tv Bloomberg Markets Bloomberg September 23, 2022 1:30pm-2:00pm EDT
>> welcome to our bloomberg audience. this is first word news. after hurricane fiona hit bermuda, it is racing towards canada and threatens to become the most powerful storm to ever hit the region. fiona is on pace to hit nova scotia on saturday as a category two hurricane, expected to leave a swath of destruction. a second system is developing in the caribbean. it may strike cuba next week. the bahamas is blaming industrialized nations for a series of devastating hurricanes that have left a deep debt as it seeks to sell 100 billion
dollars in carbon credits. philip davis says the echo system allows the nation 700 islands to store high amounts of carbon. rich nations have an obligation to help countries most affected by i'm change. the president says the efforts to reduce the rejection among women are falling flat. that has imposed a major obstacle to his reelection. just nine days before brazilians go to the polls. former army captain known for his macho bravado has plateaued with just 29% of the female vote, according to a mostly -- closely watched brazilian poll. his challenger saw his support among women grow to 49% in the same survey. hong kong is making its biggest move in the push to end the pandemic isolation. the city is scrapping hotel
quarantine for inbound travelers starting next week. in the three days after they get to hong kong, the travelers will face restrictions on their movements. among them, they will not be allowed to bars or restaurants. global news, 24 hours a day, on bloomberg quick take, powered by more than 127 journalists and analysts and over 120 countries. this is bloomberg. >> i'm john. welcome to bloomberg markets. let's have a selloff on a brutal one, and there is a high volume that is snowballing as we get through the day. the s&p 500 is down 2.3%. some real pain in the equity market, but if you are a bond investor, you are not removed from it by any measure.
look at the two-year yield. we are getting closer to the 5% call. some people are saying 48 hours the of, this was a country and take. but not anymore. the yield moved about six basis points higher in the curve. it moved higher with the dollar not far behind, and it is up 1.2%. it is driven by what you see overseas. the crash you see in the pound, the crash you see in the euro, a lot of politics at play. a lot of fiscal issues. driving the dollar higher and higher. we didn't need that, but nevertheless, the ripple effect shows up in the commodity space. red crude is 85 and dropping below the barrel. a 5% move on the day. >> when it comes to wti, were at our lowest level since january. we are in jeopardy of basically being bought on the year. with a continued selloff in oil, we have seen the dow components like several -- several on
hundred threshold -- chevron under pressure. the key concern about earnings compression, giving the uncertainty is front and center with a company like costco. it is straight up with the market on inflationary pressures. that it's 4% down. boeing is off more than 5%. they have settled the sec program, and in the world of technology, a new ceo and a lot of reaction for shareholders of doc you sign. 4% off. the markets have been sliding recently, that this interest-rate sensitive tech growth names have not caught the eye of investors. >> one of the causes of this market rally comes from the u.k.. liz truss is u.k. government delivered the most sweeping tax cuts since 1972. all in effort to boost economic growth.
check out what the chancellor said earlier. >> i'm going to abolish it altogether. we will have a single higher rate of income tax of 40%. we will cut the rate of income tax to 19 pence. one year earlier. we are planning an increase in corporation tax. we will be canceled. corporation tax rates will not rise 25%. it will remain at 90%. we are cutting that. all it did was push up the basic salary of bankers. we drove activity out of your. we are going to get rid of it. >> joining us now from london is our stingley trust. guy johnson, the conservative party's ammo -- and oh -- modus operandi has not been this before print what are we seeing
as a function of the poster child of monetary policy and fiscal policy butting heads? >> is colliding and it will be passing to see how they react to this. a lot of what we got today from the charter was anticipated. the abolishing of the income tax rate, it caught people by surprise. the market is reacting violently to this. the market sees this as being inflationary. we have a big inflation problem already. as a result, but we are seeing is, affectively, gasoline is being thrown on the fire. the market has repriced the bank of england as a result of that. deutsche bank is out with a call for the rate hike to come from the bank of england, shortly. they're pricing more than 100 basis points to come from the bank. this is a central bank. you wonder what the bank knew about this package. it seemed not very much, but they have to react to it very
strongly by jacking up rates. you wonder whether or not that will undo some of the effects of the text that we are seeing. -- tax we are seeing. >> there is a hope that this plan can give a lift, but such a sizable and swift target reaction, what does this new government ultimately have to do , given the reaction we've seen from the markets? >> that is the concern they have. down in westminster, they said they don't care what the markets do. they are going to do what they going to do. that was the line earlier. it does matter. if we see rates moving up, aggressively, that will affect the cost of capital for the kind of investment that the u.k. needs right now. there is a range of areas including transport and energy. all of that became significantly more expensive. there is an argument that says maybe it didn't go far enough.
we need to see further supply-side reforms to actually make this easy. the hard bit is delivering the supply-side reports that will deliver the growth. it will deliver growth on a sustainable basis. the market already made his judgment on the inflationary impact. the government is going to have to do a lot to finish that. it is capable of delivering that economy on a high-growth trajectory. >> we are looking at market pricing. it is 50% odds. not for a hundred basis points, but for hundred 25 basis points of rate hikes in november. i'm curious, if you are seeing monetary policy and fiscal policy, and they are colliding, what is the point of doing this? the assumption is the boe can take more drastic measures. >> the politics are a factor. there is an ideology in the mix. liz truss talked a great deal
about tax cutting in the campaign, and that only held in the conservative party to win the seat she now occupies at 10 downing street. there is an ideology in the mix as well, but that is a reaction to the bank of england. it is critical. there is a belief in the government that it will not be as inflationary as the market is suggesting. as a result, the bank of england will not react. there is a knee-jerk reaction today. let us see what next week's move is. but we see a continuation of this, or will they react earlier than anticipated? >> thank you. rate reporting bid guy johnson joining us with the latest out of the u.k.. staying on the subject of ideology, italy is preparing for what will likely be a historic election. for more on that story, let's go to maria who is covering the story in rome. what more can you tell us?
>> what a joy to come to you live from rome. the most incredible city. the eternal city. you can see behind me, in real time, the final campaign rallies are being held. this is the final day of campaign, and we moved to sunday. this is a town -- italian politics. it is sexy and there is drama, but it does feel like this is an important book. it is officially the end of the government. this country could be about to change gears significantly. this is happened in the context of the war in ukraine, and the energy crisis. it will hit the next primus or like a storm. no pun intended. this is the number one issue he will have to focus on, and then, the question about italy. can they grow and put in a norma's debt on a sustainable path. >> you cut your teeth in this
before you became r-star european reporter. what does this do to italian yields when they are in focus relative to the ecb. >> there are two things. one is that you have the european central bank. it makes things clear. they will fight the fragmentation, but it brings up a good point. what is unjustified fragmentation, and what does it become obvious that this is a political storage? this will depend on the government, on sunday, and the policies that manifest that they want to react. i would say, when you look at this, and you move away from european central bank, the other factor that plays on the lack of volatility in the market is perhaps not as expected as it has been in other elections. there have been no mentions of italy exit. there are no potentials that the italy has crashed out of the euro, and contrary to 2018, this
is a campaign where the rights in particular has been very focused on playing that message. there is no intention to pull out of the europe, and it is over for the time being. it plays no part, and it serves to calm down some of the fears. >> one of the staples of this policy, which is quite controversial, is investment in infrastructure. specifically in light of the energy crisis. what happens if we get the first female primus or of italy? we get the same investment? >> that is one of the reasons. so often, they are hoping to get energy deals with algerians and diversify away away from russia. this country has been exposed to russian gas for many years. i wish i had a simple answer, but this is someone who is smart, and has been in politics for a long time, and it is difficult to read. when you look at this, which he speaks to the italian and
domestic audience, yesterday, this is the way we know it. this is bravado in a fiery language. but we look at her message to the international community, a lot of this is been statesmanlike. she says nothing will change, from the policy. she doesn't want an open confrontation with brussels from the get-go. the real question is, who is the real one. we are only going to see that if she becomes the first email prime minister when she gets to government and actually has to make decisions. >> a lot to digest. we will have all of the coverage this we can. thank you for joining us. reporting on the ground from rome. we have to bring it full-circle and check on the markets. we are joined from the market live team to the of. the contagion effect is fascinating to me because we are seeing a massive equity selloff. what is going on and stocks?
>> the pound weakness is spilling over here in the u.s.. stocks are seeing a big selloff with two standard deviations. that is the most of the s&p 500, and we are eyeing that in june. we have touched the closing lows, and just recently, we don't know what the afternoon will bring. below that, we will have a problematic look because there is not a lot of support for stocks. you'd have to go back to september, and that could be problematic, particularly for retail traders who have been stubbornly buying relentlessly whenever someone over sells. that will bring capitulation which will take away support from stocks. >> i'm glad you talked about the summer lows because the initial equity balance we saw might have some of the hardest names that are rallying in the last two years.
sometimes, there is an idea that there is no alternative, but today, when there is a choice that investors are making, and they look at the charts, you are talking about equities versus what is happening with bond yields. walk us through what you are hearing? >> the so-called model which takes bound yields -- bond yields is getting attention as they search higher. if you look across corporate bonds and treasuries, that is seen as a threat or stocks. investors can look for similar or better returns elsewhere. if you look at the. before that, the financial crisis, this was the norm. it was a reality. then, it wasn't bad for stocks, but stocks outperform corporate bonds i 60%. it is treasury returns, so really, the one signal that stood out is stocks tend to
underperform in times of recession, so if you think you are headed towards an imminent recession, bonds can provide some coverage, but if not, this may not be a winning strategy. >> thank you so much. tatyana joining us as we continue to assess the market story, and we have more coverage coming up. stay with us. this is bloomberg. [drone speaking] technology lets drones deliver pizza. no,no,no! have a nice day. but to deliver powerful insights that are on target you need more than technology. you need cdw. we can help transform and manage your it environment with a dell technology solution, so you can use your data to innovate. wooh pizza is here! i'm still gonna eat it. me too. tip please.
we have watched the weakness play out. with the canadian markets, let's get a little more on the economic reality behind the equity malaise. ryan weighing joins us to talk about the market and what it is absorbing. great to have you with us. if you think about these last couple of weeks, the cpi print that made it clear to investors that there is an inflation fight that will continue, and a fed decision on rates with a commitment to possibly be ok with a cooling economy to the point of a recession to fight inflation. if we just come back to the inflation story itself, what do you see in the numbers, and how do you feel against despite against higher prices and how is playing out? >> absolutely. a pleasure to be here. what we have seen in the inflation numbers is that over the course of the year there has been a bit of a change in the mix of inflation. there is less pressure from goods prices, especially for good prices, but more coming from core services.
that is affected by the labor market. that is the category being pushed higher by a steady increase in rental inflation which still has some time to run. kriti: kriti: i want you to ask about the 50% odds in november. the u.s. has famously said that it's our currency with your problem. should the fed care about this? >> the fed has to keep an eye on everything. you have to remember that the fed chair has talked about the foreign-exchange effect as one of the ways through which tighter monetary policy actually does bring down inflationary pressures. those factors mentioned reduce spending in the sector, and also potentially lower asset valuation. that is something at the top of the mind, and the third factor was a stronger dollar, which put
some downward pressure on inflation in the warm of a reduced input cost. remember, it is a global worry. the foreign-exchange movement is not helpful. >> you are covering all things u.s. economic from hsbc. we thank you, as always. in new york city, global leaders are gathering for the united nations general assembly. the top of the agenda is the ukraine and the global energy crisis. croatia sent an entry to the euro zone next year and is playing a key role in gas supply. i am pleased to say we are being joined by andre, the prime minister of croatia. we thank you for taking the time. welcome to bloomberg. let's dive right in and talk about the sanctions. at the core of the market selloff and the economics, there is an energy crisis. what is for you the must-have and the sanctions against russia? >> thank you for the invite. and the opportunity to participate on your program. in your, i think the whole
global leaders summit. the whole week. it has proved that the russian aggression against ukraine is a political issue for the world in the world governance, and international law and our reactions inner unity stand for it. i think so far, the international community, the transatlantic community, it has been united. very clear and fast. with sanctions adopted. that was following the 24th of february events. i think there is a clear political will that the sanctions should continue either being rolled over or even new explored. this is a critical position now that we have seen the announcements of this week, and for the mobilization of the country and nuclear weapons and for organizing not being recognized by the community and occupied in parts of the european territories, soy think the whole package so far, but for gas, has been very strong.
>> jon in toronto. the tensions of ongoing sanctions where you and in europe, we have seen a concern about access to supply, heading into the winter. can you tell our audience in terms of securing enough energy sources for the winter. i saw this week you met with the canadian prime minister. countries like canada are trying to determine what role they can play in this global story. what can you say? >> in my country, we anticipated this crisis for a potential crisis of supply sending from russia. we have invested in the natural gas floating terminal a couple of years ago, and it was cofounded by the eu. it has a capacity of 2.9 billion cubic meters. it made a decision with 6.1
billion, which is far more with such a way that we would like to say we serve as a regional hub. it may also be in the supply route for gas when it comes to our neighboring countries, especially bosnia and yugoslavia and others. especially for germany and austria. for the european union, with an alternative supply grid, with inter-connective, in order to ensure the security for the industry and our citizens, most of all, by government has passed a very strong extensive package of support, and for citizens with businesses and farmers and pensioners, and fishermen. the anticipation is
hospitalizations, and homes for elderly people. it is a well calibrated and all-encompassing package, and most of our colleagues are combining with the eu funds,. >> very quickly, 30 seconds, price cap the oil. you think it will happen? 30 seconds. >> very difficult. i think we should do is get the gas prices, this is not the moment, with the g8, i am sure they do not actually have excessive profits, which is an art view, for times like this. >> a pleasure to have you. primus or croatia. it joining us right here in new york. a quick look at the markets shows it down 2.2%. the bloomberg dollar index
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>> keeping you up-to-date with news from around the world. here is the first world. russia has started staging votes on annexing parts of ukraine it still controls. the u.n. has called the votes a violation of international law. ukraine and allies have announced a referendum as illegal as few countries are likely to -- recognize the results. we go to fed chairman jerome powell. chair powell: it started in 2019
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