tv Bloomberg Markets European Close Bloomberg January 12, 2022 11:00am-12:00pm EST
starts right now. >> the countdown is on in europe. this is "bloomberg markets: european close," with guy johnson and alix steel. ♪ guy: 30 minutes to the close. quick refresher on the price action. european stocks up. energy stocks, mining stocks doing the heavy lifting. we are potentially, according to some, about is he some fx volatility. this is u.k. nat gas, down by nearly 6% today. similar story when it comes to the contracts as well. basically, we are all kind of responding to the cpi number. the highest number since 1982. alix: it is definitely hot, yet you are looking at some kind of relief rally in the u.s.
what was actually priced into the market? the nasdaq up by 0.1%, but off the highs of the session, so watch this space. how long can this relief rally actually last? just to point out what is leading it, the faang index of those large big cap tech stocks up by 0.6%. interestingly enough, the dollar, the bloomberg dollar index at a two-month low, the lowest we have seen since the beginning of november. the real question is why. how much more downside can we really see in the dollar? that really pivots the conversation over to your neck of the woods, what we will see with the ecb. if we see in ecb that is going to have to move faster, at some point does the pendulum swing back to the u.s. as you have money flowing in? yields staying very firm right now at 1.73%. guy: it feels to me like dollar weakness rather than euro strength today. i know we are north of 1.14 road
dollar, but that is the feeling i think we are getting right now. it may switch. we will wait and see. certainly the focus is going to shift to europe this year. this value story we have been tracking so carefully, what a cracking start to the year. the question is, does it have legs? that is the question a lot of people are trying to figure out right now. have we priced in the four hikes the fed is going to deliver? why would devalue trade continue?? does that favor pushing money towards europe, which may accelerate that move on euro-dollar? goldman sachs out with its client survey, giving us an idea where it sees the money maybe starting to flow. certainly the expectation, and this is the survey in terms of the geographies where money is likely to be invested, which region will perform best in 2022 in local currency terms. that last bit is important. europe, 36%. the u.s., 32%.
i would be interested to know actually in reality whether there is any significant difference. asia x japan, 18%. quite interesting. some are calling for a significant japanese outperformance this year. euro certainly comes out on top. will that finally actually come to reality, as alix and i have discussed many times? the reality has never really come through. let's get another view and another voice on this discussion. candice bangsund, fiera capital vice president and portfolio manager, joining us now. let's talk a little bit about whether the reality of this situation is going to come to the fore. is europe going to outperform in 2022? candice: thanks for having me. in 2022, we respect that value rotations continue, particularly given the strong economy,
elevated inflation, and the catalyst that we need is higher bond yields, particularly at the long end. we have not seen a very notable move in the 10 year, and this is what we need for that value trade to take hold, to benefit the financial space resources. this inflationary environment we expect in 2022 ultimately benefits the cyclical value sectors that are tied to the health of the global economy, and of course will benefit from higher interest rates, so this is inherently a play onex-us stocks, particularly in canadian and european markets. alix: is it a tactical trade the first half of the year, or a structural shift? candice: as of right now, we are a little bit cautious early on in the new year. we have been expecting the last few months more sporadic volatility as investors digest
this transition from a policy standpoint. we are going from extreme accommodation to something incrementally less supportive, and this typically does in just volatility into the financial markets. as of right now, we expect this volatility to indoor and near-term. if we do see a material pullback , given the optimistic outlook longer-term, we would use that as a buying opportunity, and that is where we see outperformance in the value cyclical space persisting for the remainder of the year, resulting in ex-us outperformance, particularly in europe and canada. guy: in terms of how quickly that could happen, will it be over fairly quickly? a lot of people are describing this as a trade. this is not a long-term shift. i hear what you are saying about the volatility, but in terms of the duration of this move, how
long is it going to last? do i want to think about it as a trade or think about it as something longer-term? candice: i think you would like to think about it as something longer-term given the longer-term outlook that is still quite constructive for macroeconomic perspective. we are heading into another strong year of global growth, above trend. policy, while indeed normalizing, is far from restrictive. this is a very constructive backdrop for risk assets, specifically those sectors that are tied to the health of the global economy, and what we missed last year and even in 2020 was that move in interest rates because of course, there was a lot of uncertainty pertaining to the pandemic. this is what really drove that technology trade and the growth defensive oriented trade. now that the global economy is on solid ground, inflation running high and expected to continue to do so, interest
rates moving higher, these are the catalysts we need for more long-lasting outperformance in that value trade. alix: let me talk about the energy story in europe, which seems a lot worse than here in the u.s., and it is not necessarily a supply situation. it is a demand chain situation. citigroup says europe faces a $1 trillion energy bill, and the energy is becoming prohibitively expensive in europe, and that is going to affect consumers as well as all industries across the board. at some point, does that start to crimp growth? does that become a different story? candice: that is the big question right now, is disinflation narrative and the impact on consumer spending. what we have seen so far is that there has not been a lot of impact. you look at consumer expectations for long-term inflation, and they are actually quite stable. of course, the near-term expect patients have spiked higher, alongside higher gas prices, oil prices, etc., but long-term we
are seeing consumer expectations come down and remain consistent with stability. i think importantly from a consumer standpoint, job markets are improving. weight she's -- wages are on the rise, and savings that have been stocked up during the pandemic should help alleviate some of that pain as well. guy: there are some that believe we are late cycle. there are some that are even starting to talk about a recession. there are definitely fears in the market that the fed is going to struggle to deliver a soft landing, and if the fed struggles to deliver a soft landing and gets it wrong, that recession reality may come to the fore. if that happens, how does that change your outlook? candice: recession would change things materially. right now we are still quite constructive on the stock market in general. of course, if recession was on our horizon, which is a 12 to 18 month horizon, we would be looking to go underweight
software. that defensive play in the u.s. has likely outperformed. but we don't see that is the base case. our base case is for that reflationary recovery to unfold in the next 12 to 18 months. we do not see a recession on the horizon for at least the next few years, and that is because it will take some time for policymakers to get towards neutral, not to mention restrictive terrain. so this is essentially in our view extending the visibility of the cycle. alix: what changes the german 10 year to reach zero? candice: i think what you are seeing is a lot of spillover. just last week, stemming from the u.s., we saw that global bond selloff really ripple through all of the markets. this is consistent with that outlook that we do project for the coming years. stronger growth, higher inflation.
bond yields need to move higher. yield curves are steepening now. particularly for the financial sector versus the growth space. alix: super appreciate it. really appreciate you coming on for that. coming up, we will follow the energy story even more. citi says europe is facing a $100 trillion energy bill. we will break that down more with the founder and president of gas vista, joining us next. there u.s. tanker is headed to europe. is it going to be enough? this is bloomberg. ♪
>> -- are clear about the prospects for progress in these talks. they express serious concern about the russian military buildup in and around ukraine and called on russia to immediately de-escalate the situation and to respect the sovereignty and territorial integrity of its neighbors. alix: that was nato secretary-general jen stoltenberg -- secondary general jens stoltenberg -- secretary-general jens stoltenberg. more arrivals of liquid natural gas cargoes into regions from the u.s., those vessels are now rerouting to europe, leaving asia potential he exposed to a price spike in the case of a sudden winter cold snap. to a nest is leslie -- joining
us is leslie palti-guzman, gas vista founder and president. will it make any dent in gas prices in europe? leslie: the trend is definitely towards more lng cargoes heading to europe this month and next month. we see about 8 million tons of lng heading to europe in the last week of december and the next three weeks. the outcome of the impact on pricing and whether or not it will be enough is going to depend also on the weather and gas pump moves in the coming weeks. guy: what are you expecting from gas in the coming weeks? that is the big question, along with the weather. the iea out today, talking about the fact that maybe russia has exacerbated europe's winter gas crisis.
do you think we are going to see any shift in the policy when it comes to gas? leslie: that is the $1 trillion question. gazprom has been unpredictable. all of the potential signals, the level of gas storage in europe, the timing of the refilling of the storage, you name it. you they remember in october, vladimir putin made an announcement that he would stabilize the market. that did not happen. but each time we see an announcement from gazprom or the prim -- or the kremlin, we see a rise, and that basically confirms that gazprom, the kremlin have still an outsized role in europe's gas market. they can, depending on their
moves, they can influence the pricing, the level of storage, fuel switching, and they have been playing with the signals and traders. alix: how do you know how much of it is russia can't fill the pipeline because of its own needs and supply issues versus they are using it as a political tool? leslie: there are not much independent sources in terms of production inside the kremlin. they have their own need, of course. but what we have seen is they had no issue fulfilling their long-term contracts. the issue has been in them limiting the amount of gas available on the day-to-day spot markets. so they have the ability to fulfill their long-term contracts, but not the short-term supply, which is questioning why they are fully
able to respect one, but not the other. guy: what happens next winter? what do you think we are going to be looking like as we head into september, october next year? to what extent do you think we will see some of this storage being refilled back up to sufficient levels, or is this something we will have to be factoring into next winter as well, and the implication for inflation is something we need to start thinking about now? leslie: i think we are still looking at the very volatile gas pricing in the coming months. there is the russia factor, but we also need to look at other suppliers, specifically lng in the european gas market. the european economic recovery and the forecast for gas in the sector, of course electricity, but also the transportation sector and industrial sector, so
basically i think that the situation will improve, but we are still looking at high prices and the double digits for a while. alix: there is some question as to if not tear gas and nuclear, for instance, will be accepted into green as europe transitions to this green energy plan. how does that factor into the medium-term outlook for demand from the continent? leslie: i think that gas and nuclear will be included in the european economy. that is a realistic vision because we need gas in the near and medium term during the energy transition, and that will give us a little bit more predict ability also on the investments still needed in the gas sector, and that could be investments that are for lng imports, for oil and gas storage, enter connectors, but
also it will be able to switch to include also low carbon gases such as biogas or hydrogen in the future. so i think it is a pragmatic decision. in terms of demand, the demand of gas is real. you can see also that the german coalition has recognized the role of gas during the energy transition by germany utilizing coal plants and nuclear generation. in france right now, you have also a shortage of nuclear power , so there is more reliance on renewables, but you need still gas is a balancing factor in the electricity sector. guy: the russian deputy foreign minister briefing right now, talking about the fact that he presented nato with russia's analysis of the worsening ties between russia and nato.
i guess all bets would be off, at the point at which russia may be does put boots on the ground in ukraine. we will watch the situation very carefully. leslie, thank you very much for your analysis. the gas vista founder and president, thank you very much, indeed. coming up, we will turn to u.k. politics. british prime mr. boris johnson says i'm sorry for the second time in barely a month. he attended a party in a downing street garden. what does it mean for his political future? what does it mean for politics and the u.k.? that discussion is next. this is bloomberg. ♪
♪ pm johnson: with hindsight, i should have sent everyone back inside. i should have found some other way to thank them. and i should have recognized that even if it could be said technically to fall within the guidance, there would be millions and millions of people who simply would not see it that way. guy: british prime minister boris johnson a little earlier today, apologizing for attending a gathering while the u.k. was in lockdown in 2020. it feels like a long time ago, but it is fresh in many people's minds. the real question is, was that enough to at least defuse the situation for now? it is not going away.
this challenge is not dissipating completely for boris johnson. but his strategy has always been let's hope something else comes along that will divert attention away from this. david merritt joining the onset now to talk about this. that is the question. what did what we heard from boris johnson do in terms of affecting his political trajectory? david: well, it kept him in 10 downing street for today. it has certainly been one of the toughest days of boris johnson's premiership. you saw his expression there making that apology. hang donald -- hangdog was the expression our reporter use. this man one a thumping majority for the conservatives, and now people are talking about his power draining away. not only does he face calls for resignation in today's prime ministers questions, but he's being called into question by
his own side. mp's openly calling for a leadership challenge. that is quite a difficult position to come back from for any prime minister, so boris johnson, yes, he is still in 10 downing street tonight, but his position is looking very precarious. alix: i wonder what shiny new toy we will get out of downing street to sort of diverge from this. something has got to come up to make the public forget about it. david: that is what mr. johnson will no doubt be hoping. he talked today about waiting for the results of this official inquiry. that could be next week. it could be even longer than that. will something come up? there is some good news in the background that the omicron wave is definitely on the wane in london, and the country may be beyond the pandemic, ahead of many other countries. but all of that good news has been drowned out i'll of political noise. mr. johnson is just going to hope to sit tight and hope the
public gets bored, but this story has been running from any weeks. the longer it goes on, it is only raising the anger of those who had to miss family funerals or relatives diane, and the trouble for mr. johnson keeps getting worse. alix: i love reading about this story. i am sitting here in new york city. lou briggs david merritt joining us. we are about 15 minutes away -- about five minutes away from the european close. inflation pressures have become broader. she still excites inflation pressures to move down, but does support raising rates in march if the outlook stays the same. this is bloomberg. ♪
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power higher unlike their counterparts. they have positive for the year. adding to that a little bit. in germany, up by .4%. two areas of real strength. clearly, we have had to factor in the u.s. ppi number. we have basically been pushing up throughout the day. not by much. we are up .6%. tracking back up. 490 that we saw towards the tail end. basically, resources are climbing higher. really adding to the upside. they are up very strongly. we continue to see crude remaining very elevated.
health care, down by around .5%. that is the breakdown. let's talk about some of the individual names. down by .4%. what is interesting is the stories that we confirmed a little while ago. it looks like one of the bidders for the city business in mexico -- they are looking to exit. it could potentially be one of the acquired. up by 7.3 percent. really positive in this sector right now. really powerful upside. then we come to phillips. this is the story of the day. what we are seeing, the reason for that, they continue to have ongoing issues.
the products that they have been producing continues to weigh quite heavily. it is a supply chain story. it is a really painful one right now. as a result, it is starting to impact the number. what is the read across for ge? it will be interesting to see what the crossover is into that ge healthcare business. >> the recovery delayed. maybe we have not hit those peaks supply chain issues. they report later in january. have we peaked in terms of supply chain issues? >> i think it will be interesting to see what else comes out of this earnings season. a peak and supply chain issues is not the same as this thing over and done with.
if we start to see early signs of easing, did -- that does not mean that everything will bounce back to normal. they will continue to have trouble in the fourth quarter. there are big differences in how they have been able to manage these better. they have been able to navigate a little bit better. it will be interesting to see what the implications are for the health care business. they said that they lost out on about nine percentage points because of challenges, getting product out the door. i think, if you look at what they are saying, it does raise concerns about whether those challenges have persisted for ge as well. the point about some companies
managing this better than other, they were saying that the semiconductor challenges have peaked. it may come down to operation. >> how company by company is this? the chip shortage mentioned that there were prices going through. if that is still happening, what kind of company do you think we will be looking at? >> all of them. so much of the economy has gone high-tech. we have talked about semiconductors with construction and agriculture. health care, imaging equipment. we have seen a huge push to add digital capabilities to this old-school equipment. they are a lot more dependent
than they once were. perhaps not as much as some of the more high-tech oriented. >> thank you as this is certainly well represented. not only having to struggle with the challenge of covid, but also brexit. the first time in person. that is one factor that we have to think about. the other factor is what is happening with these new rules. these systems have been brought in. they have been brought into the beginning of the year. they are having a huge impact in
terms of just six. not only have we got this new movement system, which the u.k. has just introduced, it looks like a complex customs arrangement. it is huge, down into places like nova. joining us now to give us her take on this, elizabeth. thank you very much, indeed. how bad is it? give us a sense of what is happening with the supply chain story. >> they -- it is because they have come in. it is a portion of goods that
they have correctly. wholesale, systematic issues. there have been delays. we do not have the official stat on the delay time. we are hearing it resolved within two hours and we are hearing it about 90%, paperwork. some are complex. generally, we are seeing them come through at the moment. >> where is the biggest bottleneck? i feel like that is all we
well. a lot of issues still ahead for our industry. they will determine the issues to really tackle in the year ahead. >> this is not a situation that will not be alleviated anytime soon. >> in order to attract more people into our sector, there are some changes that need to be made. particularly, one of the things that put people off, either themselves or their children to be lori drivers is a decision that is not safe or hygienic. really, we need to focus on these places. in terms of the terms and conditions, and how our industry is valued. >> what kind of increases do you think that will need to be made?
>> even up to 39%. wages have been going up. some companies are seeing some difficulties. whether those wages have gone up and gone up dramatically. we are also needing not system to drive testing. about 45,000 did not take place. wages have gone up. >> in terms of the regulation and the issues that we are facing around the new brexit requirement, they are not fully in place yet. what is your sense thus far about how some of this will be resolved? you mentioned the i.t. system.
it went you think the next phase will come, as a result? >> we saw it a year ago. the paperwork can be mastered quickly. however, the bigger issue, i think, is coming up in july. we have paperwork that will need to be checked. a special border inspection site , special facilities. that is a lot, but we really need a result.
that is what i will be facing moves -- facing. it will take more time. a lot of the changes to the documentation, the -- it can be done away from the border. we could see those delayed. it could be happening there. >> elizabeth, policy director, we will keep checking up with you. a couple of things happening in relation to russia right now. you are looking at a live shot of the foreign minister. it is holding a briefing. a couple things. they showed some big differences.
they did present nato an analysis of worsening highs. the situation is still a hard talk. at the same time, u.s. officials are briefing reporters on potential sanctions. they are seeing contingencies, if they end up targeting the rest of the sector. they could limit sales of technology. targeting energy sector, but in a different kind of way. they are looking for ways around a full on sanction of the actual energy product. i think this is a really tricky line to walk. it appears it was a heart-to-heart. >> that is probably a result of feedback. deeply concerned about nerdy
prices that might be targeted. check not -- technology transfers and it might be one area. we will continue to watch for more details as the story progresses. these are the closing prices in europe. a little bit of a spike higher. we have seen around europe today. technology has not had a bad day. alex and i at the top of the hour will be transitioning to bloomberg radio, looking forward to that. you can find us. that is where we are going. >> what is that? i do not know what that means. coming up, global efforts to
>> this is bloomberg markets: european close. coming up, former nato ambassador. this is bloomberg. let's check in on the first word news. i am alix steel. skeptical of a government attempt. we spoke to gloom -- bloomberg. >> when inflation arrives, it is difficult to stop. it needs to be dealt with in a robust fashion.
>> the rapid spread of the variant led to many people missing work last week. employee absences rose 18% compared to the same period in 2021. that is your first word news. >> i was not there. i was here. i will be here next week as well. alex will be having a holiday. let's talk a little bit about what is happening in the pharmaceutical sector. we have spent a long time talking about it this week. let's carry on our conversation and investigation into what is going on. he became ceo in 2015 and has been reshaping this company.
i think that is an understatement, taking it forward into the post-pandemic era. thank you for your time today. we really appreciate it. what is your perspective about where your industry goes next? how different is your outlook in terms of how you will position post-pandemic, versus pre-pandemic? >> thank you for inviting me. reinventing ourselves into a charitable pharmaceutical company, we are in position to grow, driven by a diverse pipeline. we have reinvented and that is what will drive our growth in the future. the pandemic has accelerated in some ways, but it did not
detract from our agenda. >> he made the decision to not go after a covid vaccine like many of your peers. i am curious. what is your role in it? >> we are in the vaccine business, but we do not have the right technology. that is why we decided to partner. we have continued to be reactive on that front, in order to help the community. >> how has your view of the health care sector changed? we have seen a huge acceleration. the rate of change has really picked up. regulators have taken over.
in terms of fine-tuning your plan going forward, do you think you could achieve more? do you think you could push on faster and push into areas more quickly? not only within the industry, but a partnership in the landscape, the ecosystem has changed. >> and has accelerated. we have a partnering model. this is something that we have done for many years. we have many partnerships ongoing. it has accelerated further. this is something that we are operating. so, we are looking forward to that.
the pandemic has not created a new trend but accelerated many new trends. quest which one do you think will accelerate the fastest? do you have to buy into it? quest it will impact almost an equal value chain. it is the way that we commercialized our medicine. that would be the biggest impact. science is progressing. it is very important. that is something that we do well. i think we see an acceleration. there are many ways to innovate. it is difficult to serve. >> you are focused on oncology.
you have a real area of speciality there. i am curious about oncology. what is happening in oncology right now? anecdotally, i hear that many patients have had their treatment delayed. dad been problems and issues around the world, focused on what is happening with the pandemic. does that change? how does the backlog get clear? how does it change how your -- what has changed specifically, there? >> there has been a postponement of diagnosis. it is very unfortunate. i am very worried about it. it will have an impact on
patients. at the same time, scientists -- there are many ways. it would be even more progress in this area. i am optimistic that the backlog would be set in the future. the science would help greatly. >> we only have about 30 seconds left. i want to know about your relationship with cathie wood. how actively involved are they? >> we have interaction with them the way that we have with many investors. people are very intrigued because of what we did in the past. we see an acceleration and engagement with many investors. >> thank you very much.
we appreciate your time. thank you very much. looking at the market, the nasdaq is up by .5%. it does feel like a little bit of a relief rally. how long can this really last? >> it will depend on the data and what happens with the fed. we are obviously going to be getting more news tomorrow. we will look forward to see what comes out of that. there is plenty of data to still work through. it is by no means over. >> coming up, the president and ceo joins us. this is bloomberg. ♪
>> i think there is -- i think it is in russia's interest to stand down. >> we need to be thinking about how to bring down inflation, but at the same time, keep linton going. >> this is balance of power with david westin. >> from bloomberg headquarters to television radio, welcome to balance of power. we talked about it on capitol hill and today we saw it. up 5/10 of 1%. what does this mean? we turn to our washington bureau chief. thank you for joining us. give us your stance. how is the white house likely to react?