>> this is -- this is bloomberg markets.

alyx: just the latest company to warn of the inflation impact. the fed with growth in focus. have yields finally peaked? and worse than 2020. china says their economic pain is worse than two years ago. we will head to davos, for their take. welcome to bloomberg markets. it feels like it is a summer friday. volume is light with hardly any movement in any asset class. gaia: we are about to get the answer to the question that almost everybody is asking right now. is the fed about the blank? should we be pricing out? let's talk to emily, try to get

an answer to that. marie, is the fed going to blink ? have yields peaked? emily: we believe that the fed will pause after a rate hike in the next few meetings. we see growth accelerating. lead indicators are falling less than 5%. the fed is getting the tightening that it once in terms of financial conditions. we think that the fed will be able to pump the brakes and we are seeing a huge opportunity. the aggregate bob -- we were getting 1.7 percent on the aggregate bond. it is an opportunity to add.

alix: you are still over 3900 on s&p. i had to think that they want even more now. emily: i think so. the fed is getting what it once. but there is more work that needs to be done, in terms of inflation. it looks like there are a couple elements that have kept them elevated. while prices at 110 dollars a barrel is not helping the inflation situation for the fed. we have seen supply chain issues being exacerbated. it has brought economic activity to a halt. inflation is still here and it is not going away. the fed will do whatever it takes to attack inflation, and

it needs evidence that inflationary pressures are subsiding, to pump the brakes. we might get more clues on that in the fed minutes, this afternoon. guide: if the fed is going to signal that it is going to pause , maybe we do get that signal today. maybe it is to rearview mirror to get to that. i read in a position where we need to think about rotating out of value and into growth? emily: certainly. value has been the trade. you think of overweight sectors like energy and that cyclical element that provides inflation protection. you are going to find quality. ones that do not need to pass capital market, a good return. you will find more defensive

parts of the market. you really want to think about emphasizing that expensive element in portfolios. one of our favorite places to think about our utilities consumer behavior is changing away from what we want. we think that these companies that are going to have that consistent demand and are going to add a lot of value as the cycle progresses quickly. alix: what do you do with high-quality tech? if the yields have peaked? emily: high-quality tech is the baby that was thrown out with the bathwater. this is indiscriminate, macro driven selling that we are seeing pervade the market this year.

do not get too comfortable in the fast lane. they have done so well since the recession ended. we really thoughtful about where you are finding those opportunities. guide: why do you think the s&p bottoms out? i know they are difficult to get right, but are we in the process of bottoming on stocks more broadly? do we have further to go? we went into the pandemic significantly lower than mayor weaver now. we are still as evaded from that position. do you think we had down around where we are now?

emily: i saw that posting. we could have further to go here. we are looking at a decline of close to 20%. we have putting about a 50-50 odds on it. you can see further declines. a decline of 37% on average versus non-recessionary bears. we are almost there, but we could have further to go. it is about making trade-offs, in terms of performance. if we are starting to think about recession, areas like european valued stocks have held up incredibly well. we do not really understand that disconnect. you can see oil prices coming down. energy stocks start to roll over little bit. there are pockets of

opportunity. they can do well. alix: if you have not sold yet, where can you still be selling, if somebody did not take your recommendation at the beginning of the year. emily: international equities, in general are going to get a lot more cyclical exposure because of the relative sector composition. the benefit from having a lot of energy and financials. european banks are moving higher, which is a massive disconnect with this move towards a recession. we would look to step away and move more to defense, will -- which will be warranted. . guide: what does the -- guy: what does the world look

like after this? emily: it is a hard landing. the fed is going to act aggressively. energy prices remain elevated. there is a chance that they need to move forward with aggressive rate hikes. i think the most important is the playbook. if you believe that a recession is forthcoming, there is an idea that the fed will move aggressively and there is a time where you want to embrace bonds. even in a soft landing scenario, if we get that pause, we still want to embrace bonds because so much tightening has already been priced into the yield curve. that means you have to believe

that the fed is going to raise rates. bonds are going to offer opportunity, either way. alix: i wanted to get your take on earnings. that is what we saw for the likes of walmart. have we made enough? emily: no. it is actually still picking up. we have not seen that in expectations. we could see it further down in stocks. retailers are a small part of the market. back to that conversation around technology, that will be a

critical piece. i think that the fate of those companies will be critical. it is the best earning growth prospect. alix: coming up, we will head back to davos. we will get the latest on the saudi investment manager. ♪

>> we do not have a lot of capacity.

2% or lower. it is very low. right now, the price is going down quickly. very soon, there will be 100 million barrels or more. alix: we want to go back to davos. >> joining me is the minister. we heard about capacity. we know you are trying to build your capacity. are you open to attracting foreign investors to directly invest? >> first of all, let me say that we are open to investing across

the board. saudi arabia is doing better than ever. we had coming out of the pandemic, of multiple crises. our delivery against 2030 is ahead of schedule. i can cite a number of metrics that we have exceeded, but our commitment to the energy sector is consistent with our policy over many decades. it will continue to be a key anchor, in terms of the -- delivering predictable sources of energy, oil and gas. gas will be expended.

the capacity is being tech -- being tested today. there is also going to be an expansion. >> you are saying you are open to investors investing directly into projects? >> of cross -- across the board. >> we are seeing an interest in renewables. it is coming out of solar, coming out of wind and hydrogen. those projects are well advanced. the oil services sector is booming.

in terms of investment, i leave that for my colleagues and the energy sector to speak specifically. we know they can do the entire thing themselves. they have it exclusively, but i will leave it to them. >> saudi arabia has been looking to diversify their economy. how is that coming along? >> as i mentioned, we are committed to the energy transition, both the supply and demand side. i spoke about opening abundant resources, sunshine, weighing, ample land and infrastructures.

they develop at the lowest cost. both waned and solar are studying a global record, same thing with -- >> who are you speaking to? >> on the demand side with activating demand for renewable energy. we have already broken ground on our first assembly plant. we are talking to at least two others. i am not at liberty. but they come from three different. we are hoping to make the announcement this year. this is happening rapidly.

it is a good location to be a global supplier. we will develop an entire value chain for manufacturing components, research and development, to material, base material compounding, to talent for saudi arabia, to batteries and mineral materials. >> give us a sense of where you are. we know that use this because of the aramco deal. how's it looking for 2022? >> for 2021, we exceeded our target. we started from a low position at the beginning.

last year, we quadrupled that. $20 billion, in terms. yes, they contributed, but we would have exceeded our target for 2021. we see the trend continuing for oil and gas energy sector. it continues to be key to the region. we are endowed with abundant resources. they are converted into materials that are used for sustainability. but we are seeing new sectors attract.

tourism is a big sector. again, we quadrupling the number of visitors. it is something that we are proud of. but also, cultural tourism. a site yet undiscovered. our people, our culture. >> give us an update. >> we have an advanced stage of structuring their value propositions. it will include logistics and unique manufacturing value chains. both on the east coast and west coast of saudi arabia, there will be financial disturbances

and to host a regional headquarters from around the world, in the capital city, and there will be some in tech. in an ecosystem that allows them to compete globally. >> can you quantify that? what will that translate to? >> i mentioned earlier that our targets are ambitious. we are going to attract, annually, over $100 million. this is coupled with investment from leading saudi companies, as well as from the saudi private sector. we believe that special zones will contribute something like 20%.

it will be more catalyzing, not limiting. the base economy will be the platform on which most of the commitments will go to. >> alcohol will be allowed in some of these economic zones. can you clarify that? >> i think you mentioned speculation. there is no policy change in saudi arabia. saudi arabia is firmly committed to its values, to the wishes of its population. as we mentioned, we know that our population is proud. we believe our proposition, our quality of life is still very competitive, without introducing alcohol into our country.

>> thank you for your insight today. back to you. guy: we will be back to davos very shortly. much more ahead. this is bloomberg. ♪

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>> it should that is what we are watching the most. alix: you are looking at stocks that are high. abigail doolittle is tracking

those moves. >> were mentioning, down about point 2%. volatility that we have seen in recent days, it is continuing today. you can see that in the nasdaq 100, doing better than 1%. it is a risk on day. stocks were lower and bonds higher. it is below 30. there is a little bit of a risk on move for stocks and risk at -- assets. it is pretty rough, down 7.5% after a difficult april. you can see the movement you want that last high taken out.

the 18th. and while big tech is higher today, apple with amazon and the like, amazon is on the cusp of perhaps losing its one trillion market cap mark. you can see amazon back in 2020 above that $1 trillion mark. 2 trillion, frankly, for much of last year, right now on the cusp , clearly suggesting that if that happens maybe the nasdaq 100 isn't going to make it and the downed trend -- down trend will continue. the retail sector earnings are always on the move, six point 8%, the luxury homebuilder put up a strong quarter and talked about softening demand for the third quarter in line with new home sales.

they disappointed, guy, as you know, but nordstrom, the high-end shopper is out and about, sales up i 6%. they raised the outlook. kohl's, nice bid there, up after a disastrous quarter and outlook leading some to think that there could be a buyout there with some possible speculative buyout surge, up 13%. guy: great stuff indeed, abigail. returning now to davos and the irish prime minister. over to you. >> the irish prime minister is with me, good to have you with us. it is still about the dispute of the northern island protocol with a current u.s. delegation in europe, though some say it is more symbolic than significant. what's your take? >> it's much more than symbolic,

the u.s. peace process has been one of significant substance and when someone like the chairman's of the ways and means committee of the house leads a bipartisan democrat -- delegation to brussels and dublin, that is significant, particularly given the desire of the government to have a trade deal with the states and the genuine desire of the u.s. and these representatives to find an agreement that would be enhanced and not undermined and that the carefully calibrated work that has been done in respect to that would be upheld we had good discussions with them during the week. they do understand the need to work on the operational protocols, but the trade representatives and those with experience couldn't see anything that couldn't be resolved in terms of the technicalities around the protocol between the

u.k. government and european union that i thought was quite helpful. >> but realistically, what can be achieved? what is the best case scenario in the worst-case scenario for you given that it was signed in 2019 and still here we are. >> best case is for the u.k. government to engage in intense negotiations with a view to bringing about a resolution to these issues. disputes of this kind need a will and i have question, myself, if the will exists, particularly within the united kingdom government, for quite some time. when i met with the vice president last year to listen and come back with new proposals, last october he came forward with a significant set of proposals but was not reciprocated by the u.k. government at the time and there have been changes in terms of the negotiation team with the new trust in charge and in my view the u.k. government hasn't

given that process a chance and we are concerned as to whether there are different agendas that play or whether the u.k. government really wants to settle this because i don't see a landing zone from the u.k. government and am unclear as to what would result. i am clear on politicians in northern ireland, those concerns and where they would like to land this, particularly goods from the u.k. to northern ireland. if the technocrats were allowed to engage, people from industry would be at the table. we met them recently. they are saying to us that the protocol works for manufacturing, for the meat industry and the dairy industry. there are smaller sectors where it is not working for them and therefore they have the know-how and the expertise, minus the politics, to resolve genuine outstanding issues that are there. >> in your view is the u.k. acting in good faith when they signed that protocol?

in 2019 did they know exactly what they were signing up for? >> yes, they knew exactly what they were signing up to in the document and was in a test to that. it was spelled out as well as the implications of the protocol with the british prime minister that recommended the protocol trade agreement to the parliament that subsequently ratified the international treaty with the european union. the u.k. government really has decided now to indicate that they are now contemplating that, reneging and undermining that treaty unilaterally. that is not how democracies and countries of like minds normally behave. the u.k. government engage with the european union and they have said they are willing but they have put demands on the table where if they don't get our way, they will go ahead with this legislation anyway and that is

not how we normally engage. >> you have said before that all options are on the table. what are you referring to and is re-negate -- renegotiation on the table? >> know that was in the context of the response to the united kingdom unilaterally enacting legislation to get rid of and tear up the agreement they had entered into with the european union and the european union says all options are on the table in terms of how they would respond to the united kingdom if that eventuality happens. of course we don't want to go near their. we are all experiencing this and talking to representatives from the ukrainian government, for example, there's a terrible war on the people there affecting all of europe. the united kingdom has led well on that, i give credit to them for their leadership in that respect but geopolitically the u.k., ireland, and other states should be in alignment on the big issues. things that should not be of a subject matter of dispute at

this kind. they can be resolved, i'm certain of that. the details can be resolved if there is a will on all sides to resolve it and i appeal to the british government to really engage with the european union and with the vice president to be extreme in their flexibility around this issue. >> are you optimistic it can be resolved before you leave office in december? >> i hope to be in government still -- [laughter] >> your position. [laughter] >> it comes back to that issue of if there is a will there, it certainly can be. the issues are not of a kind that should present -- prevent resolution, that's my genuine view on all sides in the wish of all in the european union, they have no desire for disruption or for trouble. we have just come out of covid-19 or the emergency phase of covid-19 where europe responded fairly well and we

have this terrible war with relation to ukraine and we have these economic issues, we don't need this dispute. >> some say that if talks fail, there could be a trade war between the eu and the u.k., what are the prospects of that? >> unilateralism by one party can create that response, but nobody wants that. so, that is down the line but it is something we do not want to contemplate. at the time of cop 26 last year we had a similar moment like this where britain had pulled back somewhat from some of what they had intended and what they had threatened to do at that time and that has become frustrating for member states in the union and for the commission , this stop start approach to the engagement and these kinds of threats of unilateral action from time to time. it is not conducive to a constructive resolution.

>> europe and ireland trying to cut reliance on russian gas but in that commission to renewables you are coming across high prices and that transition could cause to 30% more. is that impacting the transition? >> know, our fundamental challenge in terms of moving to renewables would be structural, delivery, planning, and we are working on that, we have a framework for the veil -- development and ireland and for the next decade the biggest advancement would be offshore wind. what is the windiest seacoast on the western seaboard? that's how we are going to play it for the long term. certainly by the mid-2000 30's, we want to be exporting energy and that's the ambition. the war in the ukraine, what it is teaching us and the rest of europe has put up to the rest of the world, there's only one

journey here towards rubles and we will have to double down on that, notwithstanding the enormous pressures at the moment on the crisis around fossil fuels and so on with energy issues. i think that this is actually a watershed in the transition to renewables and ic acceleration and lessening of the dependence on oil and gas. >> this war is causing escalating inflation and a lot of grief. there is a costs crisis right now. is it about to get worse before it gets better? >> it will probably get worse before the end of the year but various governments are taking measures to ease the pressure on people but the war is having an impact. it has many facets to it. what people are doing in terms of the terror in ukraine -- ukraine, it's the worst since world war ii.

significantly now a food crisis, potentially famine. when you combine the absence of exports from ukraine in terms of grain and someone with other droughts in africa and so on we are facing different scenarios internationally and globally into the future. but we have got to hold the line because what is at stake are the fundamental values of democracy, freedom of speech, and i generally believe -- genuinely believe in what president biden says, there is a significant challenge ahead of us from those of us who have -- or like-minded between the authoritarian regimes and those who want to actually snuff out free media and undermine contrary views within society, freedom of opinion. these are values that can be taken from us by authoritarian leaders more quickly than perhaps we might think and therefore what i'm saying basically is that we didn't want this war, but nonetheless the

consequences of it will be felt by all of us in all societies in europe and once we have that clear vision as to why we are taking the stance we are taking, i think people will be aware of that and take it on board and put their shoulder to the wheel to make sure that we can absorb these pressures and come out the other side stronger and better for it. >> prime minister, we thank you so much for your time today here live at the world economic ornament davos. guy, back to you. guy: she was speaking there to the irish prime minister but the british prime minister has been feeling questions in london. not related to the irish protocol but related to the publication today of a great report into the party gate saga. the prime minister is continuing to answer those questions. let's take a listen to what he saying. >> it's kind we have never seen before in my lifetime, the

effects were not knowable and you had to proceed through nonpharmaceutical intervention. you had to get people to behave according to certain rules. i don't have problems with the rules, tom. we should have, we should have recognized the boundary there for the people continuously working together in the same place was going to be hard to draw and we should have, you know, things it should have been done differently and later, they will be done different from now on. the crucial thing, look, the covid pandemic costs the government, supporting businesses and families, it's a difficult fiscal position. some features of the economy are extremely strong but there is no doubt that because of the global

supply chain shock, exacerbated by what putin has done in ukraine through the spike in the price of energy, we will see pressures for a while to come. i've got to be realistic with people about that. pressures on household finance. so, what i am saying to people is that we will continue to respond just as we responded throughout pandemic. it won't be easy, we won't be able to fix everything, but i will also say that we will get through it and we will get through it well and we have -- guy: the british prime minister speaking at 10 downing street, -- 10 downing street, the bulk of the questions about the gray report and a jet -- addressing the issue of the expectation that by the end of the week we could hear from the chancellor in terms of providing further

assistance to the british public. coming up, the annual twitter shareholder meeting kicks off and the question on the minds of most is not even on the agenda. what's the latest detail on elon musk's offer? we will go to california, next, to try to get an answer. this is bloomberg. ♪

ritika gupta: you are looking at a live shot of the principal room and at 11 a.m. new york time, we will be joined by a special guest. this is bloomberg. alix: one corporate event you want to watch today is twitter, holding their annual shareholder meeting at 1 p.m. new york time and the big question on the mind of everyone is the potential sale to elon musk. one of the founders of twitter said this morning that this meeting could be one for the books. >> it feels like the rag a rock of twitter annual meetings,

where there is only sort of one option shareholders are looking for, to know that the deal is going to go through because now the deal price looks like this amazing deal and the rest of the world has melted down and the rest of the questions i think ill be can i get my money now. alix: joining us now is ed ludlow in san francisco outside twitter headquarters. ed, the twitter stock, up today, it far cry from the asking price, the original asking price from elon musk. what are we looking for today? >> whether you are a shareholder or a merger arbitrage specialist, there are a number of scenarios and outcomes we are trying to discern, right? the elon musk bid to buy the company isn't even on the agenda. ned siegel participated in a q&a so you would imagine they might be asked on the one hand there is acceptance of that $50.20 per share, that current bid isn't going to happen, but you are also try to calculate the

outcome where the deal perhaps doesn't happen at all. elon musk says it's on hold until he gets more information on the percentage on the platform that's bought but somewhere between the no deal and pricing that at $54 and $.20 per share, is the price more reflective of what we have seen in markets recently? twitter and its recent selloff of weeks and months has seen further pressure because of its guidance for the year. is it going to be a deal? do they come out with a lower price? guy: to that point, what do people think on hold means right now? ed: you will remember last week that we reported at bloomberg that there was an all hands meeting at twitter. the chief legal officer there at twitter told employees in the meeting that there is no such thing as the deal being on hold. we have spoken to m&a lawyers,

m&a bankers. once you sign the deal, it's not on hold. you can come renegotiate for the offer but you cannot put it on pause. this is classic elon musk, right? going to twitter, stating his side of the story but us not having a mechanism to ask him about it. alix: the vibe, there, do shareholders wanted to go through? are they into the deal? ed: thinking about ragged rock, the end of the world as we know it, $54 and $.20 per share seems an unbelievable offer right now. put yourself in the shoes of the shareholder and that outcome versus worst-case scenario, you would probably take it, right? but i think there is a concern that no matter what happens, twitter has to change. elon musk is talking about moving to a subscription model. thinking about advertising models in this macro environment

that we are currently living in, something has to give and that's what i'm hearing that only from twitter shareholders but insiders as well trying to get to work on a product, product engineers who have been working on something for some time and they worry that if elon musk comes in they will have to pivot in a dramatically different direction. guy: the snap story was about the macro advertising slowdown, a real shock for a lot of people. ed: it was a shock for two reasons. they gave a bullish forecast about their user base recently but we were also told not to worry about it in that metric. that it was about the confidence of the consumer and of the advertisers and quite clearly that's been shot aced on what's going on in the global economy. guy: great stuff indeed, ed ludlow, from there in san francisco outside the twitter meeting. this is bloomberg.

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guy: coming up, the european close with a quick check on price action. we are waiting for the fed. euro-dollar is a little softer today but it had been a quite critical levels. softer language coming from fed speakers today. dovish down. crude a little bit at 114 right now. plenty to talk about with the crude market. asset management joining us next to talk about russia as well. this is bloomberg. ♪

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guy: european stocks are higher, the retail is leading and the countdown to the close starts right now. >> the countdown is on in europe. this is bloomberg markets: european close, with guy johnson and alix steel.