tv Squawk Box Europe CNBC March 21, 2022 4:00am-5:00am EDT
about your own house. think about the business you work for. think about the country. people don't like to change. business is hard and business is scary, but you're gonna have to come to grips with it if you wanna grow your business. welcome back to """squawk box. we had the federal reserve in last week with the chair offering comments on the u.s. economic outlook in particular
with the comments around the unlikely event of recession. now this morning we are waking up after a muted and down beat session in asia. investors continuing to watch the covid situation in asia and mainland hong kong and china and cases rise in europe everybody watching the events in ukraine continuing to unfold the stoxx 600 is opened on the back foot. we are about 15 basis points in negative territory let's break it down by sector. what is behind that move lower for the overall benchmark. we have real estate and travel and leisure and utilities. no major move to the down side holding steady construction and chemical and financials in the middle of the
board. we have banks and insurance and autos and oil and gas. the only sector seeing a bounce which is oil and gas within that basket, it is a mixed bag. let's look at the indexes. last week's gains were broad from the sector and regional persp perspective. the stoxx 600 gaining 5.4% in terms of the regional breakdown, no change flat open for the ftse 100 in italy, the ftse mib is 12 points lower and we have an open for the swiss market which is trading lower as well. as you can see here, it is a fairly muted start to the trading session coming off the strong gains last week we are waiting for the opening print on the dax we have the spanish market trading .10% lower
we will keep an eye on the dax for that market when it opens. now taking a look at nickel. lme, nickel is down 14.9 basis points a nickel reopening with a 15% band width hitting limit down already london stock exchange has struck a $1 billion deal to sell its wealth technology platform beta plus along with clear lake capital. the deal could be announced later today. it completed the $27 billion takeover last year we have a london stock exchange trading higher this morning. credit suisse announced a revamp of the board of directors following the billions of losses
linked to the dealing of argegos. existing board member christian gellerstad will replace the outgoing member. credit suisse named a new chairman back in january after a antonio resigned after a breach of covid rules and shares trading in line with the banking sector i mentioned the focus on covid cases. they are on the rise in europe including in the uk, france, switzerland and italy and the netherlands. this is all with ba.2. it is a stealth variant. this is difficult to distinguish from delta the travel stocks is one of the
worst performing sectors. the eu will debate imposing embargo on russian oil imports as it discusses the latest on ukraine. baltic countries are push for the measure. the u.s. announced it will stop russian energy imports obviously a key story to continue watching brent and wti trading higher this morning. no net profit at ramco the company capitalized on the increase in prices the market is expected to remain tight for the rest of the year according to the ceo >> even before the crisis, the market was in healthy demand and spare capacity everything i talked about was before the crisis. the crisis made things worse
investment substantially we hope the situation will ease up between russia and ukraine and things will get back to normal however, it will continue to be tight in 2022. >> let's get thoughts on the markets. joining us now is the head of the equities ofasset management let me ask you about strategy. it jumps out to me if you are looking at markets that are roaring back, we have seen what 8% is up on the nasdaq versus 5% on the dow last week some areas of the growth apart from the market out performing other areas of value what jumped out to you should you chase these trades? >> good morning. i don't think we should chase the trades the move with the nasdaq was around the views on what the fed
were doing with the interest rates. i think the growth that you are referring to is relatively short lived. the reality is that bond yields going up discount rates are going out the denominator for the high value stocks is challenging in the short-term >> let's turn attention to the ftse when is the uk stock market considering this equation? we haven't recaptured the highs of the year or post-pandemic levels >> i think we are looking healthier in the uk market we were coming into this year with a lowly valued market as a start point. you know, as you said, the components of energy, mining, banking have clearly provided a lot of support on the flip side of that, a lot
of high growth companies which have clearly been successful over the last few years. the mix has been very positive you know, our belief is this mix is still going to be with the balance of 2022. the instance of the oil sector opening up this morning. the oil sector needs the oil price to come down to show its performance. at the moment, we think there is a $20 premium in the oil price i think that is putting investors off buying stocks. we are looking at cash flow yields of over 20% conversely, we need the commodity prices to normalize and i think investors will recognize that before the war, you know, we had tight commodities situations around metals and oil and these prices were with going up before the war. i think that's what we need to see the shares make substantial
al strides from the levels >> alan, good morning. the tone of the bank of england was most dovish than expecting last week. this week, we are turning to the fiscal side of things with the spring statement on wednesday. clearly, authorities are worried about the cost of living crisis. what are you expecting from the fiscal side and how does that factor into your investment strategy in the uk >> what we're seeing is very significant increase with energy costs. national insurance going up in april. all of these combine to severely impact income for a lot of families a very concerning situation. what do i think could happen on wednesday? people potentially cutting back on the excise
i don't know whether there is other concrete measures with the governments still sticking to the national insurance which is due to come in for april what impact does that have on the consumer what we do know is the consumers save 200 billion pounds through the pandemic lloyds bank added $65 billion to the deposits over the last two years. coming into the situation, you know, we would have argued the uk consumer was in a robust position what we think is going to happen is that the uk consumers potentially dial back some of the larger ticket items. like cars and kitchens i do think at the same time, travel, eating out, i think at the moment, will be relatively
well protected, particularly because people over the last two years haven't been able to travel in the way they would have expected. i think there are pockets of consumer spending where we have a greater degree of conviction that is sustainable. i agree over the longer term, if these energy prices do indeed stick, and we are coming into summer so people will switch off heating. if those energy prices stick, that will have a significant impact on disposable income. >> i hear you on the ckconsumer side of things i'm interested in the business side of things wage pressure is increasingly a problem here the tight labor market and tighter with the last bank of england meeting and recent pair that with the increase in energy costs and costs post-brexit.
it feels like the outlook for businesses is pretty grim. >> i don't know whether i would call it pretty grim. yes, indeed, there are significant energy cost increases. we have speaking to companies at the moment and we are looking at 5% or 6% increase in overall input costs. how does that reflect in the price they need to put up goods? maybe 3% or 2.5% i think this all comes back to picking the right companies of the companies with pricing power. remember we're actually operating now in the 8% nominal market and companies price on a nominal basis. this is the time we talk about equities being a good hedge against inflation. yes, they are, but the key is the stock selection. the narrative that is worked over the last few years, which is actually valuation doesn't matter because the discount rate
was so low and we were going for top line growth. i think that's potentially clearly going to pivot the remainder of the year. we will look for companies to have attractive valuations and those with the ability to put prices up. >> who are those companies, alan >> i think there are companies in every sector that are able to demonstrate. outside of the obvious like mining, which clearly can put up the prices up on a daily basis i think the banks where one of the main drivers of the profit pool and deposit interest income which hasn't been there for last decade our view is interest rates in the uk will need to get to nearer 2%. that will be a very significant profit driver for banks which historically sit on low valuations i think if you go through sector
by sector, there are a lot of companies that continue to have relatively strong pricing power. it is just a question i think of going each sector and looking at it and seeing which companies do have historically the ability to put prices up and you have strong market positions and are able to reflect some of those input costs. >> let's go back a step, alan, and talk about interest rates one more time. i keep seeing the people who have gotten wrong the fact inflation has been sticky in 2021 and appears in 2022 they are saying what is the point of raising rates if we raise rates, it will get worse. it is to ward off something worse of the. >> i agree with you. i was disappointed in the narrative in the bank of england last week. if we think about the rate increase in the prior month, we
had four members who were talking about putting 50 basis points on. in the last report, we had one member suggesting no rate increase was appropriate a real risk as you described as the market believes the bank of england gets behind the inflation curve. we get policy error. if you think about the last few years, the ability of the bank of england to forecast the economic growth impact of the pandemic and subsequent rebound and the transitory position they will get behind the curve and as you said, the risk then is the inflation is more imbedded and more difficult to contain. i think going faster earlier is the message. i think the fed is clearly understanding that and we have president bullard saying we
should do 50 basis points right now and the uk should learn the lessons from the u.s. approaching the situation. >> alan, thank you for joining us and sharing your views. now let's look at key corporates in focus this morning. julius baer has credit to a small number of sanctions of the the exposure is mostly in the form of mortgage loans and not accepting new clients with a russian residence. the bank reduced the collateral value to zero last month julius baer up .70%. s.a.p. announced the cfo will leave the company next march. it will search for a successor s.a.p. shares down 2% this morning. german factory inflation
below forecast for february ppi. the expect tations of a 26% jump it is on par with the highest level since modern records began. the dax is down 13 points after last week's strong run volkswagen recalled atlas vehicles over wiring issues. the carmaker warned it could cause damage to air bags and windows and brakes the company will notify customers. shares are down .60% steve. coming up on the show. french candidate for presidency. jean-luc melenchon holds his first rally.
we are in countdown mode to the french election. and jean-luc melenchon held the largest rally over the weekend he is the opposite of the current president emmanuel macron and promised to tackle inflation and raise taxes on the wealthy. melenchon sits in third place according to the latest polling behind marine le pen let's get to the latest. the far left has used taxes, but hasn't been successful it may felt it was popular among the population give us a sense of what melenchon wants to enact with the targeting of the wealthy >> he has been getting a lot of the left vote which has been split. the socialist candidate is polling at 2%. melenchon is in the third run to be president and he is getting a
bit of momentum in the poll. polling in third position behind marine le pen. and yesterday, he showed support in paris with the gathering and he is putting himself as the alternative to emmanuel macron he is saying that he is the one proposing an alternative view for society and france take a listen. >> translator: yes, another world is possible. yes, a world built with our hands and dedicated to humans and nature a world with the living and not consumer products and goods. >> cakaren, he is running on th capitalist reform where he wants to lower the pension age to 60
years old. he wants to raise the minimum salary he wants to tax the wealthy and foreign policy point of view, he is against what he sees as anglo-saxon world. he has been trying to get rid of the past putin sympathies. he is trying to move away from this in the past couple weeks. blaming nato and the west for the rise of tensions in the region he dedicated the march yesterday to ukraine he has been gathering momentum in the polls he think the next few weeks is crucial for the left wing voters and to get the green vote and get momentum to get into the second round meanwhile, emmanuel macron has not been campaigning this weekend. i was presented with the
campaign manifesto he held a ceremony after the terrorist attack some members of his team is doing events across the country. he is not campaigning. he will be very much courted by the geopolitical situation he is preparing for the nato summit this week he has a call with president biden and other eu leaders to prepare for the summit he is very much still caught up with those international events before the campaign event starts on monday. two weeks before the first round. >> charlotte, can i ask about the inequality story in france if you look at melenchon's point, he is on the 500 richest families which doubled their wealth you think of the higher energy
costs and petrol costs and food inflation. and i know there is a lift of support for the increase of minimum wage >> this crept into the conversation it was before the ukraine crisis we are talking about inflation and the purchasing power and the question offing energy prices. reinforcing the fears. this is the number one concern for french voters. as you say, melenchon talking about higher minimum salary. that's one of the key concerns that is the argument from the emmanuel macron camp the economy issing doi doing ben before the economy has been protected after the covid crisis and unemployment is at historic low. and cut on taxes and with the energy prices capping. that gave extra money and support to certain populations
it would carry on watching this. they announced the nuclear plan a few weeks ago saying to give them extra independence from price to have lower energy prices they keep pushing on the agenda. this question of where the opponent is trying to push the conversation with the purchasing power and what the government will do in the very uncertain environment. that has been the argument the macron camp saying our economy record is strong and carry on with the reform we know emmanuel macron has been campaigning on reforms he was a reform candidate. it was all about reforms we know what came with it. he now has learned in terms of method it will be interesting to see if he gets reelected and if we see social unrest creeping up again. we know that is the tension which is present in the country
before the pandemic hit. >> charlotte, a lot of evidence from the nsa and others that russia interfered with the brexit referendum vote russia tried to interfere with the trump election in 2020 we hear about somcyber wars andw russia does not appear to win the cyber war over ukraine what are the french doing to make sure the russians don't interfere with the election this time around? >> it is interesting you mentioned this you remember that in the last election, marine le pen got financing from russia. there were photos of her traveling to moscow. this time around, her finances were difficult and she got some funding from hungary again, you could see potentially a russian connection there when it comes to financing the far
right parties. in the last election, it was emmanuel macron's campaign was targeted by the russians we have not heard much in the campaign we know the risk will be very high we know that president macron is speaking to vladimir putin on a regular basis about the ukraine crisis and they were talking again on friday. we know the french authorities know this is a risk during the campaign they are watching closely of anything there >> excellent thank you very much for putting that in perspective. are charlotte updating us from the left and jean-luc melenchon's latest attempt to become president. and germany takes steps and gaining more energy independence from russia and europe is continuing to discuss a potential oil ban as well. we'll discuss after the break.
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energy partner with qatar as they look to wean off russian energy >> this is in reality, it doesn't work also embargo on oil and gas and stop buying russian oil and gas. it is bloody oil bloody gas ukraine rejects russian demands as kyiv says it is not able to create a humanitarian corridor from the besieged city today. russian forces cut the city off from the sea >> translator: mariupol will go down in the history. to do this, the occupied area. china deflects criticism and says it is on the right side of
history over the war in ukraine. china's foreign minister hits back at the u.s. interference. markets in europe have been open for about a half hour now we are trading in positive territory. the stoxx 600 is now up 15 basis points we did open in negative territory. we bounced off the lows of the morning. we are now adding to last week's strong gains where the benchmark gained more than 5%. stocks on both sides having a stellar week the best performance in nearly two years. ukraine remains firmly in focus. also monetary policy with the federal reserve and bank of england raises interest rates last week.
sending encouraging signal that we will not be tipped into recession and that seems to provide support for equity markets. turning to the sectors the breakdown this morning is a mixed bag. we have basic resources and oil and gas are out performers we see a rise in the price of oil. banks also holding up well .90% along side insurance and auto. technology shares down .9% travel and leisure under pressure down .76% as covid cases rise. and from the individual stock persp perspective, the standouts this morning. a couple of names in the basic resources. north kedro up the fertilizer space up as well. more losses for prosus there is a lot of volatility in this stock this week
karen. julianna, thank you very much let's push on and look at the latest around sanctions as the eu will reportedly debate an embargo on the russian oil this week they consider the latest over the kremlin invasion of ukraine. the u.s. has announced it will stop russian energy imports. european countries have declined to make the same move. germany and qatar are talking as berlin looks to wean off russian energy germany would not need russian energy in the future just crossing the wires a couple of minutesing ago, that signing five mous on hydrogen support.
let's get to annetta this has not worked in the situation as we have seen what istaking place in ukraine. how rapidly is the mind set shifted in germany about serse severing ties? >> we has as you were pointing out that the general understanding changed with trade and close ties to russia and also to the close relation than should have prevented a military escalation, which we are now seeing it is a u-turn when it comes to energy security and energy strategy of germany which is dramatically fast. what happens is they were in
qatar to bring together a deal for liquid natural gas germany is about to build two terminals that might take up to three years to get fully operational. it is a medium-term strategy to get away from natural gasses from russia. that is one step in the direction. they don't want to replace the 55% of gas supply from russia like the renewed dependency on qatar. they don't want 15% share for each supplier. also, of course, the hydrogen strategy plays into the mix as well hydrogen is a key component as well to build up capacity. ukraine was the big target in
the potential hydrogen strategy. also, karen, it will not remedy the situation in the short-term. i guess the key question is how long will it last and how quick can you build the terminals? and the price for liquid natural gas which is higher than russian natural gas. higher energy prices are here to stay, karen. >> i'll pick up there, annette the russian ukraine crisis marks an issue for the energy sector it will grow by 60% after the sharp fall in the last decade. i read in the latest research and if you don't mind me saying, every time oil prices go up as we saw in the last decade, cap x goes up aggressively
that time accompanied by shell that meant we had decline at a later date is that going to happen this time around? the fast investment that aramco builds up and all of a sudden we have too much energy and the price goes down. good morning to you. >> good morning. i think it will be a repeat of what we saw in 2004 to 2014 in terms of scale the focus will be the difference back then it was shale and lng this time is renewables and hydrogen we need a major reinvestment phase in the energy world. we have come down from $1.4 trillion for primary energy down to 0.8 that is not sustainable. we need to build up. that is why we will see 60% growth in 2025 back to $1.4 trillion. >> i had my day come and i had
an old car which is diesel i decided to fill it up to give it a run this weekend. like me, a lot of people are deciding not to drive so much. they are consuming less. ing trying to turn the heating down is this destruction of prices happening yet? >> i think the two things we need to look at here in gas, the destruction in europe is taking place since october of last year in oil, we typically see it in europe because so much of the price of the pump is taxes the oil price doesn't have a huge impact on the consumer. we find more of that happening in the u.s if we look back to the two periods in last 20 years, in the u.s., it happened when the cost of gas reached 4% of the disposable income for the average consumer
to get there, we will need to reach $180 a barrel. that would be the upper extreme of where we think we need to go if the supply disruption ended up >> it is karen jumping in. i want to ask about the pivot to gulf states and energy dependence that europe is trying to achieve away from russia. it feels like it is uncomfortable. the language from the german economy minister saying they don't want to profit from the sanctions on russia and answering questions of how they stand on russia sanctions. along with saudi arabia where boris johnson did not want to tackle the humanitarian issues which have been there for years around saudi arabia. this is sitting uncomfortably. how will they tackle that? >> i think importing a lot of energy is uncomfortable from the
security supply perspective. we can diversify the supply and signing enough long-term contracts to ensure we get supply over time and europe has failed on both it did not diversify supply and did not sign a lot of long-term contracts in the last decade and secondly, create alternatives locally that is where not just renewables, but especially hydrogen is increasingly interesting. this is not just an energy chriss in europe this is a winter energy crisis with the seasonal component. the only way to address it is by having green hydrogen production h here >> let me read something here. russia is guilty of war crimes russia is destroying ukraine without respect for the rules of war. this is are more important for your world we are ready to talk about
energy sanctions as well if europe sanctions russia and by the way, that is simon speaking, the foreign minister of the republic of ireland if there are energy sanctions from europe toward russia and meaningful, is that going to affect the prices we have or is that already in the price? >> some of it is already in the price of what you described would have a bigger impact europe imports 4 million barrels a day of russian crude let's say it cannot go anywhere else and out of the remaining 3.2 million, perhaps 2 doesn't find a home. that would require a coordinated deep opec action and form of demand in russian pricing. >> can i ask what it means in
terms of renewables with the embargo of oil from russia is there enough money with investment we know they are trying to pivot away from traditional oil. is the money there to accelerate the process? >> the money will be there it needs better returns. i think the returns offered renewable power in the last two years and they were too tight to really allow the level of investment we need here which across the energy space is $1.4 trillion we need to reach $2.5 trillion per annual by the middle of the next decade. we think there is enough capital around by the way, it is not just renewable power. it is charging network for evs and hydrogen for the seasonal component. this will be the biggest energy
cycle investment we have seen in decades. >> when it comes to the cap needed to fund the transition, how does thecap x intensity compare for renewable versus hydro carbons? >> that is a very important point. thank you for bringing it up when we look at renewables, through the cycle, given the long life and low cost of capital, it can be compared. the cap x is higher. it is between two and three times higher than carbon if we want to shift more and more to what is renewable and low carbon, it will require higher cap x. this is why with e go back to profitability. we need to unlock the $1.4 trillion in the next three y years. >> thank you for joining us and sharing your report. head of the european natural
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ukraine has refused to surrender are mariupol after the defense minister gave kyiv a monday morning deadline to relinquish support of the city this is to have a humanitarian corridor from 10:00 a.m. to 7:00 p.m. the city has seen the heaviest fighting and it continues to sustain heavy attacks over the weekend. pres kyiv says it has lost access to the sea of azov for the first time if russia gains full control of mariupol, it would gain control of the coast
karen. russia's military launched a series of attacks on ukraine using long-range missiles. the fuel depot was targeted a day after the missiles which were capable of hitting kilomet. russian forces continue to attack residential areas in kyiv with shelling in the shopping district on sunday, kyiv authorities now estimate that more than 220 people have died in the capital since the invasion began the casualty figures are not officially verified. british intelligence estimates the bulk of russian forces are stalled 50 kilometers from the city center. the foreign minister said the only deterrent are for the
actions in ukraine are the military power calling for an energy ban. russia's president will continue unless stopped >> we don't have any other option putin underestimates us. the world underestimated us. i saw that american intelligence gave us 96 hours and after this, kyiv would fail. i can say kyiv will not fail and we will not surrender. more than 100,000 people joined the defense. civilian militia i am among them. despite the fact that i'm a member of the parliament and i'm a civilian person. thousands of ukrainians are taking weapons in their arms we will stop putin what will be the price what will be the price for us and the world? >> let's get out to nbc's ali arouzi from lviv i want to get to the latest from lviv ali, we saw the moving pictures
of prams lined up to represent the loss of lives. more than 100 children hit in the crisis give us a sense of what is playing on the ground. >> reporter: hi, there lviv is a safe zone for the waves of displaced people that have been forced to move from the war-torn eastern and northern and southern fronts of the country where the bulk of the russian forces are this is a traditional safe place. it is showing signs it may not remain that safe there have been attacks on the outskirts of lviv and an aircraft maintenance site was hit a few daysing ago that was four miles from the city center. it has made people nervous people don't have many places to go from lviv they don't have a network of
people in other countries to give them a safe haven they are worried that if this place was to fall apart, their lives may fall apart you mentioned that very moving scene in the lviv market square that set up over the weekend they laid out 109 empty baby prams to represent every child killed in the war. that number has gone up according to ukrainian officials. it has been a devastating war for children as well the u.n. says that one child a minute is becoming a refugee over 1.5 million children in this country have been displaced so far not only does that impacts them, but impacts their lives. we reported on orphans trapped on the east side of the country.
these are the most vulnerable people in society. an american group had come in to help them escape they brought them to lviv to give them comfort and a warm place to sleep and food and bedtime stories. sorry, those are the air raid sirens that come on and off. it shows how sensitive lviv is air raid sirens going on constantly which makes people who escaped other parts of the country very anxious >> ali, i appreciate your reporting. one child a minute becoming a refugee. nbc news' ali arouzi president biden is set to host the call with germany and france and italy to discuss the russian invasion of ukraine. on wednesday, biden will travel to brussels for meetings with nato, european and g7 leaders. this will be followed with a
meeting with the polish president on friday as the country deals with the influx of 2 million ukrainian refugees the white house said biden will not travel to ukraine. quite a big week with prbz heading over here. i think it is useful to think about this from the u.s. perspective and a midterm election year. polls suggest that americans are closely following what is happening in ukraine it hasn't led to a rally in support for president biden yet. that is something he is considering in the lead up to the trip, steve. >> three issues. one, president biden shoring up alliance and sanctions across europe and tightening it up there. and then the most important issue, given what the mp was saying, karen, he wants to shore up the support given to ukraine. >> indeed.
it is 5:00 a.m. in new york the win streak in jeopardy the market posting the best week in two years oil on the rise again. breaking news. a deadly 737 crash in china. details slowly rolling out boeing stock is sold off in ukraine, pushing back against the russian ultimatum over a key port city hopes for peace talks endure. and trouble for bob
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