tv Bloomberg Markets Americas Bloomberg June 28, 2022 10:00am-11:00am EDT
debates capping oil prices in russia. world leaders had to spain for a nato summit. the stock is down almost 30%. investors rethink valuation of companies and startups. from york, i'm alix steel. welcome to berg markets. just being off for a couple of days, it's hard to get a good takeaway on where we are in the market. it feels like a bear market rally could be in the cards technically. i don't know what's next. guy: we are trying to figure out whether they should be looking in the direction of the inflation threat or the recession threat. we are not going to look at good data right now. that is one of the factors you need to think about. the consumer confidence board,
the index is out and it's weaker than expected. it continues to roll over fairly aggressively. given what's happening with gas prices, we come through at 98 .7. 98.7. the prior number was 106.4. that has been revised down to one hunter 4.2. -- 104.2. the expectations number dropped from 77.5. these numbers a been revised lower. then you've got the manufacturing index which is -19. these are not good data to say the least. these are not good numbers. the consumer appears to be rolling over fairly quickly.
that's just my take. let's get an expert on what is happening with these numbers. how do they look to you? >> the data are starting to weekend. it's really not that surprising, consumers are being buffeted by higher food prices, higher rent and housing prices. they are seeing interest rates rise and making it more difficult for them to finance things like cars and homes. alix: can we talk about expectations? it looks like we are down to levels we haven't seen since 2013. what are we learning from the expectation read? >> what the numbers are telling us, consumers are seeing a russian -- recession around the
corner. here is the confidence board, we have downgraded our forecast. we expect a brief recession starting in the fourth quarter of this year and extending into the first quarter next year. what consumers are telling us is consistent with what economists are expecting. guy: in some ways this is unsurprising. the consumer is being buffeted by a number of factors. the rate of change is what catches my eye. are you surprised by the rates of change? the confidence levels are decelerating quickly. >> certainly they are. i thought they would've come down faster. the present situation numbers are still healthy. right now, consumers are working. they see wage increases.
the income is still coming in. they are able to whether the inflation they are seeing. that is certainly part of our headline. that's keeping the numbers from falling dramatically. that expectation gauge is worrying. alix: it is at 7.7%. i wonder how sticky do these numbers tend to be? if we wind up having commodities come off the highs, how fast can we revert to the positive? >> i think it's going to be some time. our own inflation expectations in terms of forecast, there could be a big number on inflation for june. we hope this will be year-over-year inflation rates. inflation is going to take some time to come down.
we have the pce deflator at 2.7%. that is still above the target. that's including what we are anticipating from the fed, raising the fed funds rate to 3.754%. guy: we are taking a little bit of a rollover when it comes to bond yields. you are seeing that at the two-year level. as we watch this number have an impact on the markets, we've been much lower than this during the great financial crisis. we were down into the 30's. how low does this number go? what is a mild recession commensurate with? >> you can't match the consumer confidence index against gdp.
they move differently. it's really a signal of confidence as opposed to forecasting gdp. with slight dips in gdp minus a percentage point in the fourth quarter and the first quarter, some uptick in the unemployment rate around 3.7%. that is material. we thought it was going to fall to 3%. we are coming from a position of strength. there will be a recession. it won't be anything close to what we saw in the pandemic or as long with the great recession. alix: we are well off the highs of the session. does the fed look at data like this and say i can't do all the hikes i wanted to do? will they cut earlier than we
thought? wax i don't think so. the fed is looking at inflation. the fed is concerned with the actual inflation numbers and expectations rising and becoming unanchored. the fed is concerned about its credibility. i would imagine the fed is going to continue on its track. the weakening confidence is commensurate with what we are expecting with growth. the fed it will continue on its track area -- track. guy: if gas prices came down significantly, say they came down one dollar, how big of an impact with -- with a have on consumer confidence? >> it would certainly help. one year inflation expectations are tied to gasoline prices. until we have a resolution to
the war in ukraine and the effects of that is having on food and energy prices as well as semi conductors and everything some conductors go into, we are going to see these supply-side pressures on inflation. a dollar off, i would love that as i fill up my gas tank. that is still very high inflation that consumers will be facing. alix: when thing -- one thing gets cheaper. i really appreciate it. thanks for joining us. what does that mean for the market and companies? we have these rosy profit expectations. we are going to check that morning coming up next. this is bloomberg. ♪
expectations are too optimistic. then we get this really negative read on the consumer from the consumer confidence board. join us is louise. when you put it all together, you get the profit margins and you've got the potential topline weakening consumer demand. what is your outlook? >> i think it is certainly a possibility. a lot of this is going to hinge on price-performance as we see second-quarter earnings come in. that is one of the reasons i think it's important to pay attention to where the stability in the market lies. what we've seen, areas that have done the best have been health care and staples. that's the areas that were left for dead and everybody was banking on future growth. the stability has been in those
lower pe stocks, the more stable pe stocks. it will be interesting to see how second-quarter earnings come in. i'm not sure the market has priced that in. this is one of the reasons i've been looking at 12 pes rather than forward. i'm not sure earnings of fully adjusted for what earnings might be in the second quarter. guy: stability is an interesting word. this market, the macro backdrop feels anything but stable right now. what is your degree of certainty one month out, six months out? how easy is it to make decisions right now? >> you have to make long-term choices. i think it's a relative of stability.
our clients are looking for diversification and worthy stability lies in the current market to stay invested. those areas have hung in there. as you look at second-quarter earnings coming in, there might be more opportunity if there is some fluctuation in where earnings come in. maybe there will be a better entry point for some of that technology. i'm not sure we can tell that yet. looking for the areas of relative stability have been the way to play the market. alix: in order to know that, don't you need to know with the bigger risk is? it was inflation. what do you think? what is the bigger risk for the market? >> i think they are intertwined. they were coming off zero level
in the pandemic. we've seen huge increases in where the levels are. we started this year with the two-year at 135. now we are at 308. everything else is priced in the threes. i think there is some risk with interest rates. no matter how much the fed raises interest rates, that doesn't change how much oil is going to be produced and refined and distributed. it will certainly dampen the housing market. we are starting to see that now. the biggest risk is how quickly and how steep the interest rate curve becomes. that will have more of an indicator effect of what earnings are going to do. guy: what i'm hearing about at the moment is since it's not on what happens the next 12 months,
the feds hiking cycle, people are trying to figure out what the cutting cycle looks like and getting ready to position for that. how noble are investors going to have to be as we go through what looks like an accelerated cycle? we see the fed stepping on the brakes pretty hard. when we start to see inflation becoming more tame, trending in the right direction, the fred -- fed flips to cutting. how do we navigate that process? >> that's the trick. we need to look at what we anticipate coming through the year. they would have to overshoot to get the level they are aiming for. once again, if we see some of these supply shocks abate and we have any resolution in ukraine, we will continue. we've become accustomed to
seeing interest rates come down as soon as the market gets panicked. i don't know they will cut interest rates as swiftly as they raise them. i think we are going to be in a world with higher rates for the next year and a half or so. alix: many work interpreting the rally in the market to china loosening their quarantine rules. when i saw that, my first ring was that's the last thing we need, more buying and more demand coming from china. a question asked how you -- a viewer asked how you see it. >> overall, in order to get a good look, we need to have china as a significant contributor opening. that will put pressure on oil and some think it should get
some of the supply shock problems out of the system. i think it will provide some normalization so we can see where we are going. guy: you spoke about your investors desire to stay invested. why is staying invested the right call right now? >> what we've seen in prior bear markets, we hope to see higher lows and higher highs. it's very difficult to anticipate when things will end, if there was any resolution in ukraine and china comes back on it. it's important to remain invested and diversified and keep a longer-term view. it's easy to miss the biggest. guy: thank you very much indeed. thank you very much indeed. breaking news, the firm is
alix: the global head of business development at citadel is leaving to run a crypto venture. what can you tell us about this? >> it's a great scoop. central securities, that massive market maker we always talk about, they help democratize stock trading and make it cheaper for investors to trade. think about that moving into cryptocurrencies. the business fell up meant --
development head is moving over to crypto. there is a lot of support. the question is this massive convergence you are seeing between trade buys. it is similar to what you see over at robinhood it that big convergence between traditional crypto players winning to get into stocks. guy: let's talk about that deal. do you think they are going to go ahead with it? what kind of timeline are we hearing? there hasn't been a formal offer made yet. >> the wanderlust is real. you look at two different companies, you look at the company that has grown conservatively with a not explosive headcount like it's brokerage peers. robinhood has had hyper growth
over a number of years. you have to wonder if it makes sense. there are no active discussions. with that said, the desire to push into not just crypto assets but traditional stock trading. you get really interesting really fat. does the robinhood brand give them anything they don't already have? they were thinking about making big changes in the wake stock trading is worth. a lot is happening between all of the market makers right now. alix: let's talk about the big wall street banks. goldman sachs and their markets division is losing money. we talked about it in break. what do we know about how they are losing money on this? >> you do see goldman sachs expanding markets significantly,
100 billion dollars worth of deposits. it is losing more money than expected. what investors are looking for is for the business to turn the corner here. it is expensive to get into the lending business. a lot of consumer banks are facing tougher macroeconomic environments ahead. it does over the cost of funding. are they going to make this big have it the way we've seen other banks in the past? the morgan stanley consumer division leads more by wealth than deposits. guide: everything i've read says the stress tests were positive. is that your read? >> i love to read. if you look at it, morgan stanley had announced buybacks. these stocks have fallen so much that some of them have fallen below value.
the question here is how tough is this environment going to get, especially when jp morgan, jp morgan did not lose their dividend for reason. they are anticipating higher capital requirements. that's worth looking into. alix: i was interested in what they said about preserving capital. i'm going to keep this here. it's uncertain. >> is that because they want to pile up money back into trading divisions? do you want to be making markets the big way when liquidity is spinning out? guy: there's nothing you don't have an answer for. alix: that's true. guy: right stuff.
guy: of course the big topic at the g7 meeting, how leaders can wean their countries of russian oil and gas. the french president addressing the issue at a news conference earlier today. >> our ministers both continue following the initiative of the united states to work so such a ceiling can exist by applying the broadest possible amount of buyers. we have to do the same thing with russian gas, which is simply because it goes through pipelines. the russians's ability to use
lng grass -- gas is low. we continue to move forward in the coming weeks on this subject. guy: emmanuel macron speaking earlier in germany. we now go from germany to spain and the nato summit. maria tadeo is covering both forest. she just finished covering them g7 meeting and joins us from madrid. there is a lot of talk about capping russian oil and gas prices. it sounds simple. how hard is it, though? maria: it is incredibly complicated. that is something that g7 leaders have come to terms with in the summit that just wrapped up in bavaria. it is a great idea on paper. they recognize that politically it is toxic. it is so hard to stomach the revenues vladimir putin is making while the war is on. just yesterday the shopping
center targeted by a russian missile, of course, now the ukrainians saying they view that as a terrorist attack from the russian federation to ukraine. this is incredibly difficult to swallow, but then they realize the limitation of it is also very difficult. you would need to set up price caps. nobody knows what that cap would look like in real terms what the price behind it. then, of course, you see there are countries like the french who say we need a global coalition. the reality is there are countries like india that participated in the g7 as a partner nation and behave in a neutral way when it comes to russia. will they stop buying cheap russian oil? there is no indication they are willing to do that, so they agree that is the sense of travel they need to take. there is nothing specific on paper. alix: webinar speaking, saying europe must be ready to cut gas use by 30% in winter. it drives home how immanent this
crisis is. if you don't get more fuel you will have to cut your factory output, your manufacturing so you don't use that kind of gas. i'm wondering if you can tell us, you mentioned the outliers like india, but what is this unanimity among the g7 as they head into nato? maria: to pick up on that point you say, the narrative in europe is very much changing on that front too, to say you have essentially right now two months to fill up your storage. if you don't then in the winter you are in the hands of vladimir putin. he can decide at any time to cut it off. the italians, the germans behind the scenes are prepping for that, in the narrative in europe is changing. ceos and government officials now prep the public opinion to say from now until the winter we are in a war economy and prefer to come down and reduce your energy consumption in europe, which is an incredible thing to
ask people to do, especially as you enter the winter. that is the most vulnerable time of the year for europe. when it comes to the g7, the united states called for this cap. the italians have said they want to see it in gas and oil. the french do not want it, but they have a different view. the real question is, what does germany do? the german industry is incredibly concerned about what the next of the year is going to look like for them. of course, inflation, a country that is consistently debating inflation for many reasons. alix: thanks so much. maria tadeo joining us from the nato summit. let's get some more insight into how these nations can induce their dependence on russian oil. we are joined now by toby rice, eqt president and ceo. kutty is a producer of natural gas. -- eqt is a producer of natural gas. his demand for natural gas
overseas is tremendous. long-term contracts are finally being signed at solid prices. what do you see, a gas cap -- gas price cap? what does that look like? toby: it sounds very difficult and very challenging to pull something like that off, but there is a simple solution here. to fix this energy crisis the world is dealing with right now, an energy crisis that is resulting in unnecessarily high energy prices, rampant inflation, the war in ukraine, and emissions around the world are going up. that solution is unleashing american energy on the world stage. the united states has the ability to increase our energy exports for natural gas by over 50 bcf a day. that would be a for full --
fourfold increase. this will lower prices from on president energy security to americans and allies around the world, and eliminate russian influence. guy: that sounds great. needs to be a lot of investment, and investment quickly. europe is struggling with re- gassification. we are heading toward a winter where the iaea is saying europe may need to reduce its energy consumption by 30%. what does this winter look like? toby: this winter we are going to be praying for a mild winter. and unfortunately that is the state of where we are at today. now we are completely dependent on weather. for the health and safety of our citizens. this could have all been prevented, and we need to start look -- to start working on the solutions to make sure we are not praying to the weather gods for mild winters. take back control, and that is the united states unleashing its energy resources. alix: he just gave guy free permission to talk about the weather for the next 12 months, so thanks for that one. guy: to be fair, i didn't need
permission. alix: well, now you have it. guy: i'm a brit.l alix: i wonder if we are going to be talking in six months on how we have a cap on oil prices, some cap on russian gas prices allowing fuel to come into europe at the same time when u.s. producers are going full out trying to get their natural gas to europe. could we see an oversupplied market, particularly if we have a mild winter? toby: this is a really important part. one of the things preventing the american energy producer from putting more supply into the market is long-term demand. the good news is, when we are talking about lng, this production will follow only after we get the pipelines, we get the facilities and long-term contracts. this coordination is going to allow us to make sure we are keeping the supply paired up with demand and should bring more sustainable prices. we can put gas on the doorstep
of europe for a price of nine dollars. very attractive to both the european consumer and the american consumer, and also it is a situation where this energy can generate modest profits, and that would mean we would be incentivized to make these investments. but we need to make sure we see the demand pipelines and infrastructure before we can make these investments. but we totally have the ability to do this. guy: this is going to sound like a strange question even the context we find ourselves in with the dependence europe has on russian gas. do you think europe is nervous about making itself dependent on american gas? annmarie: -- toby: absolutely not. the united states has been a trusted partner around the world first for centuries. the commitments they are making today are going to be honored and respected. it is one of the biggest benefits we have in the united states, is our reputation and
ability to fulfill contracts, and especially with something like this it is not only important to europe, it is important that the united states brings this energy into the world and allows for more peace around the world, because any conflict that happens -- and i do not believe ukraine is the last conflict that will arise -- is going to impact to the united states. we take our security very seriously and allowing -- and supplies to our allies is going to bring security as well. alix: last question from me. you guys do supply, translation, and distribution. how much business do you have? what kind of contracts are you looking to sign? toby: we are certainly focused on trying to be part of the solution, and unleashing u.s. lng. first is the awareness, letting everyone know the united states has this massive potential, but we need facilities to make it happen. in addition we are working with international customers to shore
up some demand and get connected to some of the projects we are working on here so when we are ready to build these pipelines and facilities we have the long-term contracts that would support the products that are going to bring us into this world. guy: it was great to catch up. thanks for joining us. look forward to hearing more. toby rice, eqt president and ceo. take you very much indeed. we're an hour into u.s. trading. since we saw that confidence data we know it is over when it comes to risk assets. abigail doolittle, tracking the moves. abigail: we have another roller coaster day here. earlier the s&p had been up 1%. now it is up fractionally. the nasdaq 100 is down, having everything to do with that conference board. consumer sentiment having its lowest rating in more than a year. that is a leading indicator, so it suggests we could see more of that sentiment to come. stock investors not liking it. of course, not a lot of inflation here. but it is up about two basis
points, confirming this overall picture. yields, of course, this year when i rise that puts a pressure on stocks. the idea of valuation becomes more expensive. over the last several days there has been this pair market bounce we were talking about, and we have been talking about for many days here. it has been strong for tech in particular. the nasdaq of the last seven days, up about 7.4 percent, including today's decline. cathie wood of the ark innovation etf, a lot of the stocks in that etf, technology, and she admitted she got the inflation piece wrong. is this the beginning of a real bottom for tech stocks or just the bear market bounce? we will find out where we have a bigger bounce it has to do with china and travel stocks. take a look at wynn resorts. china has reduced its quarantine around travel by half.
now just a seven day quarantine. it receives more than 40% of its revenue from the facilities in macau. we see disney up. shanghai disney will be reopening, i believe, tomorrow or thursday, june 30. that is another boon therefore the travel, especially in china. u.s. travel doing well too. american up 4.5%, and marriott up. but i think the overall theme on the day, similar to yesterday and so many days this year, volatility. alix: also that reopening point as well. thanks a lot. abigail doolittle joining us there. coming up, it was a rough few days after going public last week. we are going to talk to the ceo of polestar. join us for that next. this is bloomberg. ♪
this is bloomberg. keeping you up-to-date with news from around the world, here is the first word. nato is set to label china as a systemic challenge when it outlines its new policy guidelines. merck has also learned the u.s.-led alliance will highlight beijing's deepening partnership with russia. still, nato will not go so far as to call china an adversary. in san antonio a hospital has confirmed the deaths of to bring people found in and examine symmetry. that brings the death toll to 48, apparently victims of heatstroke. authorities believe they were migrants. texas has seen a surge in immigration over recent years. smugglers sometimes use commercial trucks to bring over migrants. i'm california the state senate has passed legislation that would allow the public to sue firearms manufacturers for harm
caused by guns. it is designed to use energy -- industry standards, despite federal law which immunizes gun makers. it is part of a package targeting gun violence that california governor gavin newsom has promised to sign. global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. i'm ritika gupta. this is bloomberg. guy: thank you very much indeed. i want to quickly talk about what is happening in the markets. the data earlier on, certainly changes the direction of what we have seen today. european equity markets still positive. you have also seen significant weakening of the euro. we have the center conference taking place down in portugal. we are going to be talking about that in the next hour. now we have a special guest for you. we welcome our television viewers and radio listeners joining us live from the nasdaq is thomas engine laugh -- thomas
ingenlath. you have taken the company public, you are now a public organization, a public company. he did that you a spac friday. it is an interesting time to be making such a transaction. generally ev spac combinations have not gone well. why is polestar and its deal going to be different? thomas: well, we finished successfully our listing, together with our partner, and i think us being a real company, delivering already for two years and having a real business going on with a product portfolio already developed, ruling out, i think that made the difference. matt: talk to us about your portfolio. the polestar one was an extra
ride -- extraordinary exciting vehicle, but also expensive and limited. you have the two and have just introduced the three. what are you expecting in terms of a fleet? thomas: yeah, well, this is now the new chapter, with three cars rolling out in the next three years. the first will be the suv, as well produced in the u.s.. we have a second suv coming in 2023, then the beautiful concept car becoming reality in the form of the polestar five, a four-door we have just driven up the hill at goodwood and shown the real advanced stage of the prototype there. matt: guy, have you been to goodwood? guy: he is talking about the festival of speed which just finished. i live fairly close, so i saw plenty of cars going up the hill away from me up toward goodwood.
it is an interesting hill climb. the weather this weekend was pretty nice. thomas: it is -- matt: it is hugely important in the car world. what is even more important right now is chips and supply chain. he talked about the fact you are producing in the u.s., as well as, i assume, in growth in, sweden. what is your supply chain look like? thomas: we are, of course, a big topic, and in 2021 we had made that journey with a very short visibility on our production planning, but of course 2021 and 2022 we successfully have managed to get our cars out of the factories. and now, of course, always the question about covid-19
lockdowns. of course, this will be still in the year 2020 31 of the topics that will be around. guy: in terms of where the business goes, you have 1, 2, three, you say you are going to be expanding further than that. who is your target here? we hearing -- we were hearing from elon musk, and he talked about the supply chain opposition rather than other car companies. do you see at the same way? if you don't, who are you going to take market share away from? thomas: i think that might be a slightly different game. elon and the millions of cars he has, we are obviously positioned in a different segment. we are aiming for the luxury, premium segment. and clearly want to target that market, high profit margins and the volume for that reason. being rather clearly defined by
this target group. so, 295,000 cars we are aiming for in 2025, and of course that is a dimension where we have already secured the production in the factories and are purchasing for all of our parts has happened already. matt: do you have any influence on the charging infrastructure? that is one of the biggest problems for me when it comes to electric cars. there just are not enough chargers. around the corner from my house there are six gas stations. none of them offer electric charging and i have no idea where i would go if i needed some. thomas: it is indeed a very important factor. we have very strong momentum in electrification. -- share from last year, and the charging infrastructure has to develop along the lines, because otherwise it would be a threat to that movement. one thing is the charger you
find right next year, the other question is where do you charge when you are on your trip? electrify america, our important partner, is developing and investing lots of money into developing this infrastructure. same goes for europe. there is momentum, but is it enough for the big movement we have two suv still? matt: i want to talk about dealerships. mi only going to be able to get your cars through volvo? how is that going to work? thomas: we were together with volvo dealers to build up and set up new, what we call spaces, or you will meet the brand. this we have already done in the u.s. big time last year. it will continue this year. we have a very branded experience for our customers. guy: at the festival of speed
guy: so 35 minutes to go until the end of trading in europe. it is turning out to be a fairly interesting day. now i think there is a number of factors coming together to produce some real interest. stoxx 600 coming down. we are up by 4 -- 5.4 percent. while off the highs. euro-dollar, lagarde was dovish. that seems to be the market take. brent crude, catching a bid. we are up 1.4%.
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guy: tuesday the 28th, european stocks are rolling over. euro testing 1.0 five. the countdown to the close starts right now. >> the countdown is on in europe. this is bloomberg markets: european close with guy johnson and alix steel. guy: let's talk about the markets. 30 minutes to go until the close.