guy: live from london, i'm guy johnson. we are now counting down the european close on bloomberg markets, all you need to know. first, let's deal with what is happening in europe, curves darting to flatten. the central bank may need to add more support if rising yields. very different picture at the bank of england. rising yields reflect good news on the economy. the chief economist sees the risk of central-bank complacency on inflation. british airways sees its stock jump. the group saying it will be critical to reopening travel. let's talk about the markets and tell you what is going on. we are starting to see a little

bit coming back into the bond market. we did see comment earlier on the back of what we heard from yesterday, lagarde the day before that. what we are seeing basically is driven yields -- german yields. stocks are down about 1.5% in europe. there is an element of catch up because the selling state side does come after european markets have closed. that needs to be priced in. alix: that is a fair point. in the u.s., there is a little calm here and it is the last day of february mso you are going to have a lot of rebalancing, particularly -- february, so you're going to have a lot of rebalancing, particularly in equity markets. i am using a proxy to track the momentum trade, pre-much flat on the day. yields obviously finding a little stability here, buying coming into the bond market, europe outperforming. still seeing yields down by

about 2%. morgan stanley said you are going to want to sell any rallies in treasuries. position for that steeper curve. that trade is not necessarily done yet. i do want to highlight the bloomberg high-yield index. i have been tracking it all week. the amazing thing yesterday, you saw this move in the bond market and high-yield markets did pretty much nothing. it is going to be hard to get financial conditions to tighten without credit spread widening out. guy: absolutely. in terms of the way the global central bank is dealing with this, let's talk about that. there was a rumor earlier on that maybe ecb was in the market . we have seen the ecb executive board member sang the central banks may need to step up and

deliver more if the bond rout starts to threaten economic recovery. >> in real, long-term rates, at the early stage of recovery, they withdraw policy support too early and too abruptly. policy went then have to step up its level of support -- would then have to step up its level of support. guy: james athey joins us now from aberdeen standard investment. what you make of the moves over the last -- do you make of the moves over the last 24, 48 hours? the fed seemed comfortable with it. the ecb is starting to get worried. james: dramatic, to say the least. i certainly think the last few sessions, the last few days, we went from repricing to something much more technical, position

clear out, capitulation. you mentioned australia liquidity down. the rba have been in the market because of the policy. the added one overnight and that hasn't -- they added one overnight and that has not had a huge effect. central banks have been challenged by markets. whether that is intentional and whether are truly pricing this monetary tightening or this is just driven by long positions being cleared out is difficult to say. central banks so far, most of them have been pretty sanguine. some of them, the fed and bank of england for sure, are almost cheering on this bond market. it has been difficult. we started at a low base. we have moved quickly. in the grand scheme of things, a

10 year nominal treasury would look mispriced on the low side to a significant degree. i do not think there is any macro reason why we cannot go forward. alix: let's weave that together. is the fed doing the right thing? if markets crash, what does that need to look like for the fed to do something different? james: i find myself kind of arguing against -- i find myself argan against my own beliefs because of how central banks are behaving. what we just heard is exactly what i would've expected from central banks, the idea being that these mean you almost mandate to suppress the market's natural reaction. rather than allowing the markets

, you suppress that through bond buying. that has not happened and that has been the main area i have been totally wrong this year. central banks have may be just called that a good thing, a positive repricing. in the previous cycle, they were engaging intentionally and a policy to push down yields, claiming that was stimulus. i cannot really understand, but i have not understood central banks for some time. ecb is different because their policy really is trying to serve so many different masters. of course they are trying to support the economy, but really they are trying to keep the thing together and keep markets from pricing risks appropriately and some of these heavily indebted formations. it is no surprise to me they cracked first. is the fed doing the right thing ultimately? yes. i think now is a good window. there is so much bullish sentiment out there. if the fed can allow the market find his own equilibrium without

additional fed support, that has got to be a good thing. guy: so maybe start to take away some of the pressure ahead of a temper tantrum. so what happens next week, james? you have a lot of fed speak. it culminates thursday with the fed chair in advance of payrolls friday. how do they finesse the message at this point? if they do not reference it, the market is going to see that as being a tacit recognition that yields continue to decline. how do they deliver a message that may be does not alter the direction but alters the delta? james: that is very difficult, i think. the intention of their policy is to create this bullish sentiment, these animal spirits, this higher inflation growth forecast and expectation. that is what they are trying to do and engender. it is complicated. i do not really think words would be sufficient. if the market is running with a

12% growth forecast, i do not think the fed's message is going to stop somebody wanting a 10 year treasury. to me, they will become more aggressive and i think have to act only when we get some serious, more serious across markets. it is going to be difficult to see financial conditions materially tightening if credit spreads are in check and equities are not becoming disorderly. so far, no equities -- equities have been relatively orderly, considering. alix: when it comes to emerging markets, are they going to react as orderly as you are saying the moving yields has been? james: no, i think emerging markets are a different situation. i do not buy the idea that this macroenvironment is universally bullish at all. i can understand the emerging

market equity story. we are likely to see commodity prices continuing to fall, but central banks in emerging markets in 2020 were allowed to engage in policies which normally reserved for developed markets. they were cutting rates aggressively, even engaging in bond buying as their currencies weekend. -- weakened. if we now have a global reflation recycle when policy rates are at all-time lows, i'm not quite sure why you would want to own emerging market local currency duration. we will continue to see yields they are rising. we have had some. you are better protected and some of these markets versus developed markets and terms of yields and curve steepen us, but that does not mean -- policy rates have to be hyped.

guy: i want to wrap it up for this section you talked about the potential for the treasury market to go further unless the fed steps in. what does that mean for europe? clearly the ecb is at the moment at the point where it wants to talk about it. may have to take action. -- it may have to take action. the effect of the treasury market, if it is going to see higher and higher yields, it is going to be absolutely enormous. is there anything the ecb can realistically do to nail european ecb down to the floor without that happening on the other the atlantic? james: obviously, yes, there is something they can do because they would certainly describe their power is being close to limitless. we saw there might be limits on central bank balance sheet accumulation or policy. those limits have ceased to exist. the ecb could make an open ended

commitment to buy as many yields as it takes -- bonds as it takes to keep yields cap. i think really it would be about slowing the rising yields. central bankers, economists seem concerned with the pace of change. unless the level is far too tight. they can. they probably will do that. if treasuries are selling off reasonably dramatically, then i do not think the european duration complex can be immune to that. if you have more entrenched longs, you can help your max -- you can have. where becomes a position clear out. -- you can have periods where it becomes a position clear out. alix: we are going to look at the british economy next. rishi sunak's budget is coming out next week.

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alix: live from new york, i am alix steel with guy johnson in london. this is the european close on bloomberg markets. the chief economist warning ok inflation could accelerate more than expected. he warned central bankers not to be too relaxed about rising prices. >> the greater risk at present, given the balance, is not of central-bank conservatism but instead of central-bank complacency, which allowed the inflationary cap -- cat out of

the bag. alix: james at the still with us. why are we talking about this already? james: to be honest, you have monetary policy is incredibly easy. you have fiscal policy, which is on wartime footing. to pretend any of us understand inflation and inflation dynamics , which is a massive question. sender theories do not to close to what we have observed, which is not inflation either. but the potential for the upper end of the inflation distribution to realize in the next 12 to 24 months is far greater then it has been in a while. the u.k. is a more inflationary economy than others. the average rate of cpi inflation is above 2%.

you would not necessarily think it, but it is above 2%. we have not, during that period, been dealing with 10%, 12% fiscal deficits. i think a lot of it relates to the ideology. he is more of an inflation hawk than others so sees that as a greater risk. guy: how being -- halbane talking there about not just an inflation cat what a big cat. i am wondering what kind inflationary numbers we could be thinking about if we are talking about something more substantial. we are at 81 basis points. how high do you think they need to be? james: the five-year u.k. rpi swap is at 3.5%.

rpi is not the bank of england's chosen metric, but it is a metric. that will average 3.5% over the next five years. on that basis alone, it not look great. the u.k. has less input into inflation. there are so many moving parts. the inflation pictures incredibly complicated, difficult. that will have occurred in exactly the types of surfaces we have not been able to consume or have been locked up that we will rush to consume when we come out of lockdown. the potential for less supply to meet with greater demand in the short to medium-term. the big question, as always come out what does that mean for wages? high prices with flat wages means less consumption power. over time, that is a headwind to

gdp growth, not a tailwind. the potential for an inflation shock which gives way to more inflation is real. higher prices more likely to lead to higher prices. alix: in terms of next week, when we have rishi sunak unveiling's budget, how is that going to play into this conversation -- unveiling his budget, how is that going to play into this conversation? james: it is going to be interesting. the conservatives are still trying to be conservative, but that is very difficult to do at the moment. the reality is they will need to try and give the impression of recognizing that they need to rein in the fiscal policy side but not wanting to do that now, soon, immediately when the economy is still vulnerable. i think maybe you end up with backloaded fiscal tightening measures, which should not have any economic impact today but just retain some credibility.

in the short, out expect things to continue to be supportive -- short-term, i would expect things to continue to be supportive. i think we are in this duration purge until something breaks. the u.k. economy stands to benefit a lot from reopening. guy: james, the government is going to have to continue to follow a lot of paper. -- file a lot of paper. is the qe going to be there to buy that paper? i know it is not necessarily meant to be in terms of the way the mechanism is meant to work monetary financing and all that, but there is the danger that if it is not there we could have a problem. james: absolutely. i do not quite know whether it kicks in. that is a psychological phenomenon. you do not want to get the stage where it has gone too far and things become disorderly. at the moment, it is difficult

to find anybody been truly fiscally responsible. it would not stand out quite so much that it would and another environment when we were running a deficit and nobody else was. the chancellor will be afforded some freedom by the prevailing environment, but that will not last forever, and it certainly will not last forever if realized inflation outcomes are heading up and heading higher. it is want to be careful off. i do not think that is a story for now, but i am sure that is the back -- at the back of the bank of england and chancellor's mind. alix: how would you trade the u.k. right now? james: short. for the same reasons really. we see the u.k. economy as having been dramatically affected by the lockdowns but also having been punished, if you like, by financial markets and the whole brexit saga. i think the bad outcomes are now in the rearview mirror. the u.k. can look forward to a

better economic outlook. therefore, there is a potential for upside for u.k. gdp for the rest of this year. you are not being compensated for better growth, better inflation, and bad fiscal outlook. guy: james, always a pleasure. have a great weekend. thanks for your time. james athey of aberdeen standard investments. this is bloomberg. ♪ bloomberg. ♪

alix: it is time for the bloomberg business flash can i look at some of the biggest stories in the news. a panel of fda advisers will take a close look at j&j's vaccine today come out one of the possible steps of authorization for the country's first one dose immunization of

the virus. bitcoin's rally hitting a speed bump, heading for its worst weekly decline in a year. bitcoin has been down 21% this week. skeptics say the search is a speculative bubble and destined for a repeat of the boom and bust of 2017. british airway's parent says there are grounds for optimism about air travel this summer. they are posting their first annual loss in almost a decade come at $9 billion. the ceo expressed growing confidence. that is the latest business flash. i feel it we have heard this a bit, that easyjet, carnival said the same thing. they are having a lot of bookings, a lot of we will be vaccinated or could counsel for does not work. -- cancel if it does not work. guy: interesting to see what

happens there. i do not know. i think governments are hedging their bets at the moment, putting a positive spin on all of this. the europeans are trying to vague out exact they with they want to do -- to figure out exactly what they want to do. you're definitely buying an option if you are basically buying a ticket at the moment. a lot of people are making that decision, saying i will buy a ticket, get my money back. alix: i was really close to doing that. i did book a hotel for paris in october, but i do not have to pay for it until the day before we would essentially be there.

but i'm hesitant to book a plane flight. guy: airlines are quite happy because they are taking money in it which is great for cash flow. it is about survival on the cash flow front. the liquidity position looks ok at this point. that is why the markets are treading positively. the close is coming next, so i can show you exactly what these numbers look like. these are the final numbers in europe. it will be a puffed -- tough day for the ftse. this is bloomberg. ♪

guy:guy: we are wrapping up the trading session in europe not only for the session but also

for the weekend month. we are done with february. that stick a look at the session. you need to bear in mind what happened over here. yesterday's u.s. session, this morning coming in with a fairly ugly legacy as a result. a fairly sharp moved out of the begin of the day and we have been naturally tracking lower through most of the day. a fairly ugly session. let's talk about it on the month and give you an idea, and little context. you need to know what the journey looks like before you start talking about where the destination is. for one month, the stoxx 600 is also down we have basically just gone sideways, down around .8%. a choppy start to the month. we climbed out of that, that as the bond market route has taken hold -- rout has taken hold, that has had an impact. it has not been a sure madagascar has been in the united states, but the bond market has been in charge --

stabilization in germany. there were rumors earlier on the ecb -- i have not seen that substantiated. we are getting a positive story on stabilization at 76 basis points. really sold off aggressively over the last few weeks. i want to highlight this. look at what is happening in the u.k. continuing to selloff on the back of those comments from the bank of england. this is the gmm. this is top markets on the month, just to give you an idea of what has happened here. some dramatic moves over the last month, which are really worth bearing in mind. the s&p up by over 3%. the bond market, kind of a counterpoint that will be interesting. australia, 77 basis points on

the 10 year. the u.k. has had 49 basis points on the month. u.s. five year, really moving. this is alix's column. copper up by 15%. some huge moves taking place here. this has been a real month of turbulence and in some ways a complete pivot, a complete change of direction for so many markets. the commodity story really ramping up, the bond market story really coming under pressure. equity markets have become the assets at the moment that are the least disturbed by all of this. i wonder what mark is going to bring. march -- what march is going to bring care march can be quite fun for equities. iag being rewarded today not for the record breaking performance on the downside prefer the liquidity position they managed to maintain. -- but for the liquidity position they managed to

maintain. that is continuing to yield dividends today, up .3%. one of the best performers today on the stoxx 600, up by 7%. the company is doing readily will at the moment as a result of being able to offset what has been happening with the pandemic. and then energy. -- engie, the outlook quite positive. alix: you are excited about being in front of that gmm board. it was awesome. we want to talk to a ceo joining us from paris. walk me through the modeling in terms of recovery. you mention you see no more stringent lockdowns and gradually easing of restrictions. i wonder if you see the risk to the opposite -- upside of that or downside. >> great to talk to you today.

we announce our results today and were happy with results. we met our guidance and came out at the end of the year almost back to 2019. we come into 2020 one with a lot of optimism. the covid uncertainty is still out there, to your question on what could still move here. that is something we have not -- something we have taken into account. events are having an impact, so we took that into account also for our guidance for 2021. of course, really a very strong

-- strongly coming back from 2020. guy: judith, good afternoon. it is guy. france at the moment, slow vaccine rollouts. i assume you are factoring in that will pick up. at the moment, there are concerns about the possibility of a third locked down. is that part of the plan? judith: yes, we have to live with this virus. we are much better equipped as a society but also as a company. we have had relatively limited impact. we were pretty much in line with the previous year. that is what we are expecting. of course the vaccines are going to be rolled out. that is how society is

offsetting the negative impact from some of the variants also heading our way. alix: as you see the recovery improving at the euro recovery fund kicking in and 2020 to come out where so much of that is going to go to the green transition, what acquisitions do you have to make? what kind of technology or energy systems are you putting more money into? judith: we have said renewables and networks are our priorities. it will be an opportunity for us to mention europe. the united states is where our biggest renewable platform is. with the new administration coming in, we believe that is going to be an advantage for renewables. energy renovation, clearly an area we are working on.

we are really hoping to tap into some of the projects, also in some of the other countries. guy: out of interest, hydrogen. how big an impact do you think that is going to have? i am always trying to understand how the economy is going to work. you have various deals you have been doing. how big a part of the energy mix do you see hydrogen being going forward for europe? judith: it will be big. we think by 20 -- 2050 all gas will be green gas. hydrogen is one of them. so that is how we are looking at it. hydrogen is still starting small, but as we go through this it is going to be almost -- at

the end of the period. right now, it is mostly a 2030 topic, but we are going to have to work on making it a topic for the 20 20's. it is such a great opportunity. every part of the value chain you need to have hydrogen from production to renewables, the storage, we have so much to offer here. this is one to be big for us. if any company is able to tap into this in your 2021 guidance, you qualified -- tap into this. alix: in your 2021 guidance, you qualified what happened with texas. what steps need to be done on

your end and texas's going forward? judith: there will be books written probably about this topic. it is in the early days. it has been such an unprecedented move in terms of temperature. it was -10. you had pipelines freeze. you had wind turbines freeze. it is hard to say what you do to prepare for some thing like that. one of the things we are seeing, our north american headquarters is in texas. we are the third-largest energy retailer. for us, what helps is really is offsets and hedging. i think that is an important topic in the energy world of the future also because to just have

-- if you do not have the knowledge to manage the system. guy: was it an advertisement for making sure that grids are connected? texas basically existed as an island. it was not connected to other places. obviously there are going to be big differences in whether there are going to be different conditions. is this an advertisement again for the biden administration to invest in more advanced grids? is that where the investment needs to go? judith: it certainly seems there is an opportunity for investment. there is also a topic around the energy market. when you have such big imbalances, that is when you see what we have seen.

typically electricity is over $25 an hour and texas. it went up to like $9,000. you had all these extremes. that is what made for the financial imbalance. the data is not yet available because of how recent this is, but i'm sure there will be analysis. guy: thank you for your time today. we always appreciate you joining us, judith hartmann. let's talk about the european markets. we are now done with the day, week, month. negative session today, unsurprising given the moves we saw yesterday after europe had closed over in the united states. priced that in this morning. how will march go? great coverage coming up on that one. this is bloomberg. ♪

alix: this is bloomberg markets,

the european close. coming up, u.s. transportation secretary pete buttigieg dirt -- joins a radio with kevin cirilli . this is bloomberg. ♪ alix: let's check in on bloomberg first word news, the house expecting to approve president biden's coronavirus relief bill today. that will bring most americans one step closer to receiving a $4000 payment. it is unlikely the measure will include an increase in minimum wage. the senate parliamentarian ruled that cannot be considered under the fast-track procedure being pushed to get the stimulus package through congress. donald trump will declare himself to still be the leader of the republican party this weekend. he will speak to a conservative group in florida sunday. a senior advisor says he is unlikely to say whether he will run for president again in 2024 but will crush opposition in the republican party. the european union, the ecb

president says unless the bloc hurries apple and google will step into the vacuum. she says tech giants are in talks with the world health organization about some kind of vaccine certificate. 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. guy? guy: thank you very much. -- that was futilely done. alix: was it -- futil -- beautifully done. alix: was it? i just read it and it was on screen. we are like puppets or dogs. guy: dogs. alix: squirrels. guy: let's move on from that, shall we? financial markets are pricing in -- that is karma. alix: it is friday. guy: financial markets are

pricing in that we are going to be back to normal fairly soon. we are open to be let out. it is all going to be great again. prominent ceos are saying they want employees back in the office. what does that look like and are they right? stanford economist nicholas bloom has done some research into this on working from home. he did it years before the pandemic and he predict a disaster if this is not handled well. he joins us now. thank you for your time today. let's talk about what is working -- what working from home is actually going to look like after that. there are bosses and big names out there saying we are going back to the way it was pre-pandemic. are they wrong? how different is it going to be? >> i should first point out there is a huge range of opinions. you had goldman sachs yesterday saying they are going to go back to the office. they were not clear if that was

full-time but they are not keen on full-time working from home and their other companies five times their size that are in favor of working from home. google, amazon, twitter. i can tell you the average. i have talked to a couple hundred since lockdown began. the most common policy is post lockdown we are going to go to something like one to two days working from home, maybe wednesday, friday, and the other three to four days coming in the office. alix: the conversations about the k shaped recovery. i wonder if this hurts or helps inequality. nicholas: i think it is a problem. you are right. just to explain where we are now, right now, about half of americans, half of rich northern europeans are working from home. they seem to be doing a full time. they are typically college grads. they are wealthier. the other half has either lost

their jobs, as we see in unemployment numbers, or they are on the business premises. post pandemic, those of us working from home are going to return to the office but not fully. we will be at the office three days a week, two days at home. in a survey, people respond that is worth 8% of salary. basically, educated, better off people like me are going to get to work from home a couple days a week post pandemic. very nice, but the other half of society is not. that is an issue. guy: i read your piece. one of the things that came out of the study was the idea that those that work from home are going to be disadvantaged when it comes to promotions. the way around this is to basically bring everybody in from a team on one day and let them all work at home on another day. that has to be done as a team. you cannot do it

higgledy-piggledy. is that something companies are going to accept? nicholas: you're right. even my views have changed in this. you mentioned working from home. i have been working from home for a decade now. the beginning of the crisis, some people want to work from home five days a week. they love it. a quarter of people tended to be living in small apartment and never want to work from home again post pandemic. the other half of the people, like me, want to go to the office three days a week and work from home two days a week. we are in favor of choices. it turns out there's a problem with that. you look in the research data and find out in large teams, if you have some people working from home four days a week and other people coming into the office, those that work from home suffer and promotions. in a study i did come up promotion rates are halved.

if you look at who is asking to work from home has spent -- post pandemic, it is more likely to be women, young kids, people with disabilities, potentially the very religious. if you let people choose in the short term that is great. you run this thing ahead 4, 5, six years, promotions are going to be concentrated on single young men, and that is a diversity and legal timebomb. i am nervous about letting people choose. i think it is better off, two days a week from home and have everyone work those two days from home and have everyone come into the office on the others. alix: do you see companies and management thinking differently regionally? he mentioned a study in china versus the u.s. or u.k. -- you mentioned a study in china versus the u.s. or u.k. nicholas: a lot of it depends on what housing you live in. singapore apartment are small, often one bedroom, one living room. they are less inclined to be at

home. a firm in indonesia -- generally u.k. might u.s. commend new zealand tends to be pro-working from home. and more crowded asian cities, it is more problematic. less computers. in indonesia, a lot of employees did not have laptops at home. they cannot work from home. guy: ok. i am in the office. you're at home. it will be interesting to see how this ultimately shakes out. thanks for getting up so early. greatly appreciated. nicholas bloom of stanford university institute for economic policy research. greatly appreciated. this is bloomberg. ♪

alix: let's take a look at some of the big events next week. you have sunday marking the one-year anniversary of the first covid-19 death here in the u.s.. monday, the action begins. the senate begins to vote on stimulus. tuesday, a lot of retail earnings at target, kohl's, nordstrom. so a lot of things happening on the ground here. guy: budget wednesday here in the u.k. the budget used to be done. it has become less important the last few years, but this year i think it is going to be important. the big event is going to be the exxon investor day. broadcom friday. china's national people's congress meeting. and of course payrolls as well. alix: it is going to be super interesting. i wonder with the jobs environment what we are going to see on wages. we did wind up seeing wages moving higher. you strip out the extra benefits

in the u.s. and wages start to move higher. that is going to be something. guy: this is the way we are going to differentiate between the various central banks. you are going to have a situation where you judge it by the labor market. if the u.s. labor market picks up, you could argue that will be the green light for the fed to let steam out of this story in the bond market. central banks like the ecb with the labor markets still really tricky. that is going to be the differentiation and keep any way young those numbers. -- differentiation. keep an eye on those numbers. alix: we are just for that. guy: we are going to find -- adjust risk for that. guy: we are going to find out next week. we are heading toward some sort of tantrum. how big it is is up to the fed. they have an opportunity here may be to slowly let air out of the balloon. if they do that, maybe the

bursting becomes less of a bang and more of a pop. that is certainly something people will be thinking about. alix: good visual. let's look at the pop and take a look at what is happening in the markets here in the u.s. a couple things happening. you are seeing equities finding their footing, the nasdaq up. if you are buying yields and equities and selling yields -- selling treasuries and stocks, that is hard. i wanted to highlight bitcoin. that is off almost 2%, much worse than we see the underlying bitcoin. that is interesting. coming up, a former obama administration chief economist will join balance of power with david westin on bloomberg television. this is bloomberg. ♪ mberg. ♪

david: from bloomberg world headquarters in new york to our tv audiences worldwide, welcome to balance a pallet -- balance of power. joining us today is our cross asset reporter. give them what happened yesterday because it was dramatic. >> let's start off with the s&p 500, you are seeing it in the green. it is meandering a little bit with tech gains and that has to bring me to the nasdaq 100 that told you the tech bounce, the underperformance yesterday is turning into tech outperformance today. crude is also pulling back a little bit, not in line with risk sentiment but that could change. that is probably reacting to a little bit from the dollar. the real action is in the bond market, specifically in the five-year yield. you already see that cross back to yesterday's levels. this is why it is so important. if you look a little bit broadly to all of the maturities, the two, the five, the 10,