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tv   Bloomberg Markets European Close  Bloomberg  May 23, 2022 11:00am-12:00pm EDT

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guy: european stocks higher. commodities and banks leading the way up. come down to the close starts right now. >> the countdown is on in europe. this is bloomberg markets: european close with guy johnson
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and alix steel. guy: 30 minutes until the close in europe. every sector in positive territory, the market up by 0.9 percent. commodities doing well. banks also higher, which is interesting because they are rallying on what jamie dimon had to say and if you think about what 15 lagarde said, rings can get interesting -- christine lagarde said, things can get interesting. in theory, this should be good for banks, but we will wait and see what happened banks trading higher. the euro also rallying, at $1. 06, giving back some of that
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dollar strength. banks at 1%, we will talk about christine lagarde in more detail in a moment. some great reporting. the base being pushed higher -- the base of these yields being pushed higher. testing lagarde suggesting the path of rate hikes she would like to see. alix: here in the u.s., it is a similar story. the kbw bank up, nasdaq, no idea if it is negative or positive, but i want to highlight raw scores. after reported earnings last week, it got hit hard now it is up by 8%. we are seeing a bounce of stocks of gun beaten up the most versus some shift. guy: let us talk about what is happening.
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i hear what you are saying. tech stocks being beaten up, but comments are suggesting are the lows in? maybe not. there is chatter about how far we could ultimately go, but let us talk about what is happening with the economy. you take the european cup -- economy. they are pushing back at concerns of a recession at davos. they also added they are willing to support developing countries. >> we are looking for 2022 to be a good year, especially for developing countries under a high level of debt. when you were that jumps out and you are in a take fiscal position, of course this is a time when the imf has to step up. guy: the debate dabbles seems to
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be how do we solve this problem with inflation? with higher rates? or with supply-side solutions? the ecb is in a difficult place. the governor in davos has been talking about inflation in europe. he says the ecb must normalize policy but you get these comments from pristine lagarde. -- christine lagarde. she is being pushed very hard. she is talking about rate lifts at the july meeting. that is in line with forward guidance. based on the current outlook, we are likely to be in a position to exit negative interest rates by the end of the quarter. then we will get rate hikes, at least 50 basis points by
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september. when you get these other comments that are being reported by bloomberg news. lagarde's rate hike plan urges the ecb to fast action. the hawks are pushing hard. what they want is maybe the possibility of 50 basis point hikes. lagarde is nowhere near that. how far do we go? what is it ultimately going to mean for the european economy? are we going to see the ecp -- vcd more aggressive? let us talk a little bit about what is happening at the ecb right now. we are in a vote face. lagarde is pre-committing, but the ecb says it never pre-commits. what does this mean as you think about investing in the euro zone
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? how should i be recalibrating what i want to do? >> i think there is a lot of debate happening. as christine lagarde mentioned in her blog, they clearly want gradualism and flexibility, because things are very complex in terms of managing inflation which is at an outbreak and at the same time trying to figure out how many doses of vaccines and booster are required. clearly, moving fast could have unintended consequences of causing a recession. she has been clear that they will have to think in terms of the nature of inflation. we do not have an excess aggregate demand problem.
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therefore, it has to be a gradual adjustment, because high inflation is to demand. in terms of investment, we have to look at sectors that have high pricing power, mining materials for gas. and also think in terms of valuations. today, we like companies with high income. alix: is stagflation inevitable? you like those companies that have pricing power, but if demand falls off, is anything work? kokou: one thing we are focusing on is the energy transition. there will be sectors that will benefit from the european green deal. you have the deal that just got another 330 euros of investment. there will be structural demand in some sectors. fixation does not have to be
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inevitable -- stagflation does not have to be inevitable. a lot of numbers have been resilient. industrial activity is we opening after lockdowns. you are seeing positive momentum at economic levels. staycation is a risk but not inevitable. guy: if we were to see 1.10, maybe 1.15 euro-dollar, if we do get the ecb being more aggressive, you could see the single currency re-appreciated. would that change the dynamic? kokou: good point. we have the target of 1.15 for the euro-dollar. if you look at that interest rate differential, clearly the
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fed has been more aggressive in tightening its policy with stronger interest rates. they will be at 50 basis points by the end of the year, whereas europe is at around 100, but it is not a surprise to see the euro-dollar fall first. the -- increases the inflation problem. having a normalized currency will help, but it makes the case for banks even stronger in the context of moving away from negative rates. that was the indication of the eurozone we were talking about before now, banks will be in a better situation. alix: great point. there is a school of thought that says if you get out of negative rates, even just getting to zero will be good for growth. is that something you agree
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with? kokou: to some extent. one problem of negative interest rates is that we have seen businesses that were unprofitable being capitalized because of those interest rates and the quiddity. today, we are starting to see a bit of natural selection. the credit market is widening. therefore, it will force more efficiency in dealing with these indications of problems we have seen in europe. it is what has growth in europe going. guy: in terms of how you think these markets are going to move from here, we have come a long way quickly. the u.s. markets trading down, the s&p into a bear market friday. what are you guys in king in terms of how much further this is going to go? what do you think comes next?
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is it a bear market rally? a sustained rally? kokou: we have a lot of debate. our view is that we are going to see in normalization of inflation slightly below 3% and growth will slow down without going into a recession. what is interesting today is that it is like 2020 where we were talking about an l-shaped or v-shaped recovery. today, we are having discussion around the inflation where we go up and down or whether it will be more of a flat tip, an inverted l, and inverted u? our view is that we are close to peak inflation and this is likely to normalize. we are more constructive.
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alix: can we drill into what that means for growth? if you have rising yields, high growth in tax, the move in value continues, in theory that should be better for european stocks. where do you set on that? kokou: as i said earlier, we like quality company names that are exposed to the energy transition, being able to monetize these trillion euro investments. we like banks and europe's because of the negative interest rate scenario being less of a concern going forward. ultimately, the bigger story is the multi-asset picture where we have equity and bond correlation being positive. we lost on our equity and credit portfolio. for us, this is the main problem in terms of redefining the new 60-40 portfolio forward in terms
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alternative strategies. alix: great your perspective. coming up, credit suisse theocentric employees will never return to the office full-time. -- ceo says employees will never return to the office full-time.
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alix: the world economic forum returns. leaders are in davos. francine lacqua spoke with a ceo. >> the high inflation shocks
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that we have seen, it is clear that people are in restock mode. but we think there will not be a recession. there will be a slow down, but -- at 2.94, they have come down. if you look at certain markets, high yield markets, they have come under pressure. francine: and under pressure they get crazy? thomas: they have been pretty quiet, but are bottom line is, do not panic. they look at housing development. that is important for our clients. we stay in front of the client. that is what i am focused on. francine: you are not seeing any
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outflow, still fully invested? thomas: it is leveraging, as far as their assets, the management going down, prices going down, there is leveraging in asia. [indiscernible] have not gone down, but no outflows. francine: does it hurt your ability to collect in certain parts of the market for your wealthy clients or not so much? thomas: if you look at our revenue streams, inserts have come under pressure because we have lower lending volumes, but with interest rates going up, that should be a positive element going forward. returning revenues have come down because of lower um's and
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revenues have started to liquidity is sometimes good for actual revenues. but it has created -- 2022 will be at lower levels than last year. guy: then battled thomas got teen speaking to francine lacqua. tomorrow, an interview with christine lagarde live from davos. she's got the world at her heels. the debate at the ecb is how the clique to raise interest rates. it was clear from lagarde's blog that we are headed out of negative rates. we should expect to be back to flat by september, which is going to have a massive impact on europe's banking sector. that will change things.
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i want to go to frankfurt. steve aaron is standing by there. steve, the topic is negative rates. how big a difference is it going to make? steve: it is going to make a massive difference for banks. banks have been facing an environment of negative interest rates for a decade now. they have complained since then about the negative impacts on their income. once that comes back and given other cost-cutting they have been doing, it could boost profitability and make a big difference for their shareholders. alix: does it matter how positive the rates get? is zero enough or does it have been more? steve: there is a big step for banks. they have a lot of cash posits
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-- deposits. after pocket that. you can pay the ecb at the moment. they are not making money off the deposits they are hoarding that would make a big difference, but once against into positive territory, it then becomes a question of how much money they can make, but even zero would be a big step. there is a lot of banks that have been highlighting just how much a rate hike would help them. deutsche bank is one that has been continuously saying it would boost revenue by a lot. another which i covered is even more exposed to the euro area. the relative impact for them would the higher. they said recently in a quarterly update that it could
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be up to $1 million if the ecb continues on the current path -- $1 billion alix: that would be something, but doesn't loan demand to be there? jane fraser said she expects a recession in europe. our banks supporting the demand? steve: that is a concern. no one can predict how this is going to play out. one of the businesses that has been a big driver for banks has been mortgages, people buying houses like crazy. if higher interest were to come, that would decline. help much of that would be additional business for banks? -- how much guy: if we are going to get a recession, presumably the provisioning side would have the
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rights to the banks. could that offset the benefit of getting out of negative rates? steve: the current forecast on that is that most banks still expect the euro area to avoid a recession. there will be higher provisioning than last year, but it would not upset a positive effect of positive interest rates. alix: thanks a lot, appreciate you making it down with us. this is bloomberg. ♪
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>> -- energy investment
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strategist is warning the strong u.s. dollar may be vulnerable. >> for the dollar to stay supported, we need to continue getting enough capital to offset that. we think there is a growing risk around that. the dollar is vulnerable on a cyclical and also structural basis. ritika: bond yields have farther to go on the upside. guy: it is interesting thinking
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about what is coming out of davos. we are trying to fight the problem with the wrong tools. raising interest rates is not going to produce more food, more crude. if you take that thesis further, it means inflation is going to state sticky, but if the fred tries to fight that, maybe patterson is right. alix: sure, but if you can give them enough and we just sit at home and do nothing, maybe it is ok that we do not have the gasoline, but watching the dollar is going to be important. if it moves higher, that could see more of a headwind, but maybe the ecb is going to help. last week, the conversation what we needed the ecb to move quickly. guy:e wealking about policy and now we seem to be
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talking about going up to 1.10. not a panacea, but quite a big difference. if we see a weaker dollar, that is a huge problem, particularly for emerging markets. if you change the dollar, you have a much better direction and where the market was taking as. a look at the european close. this is bloomberg. ♪
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guy: wrapping up the monday session in europe, equities doing well, but italy flatlining . the ftse is up, the dax up, the cac 40 up. switzerland up.
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in terms of the way recession is developing, every sector has a new territory. a look at the stocks 600, we hit lowe's. -- tows and hour or so into trade and have been climbing ever since. the u.s. story getting a bit at her. we just came off some difficult weeks. a rise of one point percent not that great but a sign of stabilization. 435.83 where we are trading, not quite at session highs but not far from them. energy stocks have done well. banks having a fairly good day. coming from christine lagarde, rates are going to go higher. we will be back to flat.
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just hearing from steve arons that that will make a massive fusion. thanks up, energy sector of, financial services up. health care is up but down versus the market. travel and leisure, not performing that well. more of an optimistic view of the market, value doing well, but the bank story is the most interesting. the takeover story and the nma story really interesting in europe today. the commissioner said beta was initially for percent, but the u.k. retailer is falling. there were a number of them and a few beginning to drop out. ted baker has rolled over this afternoon. anglo american standing out, up by nearly 4%.
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more positives to this story out of china, the miners having a good day. alix: ford metal in australia is a mining company that has about 64 billion aussie dollars. previously in davos, the executive chairman said they think they knew us trillion government will be more ambitious on climate change. this is part of the interview with francine lacqua and haslind . >> our climate policy has been embarrassing. we are relied on by children's leadership. for about a decade, we have not, but i think the new government will pivot towards climate change. francine: but are you optimistic that albanese will eat more
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ambition in his climate goals -- will be more ambitious in his climate goals? >> they are actually in government and i think they will be much more ambitious. australia has been lagging. i am australian, know. i would like to see at least 50% or 60% down by 2030. when you have the leadership, there is no reason why you cannot do this. we intend to be down by 100% by 2030. we are in trucking, the whole industrial sector. francine: but australia is so dependent on iron ore". would you put scope three of
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those industries today to make a difference? andrew: australia, that is up to the government, but if you take the sector, you have the scope of the emissions of russia. we need to be moving fast. that we have shown great enthusiasm, the hp has shown great enthusiasm, but look at all of those companies, they're going to have to wait and see. guy: andrew forrest speaking with francine and haslinda in davos. just about wrapped up for the day, but a positive session in europe is under final numbers. the ftse, the dax, and the cac 40 up. it look at the ecb, great interview out of davos and all
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of that on the cable show at 5:00 p.m. here in london. you can find us on all of your bloomberg devices and little later on spotify. alix: it is a potential blockbuster and a chip deal. reports to buy a cloud company dm wear. what that company could look like and what valuation we are looking at. this is bloomberg. ♪ ♪
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principal room. coming up moynahan joins me. this is bloomberg. keeping you up-to-date with news from around the world, zelenskyy
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said russia's economy should be shut off from the world. he invited investors to shift into ukraine to rebuild the country. at davos, he said this is the moment that defines whether group force will rule the world. in new york, authorities searching for the man who shot and killed tax and play in the subway. an increase in assaults on the subway system is prompted eric adams to boost officers on patrol. joseph stiglitz says the fed cannot solve inflation with higher interest rates alone. >> raising interest rates is not going to solve inflation. it is not going to create more food. it is going to make it more difficult. what you do is supply-side interventions. ritika: global news 24 hours a day on-air and on bloomberg
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quicktake. powered by more than 2700 journalists and analysts in over 120 countries. i am a ritika gupta. this is bloomberg. guy: core, says it is faring better than its peers amid the semiconductor shortage. lisa abramowicz caught up with the ceo. >> intel has been an incredible company as they built the pc, but qualcomm is different. qualcomm was always focused on building communication and creating the processing technology that will allow you to have a computer in your hands. tom: you love going need. is there -- nich ise there a
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risk. to moving away? haslind: -- cristiano: the technology scale is incredible. with the smart phone, it is an advanced conversational device that is connected. when we looked at digital transformation across every enterprise, wheat see demand for technology in other industries. the company continues to drive innovation, but the automobile is becoming a computer on wheels. we going to automobiles and every other industry transforms. lisa: you got an acquisition pitch from broadcom this morning it is reported that broadcom is going to acquire vmware. do you expect this to be the future that in order to have scale and substance, you need to consolidate? cristiano: broadcom has become a
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software company. with some of the acquisitions in the past, and i think vmware is a software company, but we are going in a different direction. we will continue to be a semiconductor company focused on growth in the industry. we continued to seat not consolidation, but conversions of all those opportunities. lisa: how much are you going to move away from relying on one region, taiwan for example if you focus on hardware? cristiano: what we saw over the past couple of years, if there is a silver lining, we saw that semiconductors are important. as chips are going into much everything, even as we saw shortage of semiconductors, if
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people buy more goods and services, we need a reliable supply chain. qualcomm has done better than some of our peers because we have been diversified since the beginning. we are well balanced between taiwan and south korea and has been using chips from global founders, 20% from manufacturers in the u.s. as we think of the importance of semi conductors, we need to be diversified and have a resilient supply chain. alix: bloomberg broke the scoop yesterday that broadcom is in talks to acquire vmware. delete move surprises industry insiders. former vmware ceo spoke earlier from davos. >> i woke up a little bit startled. i had put 8 years of my life and
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soul into vmware. if it helps vmware the a more compelling, innovative growth story, then it is good. alix: anna banker broke the scoop last night. how far along are these talks? anna: is merger monday. they are in talks. it could be close, but we do not have the final details. what is the price, it's sandra? -- it said right? guy: what does mike del think? liana: vmware has done a ton of deals over the years. you might remember a tracking stock he had to buy out. his stake is $60 million.
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if broadcom was to pay a premium, he would pocket even more money. alix: what do we know about the timing? typically, if you have m&a after a soft, people say it is the bottom, does the selloff help the deal? liana: we have been trying to figure that out. i thought it would pause, but both stocks and broadcom sold off at the same point. you will still see deals is stocks move in tandem. we are also seeing private equity dealmaking. i was surprised -- i was surprised to see it, but we are excited to break it. guy: any regulatory issues? liana: there is going to be a hard look at this. radcom has operations in china -- broadcom has operations in china.
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there is not a natural overlap between vmware and broadcom so we will not see traditional antitrust hurdles. alix: the last year and a half has been about streamlining, particularly industrials. they are shedding assets. this is the opposite. is this unusual in the trend? liana: not unusual. the ceo has been trying to diversify broadcom for years. he has been looking for a big deal and vmware fits the bill. guy: does the market think this gets done? liana: any big deal is going to have a lot unsure, what is going on with elon musk and twitter? any deal will be a big question,
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but shares are up in vmware and down broadcom, which is common for such a big acquisition. alix: valuations, price, timing, any insight into the premium we might see? liana: typical premium is 34%, but we do not have the reporting to show what it will be exactly. definitely it is a question of whether vmware will want a vmware -- will want a valuation closer to where it was trading for. it was worth $70 billion in a bit ago. we will see what it sells for. guy: fantastic story. thank you for bringing us the details. this is bloomberg. ♪
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>> if we want to retain interest to stop the bleeding, we have to work together. francine: what does it mean for the next 8-12 months? it is going to be hard for poorer countries and you have the chance of worldwide recession? >> we are projecting lower growth than anticipated last year, but let us remember that3 3.6% is average growth in the previous decade. however, since we put out our projection in, which we downgraded to 143 countries,
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there are into mental changes. one, type of conditions. two, appreciation of the dollar. three, slowed down in china. all this is making it downgraded not out of question. for some countries, there is now an increased risk of recession, but we do not anticipate global recession. francine: you are right. this has huge implications for countries across the world. are you expecting to step into these countries a lot more because of these imbalances? >> we are living in crisis upon crisis. the countries that we begin with -- we are already seeing an increased demand for our engagement in lebanon, egypt,
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tunisia, sri lanka. we are looking to 2022 as a difficult year, especially for developing countries. when you are servicing your debts, you are in a take fiscal position. this is a time when the imf has two step up, and we will. alix: that was from earlier in davos. here, we have a powerful rally underweight. the nasdaq up, the s&p up over 1.5%. abigail is tracking those moves. abigail: if it felt like a roller coaster, here is why. teachers on the s&p 500, -- futures on the s&p 500, higher, then down last week, then friday
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up ever so slightly, but here is the big rally, up 1.7% over the last two days, up 4% over those lows. talk of whether we could see a sustained bear market rally similar to what we saw in march when the nasdaq climbed 60%. maybe we need to get down 20% on the s&p 500, official bear market rally needed for that to happen. in states, banks having the best day back to november 2020. jp morgan leading the way. this has to do with jamie dimon raising net interest income forecast, clearly a key engine for some of these banks. also bank of america and citigroup, you can see the gains. as for whether or not the bottom has been put in, a survey with bloomberg suggests that most
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participants do not think so. this is the s&p 500. here's the all-time high below, closer to 2400, that would be a horrible bear market. 3500 in terms of where some on this survey think the s&p 500 could go, but could we within this downtrend seat something similar to march? maybe 4500 before where the s&p 500 is right now, right below that middle redline. another good sector, up more than 2%, this is over the last two weeks -- oil is flat on the session, but over the last two weeks up 8.5%. some of the usual suspects
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getting a lift, energy up 20%. oil and gas production index up 9.2%. energy equipment and services up 15%. last year's sector is this year's sector. basis also up 50%. double in two years for the energy index. guy: these stocks are up a long way from pandemic lows. it feels like a long way down from here. abigail, thank you. let us talk about what is going to be happening over the next 24 hours. we have a huge focus on devils, but tonight president biden holds a meeting with counterparts from japan, australia, india. u.s. earnings at me, we will see how that one goes. alix: tomorrow is pmi day.
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i love pmi plus earnings from nordstrom and best buy, and davos. brian moynihan will be joining us 11:15 tomorrow. do not miss that interview. that wraps it up for us. coming up, david hobbs will be joining david westin. guy and i are headed to radio. this is bloomberg. ♪
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>> the world of politics. >> russia is losing this hopeless hapless ridiculous war in ukraine, and here come the new members to nato. >> to the world of business. >> i think the u.s. is very reliable in terms of making the deals in treaties. that is going to be a major variant. >> this


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