --kurt: he will get more. not only volkswagen. we talked about the second half of the year being bigger than the first half of the year, yet
have to say the whole year for nxp, we will continue to be sold out which means the revenue growth will continue by supply only but every quarter more than the previous quarter. q2 will be above q1. the second half will be about the first half and that is led by supplies into the automotive industry. guy: are you charging as much as you could and if not, why not. and if you're not charging as much as you could, does that imply you are a little concerned about the cycle? kurt: first, we do not charge as much as we could. what we do, and it is very strong and transparent policy, the rising input costs we are experience from expires from labor costs, energy costs, we are passing the unto the customers but just so much that
we can protect our financial model and growth margins. we do not do this in order to pad our margins. i am a big believer in the policy. in the business that we have like automotive and large industrial customers, we have very long and important customer relationships. it is not a reflection of the cycle, it is purely how much i personally and our team honor our customer relationships because you talked about volkswagen and other car companies, i want to be in business and i want to be there good and trusted supplier, not only for next year but the next 10 years. kriti: you are talking about demand not being impacted but supply is the issue. if you can't meet capacity, what kind of timeframe are you looking at to get back online in terms of getting to 100 percent of what nxp can offer? kurt: we think currently that it
could improve next year. it depends on how the demand continues, with the strong cars that need much more will continue to be strong. i think in 2025 will be certainly fine. i hope we can be fine in 2024, but i think 2023 will still be a challenging year. guy: you said a moment ago that you are focusing on prices because you want to be in business if your customers for a long time. where do you think we are though in the cycle? this serious recession fears in europe, what do you think the backdrop looks like and where are we in the cycle?
kurt: i believe the industry will have strong cycles but we are operating in a subsector, which is about the trailing edge notes and automotive and industrial, so two thirds up to three quarters of the revenue of nxp is in automotive and industrial. and given that most currently being spent in the semiconductors will not help the supply shortages we have, i did not think we will see anything like a hard landing or soft landing anytime soon. i think we have a strong ongoing demand pattern to the next few years. that comes back to the pricing. pricing levels we are achieving this year will continue to stand over the next year. this is a specific statement to
where nxp is operating given the overly strong exposure. kriti: we know metal prices and commodity prices has risen, a lot in response to the war in ukraine, but for chips, that is an extra burden. how much of the supply chain in terms of sourcing metals specifically are you adjusting? are you looking at other countries? kurt: metal isn't our concern. there was a concern that came up after the horrible invasion of russia into ukraine, we need and -- neon which comes mainly from russia and ukraine we need to look at other sources so it is not cut off. i think we are not in the worst
place as an industry. kriti: you talk about the gas part eating into it, but i want to ask about margins. how much longer can you pay extra for some of these raw materials? kurt: that comes back to what i discussed with guy we will continue to raise prices in line with the increased input costs. even labor costs here in the u.s., we have three large facilities in the u.s., labor costs are going up, but so far we have been successful to pass that on but not more than that. it is very important to say we keep a fine line and i am confident we can continue to do this because the world needs chips and the world is short of chips so we can command a price that is fair. guy: we are going to speak to the commerce secretary, gina
raimondo, and she is trying to get a bill to the houses of congress that will allow the u.s. to support the chip industry and it's reassuring efforts. what do you make of the efforts thus far? are they going fast enough and are they going to have an impact quickly enough? talk about with the government is doing and could be doing still. kurt: we are a very big supporter of the chipset, not only in the u.s.. there was a similar in europe that followed the u.s. it got significant momentum and without giving you specific details, we are significantly participating in this. one reflection is combust -- customers are demanding u.s. soil to production for big new deals for the years 2025 and onwards. we are now working on that timeframe and the u.s. customers are having an absolute
requirement that the chips which we would ship them are manufactured in the u.s. that can only be enabled for the chipset that you mentioned and the system doesn't work so i am not only supportive but i am thankful to it because i think it is absolutely the right way to do it. guy: thank you very much. i appreciate your time. kurt sievers, the np x ceo. thank you. we will take you back to china with a major supplier like kitchen made are suffering from the impact of business. ravin gandhi will be joining us. we have a lot to talk about. this is bloomberg. ♪
keeping you up-to-date, here is the first word. i'm ritika gupta. the eu has proposed a revision to the russian oil band to give countries more time. the czech republic would get an exemption until june of 2024. all other eu members would phase out russian imports by the end of this year. the united nation says global food prices hover toward an all-time high. the country has been one of the world's largest shippers of wheat and vegetable in russia. the u.s. labor market keeps expanding and wage growth moderated. a surprise drop in the participation rate says the market will remain tight. the economy added a
better-than-expected 428,000 jobs. global news 24 hours a day, online and at quicktake on bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. i'm ritika gupta. this is bloomberg. guy: let's talk about what is happening in industry we have talked and themes keep coming up and what is happening in the labor market and with china. all of these seem to be reasonably consistent and everybody is struggling with it. some of the biggest clients are becoming not reliable. such as kitchenaid, black & decker and many more. talk to us about why it some of your customers are starting to struggle.
ravin: i am an optimist. i basically say it is supply chain and people ordered too much stuff in q4 and that is inventory sitting in warehouses and that is why things are slow and we are down 11%. that is what we think we will meet down for 2022. if i'm a pessimist or realist, i say there are some very troubling signs that i see. we have a lot of clients that are reliable but we can predict their ordering patterns and we can see air pockets where people suddenly stop ordering for 30 days or 40 days with no explanation. the last time i saw patterns like that was 2008 or 2009 and i hope we don't get there but it is quite troubling to me right now. kriti: are you saying we are headed for eight recession in the united states, perhaps? ravin: yes, that is what i am saying. i hear a lot of denial and anger
and i think the market is telling us it is time to have acceptance. i think the consumer is stretched tremendously and i think this fed has been accommodative for the last decade. from where i sit, it is really hard. we see slowness in the eu, asia, america and every day at 40 million people use products that have my coating on it. see you have a pan or a grill, you may not need to buy those things if things kind of go down, so i have always felt like we are a bit of a canary in a coal mine. when we see a slowdown as we do now, it will be before the numbers you will see. guy: we are starting to see people switching to buying things for services. they bought a lot of stuff but maybe they want to go out for the night.
ravin: i didn't really understand that question. guy: my question is, everybody bought a lot of stuff, i bought all the pots and pans i need and i haven't been going out, do i need to go out and buy more or mi now released from lockdowns were willing to go out to a restaurant rather than cooking at home? ravin: i think that is potentially the case. in this situation, i know that if i was a proxy i would say that prices from my and are going up and up. we raised prices 20% to 25 percent and will more than likely add. if i had my druthers we would go
up 10% to 15% because of what we are seeing for products. the reason why i can't is that it is hard for amazon and walmart to get it through. i know that will end up at the foot of the american consumer and you might end up in a situation where people are buying new cookware and art going out to dinner -- and aren't going out to dinner. kriti: talking about china with the restrictions in beijing, how does that affect the bottom line for you? ravin: one of our plants are in the south of china and there are no lockdowns but the northern is in the shanghai area and they are under total lockdown. somebody thought this was in the refill -- rearview mirror and china is showing how the
top-down authoritarian systems work and we were seeing pictures in wuhan and we in the united states were locked down and out we are seeing this is a disease that you can't control that well. it is tough in the north of china and that extends to everything besides demand that we don't see from a consumer perspective and it affects logistic supplies and things we are talking about. guy: did you see in impact from the start of the war in ukraine? ravin: we had a few clients in russia that we supplied to our india and we have obviously stopped having that i think the biggest thing from my perspective is just uncertainty. it is just yet another thing in an environment where it seems like every time you turn on the news it is bad news, whether
price increases, gdp shrinking and i think that people just think, we have had a good 10 years, but maybe this is the time where we have to look at 2020 three getting better. i am an optimist and i think within 18 months everything is going to be fine. one of the things i just don't see it talked about is economies sometimes contract that is the way it works. on the government on both sides of the aisle has not allow that to happen for decades and there has been this extraordinarily big moral accommodative and now the piper has to be paid. kriti: ravin gandhi, gmm nonstick coatings ceo. thank you for joining us. this is bloomberg. ♪
guy: we are looking ahead to the european close at the end of the week. it has been a long week. european stocks down from reaction what we saw from the united states. we continue to get dragged lower and lower, euro-dollar catching a bid. there has been a lot of chats out of the ecb about rate hikes. june, maybe not but july quite possibly. the other factor is what is happening with the italian yield which was higher and the spread buns to pcps, around 200 basis points. is there a pressure point coming? is very spread management issue that will emerge for the ecb. we will talk about that in the next hour. so much to talk about with our
next guest, the former ecb president be joining us to talk about what is happening in the economy and how the ecb is responding and the communication strategy and what it should do for the core periphery management story. all of that is something we need to talk about. if we get to --, how important will that be westmark all of this in light of the fed and the bank of england. we will be counting down for the european close. that is coming up. this is bloomberg. ♪
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