tv Bloomberg Markets European Open Bloomberg January 6, 2022 3:00am-4:00am EST
the treasuries but also technology. it is signaling they could be much more aggressive in tightening. that was the thinking back in december. since we've still had encouraging news on growth but also on the labor market, and i look at the some of the market movement, what's most interesting as professionals are saying that it is the professionals going in and doing a lot of the volatility. tom: mark cudmore just a few minutes ago pointing to the importance of the nonfarm payrolls that we will get friday to flesh out the picture. some within wall street now pricing in a hike as soon as march. the balance she is in play as well. for some, that stood out as the most important in terms of what came out of these fomc minutes. there was a two-year lag previously when it comes to the timing cycle for the fed.
now, they are discussing the balance she runoff earlier in terms of the rate hike cycle. that is our focus as well. in terms of how that plays across, the selloff yesterday stateside and a drop of more than 3% in terms of the nasdaq and what is happening in the tech space. the ftse 100 down more than 1%, down 1.2%. the cac down almost 1.5%, losing 100 points. the spanish ibex is lower by a similar amount, as is the ftse italy as well. let's see how things are playing out across assets, as the futures look to the open stateside. we have some fed voices as well that will be helping to illuminate for us the views from the fomc, as we now start to price in a more hawkish federal reserve. pointing lower in terms of s&p futures. u.s. 10 year yields holding above 1.73, so continuing to grind higher. the implications for tech but also on the flip side of that, the banks as well.
in terms of the dollar, still bid for the u.s. dollar, gaining as we see that pressure on the euro and we see how that reflects on sterling as well. bitcoin under pressure. we will be talking to jeff currie about this. could it get to $100,000 as it takes market share away from gold? the lead cryptocurrency remains under pressure, down 1%. francine: you know what my killer question for jeff currie is? what evidence is there that people are moving money from gold to bitcoin? these are the sectors on the move. we had a huge tech rout that started in the u.s. two, days ago it was accelerated yesterday. some of the chinese companies were selling off because of extra regulation. let's look at the picture in europe. we have a lot of losses for technology, down 1.8%. the sector as a whole. travel and leisure also one of the worst performers. the telecom sector i want
to say holding strong. a sliver of green you can see. they are performing the best, i.e. flat. they were flat minutes ago. we keep an eye on the situation. it seems like the selloff not as deep in futures as they were a half hour ago but still continuing. tom: we will focus on a couple of individual corporate names. and update on next for its fourth-quarter, changing the dividend as well. losses of just 0.3%. infineon in focus, germany, and listed over there. he saw the pressure in semiconductors stateside yesterday. in terms of what's happening in the car leasing space, interesting from socgen that ald is in a plan to buy pleaseplan and a deal valued at about -- buy leaseplan in a deal valued
at $5.5 billion. let's get the bloomberg business flash now with leigh-ann gerrans. >> thank you. standard chartered and ubs are tightening virus restrictions at their hong kong offices. both banks will move workforces into teams. the new curbs follow hong kong's moves to tighten social distancing measures and suspend flights from eight countries amid a rise in local infections. now, amazon is teaming up with carmaker stellantis to develop software and buy electric delivery vans. the move puts the european auto company against u.s. startup rivian in supplying ev's for the world's biggest e-commerce company. toshiba's second-biggest investor has called for a special shareholder meeting as it steps up opposition for the -- opposition to the japanese firm's breakup plans. toshiba says in november, it intended to separate into three
-- toshiba said in november it intended to separate into three companies after years of corporate governance issues. singapore-based 3d investment partners is requesting a 2/3 vote on the proposed split before it does go ahead. bloomberg has learned that auchan is exploring a fresh attempt at a takeover of rival carrefour after earlier negotiations collapsed. a deal would create the biggest grocer in france, amid challenges from low priced german rivals. and that's your bloomberg business flash. francine? francine: thank you so much. leigh-ann gerrans in london with us. the rotation out of risky assets appears to be in full swing after the fed signaled that rate hikes may be more aggressive than many expected. here's how some of the leading industry voices have been interpreting the latest fomc minutes. >> powell says during the press conference. clearly, they were going to go. >> is this a meaningful shift?
>> i don't think that there will be as hawkish as they were in december. and remember, this is just the fed talking. >> what's changed in terms of the fed's reaction function? >> this is the early stage of a tightening cycle. as you know, it's usually not the first rate hike that matters, it's usually the last one. >> with real rates being quite low and likely to remain quite low, it is still a broadly accommodative backdrop. >> i think the only surprise perhaps was sort of the view on the balance she runoff. >> we should expect volatility to return to markets when we get unexpected results out of central bankers. >> you are seeing orderly volatility in the marketplace because the fed has signaled pretty significantly about their tapering plans. francine: well, now to talk about all of this, florence barjou, chief investment officer of lyxor asset management, and bloomberg markets editor
kristine aquino. let me start off with you. when you look at the hammering in tech stocks that really began in the broader market, it seems to be fueled by continued, intense bouts of selling by professionals. is it a market function that we are seeing the downward movement or is it really that markets are freaking out? kristine: i think you might be the latter. you did get that new catalyst from the fed and their views around the potential case for tightening, which may be a lot faster than markets were expecting. the fact that we are seeing professionals getting into this selloff and joining some of the retail activity that we saw earlier this week really speaks volumes about where market expectations stood as far as the fed was concern prior to hearing from them in the minutes and now in the aftermath. it's really going to be all about the pace now. as we heard from the various voices commenting on this in the aftermath of the fed minutes, it really will be i think key when the federal start, as well as
anything else that they give in terms of the pace and how quickly they will follow up whenever they go with the first rate hike. it is something very similar we saw with the bank of england and probably now, we will see it unfolding fed pricing. tom: let's bring in florence barjou, cio for lyxor asset management. do you see lift off from the fed in terms of rate hikes in march? florence: it's possible actually, but it's not so much the element on the rate front, it is really the reduction on the balance sheet. what i find interesting is the tone of the minutes. because a number, in september -- because remember, in september, the fed was still saying that inflation would be transitory. the fed was really not moving on the rate front. this has really changed in december.
it does look a bit like an overreaction, a bit like a panic, you know? the fed seeing inflation is high, it ispeakish.don't overreact on what the fed has been saying in december because actually, we all know that inflation currently is at peak levels. of course, inflation is going to remain high. we are still expecting it to come down. maybe this is a bit of an overreaction. the market is maybe overreacting a little bit, too. what's important is the change of tone. francine: let me just pick up on that overreaction, because this was one of the main themes for 2021. the fed kept saying that inflation was transitory in the markets did not believe them. the markets, at the end of the day, were right. why is it that the markets are reacting? florence: i think the markets are reacting now because that inflation behind the curve is a
bit validated by the december minutes. now, what the fed is probably going to do his, as they said it, they are going to be very flexible and very nimble in their adjustment. and that's a bit of a change, too, because we have been used to have a very predictable central banks with the very gradual move in rates. the minutes of december, what they are saying is that the fed wants to be more noble. for markets, that means a bit more unpredictable. i think that's what the market is pricing in a bit today. tom: where does this leave financial conditions in the u.s.? there's always been the assumption that you are still going to have decent liquidity in 2022? does that view change? kristine: it's probably something that's going to be a bit of a slow burner. despite the fact that you some markets reacted the way that they did, and yields in particular, i think the reality
is we do still have a lot of excess liquidity and excess cash in the financial system. i think it will be a slow burner sort of theme, may be a story that plays out over three to six months, maybe even up to a year, rather than an immediate reaction. especially because if some of the initial overreaction phase a little bit, then we could see a little bit of easing. definitely one to watch. francine: i know you are a great watcher of yen. yen is now the cheapest ever. is that one of the big yield moves you are watching? kristine: absolutely. the haven space is going to be really interesting. we were talking about a potential way for investors to play the tightening cycle that the fed, the bank of england and other central banks are going to be embarking on. haven assets, such as the yen, definitely going to play into
that. those cheap levels, definitely some investors are taking advantage of that. tom: kristine aquino always so good at getting to the bottom of what is driving these markets. we will get florence's calls after the break. we are going to speak to goldman sachs' global head of commodities, jeff currie, about what fed tightening means for impacts we could see from the geopolitics. also, his views on bitcoin as well. this is bloomberg. ♪
♪ tom: welcome back to the open. we are 15 minutes into the european trading day. pressure continues across the european equities space after that handover from the u.s. stoxx europe 600 down 1.3%. the ftsemib in italy down. -- the ftse mib in italy down. technology right atop the heaviest losses. still with us, florence barjou, cio lyxor asset management. before the break, you said maybe this is a bit overdone. does this mean potentially there is a buying opportunity here?
if so, where would your focus be? florence: it could be a bit overdone. obviously, we are talking about flows and liquidity adjusting. and with valuations being very high so the market taking a breath, that's not surprising. the first days of the year are very much in line with what we see for 2022. if you look at the market moves, the higher rates are certainly not linked to inflation. breakeven rates in the u.s. have been coming down. the story is really about growth remaining strong and the term premium, meaning uncertainty in monetary policy, increasing. what we see is the growth story and not inflation story. logically, the fact that value is underperforming, in fact, our basket of value stocks in the u.s. was up yesterday. we see growth underperforming, value increasing, europe holding up better than the u.s., this is something which could continue through 2022. francine: let me bring you to my
morning -- one of my favorite authors is quoting in this piece "spinal tap." he talks about the fed's minutes shaking the world. last year was a good one for risk assets in general, u.s. stocks in particular. how good can we say it was? the last few days have been full of the thames to put 2020 into context. this may be too much. i think it's useful. onto that, how difficult is it going to be making money in these markets compared to last year? florence: he's right, it's going to be more difficult to make money this year. you know, last year was really a year of expansion, combined with very supportive policy, on the monetary and on the fiscal front. we are going to see this year, growth monetary policy
normalization -- a growth normalization. growth is going to be softer, earnings are going to be softer. we are going to see wage pressures. broadly speaking, still an environment of positive growth and hopefully, you know, a pandemic normalization. but we will see, we don't expect at least, to see double-digit returns that we posted last year. tom: where are you looking for real returns in this environment? is there a dividend play that you could call out for us? florence: i think you are right, it's very important in the current environment to be looking for real returns, because rates are moving up, but inflation is still high, so real rates are going to stay negative this year. when you're an investor, will you really want to get our real returns, so you are right, dividends could be an
interesting theme. loans in the debt space, floating rates, obviously, and real assets. these are all the plays that we are looking at typically on the real income front. francine: thank you so much. florence barjou there, chief investment officer at lyxor asset management. value stocks in europe actually have probably -- to outperform some of the u.s. counterparts because they have a strong relationship with the u.s. 10 year yield. thank you for bringing that chart to our attention. coming up, as the wave of omicron infection peak, [indiscernible] the latest on the coronavirus next. this is bloomberg. ♪
♪ francine: welcome back to the open, everyone. 22 minutes into the european trading day. the selloff continuing. the focus firmly on what the fed said but we saw a rout n tech stocks -- in tech stocks that's been exacerbated at the moment. italy plans to make jabs compulsory for people over 50 and will further curtail what unvaccinated people can do after covid cases rose to record levels. in the meantime in france, president emmanuel macron is under pressure after the country
suffered europe's highest ever daily count of infections yesterday. joining us now for more is sam fazeli, head of research at bloomberg intelligence. president macron is coming under pressure after giving the interview where he says he's going to do everything he can to [expletive] do something about the unvaccinated. does that work in france? how, as a world leader, do you make sure that the unvaccinated now go get vaccinated? sam: yeah, i mean, you just have to keep making it more and more difficult to be involved in society if they don't want to play by the rules of society. the rules of society require that we are conducting ourselves in a way that does not endanger other people's safety and lives. you have a higher risk of going to hospital if you catch covid,
which probably people will, and that then impacts -- which is something you cannot deny. whether the phraseology is correct or not, his direction of travel is correct,. . in my view tom: where we are in this peak when it comes to omicron? warehouse -- we see hospitalization rates starting to increase. where we are -- where are we in this trending variant? sam: if we go by what happened in south africa, and that's a big if with a big caveat on it, then i think for at least the u.k., which started earlier than everybody else, it should be within this week or next week. so, that's where we are looking. don't forget hospitalizations carry on as cases peak and deaths will carry on.
we have to hopefully keep our fingers crossed that we are teetering on the peak, which of course london appears to be showing that. francine: is omicron now the dominant case? have they gotten rid of delta? is there anything else that you are looking at that could be worrisome? sam: omicron, for the moment, is pretty much the dominant very. i don't know if delta has been completely put to rest, but certainly today and currently, the majority of cases are likely to beat omicron because of its ability to infect, your respective of other you have immunity or not. tom: ok, sam. what do you make of israel's -- you got the mandate in italy and then israel coming out with a fourth shot and pushing that campaign as well. how effective is that likely to
be? what do you make of italy's mandate? sam: yeah, we've already seen data for the third shot were after 10, 15 weeks, you begin to see waning protection against the infection. all these measures are trying to increase protection against the infection. if we believe, if they see some data that suggest that maybe they are seeing a small bump in hospitalizations again, despite the third dose, then it does make sense to give a vulnerable people, who are the most likely to go to hospitals, a fourth shot. perhaps it has become an annual or every six months for those people. francine: thank you so much. sam fazeli from bloomberg intelligence. still a lot we need to figure out with omicron. we will be joined by jeff currie , global head of markets at goldman sachs. we will be talking about markets, cryptocurrencies,
currie. the markets, they are worried about those fed hikes coming. tom: fast and furious normalization is at work. they are less interested in that timeframe for rate hikes and much more interested in terms of what came out in terms of the fed balance sheet and how it looks like officials are willing to much quicker than they have to in previous cycles. in terms of how this is playing out, losses across the benchmark. of course, pressure from the nasdaq is down. yields are elevated above 1.7%. the dax is down. we are seeing losses in the cac. in that u.k., slightly less worse. they are down 17 points. in terms of sector breakdown.
every sector is not red. banks are lower. technology, losses of 3%. semi conductors coming in. all the way to the frothy parts of the tech sector. seems to be gaining legs and momentum. that is the shape of play 30 minutes into the session. let's focus on that geopolitics in the commodity space. russia is sending troops to kazakhstan. the central bank will temporarily halt. they are calling for greater democracy in the country. for more, we are joined by our correspondent in moscow. what is the view in russia, moscow, over what is transpiring in kazakhstan? >> hello.
russia does not like to have any kind of popular protest arrived in the countries on his borders. this is the second time in this many years that russia is supporting a leader who is facing the biggest challenge in decades. last year, it was belarus. now, because extend -- kazakhstan is facing this. they have become the element. russia and their allies and their security allies are sending troops there to help put down the unrest. francine: good morning. we are also getting news from a police spokesperson saying that 12 police have been killed in a protest. how exactly do these protests play into the ukraine session with russia? >> we are hearing that at least
300 have been hurt. we are only hearing about the police deaths right now. this is a violent situation and is distracting attention as russia is heading into sensitive talks with the u.s. and nato next week. those talks are about the situation in ukraine. the enlargement of nato, russia is demanding that nato pull back and stay away from its borders. the u.s. has been warning that russia has a major troop buildup on the border with ukraine and has warned allies that russia may invade. francine: thank you. we will keep a close eye on the situation. joining us to talk about commodities and how this is all impacting not only opec but also some foreign affairs we could be facing. jeff currie with goldman sachs.
are you bullish on commodities? what will outperform the rest in the next year? jeff: extremely bullish. if you look at the set up we have going into next year, equities, stress valuations, come back at bonds are at a high level. record dislocations in markets. you still have a lot of money in the system. finally, if you look at the investment positions, it is very low. what does that tell you? the best place to be right now -- we think you will see another year of outperformance of commodities and real assets. when we begin we go back to the core thesis that we put out in
2020 of october, this is the beginning of a commodity super -- that will go on for years, potentially a decade. tom: the beginning of a commodity super cycle. i want to threat that back in, what is a russian invasion of you came -- ukraine, what does that do? jeff: i think that event alone will not have a significant impact on supplies. kazakhstan is a much more serious direct impact to supplies. i think it illustrates the broader dynamic care. if you have sanctions imposed on russia, that interrupts their ability to bring in supplies. the key point russia is that they cannot even hit their opec" right now because of a lack of investment. if you throw that on top, it is going to constrain supplies further.
i want to emphasize this, there are only two countries in the world right now who can produce more today than they can in january of 2020, before covid. saudi arabia, uae, every other country struggles to hit that level. in that u.s., 1.8 million barrels a day below that level. oil has declining rates. if you do not invest, the production declines. we feel that. francine: i want to ask about uranium then go back to oil. we are seeing this crisis in kazakhstan, is there a potential crisis for the price? jeff: uranium has a very bullish outlook. the realizations are becoming that you want to solve limit change and decarbonizing, you knew to do this with micro
janitors -- micro generators. then, you throw these issues on top of it, kazakhstan, it creates a much more bullish outlook for uranium. one thing i am watching is for one of these governments in europe to classify nuclear power as being esg friendly or green. i think we are getting close to the happening. tom: what does this bullish view translate, how does that translate in your forecast for prices? what do you have on brent, for example? jeff: our target is $85 a barrel for first quarter. near and hitting $90. that is looking increasingly unlikely. adding to the geopolitical uncertainty, if you push iran back, $85 moves into $95. this market has potential to get
very tight over the course of the next 3-6 months. you have to remember, investors do not like commodities, they do not like the space. if they get interested in this environment in which you have tight fundamentals, the upside over the next 3-6 weeks could be substantial, not only in brent but the entire commodity complex. francine: how high can oil goat this year and does opec -- does oil go this year and does opec come in? jeff: i will not give you that number. it got me in trouble a decade ago. in terms of risk, we are going into an environment which is unprecedented. if you look at that liquidity in the system relative to oil prices, it is still at low levels. that means a tolerance of the global economy is much higher than any other point in time that we have seen.
if you put that into context with wages increasing, subsidies in europe, the upside could be substantial. if you go back to the opec plus ability to manage this, saudi, uae, the rest do not have the supply available. access to capital in this market is constrained. no one likes the space. they are not giving money to it. if no money, no ability to invest. i don't see that stopping in the near term. that creates the upside. tom: the question about growth in china, what is the demand looking like? jeff: despite the fact that omicron has led to lockdowns, so far it has not had a significant impact anything other than jim. the impact to demand has not
been as large as people feared. turning to the middle side, the focus is on chinese property market. the government -- a rate cut, local governments have on issues. they're asking banks to extend credit for properties. i think we are past it. another fact that is overlooked, 92% of the projects that evergrande stopped are back in business. only 8% are off-line. look at the demand for finishing projects, things like copper, nickel, the demand will remain high. another thing to think about, china. last year the u.s. was loosening policy while the chinese were tightening. the global was imbalanced. what will happen this year, the u.s. will tighten in china will
loosen. francine: very quick, we have to pay for this airtime and go to break. the pandemic sped up already for copper, at what weight does it become a more important commodity and oil? jeff: 2022 is the transition between the recovery demand coming out of covid and the green demand that we see. it is passing the baton. structural deficits across the metal markets start to bite in late 2022 entry 23. that transition is underway -- we think it will go underway. tom: jeff currie staying with us. can bitcoin hit $100,000 this year? stick with us. this is bloomberg. ♪
u.s. 10 year remains elevated. a bit of flattening in the yield curve. on the crypto space, bitcoin had a record-breaking year. in 2021 -- they have not had the best 2022. they have slumped to the lowest level since december. they are trading under $43,000. we look at the outlook with goldman sachs head of commodities. -- head of fx strategy. he thinks the strategy still has more upside. >> they did not like the hawkish minutes that came out. longer-term, we still think good prospects for the asset. we see bitcoin as a macro asset, going through a social adoption phase.
we think bitcoin can continue with global market share, reaching something like half sore market value. -- store market value. tom: still with us is jeff currie, goldman sachs global head of commodities and research. how are you looking at bitcoin now in terms of behavior, does it feel like a commodity? jeff: it is like any other real asset. the outlook is positive for real assets. they are not sensitive to rising interest rates like in other markets. i agree with zach, the upside is substantial. i would not call it digital gold but digital copper. it is a risk on asset, procyclical and traits like copper. does not trade like gold. if it is going to steal market
share, it will steal from copper and oil. bitcoin cannot live outside of the block chain infrastructure. oil cannot live outside of transportation. what is different about gold is you can bury it in your backyard in it can function. using the analogy of gold i do not think is appropriate. it is more like copper or oil. you do not bury oil in your backyard and you do not bury bitcoin in your backyard but you can bury old. the difference is critical. that is what makes bitcoin a more procyclical asset. oil and copper are the best hedges against inflation, not gold. i think that is critical, the distinction. i like the upside. francine: a massive shout out to -- who also -- you always try to make a smart with bitcoin.
what service does bitcoin serve in a portfolio? it is sketchy in terms of the correlation between bitcoin and breakeven's? jeff: when we think about what makes oil a great one, it is the best hedge against inflation. when they get those inflationary pressures, procyclical, and you have rising interest rates that hurt your equities and your bonds, you still have that level of command pushing higher. as that demand pushes higher, even though growth rate is declining, you can have declining demand and the oil price will continue to go up to your equities and bonds are going down. that is what gives you diversification. bitcoin is just like oil, it should give you the same type of diversification that oil and copper gift. gold does not do that.
-- give. gold does not do that. you pump money into the system, real interest rates go down and gold goes up. once you get cyclical strength, bitcoin, copper, oil perform. tom: do you cut your holdings and gold at this point, given some market participants pricing in high? jeff: we look at gold, two things. one, potential that they over hike and lead with a recessionary environment, not pricing in. or you end up with rapid inflation and they are under. right now, gold is pricing in a goldilocks scenario, they get it right perfectly. think there is upside and gold, another $100 an ounce upside. we continue to increase our
holdings here. that is against the hedge that something bad would happen. you do not want gold pricing in your backyard. if it is, something is wrong. we still want to hold it as a hedge. our core outlook, what you want to hold onto, procyclical commodities. francine: thank you, jeff. we will talk monty's and opec plus and look at what is happening in technology stocks as some of them slumped. this is bloomberg. ♪
francine: welcome back to the open. a lot of pressure in technology stocks. moves exacerbated by professionals coming in and selling off. on the back of the minutes yesterday, from the fed, it started at the beginning of 2022. let's get to bloomberg first word news. after covid cases rose, elite makes vaccines compulsory for people over 50.
in france, more than 300,000 cases. north korea has testified -- testfired a hypersonic missile on wednesday as it continues to develop strategic weapons in a challenge to the u.s. and its allies. state media says the missile precisely hit a target more than 430 miles away. the test comes days after leader kim jong-un indicated nuclear talks with the u.s. were a low priority for pyongyang. lawyers for novak djokovic have mounted a legal challenge against australia's decision to deport the world's number one tennis player. that's after federal officials overruled the state's earlier vaccine exemption for djokovic. the australian board says he offered insufficient proof of vaccination to enter the country for the upcoming grand slam. this is something that has captivated -- >> rules are rules, and there are not special cases. rules are rules. the is what i said yesterday, that's the policy of the government. francine: when he was granted
the visa, so much anger. you see that reversal, what ever your abuse, it was a harsh lesson. tom: a reminder of what is happening in australia with this pandemic, the clash of states and federal. it has led to mixed messages. everyone want to see him play, and delete athlete, you -- an elite athlete. it sends the wrong signal. they had to call out. this is what is happening on the ground in australia. he is sitting in a hotel in london. francine: if he is watching us and wants to call in, we are available. i don't know if we talk markets with him. u.s. futures are falling again. but have a look at what they are telling us at the moment. huge pressure on technology stocks on the back of the fed call. interesting view from -- today.
tom: great conversation we had with jeff currie around bitcoin. he thinks it should be more aligned with copper, not gold. the risk is with cyclical. francine: that was a great interview. i urge everyone to go back and watch if you missed it. that is it for the "european market coat " surveillance," is up next. this is bloomberg. ♪
♪ >> powell said during the conference, they were going to go. >> after the few minutes that came out earlier today my time. longer-term, we think good prospects. >> for the issue of mr. djok ovic, rules are rules. >> this is bloomberg surveillance early edition with francine lacqua. ♪ francine: good morning, everyone, and welcome. i'm francine lacqua in
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