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tv   Bloomberg Markets  Bloomberg  August 19, 2022 1:30pm-2:00pm EDT

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>> welcome to the bloomberg audience, i am mark crumpton with first word news. the g20 summit in bali. the documentation came from indonesia's president ended interview with bloomberg. >> i know that you have invited president xi to come to the g20. has he said he will come in november? >> yes. >> xi will come. >> and president putin? . >> he has also said he will come. >> it would set up a showdown with president biden and other leaders opposed to russia's invasion of ukraine.
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ukrainian president volodymyr zelenskyy should take part in the summit. london's subway network largely ground to a halt today as workers went on strike. the lockout brought more disruption to britain's embattled transport system and forced many to work from home. national walkouts on thursday and saturday. demanding better pay and working conditions. the water level at a key german chokepoint is supposed to surge next week. that will make it easier for barges carrying important cargo to cross the waterway. low water levels have been hampering deliveries of commodities in europe through weeks, worsening the continent's water crisis. global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries.
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i am mark crumpton. this is bloomberg. >> welcome to "bloomberg markets ." >> happy friday. counting you down to some -- rolling over down your some of the lows of the session. firmly back, on the nasdaq. the nasdaq 100, as well. yields continuing to rise. 10 year yields up nine basis points on the day. rounding out assets. similar to the 20 handle.
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a lot of volatility at the closing bell. jon: helpful context on the macro story today. when you are looking under the hood, fewer movers to the upside. we have watched a stock like general motors moving up 1.5%. stock buyback news has encouraged investors. we continue to see a host of different themes. you have the surge in footlocker shares, wall street loves news. they are not enthused about the situation at wayfair. the hangover after the spending online. the story of the week, arguably in the markets of bed bath & beyond, down a whopping 40% after ryan culling doing what we
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thought he would do. taylor: you told me we would only do fundamentals on this program, we can do it all. the u.s. dollar strengthening for a third day. federal reserve speakers reiterating their determination to fight inflation. some of the biggest we have seen since april. joining us now, erik nelson, wells fargo macro strategist. what do you make of some of this renewed dollar strength? it might have caught some people off guard. erik: what really stands out to me, especially in the past week, we have seen a surge in the dollar. the u.k. and europe have been leading global yields.
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we should be seeing the dollar lower. why is it not lower? commodities are the big story. power prices and natural gas prices are surging globally. it is weighing on the euro and sterling. the u.s. is becoming a net commodity exporter. a lot of liquid natural gas. you have terms of trade being more of a driver of fx. i think this is an underappreciated story and something that will continue to drive dollar strength going forward. jon: there has been so much focus on what fed players have said this week in the commitment to higher rates. there has been an emphasis with what is happening with the u.s. economy today. weakening gas prices is a near help to americans. the jobs market data we have seen has stayed relatively strong. the idea the economy to a
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certain extent can handle the higher rates. erik: that is spot on. you look globally at the economic situation in places like china and europe relative to the u.s. not only are we marginally improving in the u.s. as gas prices fall, the situation in europe and china looks more and more challenging every day. the growth divergence continues to play into the dollar strength story and the commodities piece. taylor: when you take a look at the commodities, are you confident patient is kind us? erik: it depends on the metric you use, taylor. let's think about year on year headline cpi. if you think more about the shorter-term metrics like three-month rates and stripping out some of these food and energy prices, my colleague on
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the economics side has done some great work. generally, their view is if we passed speak inflation, we will stay pretty high for quite a while so the fed is likely to stay on course. jon: we were talking more about some of these big stockmarket movers. it is late summer, volume sometimes contributes to that. what about the currency market? how does that influence what has been happening in currency trading? erik: what stands out in the past month is we have seen a general decline in volatility across asset classes. generally over the last month, we have seen increases in most equity prices. it is very unusual. typically we see something resembling an inverse correlation between the dollar and equities. what it tells me it is there is
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a lot of underlying momentum in equities and the positioning -- i am sorry, in the dollar -- and the positioning is still pretty flat. it is not a stretch trade and a long dollar. we would have expected more momentum. it is not telling us to move is almost over. taylor: are higher real yields less negative and positive real yields exactly what the federal reserve wants to see? erik: yes, taylor. you look at the last few cycles and almost inevitably the real five year rate tends to end up in positive territory. looking at the current nominal fed rate or yield, the past three months worth of inflation, that is still -200 four -300 basis points. there is a lot more room for the fed to tighten. the fed has to do more.
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jon: great perspective, as always. erik nelson joining us from wells fargo, where he serves as a macro strategist. the u.s. mortgage industry sing its first lenders going out of business after a sudden spike in lender rates. a new wave of failures might be on the horizon, rivaling the meltdown from the housing crisis in 2008. you have authored a very extensive great read on this subject and it really does highlight the differences between the big banks and the independent lenders. what is the difference? carmen: the banks have more capital. bank lenders do not, especially the smaller ones.
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the pockets of mortgages are covered by lenders, which are having a hard time now that there is no business. taylor: talk to us about the lack of business on the heels of rates going up. is that what the bank of canada wants to see? carmen: the lack of business has been going on since february or so. it is expensive to refinance your home. the housing market is unaffordable. it has brought a lot of issues to the mortgage market as a whole. specifically there has been a lot of problems -- the riskier loans without government backing. because they do not have government backing, the home loans are in more trouble. jon: we will have to watch to see in terms of mortgage lenders
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but ultimately go broke. you referenced back to 2008. one of the interesting things, taylor mentioned the bank of canada, this market navigated better, you could argue, versus the u.s. going back more than a decade, a lot became debt levers , a huge amount of debt we are dealing with because of rates raising quickly. were there lessons learned during the great recession that would offer a broader protection versus where we were back then this time around? carmen: of course. it is completely different. right now, the lending standards in the u.s. are much tighter. it will not be as much of a problem for the borrower. it is a problem for the actual lender giving out the loan. the loans are not worth this much as when they were originated because the rates have gone up. it is like a credit crunch for
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the borrower. it is a little different this time around. taylor: the credit quality for a lot of the lenders, as well, when they are thinking about taking on extra risk. carmen: the credit quality is find. the problem is more that companies, especially the nonbank lenders, the riskier part of the market. right now, they cannot access the debt. they create mortgages and give out home loans -- sell them as bonds. the bond market is tough because of the sudden spike in rates. taylor: thank you. for helping us understand. carmen arroyo joining us.
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coming up, china and the u.s. will be at the 20 summit. we will have much more on the geopolitical ramifications. that is next. this is bloomberg. ♪
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>> the rivalry of the big countries is indeed worrying. we want the region to be stable, peaceful so we can build economic growth. asian countries also want the same thing. >> this visit did not help stability. >> what we really want is stability. what we want is peace in the region. >> there is concern that if there is a conflict in taiwan, it would spill over into the south china sea, where you have territory, territory the china contests. is indonesia ready to defend
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itself or defend its land and waters? are you ready for that conflict militarily if it happens? >> we do want the region to be peaceful >> it should not come to the point where tensions rise and it affects economic growth and then later on affects the well-being of our people. in my opinion, it is very important there is a space for dialogue, especially between leaders of big countries. the global situation is extremely difficult and there should not be further unnecessary issues. we are going through a food crisis and energy crisis. the pandemic still exists in some countries. >> i know that you have invited president xi to come to the g20. has he said he will come in november?
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>> xi will come. >> and president putin? >> president putin has also told me he will come. taylor: that was a snippet of a conversation. this is "bloomberg markets." i am taylor riggs with jon erlichman. we think about the g20 summit and what it means for global diplomacy. i want to explore the topic with bloomberg's annmarie hordern. annmarie: it will be a show down with the by demonstration's aides saying they do not want putin to attend the g20. if he shows up, volodymyr
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zelenskyy should be attending. there is a big question mark whether or not volodymyr zelenskyy would attend in person given there is a war waged by russia or if you would virtually attend. it will be incredibly difficult because remember, when russia invaded ukraine, they wanted the united states -- western countries wanted the g20 to make a pariah out of russia. countries like indonesia said no. you will see an incredible amount of debate here, even about who should attend. a big question mark is if anyone will sit down with putin besides the like of indonesia's leader or china's leader. jon: it puts the spotlight -- we
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will hear more stories about the desire to be a mediator. annmarie: he said in the interview with bloomberg editor-in-chief that indonesia wants to be friends with everyone. they are in a spot where they do not want to shun russia completely in the india has not because they are a significant importer. they want to be this bridge for a meeting between president xi of china and president biden. xi and president biden -- the g20 serves as a good venue for that on the sideline or if there'll be another summit in asia around this time that the president would make his way to bali. indonesia looking to play a role
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as they host a summit. this could be historic. taylor: any hope that real substantive issues would be resolved? annmarie: it does not look that way in terms of the g20 speaking as one voice. you have a majority of these countries -- if president putin shows up and he knows he should show up because he wants to make a point. you have not completely divided the world against me. there are still some countries backing me, most noticeably china. a little bit before putin invaded ukraine, they decided to strike a new partnership. something substantive to come out is a collective group, that will not happen. but potentially you will have some on the sideline statements from countries like the united states and other western allies
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of the u.s. jon: seeing them together on the world's stage again is a story in itself. annmarie: mom need to take a family photo. [laughter] jon: questions we need answers to. when we come back, canadian shoppers may be starting to pull back on their spending. we have details on that, next. this is bloomberg. ♪
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jon: this is "bloomberg markets ." i am -- 2%. canada's retail sales likely declined 2% last month. that would likely be the first drop in seven months. we talk about inflation eating away purchasing power in the
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u.s. but in canada, as well. taylor: it is a huge story in the u.s. when you think about real wages being negative and real financial tightening continuing, jon, exactly what the federal reserve wants. i want to go there and take a look at these markets. trying to bounce off the lows of the session. we have a lot of options expiring. august sometimes does not seem volatile but i think it will be a volatile day as we count down to the closing bell in two hours. jon: obviously there has been a concern about higher rates this week. we came into this week with a four-week winning streak with the s&p. things have moved in a different direction today. it has been great being with you, taylor. taylor: we should do this more often.
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jon: we should. for taylor riggs, i am jon erlichman, this is bloomberg. taylor: have a great weekend. ♪ this is xfinity rewards. our way of showing our appreciation.
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vonnie: this returning in atlanta georgia -- lindsey graham has been ordered to appear before a grand jury investigating efforts by donald trump and his allies to overturn the 2020 election. senator graham will be asked about a phone call that he made to read raffensperger. the center appeared to suggest certain mail in ballots could be discarded. the russian invasion of ukraine is basically at a standstill. the question now is whether


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