tv Bloomberg Surveillance Bloomberg May 24, 2022 6:00am-7:00am EDT
not solve the problem of inflation. >> this is "bloomberg surveillance" with tom keene, jonathan ferro come in lisa abramowicz. tom: jon ferro, lisa abramowicz, and tom keene from davos. jon is on assignment, lisa and i are here in a changed davos. the shock of may instead of january and other ideas. you know how there is a token driver. i am the token rest are. i went to bed. you are up partying all night. lisa: the davos mood is a lot more quiet sent. this is my first year here. everyone talks about the weather being former and fewer people are here. there is also a more serious tone. not only with the backdrop of ukraine, but also markets.
yesterday we saw a pop. today we are giving it up. people are concerned what they're not seeing around corners with the china slow down. tom: the way we are in this bear market -- jamie dimon salvaged the market yesterday. i think that is true. we need somebody else to come out and get growthy on us. lisa: the fact that one company or one co can move the market so much -- today people will blame snap -- they came out with a letter saying the backdrop is deteriorating faster than expected. the fact that things are moving so quickly on one name at a time shows the lack of certainty that is driving. tom: i will talk t -- i will call it two calmer days in the
market. to meet the recession watch is still part of the conversation. i find the recession watch bullish. -- the recession watch foolish. lisa: why? michael: we are all doing them -- tom: we are all doing the math but recession is more complicated than that. lisa: christine lagarde saying it is not inevitable, others saying it is, including the citigroup ceo. these are the cross winds underpinning the discussion. tom: can we say -- in the sky? there was a windstorm. this is what saved us yesterday. lasting freeze spray. we thank the schwarzkopf people. lisa: it did not save us yesterday because our hair was wild. let's take a look at the market. you are seeing the nasdaq is
giving up the gains from yesterday, at least in early trading. you can see it down almost 2%. the s&p down 1.3%. 39.22. the euro continuing to make gains. the reason that is interesting, christine lagarde saying she will not accelerate this and drawing a nuance between supply-side and demand-side inflation saying this is supply-side driven and demand does not have to be what they address. 10 year yields down, bonds up. you're seeing that 2.8%, not a huge move. today we have amazing guests. tom: amazing guests. two days in a row. what i'm looking for for global wall street is bob prince. lisa: will be speaking with bob prince of bridgewater right now. will be speaking with gita gopinath in a minute.
also the chief executive officer of marriott international. tom: this is very important and wonderful day for us to start in davos with gita gopinath of the international monetary fund. she has linked economics into this once-in-a-lifetime event. we are thrilled she could join us. you will be with me on a panel tomorrow on growth which is hugely anticipated because of your attendance. i love what you said to the indian media, where you just pushed back against the recession gloom. how do you respond to market ponderings who wants read a paper and say a recession is coming? how do you respond to that? gita: on a global recession, we are getting that question a lot. our april numbers for global
growth were 3.6%. at that level, that is a healthy number for the global economy. there are headwinds, there are many downside risks. to say that the global economy, there is a recession, that is premature. that said i think the regions of the world that are getting hit hard, especially more recently. europe is such a region. you could see countries going to technical recessions. lisa: here's the problem for a lot of people seeing a gloomier side of things. snap came out and said the macro economic backdrop is deteriorating much factor -- much faster than they had previously expected. this is similar to other things we have seen. does that draw your concern, particular with the slowdown in china and how much that is bleeding over? gita: we are getting news that
shows more weakening in the global economy. one data point is what came out of china in april. april numbers were significantly worse than we were expecting. we were seeing interest rates going up in all of the major economies it it is changing quite rapidly, how much of an interest rate we will have and how quickly. there are significant downside risks. we will always be flagging the fact there would likely be stockmarket corrections, volatility in markets, and we are seeing that. lisa: are you counting on the fed to pause in september with rate hikes to achieve a more optimistic scenario? gita: inflation in the u.s. is broad-based. it is not all supply story. there is an important demand component. it is important for the fed to rein in inflation as soon as possible. even with the rates it is targeting right now, for some
time we will be in negative real interest rate territories. that is accommodative for the economy. i think they should not take the eye off the ball in terms of bringing down inflation. tom: i need to link in the imf work. the imf does prodigious work on this. our eric martin makes clear he is studying egypt as one of the test tubes of this rivet price change we are in in terms of rice and wheat. india has led the way with the first fears of blockage of exports. what is the imf doing to give confidence to nations that are struggling with wheat and rice? gita: this is a major concern for us. not just india, but if you look at food exports, since the start of the war about 20 countries
have put restrictions on food exports, be it wheat or palm oil or other products. we worry a lot about what is going to happen with food prices. it is one of those prices where there is more that will go up in the future then we have already seen, and it is a major concern. tom: the history is the domestic government will come to the rescue, flatten prices. the cost of bread in egypt has been flat, and subsidize whatever the commodity is until it breaks. how close are we to a breaking point of that domestic subsidy to feed people? gita: after two years of a pandemic, governments around the world, especially in countries like egypt, do not have the physical space to provide widespread report -- widespread
support. how many countries are facing a rapid increase in import prices? this is one of the trackers we have. this is a major concern. lisa: how much of this is a failing of the developed world from supporting ukraine more, from actually providing more financial aid in order to get some of those supplies to the rest of the world? gita: this is a challenging issue about how to get ukraine supply out of ukraine. you cannot get the ships to take wheat out. thinking of creative solutions in terms of putting them on trains and sending them out, but that is going to take a lot more time. we are also seeing the effects of climate change around the world. one of the reasons why india has put its export restrictions on wheat is because of poor yields and bad weather.
that is another big negative. we need to try very hard to get supply out as much as possible around the world. lisa: given all of these pressures, how long will it be until we get inflation back to a level that is familiar pre-pandemic? gita: it is dependent on the part of the world you are speaking out, but if you're talking about the u.s. our projections in april had inflation staying above 2% into 2024. it is coming down with all the interest rate increases their projected, inflation is expected to decline. the bigger headline is it remains well above target for quite a while. tom: i want to get out front of this wonderful panel i am doing tomorrow with you. growth economics is taken for granted until you take a course in growth economics and you realize what robert solow did in 1957 borders on religion.
we take for granted growth. the imf does not. what we need to do to sustain growth given three once-in-a-lifetime event? the global financial crisis, the medical pandemic, and the war in ukraine. how do we sustain growth? gita: it is a fact that not many people are aware of that post the pandemic, while we have advanced economies pretty much returning to pre-pandemic trend, to where they would have been in the absence of the pandemic, that was a projection likely to happen in 20232024, we have many developing economies that have large amounts of sparring. for that income group they have gdp about 5% below what they would've had in the absence of the pandemic. this divergence is something we pay very close attention to. we had much less fiscal
wherewithal to provide the kind of support that was provided in the advanced world. vaccinations came late to them and they are still not vaccinated. major demand problems over there. all of these areas need to be fixed. lisa: what just 3% gdp growth in china mean for global growth? gita: that would be a very dramatic slowing down. lisa: that is the ubs projection. gita: type c numbers like that come out. we had -- i have seen numbers like that come out. the most recent number, there is a likely hood of a downright. 3% would reduce the global growth. a lot to pence upon the u.s. economy and how growth there stays. we have growth projected around
3.3% for the u.s. economy, which is a very healthy number compared to normal years. tom: we have to leave. you been very successful. the sun has come out in davos. we have surveillance goats on the mountainside. gita gopinath of the international monetary fund. stay with us. exceptional guests, including the former prime minister of ireland. ♪
former trade minister of france and now ecb president speaking to francine lacqua. i remember the day christine lagarde lectured me on do not make jokes about french bread. i was at a french government gathering and they flew in a book -- a bunch of fancy bread people from paris and i made some kind of joke and she looked at me. lisa: what did you say to get that morning? it was not unwarranted. tom: christine lagarde holding court in davos. we welcome all of you on radio and television. to give you one moment 15 years ago, i remember looking down the long corridor work of the congress center at the rich and the fancy with the strange things in their hands. they were cell phones. it was before twitter, it was before this, and it was before snap. snap is having a bad day.
lisa: shares down almost 30%. the reason i find this so interesting is it is not just one company, there is a larger story. the ceo came out and said the macro economic backdrop is deteriorating much faster than previously expected, and this echoes what we are hearing from other executives. how much does this be to a slow down that has not been picked up? matthew bloxham joining us now. we are seeing shares of all social media companies drop about $100 million in market value. at what point is this a bigger story? matthew: i think it already is a bigger story. we've been hearing about a slow down in the economy for some time. that will affect all of the big advertisers. you're seeing margin squeeze across the cpg universe and that will flow through to people like snap who make their money in
advertising. what is surprising is advertisers get their budgets more towards sales activation. they want to sell as much as they can. that is the kind of platform snap is. they are facing headwinds from this trend with apple. tom: you own the high ground on making finance and revenue in the business into the actual social media. do we look at ads on social media? is part of this they are learning and discovering that maybe ads do not work or maybe we do not look at them like i do not look at them? matthew: is a big question. it is a question that has always been about advertising, what is the 50% affected? i think the industry is still struggling, even though you get a huge amount of data with
digital advertising. i think digital is generally more effective than tv. tv is a lot more about brand building and the digital space is much more about sales activation the downturn. that would be helpful to a platform like snap. they are calling out supply issues. there advertisers do not have enough products. even if there is demand the advertiser is pulling back. tom: i think we have an audio challenge there. that is like the helicopter yesterday. lisa: i wonder if that was one of the goats eating the wires? this is an important point, this goes to supply chain issues. if companies do not have what to sell -- tom: that is too macro. lisa: i think that is a big part
of this. will be speaking with this goes chief executive officer and cisco said they would sell more, the demand is there, the supply is not. they were talking about the china business. how much is this a bigger story constraining issues. tom: is elon musk having a good day? lisa: i don't think so. tom: do have matthew bloxham back? he is back with us in london. we will go to him because he knows more. lisa: than us? tom: that is not saying much. i look for the next step for all of these social media efforts. are they going to combine, are they going to find big capital, what is your crystal ball on what they do one year out for years out? matthew: merging is very
difficult. lisa: we are having technical difficulties. tom: we need a gooat shot. lisa: this is social media technical difficulties. tom: if you're underwater, we have tables, we are hardwired to give us a more stable product. part of the heart and soul are the surveillance goats which are right behind us feeding. it is typical in the winter. the cables worked in the winter. lisa: there are some surveillance goats. tom: we can hear them. it is very funny. three of them closed the piano bar last night. there they are. let's talk about the dollar. dollar resiliency and how the plumbing of the system falls apart.
they are begging for a weak dollar. lisa: how much is what we have seen over the past couple of trading sessions a peak? this is what john authers is saying that christine lagarde gave up eat to the dollar because the more she talked the more the euro strengthened. she is talking about being patient, not going .5% the way some on the ecb were calling for and she did reiterate the sense they are going to get to zero, but they are not going to go at an accelerated speed and they do not see the same impatience the fed feels. tom: this is the back story and maybe this be front and center tomorrow. more than any other davos everyone is looking at the time continuum of a war and i hear nobody talking about a quick end to the war in ukraine. the idea of stretching out the central bank chat we have. maybe the parlor game you and
jon play every day in new york will get stretched out. lisa: how do you feel about that parlor game? tom: i think there's a lot of dynamics and a huge amount of uncertainty like gita gopinath said. she did mention the food crisis. lisa: that is very difficult to parse and that is very unreal that will lead to social unrest we've not seen for more than a decade. with respect to the fed parlor game, it is not just the fed. it is important because this is what differentiates the bulls and bears. tom: please stay with us. we will have a different conversation with the former prime minister of ireland than we expected weeks ago. one of our always great visits in davos with the irish trade minister. an important conversation. on radio and television, this is
davos. lisa abramowicz and tom keene. jon ferro on assignment. someone just emailed in and said can we use the goats in the nielsen survey. we will see. right now a data check. two days of quiescent markets. lisa: yesterday we saw a bit of a reprieve. tom: oil back a little bit. turkish lira to 16. huge symbolism for mr. erdogan. that's a nice break through it's been managed at a 16 level. we have weaker turkish lira today in the jumble known as turkish politics. which is nothing like the jumble of irish politics.
here's how bad it is for you. i'm going to call you prime minister because my mother would insist i do. >> deputy prime minister. tom: here's how bad it is for you on twitter. why were you corrected on twitter so abruptly? you were out on twitter saying i was not aware of that, i stand corrected, because they were counting protestants and catholics. your nations politics right now is an absolute turmoil. >> i don't think that's the case. we have a very stable government that has been in office for over two years and will be for another two years. the economic picture is quite strong. we will probably have record levels of employment by the end
of the year if not next year. our trade figures are breaking all records and we may even balance the books. tom: the fear of the union of northern ireland in ireland is you have to take on the burden that the united kingdom pays. the bottom line is the angst of a tragedian of ireland. are you any closer now to a true union of ireland? >> if that were to happen, that wouldn't be a fear. that would be an aspiration that we have. it's enshrined in the constitution. it's an aspiration i have as leader of my party and it's also in the good friday agreement is something that could happen. the good friday agreement is that a border pole can only happen in northern ireland.
it can only happen in northern ireland if the estate feels it's likely to pass. despite the very good result that sinn fein scored in the election -- there's been a big growth of the middle ground made up of catholics and protestants who just want northern ireland to work. so there's a lot of talk of things like a border pole but the tests are very clear in the good friday agreement and there's not a majority in any opinion poll for unification. that's not to say that it's not our aspiration. it is something we need to think through and work out. and try to think through those questions, what would it actually look like.
lisa: talk about trade and how it's hitting record levels. >> i don't think we have benefited from brexit. it depends on what sector you are in. it has been very difficult for some small businesses. we have attracted some financial services from london and because we are in the single market and they are not it's been good for other investment like the tech companies and pharma companies for example. we've had an extraordinary economic performance despite brexit and the print -- the pandemic. it really is down to our model. really talented people, political stability, tax offering that is favorable and now a bit more certain than it was in the past. it's the whole package and ecosystem. it is going well and does give
us our economic strength. lisa: how much are you willing to kick up your notoriously low tax rate for corporations in response to some of the pushback you have gotten from the u.s. and other nations? >> the real strength of our tax policy for investors and businesses is certainty. with this low tax rate, it doesn't go up and down as part of economic cycles. we kept at the same. if you are making the 30 year investment in ireland. lisa: hold on a second. that is not what companies say. they say they like it because it's a lot lower than in other countries. do think it's just the stability? >> it's both. it's low and certain. if it was high and certain, that wouldn't be a good thing. the agreement that we've made and we hope it gets through the
u.s. congress and european government as well is that we will go up to 15% for large companies and we will agree to having the base recalculated. that will probably lead to loss of revenue for us. if you are making the 20 or 30 year investment, you know and i and it's not going to go up. tom: you mention something that's percolating here in davos and that is trade and international recovery or the gains will go to the elites. he mentioned -- and you mentioned the crushing housing crisis. i am an expert on saying every country has this distrust. how do the elites speak to the broad middle class about a re-globalization where they are
not getting the benefits of the game? do you do it through the channel of housing? >> i think it's a rather populist construct, this idea of elites and masses. so it's not one that i would pander to very much. but i do think we have a problem in the world and it's not just in ireland as you point out. i think the average house price in new zealand is $800,000. the problems people face in san francisco and seattle. there is a global element to our housing crisis. there are two things we can do and it's quite urgent. one is to bring wages up. to bring wages more into line with what people need to live, within reason of course. that's why an island we are bringing in a living wage. we have a high minimum wage already, but we are bringing in new protections around sick pay for example.
but a huge difficulty that people have and i can understand the anger and frustration around it, people in their 20's and 30's and even 40's with good jobs who can't become homeowners. that's a real problem for society. it's an intergenerational injustice. it is causing people to turn to populism. we are doing every thing we can to increase housing supply. tom: my grandfather of wales after the third scotch would turn to me and say tommy, never forget that dublin is closer than london. we are at the turning point of the queen's jubilee in london. the challenges of scullin. the shocking election for whatever reason in northern ireland and such. what's the view of the disunited kingdom from dublin? when you look at brexit, we look in shock. jon ferro really is upset.
he is british. i don't know if you knew that and he's viscerally upset. give us the view of this disunited kingdom from dublin. >> there's one thing that will never change. it's not unusual for irish and english people to have family in each other's countries. my sister lives in london. my nephew and niece are english. it's not a foreign country and we have been very close for a long time. i want to see a stable successful united kingdom that is sure about its place in the world. one of the reason so many people argued against brexit. was that potentially it would weaken the union with scotland and northern ireland. i think that's something that those support and believe brexit was the right decision need to have regard to.
this is the protocol that means there's no hard border between north and south. 59 out of the 90 people elected to the northern ireland assembly a few weeks ago don't want a revote and london and westminster needs to think about the consequences of imposing things that people don't want. lisa: the theme of this particular davos is recession. where are you in terms of seeing that for europe? >> economic forecasts are as accurate as weather forecasts. probably less so. certainly talking to people here is that the european union will not go into recession. there will be a slowdown. we have fiscal levers.
i don't think we are facing into recession. but who knows. we can't take that for granted. tom: all i'm begging you is get more flights into dublin, because the taxes at heathrow are outrageous. we need more flights. >> we have no travel tax. tom: there it is, folks. your message. the former prime minister of ireland and irish trade minister. please stay with us. markets turning snap down near 30%. what is snap? lisa: it's a social media company. >> keeping you up-to-date with news from around the world. christine lagarde says the central bank won't be rushed
into withdrawing monetary stimulus while it fights inflation. she spoke to bloomberg in davos. she said there's no need to panic the bank of france governor insisted there is no consensus for a half-point interest rate hike. kansas city fed president expects the bank to raise interest rates to 2% by august. after that more tightening will be guided by how fast inflation cools off. j.p. morgan chase and ubs have downgraded their forecast for china's economic growth this year. both citing the impact of beijing's covid restrictions. j.p. morgan reduces its estimate for china's growth from 4.3% to 3.7%. russia's war against ukraine has made a global food crisis work but moscow is amongst the biggest winners of the nest. helping send weight prices to
she's doing a great job with a really interesting political soup and to be honest, this is important. at this meeting there is an understanding of davos, the elite, globalization. and the republicans and the democrats don't agree with trade representative. lisa: right now the trade representative is sounding a different note that even president biden when it comes to lifting some of the tariffs on china, there is so much concern about how to cater to the globalized elite, a lot of it is mainstream economics and the populist upswing of both parties. both democrats and republicans that politicians are trying to cater to. tom: the helicopter is filming. they are doing daily shooting. lisa: tell me about that story. tom: that was last night welcome to the meetings of the world economic forum. but we are paying attention to
the markets. anthony dwyer, chief market strategist. he more than anyone we speak to has linked a bull's tone to the market and optimism with recession as signal. wonderful to catch up with you today. are we finally at a point where dwyer goes bearish? >> coming into this year i was neutral. it's been a while since i have been the biggest bull and the reason is it's all about the money. you had a crazy move higher last year. ultimately we came into the year expecting a tumultuous year. we came into the year looking for a tumultuous year because of this monetary transition. they made a case that they were going to raise rates and they
keep making that case. until they stop making the case which means inflation has to come down, it's going to be a pretty difficult environment. you can have a bottom. continuing on with what's happened over the the last couple of days. maybe into early summer. lisa: you say we are close to a bottom of sorts. to find that bottom at a time when most people do not see capitulation yet. >> in 1994, alan greenspan was a lot tougher than anybody thought he would be in that capitulation didn't come until the end of the year. you had the early year wash on a fed that was more aggressive than anybody thought. you could have made the same case in 2000 or 2018. it becomes extreme. you have extreme pessimism and
oversold indicators. what you get is a summertime balance. we are embarking on that bounce back that can recoup some of the losses. then you get the economic reality of what happens when the fed is super aggressive. that means we should have the fall all. from there it's going to depend on monetary policy. lisa: it's just one stock. this is indicative of the economy moving faster than even the ceos understand. how do this? >> you asked the perfect question. sorry tom. here's the situation. two weeks ago neel kashkari said based on the way mortgage rates have gone, we have moved
accommodation faster than we gave it in 2020. think about that statement. trillions of dollars. so you add to that the most recent consumer confidence ceo survey. it got hit on a year-over-year basis. in the university of michigan is as pessimistic as it's ever been. so somebody better tell everybody that's talking about a good economy, solid employment, good funds in the bank. somebody better tell the ceos and the individual investors because they are not seen it. tom: here's a guy that came out of the dorm room. that's part of the optimism of technology. are you optimistic the acclaimed faang stocks can adapt and adjust to the new monetary system that's been given to us?
>> are used tumultuous. multi-syllables. here's another one. differentiation. it's going to be help companies manage through a slower macro backdrop. i thought the interesting comment was how the macro backdrop was worse. that's what the ceos are going to have to deal with. we are in a leverage system with excessive debt and technological advancement. technology only improves itself exponentially with speed. it's not like the industrial revolution. we happen to be in a very bad inflation situation puts the fed in a box where they have to maintain this higher interest rate environment even as the economy slows. tom: thank you so much. greatly appreciate it. here on the outlook of the
market. amy saved me here. i don't snap a snap on tools. lisa: when have you ever looked -- used snap on tools? tom: he put a hammer in my hand, people run. lisa: it is a social media company snapchat. your daughter doesn't use snap chat? the big take for me is the differentiation within big tech. you have the hardware providers of the world and then you have the very economically sensitive advertising driven types of models and you start hearing about not only is it demand affected, what if companies don't have the goods to sell why are they going to advertise all that much with it.
tom: what i think mr. moynihan would suggest is the real technology forwarded for technology companies is free cash flow. a lot of them don't have free cash flow. lisa: they are giving bonuses to employees because right now other than acquisitions, where do you invest and how do you invest. morgan stanley did a survey. more than half were very concerned about inflation and more than half were planning on cutting back discretionary purchases. tom: for those of you on the radio, the fog has set in. what did he say? you had a perfect question. lisa: i don't know. you did, too.
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