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tv   Bloomberg Markets European Close  Bloomberg  June 10, 2022 11:00am-12:00pm EDT

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>> 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. tom: what a day for these markets, another record cpi.
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another 40 year high. consumer sentiment is crushed. here in equities, 2.5% as we inched toward the close. the italian -- you are seeing a jump of 25 basis points on the italian two-year. greece is also under pressure. this is how things are playing out. as we wait out the rate differentials, the fed is ahead of the pack. that repricing across the bond market puts pressure on these equities. alix: barclays changing their call for the fed meeting. they now say a hike of 75 basis
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points. that is already happening. you can see that in the bond market here in the u.s.. the s&p is off the low of the session after the had that terrible number after the high cpi. the bank and dex is feeling a lot of the pain, down 3.5%. the nasdaq 100 is up 3%. the overall mass back is down 23%. netflix and ebay are getting a downgrade. the pressure is coming in this fair flattening. it's almost 3%. i know you're going to roll your eyes. in the u.s., it's been a huge rereading on the front end of the curve. tom: we are at 25 basis points on the italian two-year. it is 27 basis points on the greek tenure. we've got that chart. it's not just in bonds, but also
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in equities. italian stocks are lower. that is by almost 5%. this is after christine lagarde did not convince them they have a toolkit mechanism to address that fragmentation. you can see that spread now widening. we are close to that danger zone. watch that line going forward. let's bring in the head of global strategies. how bad does it get from here? andrew: what you talking about? europe or u.s.? tom: let's start in the u.s.. andrew: we are cautious on u.s. markets. we really have formed. i think there is a significant risk of a hard landing, commodity prices are at levels
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that proceed hard landing. there is an overheating labor market which requires below trend growth. i think there is a high probability it ends up in versing the yield curve and leading to a recession. the second problem is on our equity risk premium model which is over the last 12 years. it says equities are slightly expensive. the third problem are the revisions that are normally bad for markets. profit margins are at record levels, that requires core ppi. finally, i would argue it's a bearish sentiment. it actually isn't reflected on the positioning data in terms of retail flows. i think it is a nasty set up.
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one last thing, we've had it occasions in the last 35 years where the market avoided the bear market, closing down 19.9%. on each of those occasions, you had the fed doing a major pivot. i can't see that happening this time around. alix: it feels like the same problem in europe as well. you have central banks having to get more hawkish. the new have a big re-rating with the curve. equities get hit hard. what do you buy in this fireman question -- environment? andrew: the problem in europe is a bit worse. the wage data has picked up. it's more than people had expected. you've also got the additional problem of russia, which has a
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bigger influence on european growth. europe is a significant fossil fuel important were the u.s. was in all exporter. it is worse. additionally, you have the problem are long yield spreads, their unsustainability. the ecb comes in and provides some anti-fragmentation without conditionality. in europe, it is worse. to answer your second question, i think since march i admit some producers are becoming more expensive. we are focusing on the farmer in europe.
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valuations are ok. also, they take advantage of this. biotech companies have fallen. they can buy cheap. energy independence as well as decarbonization, the yield curve is basically flattened. tom: make the case for luxury debt. there was some optimism around china as a stunned ease restriction. shanghai could be on lock down again. what is a case for luxury in this environment? andrew: it's a hold. big picture, we have been pivoting toward china. we have been a small overweight
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with other issues. we upgraded luxury from underweight to encz mark. i think there are three issues here. in the very long run, it is extreme and treat. it is a play on globalization. you want to be in the long run. problem is the short run. we have valuations that are back at reasonable levels. also around 40% luxury demand is directed at china relations. we think what we see in terms of monetary stimulus delayed. that will help that angle. archives are saying they are the turning point in real estate.
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that is the rationale behind luxury. some the names i'm not allowed to mention. they are looking quite cheap. it is too early to go overweight. this market panic, you want to position yourself for the long term. alix: we do have to leave it there. thank you for joining us. maybe some luxury stocks. we have senior japanese center the alarm on the yen. we are going to get inside on that and what is next for the euro. this is bloomberg. ♪
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tom: welcome back. after consecutive losses, the yen rebounds against the dollar after officials sounded the alarm. here is more on the moves in that space. what do you make of the news out of japan? >> i think the key driving factor has been this differential between treasuries and spreads. we know about yield curve dynamics. we are going to see those u.s. yields remain relatively elevated. the japanese authorities are swinging. i think they're trying to slow the move rather than reversing it particularly. alix: what would it take to
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reverse it? we will live in a world of big deal differentials, prickly for the boj as we have rate hikes in the u.s. and europe? jeremy: i think in a sense that was the underlying message from the ecb, it needs the boj as an outlier in terms of broader global monetary policy. suggesting they are going to try and rest this verbally is a challenge. i think ultimately that will be the case that we have to get into a scenario where the boj may need to consider recalibrating their yield control. that could be a catalyst which could be a better way to try and stem this significant depreciation. tom: there is also the differential when it comes to ecb and the fed. the yields, particulate and greece, are going up. what about spread threshold on the euro?
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jeremy: the issue of fragmentation is a concern. it's notable the number of questions madame lagarde had to deal with in terms of the context of fragmentation policy. she was very explicit they would not tolerate that to happen. it is happening. how far can work it pressure the ecb before they come back in? i think that is going to cause greater concern in terms of the valuation of the euro against the dollar. alix: we've seen this movie before. the market pushes around the politicians and central bank. they do the right thing and everything is ok. are we looking at parity again as the spreads continue to blowout? do we see that for your dollar?
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jeremy: i don't think we see parity yet. i think we are going to see continued pressure in the short term. i think we need to be mindful of the way the market is being positioned. we have seen it euro longs being filtered. i think we see the cleansing of some of those markets. when we get back to cleaner positioning, that includes the threshold. we are heading lower in the short term. we are starting to recalibrate. unless the fed really does ramp up the activity and push forward, i'm not sure necessarily we can realistically talk. sterling is downed. i think sterling is in a very fickle position because
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politically there are a number of concerns. we have that northern ireland bill coming up. i think that's amplifying the political risk. we have that inflation expectation. we get gdp for april on monday as well. that is likely to represent the third month where we see zero or negative growth. the outlook is challenging. we are going back. i think there is -- i have a great deal of skepticism in terms of what is priced in and what is likely to occur. i find it difficult to see the bank of england following through to the same extent and magnitude. i think that is going to underline the fact that sterling is going to be another performer. alix: we complain about the
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cost-of-living increase care. over there, it is so much worse. it is so much more expensive to fill up a tank of gas. data says 77% of the u.k. population feels worried about the rising cost of living. what is the best trade to express that. elias: the inflation backdrop is huge for the sterling story. they are looking for sterling trades. in the context, i think there is further downside. we were looking at sterling underperformance. that is proving to be a little challenging. ultimately, we can see sterling underperform against the dollar. i think there is some value as an energy exporter in terms of this inflationary dynamic. tom: is that a safe haven you might look to? is that where you want to be?
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jeremy: i think you want to be in those markets where you see commodity export revenues. that's been one of the trades that has been negative for japan. i think in the context of those positions, we are seeing that strong robust trade. that does provide you with a degree of safety. alix: it's going to be really interesting for the fed as well as the boe to see how they categorize what they are going to do about inflation. coming up, russian troops increase efforts to tighten control over ukraine. we have an interview with the top advisor to volodymyr zelenskyy. this is bloomberg. ♪ what if you were a global bank who wanted to supercharge your audit system? so you tap ibm to un-silo your data.
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let's go to the latest in ukraine. we are standing by with president zelenskyy's deputy chief of staff. maria: thank you very much. he joins us from a kyiv where he is monitoring the situation with president zelenskyy. i want to ask you before we move into the eu conversation, i know you have a lot to say on that. when you look at the military, can you give us an update on the situation on the front. i know you said in donbas it is very intense fighting on a daily basis. >> right you are. the situation is still difficult. we have talked with you several time, this is significant.
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now, there is a level of armed forces in the don bus. -- don bus. they outnumber ukrainians. they outnumber us in equipment and military equipment and weapons. manpower definitely. we are managing to withstand and make advances in some parts. the area is severely shelled. it is really difficult. we will not be trying to say
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this, we need heavy weaponry in this part of ukraine from our western partners. in order to help us start and liberate the donbas. >> maybe ukraine it could think about seating at some of the territory. i'd told you -- i know you told me we not going to give away an inch. these are not just tiny villages that ukraine is fighting for. this is a significant amount of land. in the next week, you're waiting for weapons. do you have any idea when they are coming? the germans say they want to help more. is that the reality on the ground. >> my is issue in, we will not cede any inch of territory,
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especially don bus. bas. we are moving slowly. you mentioned germany, they are starting to deliver. they are not that quick as we are awaiting from them. some other weapons partners are much quick and intense in numbers. we can on france, we count on spain and portugal. we never talk about some of the weaponry which will undermine their defense capabilities. the surplus amount of weapons are stored in warehouses. they are outdated for us they would be of immediate importance
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to a defend ourselves. >> the other big issue here is the food. you are saying this is entirely in the hands of vladimir putin. it is his fault. do you see any agreement that could liberate some of those exports? is the situation really stuck imports controlled by russia. >> we don't see any major agreement. we are ready to give our grain and ports and vessels. they should provide safe quarters. they should provide a cease fire. that's why we've spoken on these issues.
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we are ready. we need to combine our efforts. >> it seems that deal did not work either. you did not participate in the meeting because you said it was a propaganda exercise. i know very important meeting is happening two weeks. your government is betting everything on that membership status. based on the information you have, do you think you have a guarantee? >> we are much more optimistic now then a month ago. on the 17th of june, it will be published. we have reasons to forecast this
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will be a positive opinion. this should give to the council on the 23rd. >> you make it clear that you want that in two weeks time. ♪
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>> will come back. happy friday or not some back -- not so happy when we look at markets. most pronounced losses of 5%. seeing bonds and yields blot versus the benchmark. the fragmentation in the of own versus investors are concerned that the easy to be -- et -- ecb does not have it under control.
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-- the fed will go harder. -- in the cac in france in similar territory. by sector by sector basis, financials at the top of the list. selloffs on those concerns. basic resources on the presser. losses of close to 4%. the european central bank pivoting more hawkish and not outlining a plan around the peripheral, concerns you get a stagflationary environment in the eurozone, particularly with high inflations slow growth. let's switch it and see how things are playing out. when it comes to the sector basis, energy, the least bad performer comes to these
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sectors, down .9%. we have seen brent up a little in the session but on the week, oil is up above $120 per barrel. thanks, that sector crushed, down 6%. by the high-yield environment, it is the recession fears that seem to be pressuring that. financial services as well. a couple individual names we want to bring to your attention, credit suisse has been one of this toys of the week. on the speculation that they're looking to buy stocks. some of the heads coming out yesterday saying that is a stupid question when he was asked about an state street putting out a firm denial, just as there is question marks about whether apollo will be in the market. they bought this for $7 billion last year and they will probably sell it for one billion according to analysts and nonetheless looking to gain 5% on speculation that the firm is interested. credit suisse down 6% and erickson down as well, the probe
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being -- the comedy being probed around a corruption scandal. that telecommute and equipment provider. >> when you call question dom it makes you wonder what is behind that. credit suisse, he is one of the top shareholders, credit suisse's is one of david haro's top holdings and he spoke earlier to bloomberg television about the challenges at the bank. >> not at this stage. yet. because there has been wholesale changes of the bank from the board to the management town. i think we need to see what the new people who are involved with the bank both from the executive management committee and board of directors can do to turn this around. there are inherent values within the business and i think these people should be given a chance to try to create this value, sustain this value. the bank trades at about one
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third or 40% of book value. so the object now should be stabilization and then growth after stabilization. if they can't do it, someone else has to. tom: do they have a swiss put? are they not making tough decisions because they know this government has their back in zurich will be ubs and zurich will be credit suisse? david: i would hope not, by the way. i'm a believer in free-market capitalism and there should not be any protection. if they cannot do it and someone comes in to make an acquisition to all our parts of the business, i thing that should be allowed to happen. there is talk of someone does bid, they will give ups a chance to give some kind of a deal combination but i would certainly hope that is not the case. >>'s europe even ready for big cross-border bank m&a? david: i don't think you can have cross-border bank m&a in
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europe on a wild scale until some of the rules and laws are changed. at some point, this may happen but you still have it baking markets which makes it non-conducive to cross-border. i think there is a possibility for some on isolated levels and basis, but at this stage, you still need regulatory evening out that would make it more conducive to cross-border m&a. a company like credit suisse has a huge private wealth management business, which is now bigger than their global markets investment banking business and for any big global bank that once exposure in this area, we would think credit suisse would be in that track of assets. >> that was david haro with bloomberg's matt miller and tom keene.
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let's check the european stocks, are they settled as we catch a break? now you see the pain on the screen, the cac is lower by 2.8% in the dax is done more than 3%. itsy is lower by around just over 5%. the ftse 100 and the u.k., down 160 points, 7315 on the first see 100 -- ftse 100. alix: i'll see you point out the german 10 you -- 10 year rising the first time since when he 14 putting pressure on equities. one of the biggest buyout funds on record, we speak to the men behind that over at advent international. this is bloomberg. ♪
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ritika: this is "bloomberg markets" the european close. coming up, the gmo president of asset allocation at 2:00 p.m. new york time. this is bloomberg.
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keeping you up-to-date with news from around the word -- world, i'm ritika gupta. the biden administration is lifting requirements, international travelers teleport -- airlines view the measure as excessive. a senior administration official says the change will take affected just after midnight on june the 12th. shanghai will briefly lock down the 25 million residents this weekend for mass testing as covid-19 tested -- covid-19 cases continue. this is triggering a renew run on groceries days after the city exits what was a two-month shutdown. health officials are hoping to we doubt any silent transmission . a new loan program with the international monetary fund according to the country's finance chief is efforts to fight off invading russian
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forces push its budget and international reserves to the limits. the finance minister tells bloomberg they need more foreign aid from its long-standing donor and a new a package is underway. apollo global management is one of several possible suitors interested in grubhub units. apollo is a value -- is evaluating the business, struggling getting the $7.8 billion it paid last year. buyers are offering close to $1 billion per year. -- $1 billion. global news, 24 hours a day, on air and on "bloomberg quicktake," powered by more than 2700 journalists and analysts in over 120 countries. i'm ritika gupta. this is bloomberg. alix: thank you. asset international raised $25 billion, the second-biggest private equity fund and record. the buyout firm, majority owned by partners, took less than six months to raise the commitment. sonali basak joins us now along with david must've her and james
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brussel bank, managing partners at admin international. >> thank you so much and thank you both for joining us. i'm curious to start with david here on valuation. you have raised all of this money, but how much of an opportunity is there now to spend it when the market is so volatile? david: one, thank you for having us. on a day like today in a sea of red, it amplifies potential opportunities that we will see. it has been a benign environment over the last couple years. a really attractive exit environment, but as the market is becoming a lot tougher and cash is more important, that really helps private equity firms and private investors like ourselves. we are excited about the potential prospects of some of the dislocations happening now and what that might mean for investment opportunities. sonali: curious if you can give
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us the perspective from london, given the economic pressures across europe, especially in the wake of the starting of this war. what do you expect in terms of the outlook moving forward? >> is pretty tough. i think that it is tough in the states but in europe, we have even greater issues i think with the inflation situation. here in the u.k., we are looking at pushing inflation 10%. we will have real negative gdp growth potentially, we have the supply chain shock, then countries like germany where you have this difficult transition away from imported oil and gas and you have potentially structurally high energy costs for many years to come. we are dealing with a lot of difficult things are now and the outlook is tough. you don't hear it in advent and we have been on the ground since 1989 so we feel we understand
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the market well and we're looking forward to trying to fill out ways to get our company through this difficult period. tom: james, what is looking attractive in the u.k. and europe as well? we see focus on some of the big-name grocers in the usa and across europe, questions about bank consolidation. what for you is looking attractive in this environment? james: i think there's still a lot of opportunity to carve out -- opportunity in the carve space. we have a pretty efficient landscape in landscape -- efficient landscape. we think there will be a lot of opportunity to continue to back interesting potential products. we have done one of the largest ones in recent times, the deal which we announced a couple weeks ago. we have done over 65 pub outs during our time and 62 countries and i think you will see more of the activity in your coming up and we would like to be involved in that.
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tom: david, you talk about the dislocations, i will let you in and then a question on where you see those most acute and where that opens up opportunity. david: what i was going to emphasize is that when you see the private -- when the public markets adjust like they have in the last several months, it puts an immense amount of pressure on ceos, so as james was saying, the opportunity is because ceos are under pressure to raise stock price. that is what triggers these carveout opportunities be relied james said, we have done this successfully with ge, walmart, visa, kissing crop, so this is something in addition to more straightforward p2p's that are also going to be opportunities as a result of the reset in the markets. alix: you started to address this, the issue of -- sonali: you started to address this, the issue of choppy
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markets what do you see in terms of exit horizons and are we going to see more sales rather than ipo's ahead? david: that is for sure. the ipo market is down 90% or so ella tipped to last year. -- last year relative to the first part of this year. the exit markets will be tougher so most investors will think about deferring that for some time. as he reset their businesses. but again, for us, we are thinking always over an intermediate-term, anywhere from five to seven years, then making sure that our companies are well prepared for the environment that they are sailing into. that has -- that, as james frames, the environment over the next couple years could be rocky. we want to make sure our companies are well-capitalized and prepared with lots of resources to take advantage of any of those difficult situations.
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sonali: speaking of capital, i'm curious about your opinion, james. there's a lot of talk about the health of banks, massive amount of loans on banks. right now, when you look at bio capital, through this cycle, do you have any concerns that the money will be there over the next six months. james: we see the dysfunction in the market right now. you have a situation where it is really difficult and expensive to find financing from that additional -- from the traditional forces. it is still very active, the boots are on the other foot and you are right, right now, leverage loans it is really tough out there. how long this will last we do not know. i think you would like to see
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more formation then that would drive an improvement in the situation but right now it is really tough to get financing in the traditional manner. sonali: i'm curious also about hiring in this market. you made high-profile hires, most notably those reported you hired a new coo from goldman sachs. i'm wondering what your plans are moving forward. is there still any sense of a war on talents given this market is softer than a year ago? david: for us, the key to everything both internally and with our pope fully accompanies is our ability to attract incredible talent. that is one of the things that as we have grown with our size and scale, it has given us the ability to attract incredible managers. look at last year when the spac market was wide open. lots of ceos were being drawn to spac's and other vehicles. all of those executives are
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starting to come back to us. we are finding an immense upsurge in talents that we can attract our portfolio companies. at the same time internally, we will always look to raise our game and bring the best and brightest into our shop. we are thrilled about tether minor, from goldman, joining us later this year, but we have a host of talent that we have been able to attract and obviously that is what we're trying to lean into during this market. tom: james, let me bring it back to you and the big question of the day, which is around inflation. you both touched on this. how are you thinking about the stickiness of inflation, the longer term of inflation, and how you factor that into the business is you're looking at over that five-year horizon? james: it is very interesting how economists and central banks underestimated the inflation situation. when we did a study earlier in
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the year, it was striking how people assume it would go back to 2% quickly. we do not think it will do that. we were planning for a longer period of inflation and that is absolutely the top topic we discussed with the boards of our portfolio company. we are extremely focused with these guys on trying to deal with pricing, put in contracts which have recurring price increases, really focusing -- almost greeting a particular workstream around it. dna around inflation does not exist in many companies because we have not seen it in west markets for so long. we are also have benefited from our colleagues in latin america who have seen inflation in some of the geographies so we have been able to learn from them about how they navigated these difficult times and this is an example of how a very international organization can be used to help drive insights and other parts of our business. tom: ok.
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should nelly bass you for bringing that fantastic interview to us. james -- sonali basak for bringing that fantastic interview to us and david mussafer and james brocklebank " comi. . up, president biden will visit the board of los angeles. time to underscore the white house's efforts to ease the supply chain crunch. the dystopian inflation. this is bloomberg. ♪
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alix: stocks around the lows of the session, the s&p off by 3%, and ugly selloff. abigail doolittle is looking at those. abigail: a brutal selloff. on the week is brutal as well. the last 10 weeks are pretty brutal, this is a weekly look at the indexes and you can see, down, down, down.
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we had the one up weekend we are looking at a second down we can around. massive losses for these indexes down more than 4%. the worst week for most indexes the last time i looked since the end of january. things are moving so quickly it could be even worse but that is still pretty bad on the hot cpi print, that has since some -- send some yields a soaring higher. the two year yield now 3%. its highest level since 2008, backing up in a huge way, the 10 year yield at 315. we have the yield curve coming in, flattening, 15 basis points not so long ago at 30 basis points. will it invert the second time? it inverted briefly in april and not so much now. as for whether or not it is a bear market rally, here is not the official bear market in terms of down 20% but you can see the strong downtrend in the s&p 500 on the air. will the slows hold the echo willits in the s&p 500 higher for potentially some bounds. maybe that could happen
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technically. that said, a pretty tough picture there. investors will need perhaps good news to make that happen. tom: indeed not far off that when he percent drop. thank you, abigail doolittle, with the breakdown of the markets. in the last hour the port of dashboard of director of los angeles spoke to us about the logjam and when he sees relief. >> we are past the worst of this, whether it be the health of the worker or variants of covid-19, this tax of ships out of the pacific ocean. for the month of may, we move 970,000 container units and it will be our third best in history. the cargo keeps going because the consumer keeps buying. tom: president biden will be visiting the port in two hours time to speak about the economy as inflation hits a 40 are high. let's go to ed ludlow who is on site. what do you expect from the president? ed: we are zeroed in on
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inflation, the hot print put pressure on the situation -- puts pressure on the situation. you asked a smart question, outside of america, what is happening in china? you have factories reopening in shanghai, it actually held up well despite government induced lockdowns. do we expect traffic coming through this port? we care and we are here in the context of inflation because there is a discussion going on in the background between the union and port operators. if they cannot reach an agreement, it could be disruption in the board. disruption means a lack of containers through the place, a lack of low containers means there are not available containers for retailers to put goods in and that means higher container prices. that was one of the main feedthrough's for inflation of the last 12 months. that is why we are here and that is what we are doing into biden's speech. alix: wonderful work. ed ludlow there. we will bring president biden's remarks at 1:45 p.m. time from the port of los angeles. i know you're working double
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duties on this friday but thank you for joining me. that doesn't for me and tom on television. coming up, chair of the white house economic council of advisors will be joining balance of power with david westin on bloomberg television and radio. this is bloomberg. ♪
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>> this is balance of power with david westin. ♪


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