tv Bloomberg Markets European Open Bloomberg June 14, 2022 3:00am-4:00am EDT
arizon burned this year is moren doubled the u.s. national average. global news, 24 hours a day, on air, and on bloomberg quicktake. francine: welcome to the powered by more than 2700 journalists and analysts in more than 120 countries. francine: thank you so much, angela ciano in london. european market open, everyone, i minute until the start of cash we will speak to the hong kong equity trading. executive carrie lam later this morning as she prepares to move i'm francine lacqua in london with tom mackenzie. tom: stocks sink into a bear out of the role at the end of the month. this is bloomberg. ♪ market and treasury yields search. the dollar tears higher while the bitcoin meltdown deepens. did somebody say 100? jp morgan c 75 basis points but describes april point hike is a nontrivial risk. it is brexit crunch time once again. boris johnson sparks another rift with the eu laying out a plan to override the northern ireland water call that protocol. francine: this is what futures are looking at. interest rates were at 13%, so i
am not too worried about my mortgage but after the big selloff yesterday futures are a little on the upside. tom: we need to go back that far to get an accurate reflection of what is happening in these markets arguably. morgan and goldman sachs joining the likes of barclays starting to factor in 75 basis points. reporting on the dow jones and elsewhere that the fomc is looking seriously at 75 basis points for wednesday. 200 basis points between now and september is what the money markets are starting to price in. for the moment the markets are taking a deep breath after selloffs we saw yesterday. the s&p fell into a bear market. you saw yields on the u.s. 10 year jumping for two days, the highest and biggest jump since 1987.
the ftse 100 gaining .6%. the cac 40 getting .7%. and in spain the ibex is up .7% as well. let's see how things are playing out across as it. we are looking at futures in the u.s., the s&p e-mini futures pointing to gains of 1.2%, making up some of the heavy losses not fully that we saw yesterday. the chinese session on the mainland turnaround and sentiment ended more positive on the mainland. the dollar in focus, bid significantly in the last couple days as part of the safe haven move. coming off just .2%. as the italian 10 year which was up by -- 24% has come down eight basis points. you saw moves of plus 20 basis points in the last two days for
italian debt over continued concerns about fragmentation. bitcoin has dropped below a trillion dollars in terms of market cap. >> we are unlikely at this stage down 2.5% as things stand. to go into a deep or long we watch that as a barometer of recession. risk. francine: it will be interesting is it possible, possibly. to see if the ecb tries to francine: that was the morgan placate some of the risk on mood in italian yields. this is the move in sectors, stanley chief executive officer saying he sees a 50% risk of a after the selloff yesterday we u.s. recession. are seeing a reprieve. the markets a lot more stable all of the sectors are on the upside, just five or six stocks than they were yesterday. are on the downside. we saw a crazy day, repricing the dax leading gains higher. with the s&p also in bear market territory. technology and travel and it was interesting to speak to bill street, about the italian leisure the biggest gainers. 10-year yield, now at 3.97. and auto parts and real estate gained about .2%. and i feel like i am matching the markets testing the result of the ecb to show markets how the color of the markets today, to deal with fragmentation. tom: some money moving into i am wearing green. italian debt but not making up
tom: total energy is making an for losses in the last few days. investment over in india with we do know that the spread of adani, taking a 25% in their btp's over german bunds remains green energy operations. elevated. our previous guest saying this is something that keeps him up a biofarma company aligning with at night. pfizer on the trial of a cancer take a deep breath until the drug, currently up 6.3%. next cpi print basically. air france saying they had a the treasury yield inversion between the twos and tens is not successful rights issue, raising there anymore, the tens are now around 2.3 billion euros, they said they saw strong demand for down by six basis points, 3.29. francine: sterling posting new and existing investors. let's get over to our mliv managing editor mark cudmore, the biggest drop in two decades. you are assessing the market moves over the last 48 hours, is if you look at inflation, that is not enough for workers to the relative calm we are seeing now going to hold? mark: short-term may be but live better than they did just a year ago. overall the moves we have seen will continue. for companies, it is quite a big inflationary pressure. francine has been calling her it is this a no man's land where neighbors on interest rates, and it is worse for both parties and understandably. i want to make the point that you don't know how the bank of england will deal with that. tom: the bank of england is
even though we are very focused on the fed this week, whether coming up later this week, and the conundrum could not be more clear cut for concerns on the they will do 50 basis points or a hundred even, it is really a u.k. turning to recession and the need to address that very high inflation as well. global fame. the blue line is the fed. those 2-year yield's are 3.3%. surveillance early edition is up next. stay with us, this is bloomberg. the redline is indonesia, i use ♪ that to give and example of emergent orchids with a dollar-denominated debt. the white line is australia where the rba were fighting rate hikes. the u.k. is the purple line, up above 2%, finally, the yellow line is italy two year which is deeply negative as recently as mid december. all these markets up more than 200 basis points apart from the u.k. there is one large exception and that is the bank of japan. you can see the orange line, it looks like i am drawing a zero line, the only one that is not moving. that is why there is such pressure on the boj, we saw
record bond purchases today to maintain their yield curve control. as we heard our guest in the last hour, there is an expectation that boj will have to capitulate on yield curve control because of pressure globally. in november, everything a one of these yields was below 1%. it's about where we have come from this which is really dramatic. all of the moves have done 200 basis points apart from the u.k. the u.k. was at the higher end back in november and it has only moved a hundred 50 basis points. that may force the bag a big write more than expected -- bank of england to hike more than expected. final vote, we are still not very high. francine is falling hers -- we are talking about this really excited move and in many markets yields are close to light.
bank of japan, all these markets still have negative yields. even still we are only talking about 1%. we have a long way to go. francine: it is not so much polling because i know that is your expertise in mliv. they drop in for tea. they have flipped through interest rates over 17%. mark: it is great to have these important colleagues at this time but i am glad i know where you are getting your market insights because i have wondered at times. francine: i'm sure she would have seen these inflation forecasts. our energy editor for mliv, mark cudmore. if you look at the cost of living squeezing a lot of households, our priscilla aldrich had a great story saying inflation is not high enough for tumors but it is too high for
companies. tom: that conundrum very clear cut for the bank of england as blackrock was telling us earlier it was something to watch this week given the recession risks. but i do think we should get priscilla on the show to give her analysis now that you have given her a shout out. francine: she would come marching. let's get into key market drivers with eddie van der walt from our markets life team. there is concern where to be see -- where we see value in markets. >> we are seeing this pause in selling. i don't think that means the market is turning bullish. we are selling, selling, selling. but we are getting closer to the fed and taking some of that aggressive moves off. what we are getting it is a
window into where people are picking up value. if we look at the european open now, the sectors that are up today are telling us where will, in -- come in really big on the buy side when they are stepping back. this is absolutely telling for us. tom: what about bitcoin? >> bitcoin is fantastic. tom: bitcoin is fantastic? >> fantastically interesting on the downside. the drawdowns this time around is much much bigger than we have seen in previous cycles. previous cycles what we saw was bitcoin go parabolic, and draws down and stayed well above the previous lows. this time we are getting back to this 2017 beats. not quite existential for bitcoin but we are seeing people reassess. if we go below the highs we had in 2017 and so on, then this narrative off as long as you will bitcoin for long enough,
you make money, that goes out the window. francine: any, what is happening in commodities? >> the commodity sector is holding up fairly well throughout all of this and that is telling. that shows us we have not seen the demand destruction a lot of people are talking about yet. what we are seeing is a response to the fed, but we are not seeing worries over demand for oil and copper and those things. i think what that tells us is that if the fed slams too hard there is more downside to be had on the markets. we are pricing higher rates but not a recession. tom: the money markets are pricing 200 basis points from the fed between now and september, does that continue to give support to the greenback? >> it is very hard not to be bullish the dollar. it is benefiting from the haven
bid and yield differential. unless we see something extraordinary like an intermediate hike at the ecb which nobody is talking about, i don't see how you can sort the dollar in the next few sessions. tom: eddie vanderbilt running us through some key market themes this morning as we digest market moves yesterday. thank you. francine: the u.s. continuing to price to the upside, we also discussed the options on the table or the fed next with l street from -- bill street from green to private investment. -- quintet private investment. this is bloomberg. ♪
>> this week is fraught with peril. >> inflation is the achilles' heel of markets. >> markets believe that that is going to be forced to get more aggressive than they had expected. >> i don't think a 75 basis point hike is out of the question. >> there might be a little selloff on a hundred basis points, i think there would be a subsequent rally because the fed is finally getting a hold of the narrative which it has lost over the last year. >> this is a time to be selective but i wouldn't sit on my hands. >> there are opportunities where one can position. >> pockets of stocks that have been proven. >> europe looks good to us, china looks good, but credits in
the u.s. looks good to us. >> equities in the u.s., i'm still pretty cautious year. we still have some wood to chop with respect to the macro outlook. francine: a number of guests on bloomberg tv weighing in on the market selloff. let's bring in quintet private bank chief investment officer bill street, you could see pockets of growth but how much more of a correction could we see? bill: we are closer to the bottom then we were a few days ago. when you look at recession and these types of correction zero looking at 25 to 30% downdraft. this is a new paradigm to a certain extent with inflation. but on a long-term basis we are looking to find value in our report olio's -- portfolios, and this is a very anxious time it's going to be a long, hot summer.
but our view on inflation is turning over and if the fed manages this nimble path with its blunt instrument of policy, we could have a constructive back into the year. tom: that's a big if, monkey -- money markets are pricing in 200 basis points, does that like the risk of another policy mistake? bill: we are definitely tiptoeing this policy mistake i growth. when it comes to central bank policies, it is as much about what the fed says, more than what it does. whether they do 50 or 75 on friday, how they take liquidity out of the system in september and this big gap in the summer in august, it is xavier becerra markets. -- how they are messaging markets. we believe it will come down relatively significantly between summer and the end of the year just looking at the dynamics of
the energy market. francine: what happens if inflation stays elevated if, for example, china reopens they will demand more oil and energy. and if we are at inflation at these kind of levels and we price in a recession, what happens to markets? bill: hopefully china does open up, that's going to be good for growth and for the dynamics of the global economy but look, oil price only needs to stay where it is for the next few months. it is having a significant deflationary affected to headline inflation. in terms of maintaining inflation where it is. if it stays where the futures market expected to say, around the 115 220 five level, we will have inflation close to zero by the end of the year. energy makes up a large percentage of headline
inflation, so you can see how it will start suppressing in three and q4, that is what the fed are trying to do. they have gone past for growth in slow cycle, what they should be doing is trying to moderate this growth cycle and looking through this inflation number which goes to the point. it's really about what they say, rather than what they do. tom: how much granularity do you have to put when you look at household balance sheets across the different spectrums, whether it is the low end to the high end, we are seeing that in luxury, do you see that persisting? bill: the biggest consumers obviously the u.s. one of the good things in this environment is actually the g10 economies are coming from a relatively strong base in terms of macro, and the u.s. consumer is still pretty strong. and the u.s. consumer
unemployment rate, they are still spending, balance sheets are still pretty strong. tom: we got the michigan survey on friday and sentiment fell to a record low. bill: going back to the fed, it is about what they say, rather than what they do. individual balance sheets are actually quite strong and unemployment -- and employment is pretty strong. francine: i'm actually amazed at how optimistic you are given the day we had yesterday and the longer-term outlook for spending for the consumer in the u.s. and u.k. bill: it is going to be a difficult summer. this is it. we are constructive cautiously on the back end of the year. francine: that means you are not panicking? [laughter] bill: we are long-term investors. we are looking at value
opportunities in our portfolios. for investors, who have got dry powder, this is a significant opportunity. tom: we will get your calls after the break. bill street is staying with us. let's get the business flash with angel feliciano. angel: 2 wall st banks are withdrawing from handling trade of russian debt, in response to a biden administration announcement that it is banning u.s. investors from skipping up such as its. jp morgan chase and goldman sachs were still matching sellers who wanted out of the debts with interested buyers this month. bloomberg has been told that elon musk will address and take question from twitter employees at a virtual meeting thursday. it is the fourth companywide gathering since he agreed to buy the company for $44 billion.
many twitter workers are unhappy with musk. sources tell us a joint venture between paramount global and reliance industries has snatched online streaming rights in the indian premier league cricket. it is a blow to disney's streaming ambitions with a sports team is a contributor to global growth. each deal is said to be worth up to $3 billion according to media reports. that is your bloomberg business flash, tom, francine? francine: angel feliciano here in london. coming up, more on the markets as global stocks sink in two territory and bonds plunge. -- bear market territory and bonds plunge. this is bloomberg. ♪
>> they have already said 50 in june, 50 in july. given how bad the announcement was on friday, i think what chairman powell can do is bring that 50 forward. even though there might be a selloff on a hundred basis points, i think there might be a subsequent rally because that that is finally getting a hold of the narrative which it lost last year. tom: wharton school of finance professor jeremy siegel calling for a 100 basis points fed rate hike and suggesting you could
see a market rallied. quintet group cio bill street is still with us, we want to unpack your cautiously constructive view on markets. you say this is an investment opportunity up the decade that is misunderstood. bill: what we are seeing is this rotation between growth and value. those rotation differentials are at 20 year extremes, okay. it's not just about the growth versus value rotation, growth has been hit because interest rates are going up and the inflation story. growth stocks seem to represent the duration element of the stock market, that is why they are being re-rated. if you look at the growth stocks, there is a huge amount of very high quality growth stocks, a case of the baby being thrown out with the bathwater to a certain extent. you have had three ratings have very strong growth stocks with strong balance sheets, while
their earnings are still stable or growing. when we talk about growth we are looking at quality growth stocks, those with really strong balance sheets, low debt to ebidta, and high gross margins. francine: literally, there are about five names. bill: you can find names in tech or internet stocks. just anecdotally, microsoft, for example has very strong balance sheets and very low debt to ebitda, and large gross margins which means pricing power. some of these companies are going to benefit from the inflation narrative as well. tom: do you get in now, is there a risk of catching a falling light? bill: this is why i am cautiously constructive. there is going to be a long, hot summer. this is the period where we are getting feedback from investors with dry powder is how do we feed into the marketplace? if you just put up a fairly simple earnings chart versus
price chart on the stoxx, the differentials are huge. francine: will we see european and italian yields blowout unless the ecb addresses it? bill: yes, as an investor, we need to look at shocks into your portfolio. the biggest anxiety as i wake up this morning is the ecb, when the european bond market, in particular what is happening in the pcp and the italian space. -- btp and the italian space. we have seen this play before. we have got the biggest buyers of these bonds stepping away, and you see the velocity of those prices are scary. francine: when you look at it to say there is a risk of repetition. bill street cheap as investment officer at quintet group, thank you. coming up we will look at the
u.k. and northern ireland protocol. this is bloomberg. ♪ another crazy day? of course—you're a cio in 2022. but you're ready. because you've got the next generation in global secure networking from comcast business. with fully integrated security solutions all in one place. so you're covered. on-premise and in the cloud. you can run things the way you want
francine: welcome back to the open, everyone. 30 minutes into the european trading day and here are your top stories. stocks sink in the bear market but the rout hits pause in europe today. did somebody say 100? market start pricing more dramatic hikes by the fed. jp morgan describes a full point hike is a nontrivial risk. boris johnson sparks a rift with the eu laying out a plan to override the northern ireland protocol. interesting how bill street talked about italian the btp, it briefly touched 4%, the risk of fragmentation seems to be clearer every day unless the ecb asked. tom: bill street saying that is the thing that keeps him up at night, and whether we get more
from the ecb in terms of clarification from christine lagarde. there was a move into sovereign debt in the last few hours. 10 years also with a move across the curve, yields coming down as investors way -- weight up how fast the federal reserve will go. jp morgan and goldman sachs presenting -- predicting 75 basis points. but choppiness in these bond markets. marginal relief across the equity markets. the dax is higher by .2%. the ftse 100 as well, up 14 points. we look ahead to the bank of england. we have the fed first, then the bank of england, at a time when we could be hiking in a recessionary environment in the u.k.
banks and energy are up. telecoms also in the green. a number of sectors in the red including auto parts, real estate as well. in terms of oil, the opec report out later today, the iea is out with that wednesday. francine: the eu's chief brexit negotiator has warned that the u.k. will not renegotiate the northern ireland protocol. the bloc is weighing legal options. our european correspondent maria tadeo is in brussels. >> the u.k.'s proposal is to split the flow of goods between britain and northern ireland off of goods continuing into the eu the u.k. government says that is necessary because the democratic unionist party in northern ireland is refusing to join the
power-sharing executive there until about northern ireland particles change. the irony is that the dup is still refusing to permit the power-sharing executive. the u.k. says this is legal because of the doctrine of necessity which essentially says the northern ireland protocol is so broken, it has to be fixed. the foreign secretary liz truss was speaking this morning, she says the reason the u.k. is not reaching for article 16 and blowing up exit is because they don't want to continue with the status quo. they want to make change so that it works. boris johnson is likely to face opposition in the commons and the lord's, so it could be at least a year before this comes to pass. tom: maria, let's get the european reaction. what have we've been hearing from brussels? >> here we go again. this is the debate and whether
or not the european union now follows the warning we had yesterday that you could potentially see tariffs and a trade war the two sides read for the european union, the initial reaction is essentially what we would expect. unilateral moves are not something that works. the european union will not be forced into a renegotiation it does not believe in. for the time being, their reaction was muted. the european union says it will stick together on this but i think today is when it gets tricky because european someone service will now look at the detail of this bill. depending on how serious of a violation they believe this is, we could see the european escalate. -- european union escalate. i hear from sources that the timing of this for public opinion is not something that would play well for europeans. it is still about the you are --
the war in ukraine, and when you look at inflation and cost of living, these are a top priority, this would not seem to be one. francine: maria tadeo looking at the angles of the story, we are now joined by the northern ireland agriculture leader, mr. poots. do you think this deal goes far enough to address the problems you perceive in the northern ireland protocol? mr. poots: we find that 75% of our inputs comes from great britain to northern ireland. the eu once every mouthful of food that people will eat. that is driving up the cost-of-living and is causing
tangible harm to the people of northern ireland. it is only being reduced by the current greece proposed -- grace periods. francine: in addressing all of your concerns? mr. poots: it is only a proposal and is not legislated until it is passed. tom: does it mean the dup will rejoin the national assembly? mr. poots: it is something we will give due consideration to. things will transpire in the second stage of the reading. at the first reading there is not much that happens. the second reading shows the color of the money. therefore, as and when we see
progress on those issues. tom: the majority of people polling do not support rewriting the northern ireland protocol, and the european union are suggesting there will be retaliation. mr. poots: that takes us back to the belfast trade agreement. there were minority protections. 1988 remains important today and we need to make sure the constitutional changes that happen as a consequence of the northern ireland agreement. in terms of the european union, if you look at the situation when they bend oil from russia, that was fueled by hungary.
the european union recognized that friend they have in the united kingdom. it is far and above what most of the other european countries are doing. tom: minister, the dup supported brexit. you knew this was an eventuality, the europeans told you this was what was going to happen. mr. poots: that's absolute nonsense. they are two different issues in this respect. we are all for protecting the european union single market, but ensuring that all of that food has checks taking place is entirely unnecessary to protect the european union single market. what they european union have done has been grossly unfair, and very damaging to northern ireland.
the grace period s, were it not for those, we would be feeling real pressure as a consequence of european actions. i don't understand why the european union is so against the peace process in northern ireland. francine: minister. mr. poots: we should be working, not constantly dealing with this issue. francine: i think there was an understanding the protocol was signed. we will reserve judgment when the dup goes back to power-sharing in stormont. is the legislation enough? mr. poots: the legislation deals with many of the issues. we need to see the color of the money in terms of getting the legislation through. the second stage of the reading
of the legislation is critically important. we understand that there may be issues. parliament has overruled the house of lords. just on the second stage, we will see what is going on and take for the at that point. tom: we have had discussions with manufacturers i am northern ireland. they suggest they support the protocol. there are farmers that supported as well with some changes. what do you say to businesses as you push for this change that could lead to a trade war with the european union, mr. poots: businesses will say that but the vast majority of people are finding significant problems. marks and dispensers -- marks
and spencer cost of food was 30 billion pounds, they will not be able to absorb that forever so they will pass that on to zoomers. another company has cost of 34%. that will be passed on to businesses. i have been talking to many businesses who have difficulty finding goods that were previously easy to acquire. and taking on physicals step just to cope with that. this is not a good picture for businesses. i believe it will help business, help address the issues. tom: minister, we appreciate your time. the northern ireland agriculture minister and former leader of the dup edwin poots. coming up, we speak to london
today they are rebounding, futures in the u.s. pointing to a higher open. sentiment is steady. tom: stable and steady. global stocks are s inking, on concerns that the federal reserve will have to hike faster than anticipated. 200 basis points is what the markets are pricing in. 75 points for wednesday according to goldman and barclays. what happens to tech within that environment? for more on where the opportunities lie in the higher rates environment for tech, we bring in london technology club ceo konstantin sidorov, let's start with that question then. in a higher rates environment, what happens to technology, financial conditions are tighter. >> thank you for inviting me.
very important to separate the [indiscernible] we have a lot of quality stock in tech. we believe in this stock and our task is the advisor is to our investors how to separate. tom: you have investments over in china in didi, the ride-hailing app. what our valuations looking like and how much opportunity does it open up for you? do founders have fewer opportunities in terms of funding, you can invest at a lower valuation? >> there is a difference between private stock and the public stock. and we see a big correction in the public stock. but to be honest, we don't see a big correction in private market yet.
we will have that in the coming quarters, but still we have just a few signs of that. francine: but there is inflation and supply-chain concerns from tech. are you finding investment opportunities right now, and for what companies? >> there are so many good companies now with very good balance sheet and grades liquidity, with great growth. francine: what space? >> in many space. i believe in market heroes, and you can find those company in almost every stock market. tom: talk about the need for these companies to show that they are profitable because they are under scrutiny. we are seeing the selloff. >> not. i don't think so.
i think still be growth is very important factor, and market share. because technology still is a key point for the profitability of other sectors. it is a key point for efficiency. even in this market situation over the traditional sectors, many traditional companies are looking to improve their efficiency, and technology is exactly the sector which could help them to do so. so in terms of the fundamental points, in terms of positioning of the technology companies, nothing changed. francine: is there a specific part of technology. we are looking at meta-reality, voice recognition, is there a part of technology like more than others? >> i really like ai.
it is the sector behind any other technologies. if we look at fintech, the best fintech, the best health care, the best autonomous companies, ai is behind it. big believer. tom: what do you say to them founders you have invested in. sequoia is cutting costs and rethinking hiring plans, are you having those conversations your founders -- with your founders? >> investors are very cautious now. they preferred to sit on cash and wait for better timing. but the best investors believe, smart investors, believe the best time to invest is at the bottom. at the bottom during downturn, this proved to be the best investing strategy. tom: do you expect to see have a
job cuts across the tech sector as they readjusted this environment? >> some of them yes because many companies tried to slow their cash burn and prolong the period until the next runs. francine: london technology club ceo there konstantin sidorov, joining us with a nice roundup of tech opportunities out there. tom: still opportunities within the high rates environment. let's get the first word news now. angel: the u.k. has unveiled legislation to override the brexit deal with the european union. it risks a trade war with the eu which has threatened legal action. it would give the u.k. the power to rewrite the northern ireland protocol. beijing has recorded the highest number of daily covid cases in
three weeks. as officials call for the city to do more to curb the pandemic. the capitol had a record number for the current outbreak. the vice premier last night urged beijing to control the outbreak as soon as possible. emergency crews from california to new mexico have been battling wildfires that have forced hundreds of people to leave their homes. the fire such as this one in
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