tv Bloomberg Daybreak Europe Bloomberg January 12, 2022 1:00am-2:01am EST
cuts. goldman downgrades the nations growth crisis. good morning, the dollar dropped and we rekindled our faith in jay powell as the vanguard against inflation. good morning. dani: good morning, really trying to reassure americans yesterday that he has inflation under control and he's not going to rock the boat. how long can equities continue to do well? manus: the question is when does the put option for the fed kick in? it was calculated beautifully. between the fed who let the markets drop much further, the primary concern is stopping
inflation, is likely to be a 15-30% drop in equities, not the 2-3 percent that we become so use to. so it is deeper and lower. dani: he recommends going into cash. i think this is really the dilemma we face in 2022. if you look in net assets that will be rocked by the fed, where do you hide out? jim read points out, were looking at percent of assets with a negative annual return. 2018 was the highest amount of negative return on record. what happened then, it was that switch from qad to qt. he says this time could be worse because we are also facing inflation. manus: i shouldn't be waving my hands when it comes to trash is no longer cash. dani: finally, cash is not
trash. let's get a quick look at the markets were looking at so far this morning. we saw equities rebound yesterday and they continue, s&p futures up more than point when he 5%. you been talking about the soggy dollar all morning. the dollar slightly stronger when it comes to euro versus the dollar. 10 year yield, not even one basis point move. iron or, this is up 1.6%, its highest level since october. a lot of this has to do with some supply issues in brazil. it's been raining a lot there so there is less output. irrational exuberance in the iron or market. manus: will come back to metals in just a moment. fed chair jay powell has ledge to raise rates as much as necessary to rein in u.s.
inflation, making continued improvements in the economy and the labor market. powell on eight steed with the hat on, or were just overly helpful that he will come from swiftly behind the curve here? >> in the second day of testimony today, he said the balance sheet will be normalized or start normalizing the balance sheet by the end of the year. he didn't give my chant on the timing of when interest rates might start to go up. we have inflation data tonight, and of course chairman powell also stressed that as they do increase interest rates, they
want to ensure that the pain in the rest of the economy is limited. we know several economists say you can't raise interest rates without throwing out a broader recovery. jerome powell makes the point that they want to take it steadily and slowly. if not, they have more work to do. dani: our very own into curran there. earnings coming in -- enda c urran there. earnings coming in at 4.9 billion euros, a missed due to supply chain shortages. manus: one of the biggest electronic retailers in saudi arabia, there seeing crazy wages. jamie dimon talked about the high wages, so we are seeing that come through as well. the preliminary view for
fourth-quarter revenues is a big miss, 4.9 versus 5.20 two. we continue to see big demand for innovative product solutions. we will dig into this a little bit more in terms of the outlook. double-digit growth for the diagnostic and treatment business. dani: a good reminder that supply chain are still with us. let's look at key pieces of news on china, inflation moderate last much with fuel speculation that the pboc will cut rates. goldman at the same time lowered its growth forecast for this year. that's get the details from juliette saly in singapore. some concern about the economic outlook. juliette: absolutely, bowman is downgrading growth forecast for china for 2022 to 4.3%.
this is due to trying to contain the very contagious omicron strain amidst their covid zero policy. it would shave about .9 of a percentage point of gdp. in the worst case scenario with a national lockdown you could see gdp hit even further. morgan stanley concern for the first quarter in terms of china's economy. the call now for rate cuts in china, deutsche bank saying you could see a decrease as soon as next week. at the same time are seeing the fed move toward tightening and a number of other central banks in the region also moving toward increasing rates. when it comes to the impact here on the equity market, it's been a good session, broadly based on what were seen across asia but the china extended is up by 2.5 percent, snapping a seven-day losing streak and were seen a
stronger you want today. tech players like tencent rallying. manus: thank you much, juliette in singapore. let's get back to the virus, it's never far from the narrative for markets. the west seems to be heading in the direction of living with covid-19, while east, the fast breaking omicron variant, china is stepping out its restrictions. around 400,000 people getting vaccine booster number four. a very different mentality in asia, coming from having lived through a number of pandemics. where are we on this bifurcation with omicron? >> if we look at cases in the
u.k. right now, it seems to have fallen from the peak. almost the lowest since the end of december, which is a good sign if we see that omicron comes in a huge way, it will be more soothing sign if it decreases as well. there's a lot of covid zero conversations that hong kong is locking down nonessential shops and venues. in china they just give people a half day break to let them get tested so they can stem the omicron outbreak. so it's a very difficult mentality, the covid zero and the non-covid zero worlds. dani: and a big implication as far as the economy goes. let's get to the first word news with juliette saly in singapore.
juliette: france has registered more than 368,000 daily covid-19 infections, a new record, as omicron variant continues to spread across the country. the canadian province of quebec is reported to be planning a new health tag on those who are not vaccinated. 10% of unvaccinated adults represent 50% of people in intensive care beds. e.u. regulators are warning that frequent covid-19 easter shots may not be feasible. a european agency said repeat doses every performance will eventually weaken people's immune system and they want more time between booster programs tied to the onset of cold weather. israel has already given about 400,000 people a fourth dose. china may establish -- sources say the bank has been meeting
with a consulting firm. the move would make standard charter the first foreign bank to fully automate a wealth manager in china. sony will continue producing playstation 4 consoles. bloomberg has learned the japanese company told partners late last year to continue making it. the ps5 console has been an scarce supply since his debut in november. global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. manus: thank you very much, juliette saly in singapore. the new year kicked off in the bond market. we discussed the curves. dani: and more insight into the trading scandal that has seen a
dani: welcome back to bloomberg "daybreak: europe." manus cranny is in dubai. on this program we've had the value versus growth debate play out in some shape or another. since 2007, the winner has decisively been growth. is it different this time, with the fed that started to broadcast a more hawkish policy, and after powell's testimony yesterday, the 10 year yield has started to move significantly higher. with that, value has outperformed growth in the s&p 500 by five percentage point so far this year.
but how much staying power does this move have? let's bring it to our guest this morning, good morning to you and thanks for joining us. does value have further to run? >> one of these suggestions is that even at the trend is toward value, you've got first a rotation into value and then back to growth. bond yields were longer which is a key factor. manus: good morning, the question is, we only have one other reference point, back around 2017.
at that point equities convulsed and the curve flattening. so what's going to be different this time to start qt? rupert: the starting point for us is that longer dated yields, with four rate hikes next year, repressing the fed is now on the short end of the curve. the 10 year yield is still pretty low. you've got supply and demand moving in the wrong direction. we think there is more to go on the long and. the trend i think is clearly higher. dani: the devils advocate would
say we seen continued flattening of the yield curve. there's concerns about policy mistakes and the economic damage. jeffrey gundlach says he sees inflationary pressures building. what do you say to that argument? rupert: basically we think growth will remain as strong in the coming year. rates are still going to remain low. in terms of why growth has slowed in the last few months, we don't buy. manus: i've got to say a lot of these figureheads, is gone lot, dahlia, let's have another go. i love bob, we are all used to
the fed coming to our rescue. he saying the put option and the swing in equities, if they really do mean that inflation is the number one target, do you think the bar to backtracking i the fed from the current narrative, the bar to backtrack is very high at this time. do you have -- think they have to see 20% before the u-turn? rupert: i think it depends on what you mean by u-turn. if they go to four at the next meeting, is that the u-turn? manus: why don't the three of us talk about what u-turn is.
it's about the balance sheet, rupert. that's what we hear the most. that's where they can start. rupert: again, when they're going to start to -- all we've heard is that possibly they will do it sooner than they did last time. i agree, they can push that back quite easily. dani: estimates in this market really are that they will start sooner. jay powell even said they will start it sooner. we have a sample size of one. if you are quantitative investor, you're not going to use that to build any sort of strategy. how blind are we flying into tightening? rupert: i think you're right, to some extent we are blind. just because there's a lot of uncertainty, they're talking
about tightening far faster than anyone thought it would be. also as we all know, there are two big uncertainties there. manus: let's not be too hard on the economists, that they got it wrong. the fed got it pretty spectacularly wrong themselves. quick question before we go, we are going to dive into the earnings with you in just a moment. make your call, be brave. make your call. rupert: i think the big call, everyone is saying inflation is going to come back down.
will it come down to the 2.5% the fed is talking about, or will it get stuck at 3%? that will be a very big thing for the market. manus: does it get stuck at three or does it go to 2? you are the best guess we've had in a long time. dani: he really is. i love clear answers. manus: will get back to rupert thompson in a moment. what have you got? dani: coming up, it's more about the markets and its earnings season, we will kick soft with banks. if you are into value, is rupert also buying the banking stocks? we will discuss that next. this is bloomberg. ♪
europe." dani burger, my cohort is in london. still ahead, the earnings season . our next guest says valuations are likely to come under downward pressure. europe is where you want to be. the earnings gap between the u.s. and europe narrowing. we talked about the value trade, do you lump up in europe and if so, where's the value in europe? rupert: it's not just europe, you can concentrate your bets on one regional market, between the u.k., europe and emerging markets.
in terms of earnings growth again -- dani: i was going to say, i'm just curious, if you look at what is done well, if you look at the meme stocks, the bitcoins of the world, would you touch them with the tin put coal, given what you are -- with the 10 foot pole, given what you are discussing? [laughter] manus: he's going to make this hard, aren't you? give me a higher valuation on sterling. you like the ftse market, why do you like it, is it an undervalued play or a currency play? rupert: it's basically an undervalued play. in terms of how cheap it is, the
price to earnings share. the valuation is the number one reason. we are not putting all our eggs in one basket. the u.k. is cheaper. in terms of policy response, talking about fiscal policy, maybe they bring down the rate forecast. it's 2022 and they are still going to be hiking a year later than the u.k.. dani: rupert, you went there, so i'm just going to follow you. you went into politics in the u.k., oris johnson is facing questions over so-called party
gate. is there any point at which the politics in the u.k. potentially turmoil at who is the prime minister, does that impact your investment strategy in the region? rupert: i think the answer is no. it's all about the economics, it's all about monetary policy. if it hits starling big time, which we don't think it will, we are not talking about a change of government, we are talking about a change of leader. dani: rupert, we will have to have you back on the program with those clear, short answers. thanks so much, rupert thompson, chief investment officer at kingswood. manus, you have a busy lineup coming up. you have some exciting things to come today. manus: i have some breaking news , there is some exciting things to come.
dani: good morning from bloomberg european headquarters. we are just on 6:30 a.m. here in london. this is bloomberg daybreak: europe, here's what you need to know. stocks rise as jay powell vows to keep inflation in check. jeffrey gundlach sees recessionary pressure building. investors brace for cpi, and the treasury curve flattens as the dollar holds a drop.
and goldman downgrades the nation's growth outlook. stocks are yet again on a tear, almost 1% gains on the s&p 500, tech doing even better. but how long can that last given concerns about policy mistakes and move from qe2 qt. deutsche bank encapsulates this well with a chart, we saw in 2018 the highest percentage of assets that brought about a negative return. 2022 according to jim reed could see that again given that the same thing is playing out again, qe to qt and this time inflation is a concern so this could be even worse. and our guest from kingswood saying value.
could be important in the shift. leading the gains are nasdaq futures, up one quarter of a percent. continuing to see a saga dollar, down another day, albeit 5.6%. your 10-year yield moved have a basis points lower. and iron ore has been on a tear, we have seen brazil supply come down with weather issues and our mliv team says that is perhaps over. let's get to the dollar. it has fallen to a two month low. we are joined by our mliv editor eddie van der walt, this dollar move has confounded a lot of people. we have a stronger economy,
covid cases seeming to have peaked, perhaps this bodes well for the u.s., this should be supportive of the greenback what you mikovits weakness? >> i think with everybody being along the dollar, -- long the dollar, fit is -- this is the fed tightening a little more quickly. what we've seen is that is the wrong ways to look for the dollar. you don't want to look at rate hikes, what you want to be looking at is that haven trade. the dollar has emerged as the only alternative in this environment where people are fearing. if we see in unwinding of the stock market at the same time as we see bond yields rising, that i think the only real place people can hide is the dollar. but if you see a reversal of that trade and the stock market is doing well, on a number of
factors including a less scary omicron, that i think you can see that we can do dollar. that is catching people by surprise, but it has benefited assets including old, -- gold, oil and others. dani: if i can ask you as our resident cfa chartered account holder, we are getting more rate hikes priced to the dollar, then we don't see a higher dollar? >> who cares about the traditional assets theory anymore, right? we are trading entities, we are trading bitcoin, the world has gone a little bonkers in all of it, right? we are talking about
nontraditional monetary policy and so on. i think traditional theory is very hard to apply in current conditions. i think all you want to know is where everybody else is going to put their money, but no it before they know it. you just want to second-guess everybody before they make those guesses, and then you want to run from those trades, i think that is where the markets are at this moment. dani: you are talking about how traditional theory for assets thrown out the window, you have bitcoin, and mp's, bitcoin -- nft's, bitcoin has been trading like a traditional risk asset and doing poorly when equities are doing poorly. we don't have a large enough sample size to get a correlation, but it is not quite doing what people are saying it is anymore. [inaudible]
dani: sorry to cut you off, your audio is fogging up just a little bit there. let's see if we can get that sorted. we need to come back and talk bitcoin, our mliv eddie van der walt. in the meantime, let's get back to traditional macro economics and asset management. we have comments from chair jay powell, but along with those bloomberg spoke to master who supports raising rates as soon as march. >> the economy on a march looks like it does today and the outlook is similar, and there is uncertainty of course, but if it does i would support moving to set that meeting and starting to move back from some of the extraordinary accommodation we needed earlier in the pandemic. there is uncertainty about the outlook, uncertainty about how the pandemic plays out.
as we've seen each mu variant, the economy has really navigated it in terms of the economic outlook. but right now, we have to say that we probably need to recalibrate our policy stands because inflation is well above where we needed to be. we are in a good place to move policy. dani: she also addressed the trainings candle that hit the -- trading scandal that hit the central bank. kathleen, the scandal really barely came up in powell's testimony yesterday. you have a fed governor trading millions of dollars worth of bonds before a rate decision, you are think this is something that would elicit outrage, why does it seem like it is not cutting through more? >> there's a couple reasons for that. one of the reasons is that it
was meant to take some of the pressure off of the session. we heard from elizabeth warren on monday calling for more information and transparency. i think also there is the reality that when it comes to what the u.s. senate is sensitive to, there are other economic issues and on the responses to the pandemic that are going to be a bigger issue to u.s. voters. so i don't think it is that surprising that we are seeing senators focus on those issues more in yesterday's hearing, especially since powell is very likely to be confirmed. all those factors taken together starts or explain why we are not seeing this cut through more than it is. dani: perhaps in an indirect way is if it affects the makeup of the fed, and therefore makes the
fed more hawkish or dovish one way or the other, could this impact what the fed looks like? >> absolutely. we know there are three open seats. powell's nomination is out there. we have this issue hanging over the fed and taking on a level of prominence. and we are going to see it continue to influence the confirmation process, i absolutely think that will be the case going forward. dani: perhaps congress is more in tune with what the american public is thinking. the american public is not thinking about this, what does that mean for congresses potential limiting of trading by policymakers? >> we know there was a stock act back in 2012 that limits insider
trading by government officials, members of congress another officials. what we are seeing is renewed efforts to limit the trading of individual stocks by members of congress. kevin mccarthy, the republican leader, came out yesterday saying that if republicans gain control of the house in the november midterm which is seeming like a real policy -- possibility, then we may see a likely ban of stock trading by individual members of congress. so i think that's a dynamic to watch as we head to the midterm election. dani: kathleen, that is our bloomberg d.c. morning editor kathleen hunter. let's get back to eddie van der walt, his sound is backup and running. we have to do a pivot, but i was
just asking you what do we make of bitcoin that is training a lot like equities? >> i don't think that is that heart of a debit, -- hard of a p ivot, the fed is going to dictate where bitcoin prices go for the rest of the year. the impact of liquidity is still were some for bitcoin. dani: maybe perhaps now the video is coming to get you, tech in 2022. we really appreciate your outlook as always, we will set you up with a new microphone and camera. that is our mliv editor eddie van der walt. now the first word news with juliette saly in singapore. juliette: jeffrey good luck says recessionary pressure is
building in the u.s. economy as the fed looks to tighten policy. the fed seems pretty far behind the curve. france has registered more than 360 8000 daily covid-19 infections, that is a new record as the omicron variant continues its spread. the canadian province of quebec is reported to plan a new health tax on those who are not vaccinated, quebec's premier says the 10% of unvaccinated adults represent 50% of people in intensive care. eu regulators are warning that frequent covid-19 booster shots could adversely affect the immune system and may not be feasible. they say that repeat doses every four months could eventually weaken people's immune systems. they want more time between booster programs tied to the onset of cold weather. israel has given about 400,000
people a fourth dose. global news, 24 hours a day, on air, and on bloomberg quicktake. powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. dani: juliette, thank you so much. coming up, nato and russia are set to hold crunch talks today over concerns about a possible ukraine envision. that story is next. this is bloomberg. ♪
dani: welcome back to bloomberg daybreak: europe, i'm dani burger in london. nato and russian officials are set to hold talks in brussels today with ukraine top of the agenda. both sides have set expectations low with moscow continuing its buildup of troops on the country's border. joining us from brussels is
maria tadeo. we have already had the nato, and the u.s.-russia talks, and now nato is stepping in. can they go beyond what's already been produced on earlier in the week? >> dani, that is certainly the intention. they want to push forward that diplomatic effort. the secretary general of nato said earlier in the week that we have done deals with russia and we can do it again. the problem is if you look at what everyone has been saying, it is very difficult to go forward diplomatically. the russians have said they want an ironclad guarantee that ukraine will never join nato. and the united states is saying this is a nonstarter. nato has an open-door policy, every country that wants to join
can apply for membership. and they are sending clear signals that they want to move away from that russian sphere of influence, they want to move west. so it will be a very tricky day here. dani: is that in somewhat russia wants, -- in sum what russia wants, is there anything that can prevent nato from moving more east? >> that is a difficult question to answer, because every person that i put that question two, what does russia want, what does putin want, they tell me something different. they say this is sentimental for russia, it's ukraine. others will say for vladimir putin this is what russia does every two or three years. this is something that is aiming at easing economic sanctions,
what we do know is that when you talk about vladimir putin, this is a man who wants to sell his gas, and his oil, and he will not do that if an invasion happens. the nord stream 2 pipeline for starters will not get approved if there is an armed conflict in europe. so this paints a tricky picture for russia, too. dani: such a good point, that energy issue really impacting the geopolitical picture here. that's bloomberg's maria tadeo. coming up, further global supply chain pain. the omicron could impact shipping and zero covid policy. we will have more of that with bloomberg's and the current -- enda curran. this is bloomberg. ♪
daybreak: europe, i'm dani burger in london. let's get you set up for the trading day. we were just talking to maria about nato-russia talks, russia's fear about nato kicking more east. those will kickoff at 10 a.m. european time. we also have industrial output data for november, and after numbers from germany and france are we seeing a potential cold start, and 5.2% numbers from ireland. at 12:00 p.m. u.k. time, boris johnson will face questions in parliament about whether he attended a downing street party during the pandemic restrictions of 2020? then at 1:30 p.m. u.k. time it's the big one, u.s. cpi for
december estimated at the moment at 7%, how much fuel does this give the fed to switch to qt? and we will get russian cpi data a couple hours later. on omicron outbreak in china is sending jitters through supply chains. manufacturers and shippers are bracing for disruption. further pain is in the cards if the world's biggest trading nation cannot contain the fastest spreading variant. we are joined by our chief asia economics correspondent, enda curran. what of the moment is the biggest risk for china supply chains? >> the back story is china will manage to keep its factories going since the pandemic began, so production hasn't really been affected too much. but the chinese made goods at a record pace. the worry is that with omicron
getting into china and being much more transmissible than previous variants, the thinking is that it will be harder to control, and that will mean tougher controls on cities and will have an impact on factories and ports and the like. we could see production getting upended in why that had as not so far in the pandemic. we are seeing it already, unimportant industrial port city -- an important industrial port city north of here has been impacted by restrictions already. there are restrictions on lorries. and another port city near beijing has had restrictions there. people we have spoken to are saying they are already seeing delays. there is a paradox here. covid zero has served manufacturing china very well
and by extension global supply chains. but the worry is that this policy might come under a lot of strain. dani: i do have to wonder if that political pressure is enough to switch china away from the covid zero possibility, -- policy, is that a possibility at all? >> right now, we don't know that what is happening is the economy is slowing down, but it is not falling off of a cliff. the manufacturing export story as they are doing gangbusters, we will get trade numbers that will show ongoing robust demand for chinese goods so that lends itself to giving up for covid zero approach. on the ground, they are not spending like they used to the consumer, and there is not as much construction, but when you step away from economics, you
have some big events such as the winter olympics animate you weeks time -- in a few weeks time. later this year we have the congress where president xi jinping will expect -- is expected to be elected for another term in office. so for now, the chinese ability to stick with covid zero or at least a very aggressive approach to containing covid, how sustainable that will be with omicron will be one of the big questions of this year. dani: and if we look to the rest of the world, it's not like this issue of supply chain concerns coming from china is new. companies have dealt with it for much of the past year, internationally, are we now better equipped to deal with supply chain pressures from china? >> the headline from this year
ground there is still a lot of disruption in everyday economic life. but that great supply chain crunch is over, yes. dani: we will have to leave it there. that is our chief asia economic correspondent enda curran in hong kong. bloomberg markets europe up next, mark and -- cudmore and anna edwards will walk you through that. through that.
every day in business brings something new. so get the flexibility of the new mobile service designed for your small business. introducing comcast business mobile. you get the most reliable network with nationwide 5g included. and you can get unlimited data for just $30 per line per month when you get four lines or mix and match data options. available now for comcast business internet customers with no line-activation fees or term contract required. see if you can save by switching today. comcast business. powering possibilities.
♪ >> good morning. welcome to bloomberg markets: europe, i am anna edwards. mark cudmore joins us from single or to take us through the market action this hour. that cash trade is less than one hour away. here are your top headlines. jay powell vows to keep inflation in check, but inflationary pressures are building. investors brace for cpi at a 40 year high in the