tv Bloomberg Markets European Close Bloomberg January 21, 2022 11:00am-12:00pm EST
this is "bloomberg markets: european close" with guy johnson and alix steel. guy: we are counting down to the close, 30 minutes to go and it has been a brutal day for european stocks. stoxx 600 down 2% trading 4.73. the dax is where the real pain has been felled. prices are trying to creep up around prices with what is happening around ukraine could add to the reflationary aspect. corporate news in the mix. siemens' energy trading down. it is a familiar theme, input costs, being margined, that is impacting the ability of consumers to be able to buy the
products that they are selling as they tried to pass on prices. it is a story that we have seen and we are seeing it was siemens energy. we are talking about it later but that stock is being hit and hit hard. alix: in the u.s., and insanely interesting session is developing. we talked about action. the s&p 100 is down .1%. we were a stone throw away from the 100 moving day average and we are well off of the lows of the session. tech is underperforming and it could be worse. the nasdaq 100 off by .1%. one thing that is worse is netflix up by 23%. talk about a humongous gap. that is going to way on the under department -- weigh on the underperformance of tech. there is a distinction, even in the high flyers like apples and microsoft versus netflix. part of what we are watching is this market. are we seeing safety into the bond trade?
i do not know because we are seeing yields down by four basis points. we sought down to six as the s&p selloff took up steam. we are seeing over seated buyers come into the bond market near that 2% level and options are expiring in the equity market, $3 trillion and all of that is kicking around that will move the market. guy: got a bit of a headline breaking which i am trying to figure out in terms of importance. boosters bend off disease from delta and omicron news studies show. these have been carried out in the united states in hospital admissions and mortality looking at thousands of u.s. patients. the study seems to be focusing on third doses. my impression was that we had already kind of largely ascertained that boosters have had a meaningful impact and we have certainly seen that in the u.k. and elsewhere in europe and the united states, that third shot does have a meaningful impact, particularly one comes
-- when it comes to the mrna shots. that is compared and contrasted with the studies coming out of israel they have already moved onto the fourth shot where they are seeing limited upticks in terms of efficacy that they are getting from the fourth shot. i thought that we had nailed down the idea that the third shots are having a big impact i thought the question had moved on into whether it was a fourth shot story? alix: a lot of that is messaging, 63% is fully vaccinated and 23% has had the boosters. in the u.k., 55% so we are definitely behind on our boosters. let us get back to the market, tech down by .5%. bonds are seeing a bid which leads us to the question, if tech is wrecked, you buy balance? we want to ask that to the lansdowne senior investment and market analyst who joins us now. is that now back? >> i think the safety trade is
to make sure that you are diversified, and when you say tech is dead, half of that question will depend on which tech you are talking about. of course we have seen tech names with a huge evaluation and they have suffered a big wobble as of late, but also you have the likes of apple after a jump, another huge tech name and arguably a lot more resilient in terms of its resilience against a consumer spending sprees -- squeeze because of the very nature of its iconic products, because people are still willing to part with huge son -- sums of income just to get a piece of apple and their park it, the latest -- in their pocket, the latest brands and trends.
this is a story you will see across other brands with iconic products. i do not think it is as simple as to say that tech is dead. it depends on what kite -- what type. and you could see that this is the time to get into bonds, certainly. what i think you need to be delivering in terms of portfolios is a much more diversified take right now. guy: exactly. at the moment we are seeing the baby being thrown out with the bathwater. i hear what you are saying about apple, but it is down 4%. or percent of $3 trillion is an awful lot of cash being shifted. you talked about diversification, how ideal where the market selloff where everything is being thrown out when it comes to equity? susannah: you really have to look at why is it being thrown out today, and i think we are seeing in terms of the more cyclical stocks, i think there
are other factors in place, not of course all linked to this concern over inflation, red hot inflation and a move of central bank policy makers and their decisions in reaction to that. it is peeking through. we also have the quality from the imf to say that if we are going to be heading towards a high interest rate environment and the fed is going to hike rates, that could affect emerging markets which is why we see that today and in effects there. however, in terms of geopolitical aspects, obviously we do not know which way it goes. tensions could spark until you see some kind of reassurance, a pulling back into the market because of that. i think it is a bit of a tinderbox with so many kind of
conflicting events taking place, and you mentioned the news of the vaccine, of course omicron is causing a huge headache for so many different economies. it might be a shorter shock, but it is still a sharp one. and that is something economies have to deal with. alix: looking into next week for the fed and a potential central bank divergence or catch up, what is the right kind of trade to be looking at? because can consumers withstand 2% on the 10 year? susannah: i think certainly consumers are just going to have to get used to a higher interest rate environment. we have had ultralow rates for so long and so many people have been hooked in this era, hooked to the drug of cheap money. it cannot continue, and so consumers and businesses are just going to have to get used to this.
what will be interesting to see is the price pressures elsewhere. so, if consumers can get help with certain parts of their bills, that will help them weather the storm. i am talking about the u.k. where we are expecting the energy price cap to rise. if the government could step in and utility companies could step in and ease and consumers will be able to withstand that environment. guy: let us pick out -- pick up on that point. we had retail sales up a little bit earlier on, a significant depth, but this is down to a certain extent people going shopping in november, but nevertheless, i am wondering whether or not we will see as you say governments having to step into deal with this. i am wondering whether central banks will have to step in, whether this ends up obstructing
the market. the is saying into 22, they are inconsistent -- the boe is inconsistent with their 2% target and it is likely to keep inflation stronger for longer. my question for you is consumers start to buckle and do you think the bank of other central banks will be able to deliver the rate hikes that are currently being priced in? susannah: i still do think that putting a lid on inflation will be the number one priority. you look at the criticism leveled against the bank of england when it was -- when it did not act when it was expected to. we will look at communications going forward and they will be a lot of expectations for the bank of england to give better signals. i do think that we are going to see a rate rise most probably in february and another one shortly to follow. after that, once the bank of england showed that it is determined and the federal
deserve to take action against these prices, i think there might be a wait-and-see to see how we can squeeze this through into consumer behavior. you talk about retail sales figures down partly due to omicron, and partly due to the fact that people were going out shopping in october and november because all of those reports of shortages on the shelves, and i think we are just going to have to see what happens. once these restrictions and omicron effects fade, we will see. i think this will really help -- affect companies. guy: thank you very much indeed, great staff. susannah streeter. we have what is going on between what it -- between russia and
the united states and what is happening in ukraine. russian diplomat's meeting with their u.s. counterparts. lavrov and blinken meeting, 90 minutes of talks with neither side backing off. what happens next, are we going to see an invasion and what will be the economic and direct -- impact of it. this is bloomberg. ♪
we will have with allied partners we anticipate that we will be able to share with russia are concerns and ideas in more detail and in writing next week. and we agreed to further discussions after that. guy: that was the u.s. secretary of state speaking earlier after meeting with his counterpart, sergei lavrov in geneva. tensions continuing to escalate and let us bring in our european correspondent who joins us live from geneva. maria, what progress, if any was made today? maria: well, i think that way you look at this meeting, today between blinken and lavrov, it is to keep talking but also buying time for everyone, which you are in ukraine is reassuring, but it means that this concern in the idea that there could be an intimate invasion is not going to happen in the next few days. the idea behind it is that the
united states said that they will write down in paper some of their concerns but they will also put down some of the measures that the russians could perhaps be concerned about and hopefully get to a diplomatic path forward. if you move away from that, not a lot change. we did hear from lavrov saying we will not invade ukraine, but in reality if you look at the fundamentals it is about the future of ukraine and russia once a guarantee that is ironclad and bulletproof that this country will not join nato. this is something that fundamentally europe, the united states and nato cannot agreed to. if you look away that if we will talk an advance on that front, in reality when you look at the substance not a lot changed. by the way, the united states still says an invasion 10 help in. there is a reason, either he
invades or he pulls them back. but that would be a russian defeat. alix: thank you very much. tim asked gave a pretty stark warning. >> this is going to be a pretty proper war if it happens. putin will want to do some very serious military operations to force the ukrainians to concede a new treaty in terms of their relationship with russia. this is a major conflict. alix: we will continue the conversation with magdalena polan, a principal economist. do you agree with that, that we are looking at a proper war and we are nowhere near something like that? magdalena: i think neither of the sides will acknowledge what is going to happen and what they will have to do. they are saying the leadership will be much more dynamic and
tactical, and deciding on the next step as a situation develops. i was thinking before that any innovation would be in a difficult taught -- difficult conflict, this is not an easy challenge for the russian army. but even the military challenges that we saw were a little bit easier, both the invasion of georgia and the involvement of russian troops in syria,, they were lower scale operations, not a high political and economic cost for the russian government. it is difficult to see how that story would be done for the domestic and public. but depending on what they want to do it will involve quite large invasions, and in areas
which are not necessarily savable to russia. guy: what do you think is price? i have seen russian equities, off and some movements in the room. i have seen the cds move up more sharply. what do you think is the price right now, and how far could it ultimately go? magdalena: it is difficult to price the risks and it is difficult to assess and it tends to be priced in when things happen. what we can see is that the ruble has been underperforming for quite a while despite the balance sheet for russia and the number of hikes, and also further rate hikes in russia, so definitely the assets and performing compared to some of the other assets of the same value. and also the other thing is that the risk of further sanctions would way on the russian assets,
so there is still some foreign holdings of russian homes, this will travel in the case of the military conflict and put centrally run the risk of new sanctions. this could be painful for the external bonds not only for the american investors but the european investors who might be forced to go along with the american sanctions, or could be subject to similar inflation from the european authorities. alix: how unified do you think the restaurant countries are with that. i am trying to work out who has the leverage? just taking gas for a moment, europe needs russian gas and russia needs gas revenue. it is hard to figure out where the leverage is. magdalena: that is true, but it has hit the noon -- the unified nato front.
so they have not marshaled anything from the european stance. it is a situation for all of us and all of us are asking the question of if there is a conflict how will this react. i fully agree that western europe and southern europe is very high, which negotiated against russia were also the trainings are weaker. example on the eastern front of maeda -- of nato. guy: i was going to go there because i think the research earlier on suggesting that poland looks very exposed in terms of its economic ties, it could be meaningfully impacted by this. what impacts what we see in places like poland and hungary and how would the market react if we saw a conflict. magdalena: it is hard to assess
the exact impact, however the major chain is oil and gas. these countries do not trade as much as you think. especially contain -- compared with western europe. however, you can see the decline of sentiment which would create an almost geopolitical risk, and definitely affect countries negatively. in terms of pure economic links it is not as an important partner. maybe a little bit more for hungary which has gotten close especially over the last year. but not for poland, check about yet in the public. alix: we are waiting for president biden to begin speaking and he will be delivering remarks on his administration's work to increase the supply of semi conductors. you see the secretary of commerce. we will bring that to you and president biden start speaking.
i am was also interested in how china can get sucked into all of this. magdalena: on top of all of the work they already had, and susannah pointed out a couple of issues that can be challenging which is china which is domestic securities on the go, but with the security situation and geopolitical ambitions and southeast asia. i do not think this is the primary concern for now. i know there were talks between president putin and xi. but this is not something that china wants to get involved directly. i think the key challenge for them now is trying to engineer the long term transition and growth away for a more -- a way to a more sustainable world. dealing with the omicron variant which seems to be challenging,
and in the financial realm, deleveraging and the real estate and construction sector, which are key for the support of the party, and interactions of the party congress to approve him for a third term. alix: and the olympics, and i do not know where that will fit into the -- fit into it. we will have to leave it there. thank you a really robust conversation. we will go to break but as we are headed out a reminder of the commerce secretary giving remarks and we will be taking you to president biden when he began speaking. if you want to follow the secretary go to , live go>> for that. ♪
united states. we are positive on the nasdaq. the nasdaq flat in the s&p up .1%. we are off of the law when it comes to the european story but as you can see a very damaging day for european equities. the dax in particular suffering. we are off the floor and at one point we were down. the dax only down by 2%. the cac up by 1.83%. the ftse 100 down by 1.24%. we will monitor all of these as we come into the close on europe. what will happen stateside? it will be absolutely critical. into the close yesterday, and we will take you back to the intel event that we are monitoring with the chip story. on the president speaks we will bring you back. the close is coming up next. this is bloomberg. ♪
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session, wrapping up the week in europe. what a week it has been. in some ways europe has been insulated from some of the selling pressure we have seen stateside, which has been largely focused on tech. today we are seeing areas like basic resources and mining under pressure. europe is a sea of red. the dax is down 2.1%, the london market is down 1.3%, the cac 40 down 1.9%. the selling has been quite brutal and delivered on high-volume. i want to show you what the stoxx 600 looks like this week. this is the picture. we are off the floor. 474 is where we are trading. on the week it has been bumpy. very choppy. we have been watching carefully to see how europe will fare.
the narrative was europe is value, therefore it will outperform. the luxury sector has done well. a sick resources have done well. telecom has at a very good week. i think it was a goldman sachs that helped out there. the car sector has been brutal. a high beta play on what exactly european recovery we will see. construction and industrials down hard. technology is only midway through the day. technology has had a bad week. there have been worse comments coming through. that just about wraps things up in europe. the president is making remarks. alix: president biden is delivering remarks on his administration's work to supply semiconductors and increase the supply. we hear from gina raimondo as well as the intel ceo. pres. biden: to be able to say
made in ohio, made in america, which we used to always be able to say 25 to 30 years ago, that is what this about. folks at home might be wondering why it is such a big deal for manufacturing something so small , why is that so important? semiconductors are small computer chips that power everything in our lives. your phone, your car, your refrigerator, your washing machine, hospital equipment, the internet, the electric grid. so much more. america invented these chips. america invented these chips. federal research and develop it led to the creation of these chips. taxpayer dollars, these chips help power the nasa mission to the moon. federal investment help down -- helped bring down the cost of baking chips to build a market and an entire industry. over 30 years ago america had 40% of global production.
american manufacturing, the backbone of our economy got hollowed out. companies move jobs and productions overseas, especially the industrial midwest. decades ago we used to invest 2% of our gross domestic product in growth and development. pure research and development. today is less than 1%. we were ranked number one in the world in r&d, but guess what? we now ranked number nine. china was number eight in the world three decades ago. now they are number two. other countries are closing in fast. as a result, today we barely produce 10% of computer chips despite being a leader of design in research. we do not have the ability to make the most advanced chips.
today 75% of production takes place in east asia. 90% of the most advanced chips are made in taiwan. china is doing everything it can to take over the global market so they can try to outcompete the rest of us and have a lot of applications, including military application. during this pandemic your pocketbook felt the consequences of inflation and higher prices. whenever a factory shuts down in one part of the world, production and shipments of goods to shops and homes and businesses all over the world gets disrupted. covid-19 has compounded that problem many times over, especially with these computer chips. as a result everything from cars to dishwashers are delayed getting to showrooms and customers just as demand is up because the economy is growing. because supply is low, because supply is low, we find ourselves in a position that we are behind
the curve. prices are going up. one third of the recent price increases seen nationally are due to car prices. i'm going to turn to the boss. what percentage of chips are needed to build the cars today and what will happen next five to 10 years? >> what percent today? 20% by 2030. pres. biden: 20% by 2030 will be required, that is what the car is made up. 20% will be computer chips. alix: you been listening to president biden speaking about chips apply. he says low chip supply contributes to price increases but tying it to inflation and trying to move that forward. one of the biggest problems of his presidency. guy: let's relate that to what is happening in europe.
let's go to the european stocks that have been hit hard. what we are seeing is the margin squeeze story starting to come to european industrials. it will, in a number of different ways. chips are a number of factors we are watching. it is not just chips, it is all kinds of input costs, metals, materials, all of these kinds of things and what we are watching. the real tried being impacted by margins. it's stocks being hit hard. the stocks down 5%. siemens energy is the real story. this is pivotal to the energy transition we will all go through. input costs are a massive factor. they're trying to pass on some of those prices to their customers but customers are pushing back and struggling with the economics of making this work.
as a result we are seeing its stop being smashed to the downside. a similar narrative we heard only a few days back with another maker of wind turbines. it is suffering as it sees the input cost soaring starting to affect pricing and the effect that has on the consumer's ability to buy these turbines. i talked about the consumer, i'm talking about large energy prices buying some of these turbines. this is the problem we are facing. we are trying to transition at a time when it is an absolutely enormous struggle, and you related back to russia, you talk about the taxonomy debate in europe. it is an energy transition that is not going to be easy. that is the message from a number of different aspects of the market today. alix: it just spiral back to the actual consumer. who winds up paying for it and how much are we paying for it? it was recently addressed --
this caught the energy world off the hook. she said that it is environment of large excess savings the energy transition may lead to inflation remaining higher for longer, thereby potentially raising the risk of inflation expectations destabilizing. that's get a broader perspective on that with lord john browne. it has been a sincere pleasure to talk to you. will the green energy transition the inflationary and for how long? lord browne: i think it will indeed be inflationary for some period until he can get energy efficiency moving forward -- moving farther than it is at the moment. unit consumption has to go down. the price of energy has to go down. right now it looks expensive. that is the problem with getting
the energy transition down. we have to do something to change the way investment takes place. the change is almost the scale of the industrial revolution. guy: how do we do that in the timeframe that is necessary for the climate, but how do we do it in a time frame that works economically? we have seen huge amounts of investment already, but nevertheless we are supplied constrained at the moment. we are struggling to build wind turbines as quickly as we need them. the companies that manufacture them were just talking to investors and siemens energy. they are struggling to deliver what is necessary because they cannot get the input needed to build the turbines. lord browne: nobody has taken the transition seriously enough. the transition does not happen automatically, we have to push it. what we see today started a long time ago, not having the right
supply chain in place. not even investing the right amount of money in oil and gas why we need oil and gas. very expensive to catch up. i was often asked what would happen if we did not do any nuclear and gas powered power generation in europe? we would have to triple or quadruple the rate at which we put in wind and solar, renewable energy in europe. right now we have to double the rate to get to anywhere close to what we want, including using nuclear and gas. these are big numbers, big problems. what will have to happen is probably the price of energy will rise. what we have to do is make it rise slowly and keep it stable until we can get efficiency up
faster than the rate of price increases. and during the transition will be difficult. alix: let's go to gas and nuclear. could they be categorized as green? i understand we need them in the transition, but should they be categorized as green or should they be certain requirements to make them green? lord browne: they are not great. let's be click -- they are not green. let's be clear. they can be classified as green, and that may help in a pragmatic way to get from where we are to where we need to go and to possibly get more people to invest. what we cannot do at the moment until we figure out some different way is we cannot make europe live on renewable energy alone. it has to have other sources. that is a problem that needs to be solved. i think this approach is
pragmatic but it is not definitionally pure. i think in reality if we do not do it someone else will and import electricity from somewhere else in the world. guy: as we look to the geopolitical landscape in europe, we spent a lot of this program talking about ukraine and the fear we do see a conflict and that could impact european supply. what is your perception of what is happening? how exposed is europe? could we be about to see a major energy crisis on this continent? lord browne: we have seen a significant increase in energy prices over the last few months. oil has gone up enormously because of lack of investment. while we need oil and have for some time and natural gas, i do
not know whether it is about sustained supply or not. i know there issues in russia -- that do reduce applies to an extent. we have a problem to do catch up. -- with oil and gas as high as it is, there will be catch up. not necessarily those investing in the past because everyone wants to invest in -- i think investment will take place. i think prices will certainly rise. i think more investment will take place in renewable energy.
the cost of renewables will come down. it will still come down, but not as fast as it has in the past. i say a mix. our church -- security and a lack of prices. so we tend to say it find today, let's carry it forward. guy: lord browne, great pleasure will stop thank you for your time. lord browne, beyond net zero chairman. former bp ceo. we are wrapped up in europe. a little higher during the auction process. nevertheless the negative week for european stocks. the ftse 100 down .6%.
justin: i am live in the principal room. coming up the intel ceo at 4:00 in new york, 9:00 in london. this is bloomberg. guy: european equities closed. a pretty brutal session. in the united states another choppy day. the price action yesterday fascinating. we saw the rally fading. not a particularly good sign.
steve sosnick joining us now will stop what you make of the price action this week? steve: this is been a heck of a week. my call for 2022 was to expect volatility and we got some. in the u.s. it is only been a four day week. this is what is to be expected going forward alix:. alix:how much volatility? you are looking at an inverted vicks curve which shows how much volatility we can expect up on. how do you play it? steve: what i expect is probably a bit more in line with where the vicks is now. it is not a one-for-one characterization. a 26 vix implies a 1.5% to a 2% move is not out of the realm of reality. we have forgotten this is how life can work. that does not mean every day
will be this volatile. it is not unreasonable to expect bouts of volatility. vix is a 30 day look ahead. how you play it is being nimble. i had alluded to the idea of selling as well as buying dips. forgot that is the other part of the phrase. buy the dips, sell the rips. when the markets act with a negative tone, you want to go both ways. guy: how technical is this market getting? a lot of questions about 200 day moving averages. steve: when markets are volatile they are flailing around looking for levels. one of the logical places to look for a level would be moving averages that have worked for you. we busted through the 100 i think that gave a lot of people pause because the 100 day moving average was rocksolid and as of
today we bounced right where we should have. this is where traders are looking for support and subsistence levels. one fear is resistant support becomes resistance. as we bounce back up it is logical to think people might expect resistance at what were the supportive moving averages. alix: have we seen margin call liquidation? have we seen that yet? steve: we have seen some. i cannot comment on what i have seen internally. right now there is a generally de-risking to the market right now. it is to be expected. we see it today. it came through in bitcoin as well, which is probably the most heavily margin product there is. i think there has been a lot of people, we have had record levels of margin helping to
propel this market. it works against you on the way down. guy: how negative is it we are selling into the close. we are getting bid midway into the session and done we are fading that. what kind of a signal does that send? steve: that sends a signal people do not want to go home long. we saw the bounce in europe on the post, but yesterday was a get me out kind of trade. i think this week has been influenced by the fact that today is expiration. you saw some of the premarket volatility was definitely related to the influx of a faang stocks being down 20% plus and trying to deal with a trillion dollars worth of expiring a.m. expiration. that was why i think we saw some of the volatility.
i think into wednesday 20 had the fomc meeting, it would not surprise me to see people being a bit nervous. people sentiments have changed in a hurry. this is one of those times when you have to be a bit more wary when you cds kinds of sentiment change. alix: huge volume. steve sosnick of interactive brokers, appreciate that. this is bloomberg. ♪
boeing will be out with numbers. apple, lvmh. eco-data as well. the main event is absolutely going to be the fed meeting wednesday. we will hear from jay powell. what we learn on that day? i think that will be a big market moment. the nasdaq down another 1%. he was elected geneva into the bond market. also the repositioning into the weekend. coming up, manhattan district attorney will be joining bounce of power with david westin on bloomberg television and radio. you and dyer headed to radio. we have the full hour this time. the cable show is taking today are on dab digital radio. this is bloomberg. ♪
seven of those jobs are filled. the first time there will be real diversity on the fed. >> to the world of business -- >> we can have 5g and we can have aviation that works without massive disruption. >> this is "balance of power" with david westin. david: from bloomberg's world headquarters in new york to our tv and radio audiences worldwide, welcome to "balance of power." we will start with the check on the markets which are all over the place today. joining us or abby garrett through little. -- joining us is abigail doolittle. abigail: today is very interesting. if the year were to close tonight, and the nasdaq would be on pace to have its worst year since 2008, that is the degree of the selling we are seeing. today it has been all over the place. at one point we were looking at