tv Bloomberg Markets Bloomberg January 28, 2022 1:30pm-2:01pm EST
president volodymyr zelensky says russia's posture on the border has not escalated since last spring and that the media is making the situation appear worse than it is. >> he image that mass media creates is that we have troops on the roads, mobilization, people are leaving from places. that is not the case. we don't need this panic. mark: president zelensky says warnings of an imminent invasion by moscow is damaging the economy. russia intends to avoid invading its neighbor despite amassing thousands of troops on the border. in vienna, diplomatic attempts to revive the landmark nuclear deal between iran and world powers are entering their final stage, according to european negotiators who caution that political leaders still need to make difficult decisions to strike an agreement. envoys adjourned their eighth round of discussions today, 10
months after talks intended to restore the agreement began. negotiations will resume next week. today, thousands of new york city police officers pay their final respects to 22-year-old fellow officer jason rivera at st. patrick's cathedral, where he and his partner, wilbert mora, were shot last week after responding to a family dispute. mora's funeral is next week. thousands of flights have been canceled as the u.s. east coast braces for a powerful winter storm. as much as 10 inches of snow could fall across new york city, while eastern long island in boston could see 18 inches. washington may pick up a few inches this afternoon but it will miss the heart of the storm. the blizzard is expected to intensify so rapidly that it could become a so-called bomb cyclone. global news 24 hours a day, on-air, and on bloomberg quicktake, powered by more than 2700 journalists and analysts in
over 120 countries. i'm mark crumpton. this is bloomberg. ♪ jon: i'm jon erlichman. welcome to bloomberg markets. matt: i'm matt miller. here are the top stories we are following for you from around the world. stocks rebounding at the end of a wild week in markets. the nasdaq railing as strong earnings put investors fed fears behind them for now. the market may be rebounding but caterpillar plummets as it struggles to stay ahead of increasing costs tied to supply chain pressures. and it is not just company dealing with bottlenecks. governments are having issues as well. we will speak to the premier of alberta, jason kenney, about how the profits is struggling with empty shelves and rising prices. jon: thanks a lot, matt.
let's get back to the market story. broader averages in north america, there has been a willingness to buy, and appetite for those hard-hit technology stocks. that has been one of the standup stories of this friday, visa. it will still beat tough for the s&p to pull out a winning week. that index is down 8% on the year. the nasdaq is down more than 13%. when we talk about the challenges for tech stocks, we see it through the lens of higher inflation and what that means. we have some good context here in terms of the spending power consumers have. u.s. consumers followed by the most in almost a year, suggesting americans are pulling back amid the fastest inflation we have seen in nearly 40 years. we see this verymuted spending
story and then down here at the pce index, goods and services where the pricing is increasing, less bang for your buck, less in your pocketbook. matt: we have been talking to a number of people today. i spoke with the ceo of dreyer's ice cream in earlier who said that they are looking at high input costs. they are having difficulty passing those costs along. it's been a volatile week for markets. if that prepare them a march rate hike then maybe many more after that. we are joined now by mona mahajan from edward jones to talk about what we can expect. in terms of rate hikes come it looks like the market is pricing in as many as five. what are you looking at? mona: generally, the market has done some of the bidding for the fed. we not only have yields that are higher, markets are now pricing in five rate hikes, balance
sheet reduction in july, and the fed has yet to move. the markets have certainly done some of the work for the fed. but keep in mind we are still at the zero bound even with inflation elevated and labor markets type. we think the fed will move quickly in the fairest months of the tightening cycle. probably 25 basis point rate hikes for the next three quarters or so starting in march. at that point we think the fed will maybe take a pause, assess economic environment, see if inflation has moderated to some extent, see what the impact is on credit spreads, gdp growth, and broader economic backdrop. that is when the fed will make the move whether or not to keep accelerating or perhaps take a more gradual pace. jon: as we show a chart of what happens often with the s&p moving into tightening cycles, we have seen so much of the stock market carnage through the lens of technology. but we started to talk about
less money in the pockets of americans, the consumer side. when it comes to sectors that may be challenged, like retailers, could they be stuck with too much inventory? what are you thinking about in terms of inventory trends --industry trends playing out over the next few months? mona: generally what this fed tightening cycle will be doing, removal of liquidity with its balance sheet actions, will have a valuation impact more so than a real economy impact. from a valuation perspective, some of the more speculative parts of the market, higher valuation parts of the market, they may see bouts of volatility. where investors may win relatively are areas levered to potential rebound in the economy, especially as the omicron variant starts to fade. we see value in cyclical parts of the market including parts of financials that do well in a rising rate environment.
part of the industrial market, like aerospace, even parts of the infrastructure market, that could do well in an infrastructure focused economy. also we tend to think international and non-us markets can also play some catch up. value cyclical, em, non-us, but in tech broadly, while we would avoid those larger speculative higher valuation parts of the market, we would look at things that are more robust, have proven business models, positive cash flows. some of the things that we are looking at, enterprise spending, we think will pickup in hardware and software. mobile payments have legs especially as consumption online and in person resumes. then there are semiconductors, which may benefit if we do get some of that supply chain easing. those are some other things that we are thinking about, ways for investors to win in a tough
market. matt: are commodities and important part of the portfolio right now? have we seen all of this inflation, supply chain issues, geopolitical issues already priced in? mona: we certainly don't see a repeat of the dramatic moves that we saw in 2021. wti last year was up near 60%. already seen a strong move this year in energy markets. we don't see that extending to the same extent it did last year. we think a lot of the gains have been frontloaded, especially as we see inflation moderate in the back half of the year. keep in mind, this first half of the year will be levered to a cyclically driven economy, inflation driven economy. if you could look at a first half, second half story and commodities as well. jon: some helpful perspective. mona mahajan of edward jones
joining us with the outlook for the markets. the key issues that we keep talking about on the inflation front also include what is happening in the supply chain, headaches not only for companies but also for governments. the national governors association is meeting this weekend in washington, they'll be talking about those issues, and they will have a cross-border dialogue with that as well. one of the attendees is the premier of alberta who said that he will be there to address growing supply chain problems including the u.s. and canadian policies that have impacted many cross-border truckers causing further damage to supply chains and higher prices for consumers. we are talking about that with the premier, coming up next right here on bloomberg. ♪
matt: this is bloomberg markets. i'm matt miller. stocks rallied today after a volatile week. the s&p 500 pushing higher and pushing toward its biggest advance this year but one stock is bucking the trend, caterpillar, which is struggling with supply chain issues, forcing it to raise prices. it is on pace for its worst day since november of 2020. joining us to talk more about the world's largest maker of earthmoving equipment is pretty group to -- kriti gupta. >> the stock is down on a day
when the overall market is roaring back. they beat earnings but only slightly. a lot of that margin pressure will be crucial. inflation pressure you are seeing. they will keep factories open despite the lack around materials they are getting. to offset those costs, they have to raise prices in 2022, when one of the biggest regional bases, china, is slowing down sales because they are slowing down their construction in asia in particular. the property development story in china seeping into caterpillar's earnings. revenue rose 23% year-over-year, but the backlog also rose, 54%. a lot of this has to do with commodity costs which are up 29% year-over-year. it is supply chain issues and commodity costs. that is causing the ceo to make
some comments, demand is strong, but those variables come down to the supply chain. jon: thank you for that breakdown. staying with the subject of the supply chain, it will be in focus this weekend as governors converge on d.c. there is also a cross-border connection as the alberta premier has made his way to washington. we will speak to him next. this is bloomberg. ♪
jon: this is bloomberg markets. i'm jon erlichman. along with matt miller. governors from across the u.s. are in washington this weekend for the national governors association winter meeting, coming together to talk about the economic road ahead which includes trade issues with countries like canada. the alberta premier, jason kenney, is there in
washington. nice to have you with us. josh wingrove is also with us. the conversations that we often have cross-border is often through the lens of the president and prime minister. you are there to talk with some of your counterparts in the u.s. what do you want to achieve in the talks this weekend? jason: we are concerned about the supply challenges facing north america. we already had a continental shortage of long-haul truckers pre-covid. those trackers have been incredibly stressed through covid and now the quarantine front on truckers is worsening the food supply issue, putting more pressure on inflation for basic commodities. i know a lot of governors agree with my concerns on that. alberta is the largest source of energy imports to the u.s. 55% of u.s. oil imports come
from alberta. we are far more important to american energy security, and in that sense to the american economy, then all of the opec countries combined. that is a case that we have to keep on making. president biden's vetoing of keystone xl, line five, other efforts to landlocked canadian energy we think hurt canada. we are always looking to increase the cooperation on continental security. jon: we are watching that trucker convoy in canada make its way to ottawa with many expressing their frustration. on food supplies, you took some heat on social media for some pictures that were shared that essentially showed empty store shelves, and that prompted a response from that industry, saying that we do still have food on the shelves. can you provide some numbers? the cost of food has been
rising, but what kind of food supply shortages are you talking about right now? jason: a lot of grocery stores have intermittent challenges. overall there is apply in the system but it is undergoing stress. the decision to require unvaccinated truckers to quarantine after the cross the border has basically taken thousands of long-haul truckers out of the cross-border transportation logistics system. that will have a bigger impact which will grow over time. we are just calling on the federal governments to exercise some common sense here and extend an exemption for unvaccinated cross-border truckers. these are folks working in their cabs by themselves, they don't represent a public health risk. tens of millions of americans and canadians already have active omicron infections, so this does not make any sense from a public health sense, but it will worsen a supply chain issue. four american viewers, most of
the green products come from the u.s. and mexico. we need to system to be working at full capacity. josh: we want to talk about oil as you are here, you are talking about the benchmark price for alberto oil. $75, has not been that high since 2014. what will be the impact on capital expenditures? what does the supply picture look like? can you produce more oil, get it to market? jason: supply is not a problem. in november be produced and shipped more oil from alberta than at any other time in history. about 4 million barrels a day. the oil sands operators can actually increase volume. the only limitation is on shipment capacity through pipelines. with the commissioning of the enbridge line three replacement last year, that added about 350,000 barrels a day. there has also been some optimization work in the u.s.
networks. we are hopeful that by the end of this year we will see the completion of the trans-mountain expansion project to the canada west coast, which will add another half a million incremental barrels a day. in the short to midterm, canada can ship in maintain record levels of production and exports. we would like to be able to go further but the veto of keystone xl is the big impediment in that area. jason: when is your message online five? jason: the u.s. should come down on the side of energy security. it's been operating for six decades. it is the major source of energy for michigan, ohio refineries, detroit airport, and the southern quebec economies. about 640,000 barrels a day of light oil. it is critical to the upper midwest and central canada. canada has a treaty with the united states.
we appreciate the u.s. sitting down and talking about this in context with the treaty, but we want to say to the biden administration, while you are begging opec to increase shipments, why are you talking to the governor of michigan to stop the efforts of interrupting the pipeline? josh: generally good news for alberta coppers. voters in alberta expect a valid budget coming from you next month? jason: we will see. the fiscal situation is improving. last year we were looking at an $18 billion deficit because of covid. we have been restraining spending, and the big bump up in commodity prices is putting us in the range of a potential balanced budget in the next couple of years. matt: you talk about pipelines coming down to the u.s. what about going to your east coast? wouldn't it be great if you could supply europe with some of the extra natural gas supplies you have? giving them more optionality? jason: exactly.
canada is the ideal solution to the problem of international energy security. western europe increasingly getting tied to vladimir putin's russia. the u.s. administration lifting sanctions effectively on nord stream 2 means that western european countries will be more dependent on russian energy. i don't think that is good any geopolitical sense. we wish we had more west to east infrastructure including for liquefied natural gas exports. there was a project to deliver more alberta crude to the east coast. unfortunately, that was the victim of ottawa's regulatory approach hostile to the project. unfortunately there was a project that berkshire hathaway was repaired to invest in. they pulled back because of regulatory uncertainty. i hope in this new context, where energy security is a big global issue, that we can remove
some of the on necessary regulatory barriers to allow for greater coastal shipments, including to europe. jon: we started talking about your views on the supply chain challenges with vaccinations. we should be clear about the restriction still in place in your province. could you clarify on that please? jason: alberta has -- we have public health measures in place that by canadian standards are modest, perhaps more rigorous than u.s. states. we hope to relax those further. as soon as we see pressures on our hospitals begin to diminish. we think we have passed the peak of omicron infections, but we may just be at the peak on hospitalizations. we need to see the pressure on hospitals abate, and that hopefully later this quarter, we can significantly relax public health measures in place. matt: thanks for joining us, appreciate your time.
glad that we could get you into the studio. alberta premier jason kenney, josh wingrove there in d.c.. we are watching a market rebound, but not much chance it will save the losses for the week. even though you see green on the screen here with the benchmark index up 1.2%, we are still down 8% year to date. the nasdaq still down 13% year to date. this is bloomberg. ♪
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increased the readiness of its response force over the past weeks and is considering adding battle troops to the black sea region. he says nato is working hard for the best peaceful political solution but it is also prepared for the worst. >> from the nato side, we are ready to engage in political dialogue, but we are also ready to respond if russia chooses an armed conflict. mark: russia has denied it intends to invade its neighbor despite massing thousands of troops, tanks, and equipment near ukraine's eastern border. bloomberg has learned the biden administration held discussions with the country's largest banks some possible sanctions against russia. this week, members of the national security council and other senior officials spoke with executives from banks including citigroup, bank of america, j.p. morgan chase, and goldman sachs.