tv Bloomberg Daybreak Europe Bloomberg August 24, 2022 1:00am-2:01am EDT
the dollar firms as investors look ahead to the fed governors policy indications at jackson hole. filling the gas gap. german chancellor shows protection of carbon imports from canada. they still need a short-term solution for gas prices. pmi's floundering and you need to ask yourself what is the national ability and growth or if it is something more benevolent and sinister in the equity market. pmi's tank and mortgage rates are at 5.65%.
winds about inflation expectations. the fed current situation is uncomfortable. really is aggressively high rates. the reason is because the cash carry shows you how far the band is. [indiscernible] this is on the manufacturing side of things. cash carry is in the hawkish now. manus: enda, in terms of global recession -- japan, u.s.,
u.k., there is a cacophony of new data. to think that is something that can cause a temperance injected -- temperance in jackson hole? >> we are seeing that in european manufacturing with energy prices. weakness in japan, australia. the global economy and rising interest rates. with inflation peeking, inflation remains very high. fed officials will keep raising rates until they get back down to target. this indicates that interest
rates have a long way to go. this does suggest the slowdown has a way to go as well. manus: that shows an impact on what the employment rate will tolerate. thank you very much. the canadian prime minister signed a five-year carbon deal on tuesday. the final on a three-day visit to canada. the detail on this is a long-term solution? >> exactly. germany is forced to undergo a mega transformation. so it is now looking for
long-term as well as short-term. this is clearly a long-term solution. green energy, green hydrogen. manus: german countries, two of them are seeking relief. who are they? >> there are a few which applied for the surcharge. it is altogether 12 companies. if you look at the amount these are the main companies which are hit by the fund from russia. this is a long-term contract.
there is 92% of the surcharge. manus: great to have you with me. best men's in asia are showing caution. let's get to juliette saly in singapore. we know that there are flashing their exposure to china and asia. >> we know china is falling by about 3%. that seems to be the drop since may. we are seeing equities lower. this is the longest streak since around two months. when it comes to the china story
, there is another bearish call on china. even though we had that amount from earlier in the week. continuing to show how much of the worry from the company index. this is what we had from the prime minister in the last 20 minutes. just trying to make it easier to get into japan. manus: in terms of the currency moves. there have been some pretty punchy moves. talk us through. >> there is that two-year low.
let's go to the heart of the issue for elon musk. on to show you his response. these are allegations from him. he was fired for ineffective leadership. our data security practices is riddled with inaccuracies. they are on the take think there is a new story out right now. all of you take a lot of pride in your work.
they want to defend the integrity of that in the company. they want to set the record straight. this is with elon musk in regards to his defense. in terms of the number of people actually generally using twitter. please feel free to follow me. let's take a look. -- >> this is what shoveled the market higher. later in the date we will get more on canada and salesforce. a very historic day in ukraine. celebrating independence day. that combined with the six month mark with the invasion in
>> let think it could be a couple years to get to mood freeze or even a little bit higher. i think will inflation will look a lot better, i think it will be still above the target. they do have to get close to that. manus: joining me now is fabiana fedeli, chief investment officer of equities at m&g. i am looking at, 3.75. we spent a lot in the mid-threes, do we see that at -- as fed policy? fabiana: good morning.
i don't see that they will start cutting them. the fed has been surprised before. this may reflect the effect it would have on risk assets. sometimes in the first half of next year. we will probably stay there for a while until we feel more comfortable about what is happening with inflation. manus: i tend to forget these moments. pmi's were flat and around the world you had a story which made me think that the trajectory,
does the data from yesterday create a lower rate on rate hikes in your mind? fabiana: the thing that happened yesterday was interesting. you saw what happened with bond markets. markets were not thinking that this would change the mind of the fed. they are thinking about what he will say friday at jackson hole. i don't think you will be looking at inflation as far as core inflation. you would realize that the fed was still looking at that if you are looking at core inflation.
that is probably of good choice. hedge funds gorge on big tech. as far as the goldman sachs narrative, they are using the and -- the mliv function. did you hedge risk taking it as an opportunity to trim back? fabiana: we started the summer of love, as you describe it in a position of equities and were much more focused from about a week ago the strategies started
to take some profit from the position it leads to a more neutral standpoint and i think that markets will probably retrace what we are seeing in june and july this from what we witnessed in the last few weeks or so and we need to taper off. i don't see much more of that in terms of a neutral position. that is regarding a trend to come. manus: say you're seeing some outperformance automotive basis to the u.s.. orders that stand for you. i ask everyone how they are living without china. does that stand on its own?
fabiana: if we look at the markets, they have shown [indiscernible] it is in india, brazil, the s&p 500. the commodity overall asset class. these art with markets that have already taken action against inflation at increasing rates. i would say that was a standout to me. if you could find those markets, they have done fairly well. many of them. if you are looking at the growth
it is a much weaker cohort. manus: at what level does currency play and discussion? you have some significant moves starting to get crushed. it looks like at the moment of dollar exhaustion for an exchange within the dynamic that is how i am putting the construct together. his at the same for you? -- is that the same for you? fabiana: we are really not looking at the trends that you see.
we are looking at companies that have not affected the currency. most currencies -- these markets have not seen these moves. the euro had large moves themselves. really cannot separate that. manus: i just want to briefly touch on german powell. how perilous is the state of europeans equity markets? fabiana: we are concerned about the macro side. a lot of the european markets are upward facing in many of these companies.
euro is still strong. the gas prices keep rising. the dollar yen will be a much bigger protagonist. pst. girl. you can do better. at least with your big-name wireless carrier. with xfinity mobile you can get unlimited for $30 per month on the nation's most reliable 5g network. they can even save you hundreds a year on your wireless bill over t-mobile, at&t, and verizon. wow. i can do better! yes you can! i can do better, too! now you really can do better! switch to the fastest mobile service - xfinity mobile. now with the best price on two lines of unlimited. just $30 a line.
policy indications at jackson hole. german chancellor olaf scholz taps the boundless potential for hydrocarbon imports from canada in a deal with justin trudeau. they still need a short-term solution for the gas crisis. equities are on the back foot this morning. we are getting confirmation of divestment in china, a weakening scenario there. global equity markets are on the cusp of recession. u.s. equities are lower. house sales are under pressure in the u.s.. mortgage rates are at 5.6%. pmi's are the 2020 lows. u.s. equity futures, the nasdaq down 0.8% -- zero point -- the nasdaq down an eighth of a percent. german electricity is priced at the equivalent of $1000 per barrel.
do the economics on that. have a look at oil. there was a draw down in inventory that bolster the markets. the oil market this morning giving back 0.4%. yields turned just over this morning. neel kashkari talking about a situation which is completely unbalanced. euro-dollar still subpar and jp morgan bankers saying we could hit 114 if the gas crisis continues in the united kingdom. not just gas, but electricity crisis. $114. neel kashkari says action from central banks are still very much needed in the fight against inflation. that comes despite fresh data showing business activity in the u.s. contracting for the second straight month in august.
bloomberg chief asia economics correspondent enda curran joins me on the hawkish narrative from the arched of kashkari -- the arch dove kashkari. layout for me how perilous the moment is within the global economy. >> there does seem to be a synchronized slowdown now that is deepening by the day. we have u.s. pmi down. new orders, that is interesting because of course the strong u.s. jobs market has been a bulwark. in europe of course pmis are buckling under the weight of skyhigh energy costs. in age of the slowdown has been led by china. australia services contracted
for the first time in seven months. the slowdown in manufacturing, it does speak to the impact of surging inflation and surging interest rates on growth. the global slowdown is expected to weaken as we head into the back end of this year. manus: and just in terms of neel kashkari, when i look at the language he used in his presentation yesterday, we are in a completely unbalanced situation. we can only relax. his concern is an un-anchoring of inflation expectations and he channeled paul volcker. he said we may need a volker style movement. this says to me the fed is far from discounting substantial -- more substantial rate hikes then we all seem to have groupthinked ourselves into. >> it does speak to the gravity of the moment.
neel kashkari is something of a dove and yet here we are. he is saying we could be on track to do what paul volcker did in the early 1980's. even though inflation expectations come unanchored -- that is the key for central-bank policy policymakers around the world. he is saying you have to go hard now. he is not just talking about peak inflation. he is saying the fed have a lot of work to do. manus: and miles to go before they sleep so to speak. enda curran on the data. this year's meeting in germany brings together 19 laureates of nobel prize for economic sciences. one of those attending as a london school of economic professor who joins me now. he won the prize in 2010 for his
paper on friction in markets. thank you so much for joining us. an awful lot to get through. i am drawn to your specialty on the labor markets and frictions therein. when you look at britain on strike, europe on strike, wages, demands are rising, double-digit inflation is here, inflation may hit 8% in the united kingdom. when you see the wage demands being faced, are we about to evolve into a much more aggressive wage spiral inflation? good morning, professor. >> good morning, i am happy to be here. i'm afraid it is not simply i
have with -- i'm afraid what is happening in europe is hitting those workers who are on strike with wage demands. the answer is not to go for very aggressive wage demands because they will make the situation worse. the answer is much more difficult for the government to handle, especially you mentioned the u.k.. the u.k. essentially does not have a government and government has to make very important decisions how to share out amongst demographic groups and occupational groups the cost of the higher energy prices and high food prices. they are not used to monetary expansion.
there due to something the u.k. does not have any influence on, the war in ukraine. this is a decision to sing -- to see who will pay for the higher cost. to leave the market alone, most of the costs will be born by low wages. manus: the u.k. does have a government, it has a prime minister, albeit a less powerful one, and it will have a new prime ministers shortly, but i understand the point you are making. you're seeing the workers suffering a cost-of-living crisis, it is folly for them. this is what the bank of england governor said. it did not go down very well. how do you communicate that to the working public that they need to ask for smaller pay
rises? >> it is not feasible to give this pay rise. where is the money going to come from? those are going to be reflected in prices. you're going to want higher pay rises. manus: that brings us to the natural question, it is how much action -- central banks have to deal with price caps, deal with government. the inflation we have at the moment is supply-side driven. that seems to be the building consensus. how can central banks contribute to the breaking of that? do we need a paul volcker style response? he drove rates up to 20% and
unemployment rates of 11%. is that what needs to happen to break the inflation cycle in the united states of america? >> we do need something, but it does not need to be so sudden. manus: we are just going to pause for a second. christopher pissarides, nobel laureate with me this morning from the gathering of economists. we are in the midst of discussing whether we need a paul volcker style response. i'm going to see if we can reconnect with christopher pissarides in just a moment. of course he is the professor of economics at the london school of economics. ♪
we are back with christopher pissarides, professor of economics. we were just talking about whether we need a paul volcker style response, which was a huge ramping on rates. what unemployment rate might it take to break the back of inflation? that is the question. >> i don't think we need a volker type response. because of unemployment and the economy it would be too severe. it will cause so much more pain. there would be more waste, more strikes. we might see deflation after three or four years. it would create so many other
problems in the economy which is not worth having. . to put up with. a more gradual approach with the fed and the central banks in europe trying out the market to see what kind of rate rises they would tolerate without a response from the labor markets like we had in the 1980's would be much better now. manus: we need a measured series of hikes without breaking the economy and that is the risk. let's get to your bayview in terms of -- your big views and terms of whether the worst of inflation is behind us now. some people are looking at idiosyncratic data. used car sales. we still have zero covid in china. is the worst of the inflation cycle over?
>> we are in the worst of inflation because expectations for inflation right now are still uncertain. it is likely we are going to go a little higher. but it is not the actual figure that would be the concern. the concern is markets because that will determine what takes now. i would say we are in the worst and that is why i think more gradualism so as not to shock expectations to my -- expectations too much.
we need to find a way of bringing inflation down but let's not shock the market so much. in the end people will have expectations. manus: can we take a broader question? the world has got to learn from covid. how to treat workers and how the labor markets and manufacturing will change. many people talk about deglobalization, on shoring, reassuring. -- re-shoring. simply moving away from dependence on china. what is the labor market consequence for that the you think? >> all of these you describe is driven by technology. by information.
although we are going to need international trade, it was much needed in the past, especially international trade in services, we need to rethink how we approach the labor market. the jobs that have now been created are just not good enough. there is no protection. they have no basic rights like sick leave. governments need to take initiatives here. these new technologies apply to the whole of economies, not sectors. we need to think about the creation of good jobs.
that is the big issue we are facing. that might involve some deglobalization because we are still not the stage where we can coordinate our response to a pandemic or a financial crisis. china for example took a community approach. the united states and europe are getting closer. we saw before during the pandemic, we cannot rely on having outcomes close together. anna: -- manus: the evolution of economies in a post-world. we wish you well area -- we wish you well. christopher pissarides joining me this morning. for more on the economic impacts around europe of these gas
prices, and the war in ukraine, lizzy burden in london. bruce einhorn joins me from singapore. roos, -- bruce, what more do we know about actions from the united states to ukraine? >> there is a new package the u.s. is likely to announce today. it would be worth $3 billion. that would be the largest single package of military aid the u.s. has provided to ukraine since the start of the war. this comes a day after german chancellor olaf scholz announced a german package of military systems worth about 500 million euro. there have been questions people have raised about whether there is going to be a falloff in support for ukraine among the western allies as the war drags on. so far what we are seeing from
these announcements is that the support is still there from western governments. manus: and of course we have the fallout from alexander dugin's daughter. let's talk about that also as well. >> the issue is russia has accused estonia of assisting the assassin to flee into estonia. russia has made these accusations without providing evidence. estonia has rejected this as baseless. it is worth noting estonia is a nato ally. this does risk further raising tensions between russia and the nato alliance at a time when it
seems likely that russia is about to be trying to -- or maybe trying to inflict further punishment on ukraine for this assassination that putin has blamed on ukraine. manus: lizzie, we are six months in and that is independence day in ukraine. put some numbers around this on the economic impact of russia -- on russia i should say from the sanctions. on oil it is not working. they are producing 11 million barrels a day. take me through the rest. >> even though it is six months in it is almost impossible to judge the economic impact on russia. on the one hand the data are almost certainly unreliable. more unreliable than before the war. on the other hand the idea that economic sanctions are crippling
russia is probably overstated. russian pmi's have bounced back since may. chinese exports to russia have also rebounded. you mentioned oil and gas. the prices have gone up. volumes may be down. in value terms they are up. the only comfort is sanctions as baron berg puts it our slow poison. russia is suffering from brain drain. the longer this goes on or as the war ends, europe is going to try to wean itself off russian energy. they can only hope all this pain is worth it. manus: the debate is the flow of money into russia and where does that flow out? into gold? into other currencies from central banks? that is a whole other debate. where is the economic outlook? we have sanctions coming to bear
at the end of this year and product sanctions on russia in february of next year. is this when the screw turns more aggressively on russia? >> the west can only hope so, but in the meantime you are seeing middle the pmi -- seeing it on the pmi data yesterday. we seem to be in the early painful stages of recession and it is because of putin cutting off gas supply. that is affecting germany and its eastern neighbors more. you have countries across europe scrambling to stock up for the winter. it is ramping up wholesale gas prices to dizzying heights. even the u.k. which is not dependent on russia for energy, because of its storage model, it is exposed to this as well. it is a headache for central banks and politicians across the continent.
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