Skip to main content

tv   Bloomberg Surveillance  Bloomberg  February 3, 2022 6:00am-7:00am EST

6:00 am
the end of the year. >> how far can the ecb go? >> all they can do a slow down the process. >> this is bloomberg surveillance. jonathan: facebook getting absolutely hammered. good morning, this is bloomberg surveillance live on tv and radio. your nasdaq is down 2%. tom: it's a surprise and i think there has been careful consideration on facebook. my work on facebook three years ago, they are not as visible as the used the and i take
6:01 am
seriously what mr. zuckerberg said about facebook losing shares to tiktok. it's a serious issue and the arrogance of silicon valley does not signal the challenges they have. jonathan: the stock is down 20%. tom: it's not a surprise because these are executives with the different rulebook than other executives. if the senior executives of john deere did this, they would have their head handed to them. lisa: it surprise the markets. the idea of a nearly 24% plunge equals about $200 billion in market cap which is netflix getting eradicated from the nasdaq. it came as a surprise because just because you so google got incredible advertising revenue so why couldn't facebook use that at a time when their users
6:02 am
are not using them? jonathan: because people don't use facebook like tom keene does. tom: it was a surprise on the sell side because these executives feel they play with a different rulebook. they should have communicated these challenges way out front. jonathan: i made the same complaint about net flicks. when accompanied this big has market moves like this, is it corporate communications or does it tell you something about the market we are in today? tom: i believe we've got mike
6:03 am
wilson lined up today. this is about individual stock selection which seems to be front and center this year. jonathan: it makes up 5% of the nasdaq 100. i am on tiktok. jonathan: you carry on. futures are -2.3%. on the s&p 500, down by more than 1% stop the 10 year yield is 176.99. lisa: today is such a pivotal day bank policy. bank of england will come up with their rate decision at 7 p.m. eastern time. they will be followed by press conferences by the respective presidents and the governor. how much of a surprise will we see here?
6:04 am
the ecb is more interesting to me. can they signal that they are going to remain on hold given the 5.1 inflation rate? people are contemplating an ecb that possibly moves away from their strict policies. the senate banking committee is holding fed governor nominees. inflation will be front and center so how much do they talk up the strong labor market and how much do they look at wages which have been increasing. we will get the monthly jobs report but how much can they look at this and say real wages are still lagging and how much of a problem will this be? amazon will focus on the wage front and how much they have to
6:05 am
pay people and stock the warehouses. snap is possibly more interesting, shares down nearly 6%. how much represents a sea change in the entire social media space. jonathan: can you imagine buying amazon right now, how nervous you would be? jonathan: there has been more bad news baked into amazon. people have already factored in smaller margins. facebook derives 98% of its revenue from advertising while amazon has aws which is still going strong. jonathan: that's ducted virtually nothing last year.
6:06 am
what went wrong? >> they said they would create a new segment structure and give us the numbers around reality. the other thing is there is a deceleration in social media advertising but it's not as surprising because search did really well. if you look at the overall ad market, it grows around mid to high teens. google is growing 35% at the expense of social media ad spending over all and that is why you saw a muted guidance from facebook step what was really surprising was they said there doubling down on videos. that changes the whole situation when it comes to facebook because now they have to be the creators. when you are paying to the
6:07 am
creators, it's similar to you to post a your gross margin goes much lower than the 80% they currently make and that is what i think spooked the market. lisa: broader fear is that this will be obsolete in a few weeds. -- in a few weeks. >> with face, the fact that they still have three billion users, it's dropping but at the same time, they are still in the clear. as a small business, you don't have a lot of avenues to advertise. either you buy the keywords from google or advertise on youtube, tiktok or facebook. i think pinterest and snap may be in bigger trouble in terms of the engagement levels. jonathan: thank you.
6:08 am
they are down by more than 21%. -20 .5% on the nasdaq. lisa: it's amazing to think how much of the user participation we brought forward at a time when you take a look at the clientele,. jonathan: i don't want to go there. let's bring in country now. some of these single tech names, what is your understanding of what has happened? these are monster names and massive moves, what is your take away? >> what you're saying is that there is a correction in the market. people are questioning a significant move in large cap
6:09 am
names. my wheelhouse is in the industrial space where we are also seeing new concerns. revenues are coming in strong but they are having margin pressure and that's a reflection of the things you have been talking about, inflation and the wages. that's pressuring margins and that's something that will be a concern this year. tom: i want you to talk about individual stock selection versus sector bets, which matters this year? >> this year stock picking will matter. i said previously i think this is a value market and we will return to value. if you look at a growth stock,
6:10 am
you get that year when they hit those revenue numbers wrong. you can grow with time and stock picking doesn't matter when you look at the top line scenario. in value matters, stock taking matters because you are betting on them doing the right thing. 2022 will be of value market. tom: mixed shift of nominal gdp plus inflation is changing and we've come down for me china like economy. how do you study the revenue line of different value categories? >> i think you need to get a good understanding of price and power. in an inflationary environment, that is the key tool in any company's toolkit that they can use to that inflation. that's a company by company understanding and you need to look at their growth margins and
6:11 am
what can they reflect about the markets in which they operate. they have pricing power or i think you need to understand the sector. you can probably group certain sectors together like oil companies and mining. you see great topline growth there but as you move further away from the markets, you need to know what you are buying. lisa: at what point do we look back on this dot com redux, that these specific stocks stories become specific? >> we saw a lot of these things corrected last year. if you look at the nasdaq last year, four out of 10 nasdaq stocks were down 50% from their 52 week high and that was in the
6:12 am
tech space. it has migrated over the spac area and we are finally seeing it move into the tech space. not all tech is the same. sometimes it's just pure competition. the competitive landscape has changed and people have not acknowledged that in large stock declines are a reflection of the fact that people now believe there's been a fundamental shift in the business model and they are reevaluating. jonathan: thank you for joining us today. i'm looking at the quarterly performance on facebook. we haven't seen a move like this ever since facebook since it's been a public company. lisa: we haven't seen them not
6:13 am
grow their base users. i think it was 2.91 billion each month. at some point, we reach saturation but if they start going the other way, it's a big problem but what's the problem for an index level? jonathan: there was a 19% move in 2018 but this is what happens if you don't deliver growth. you've got a bit of a problem. tom: to conflate the same stocks as one is wrong. they each have an individual character and individual story. jonathan: futures negative this morning and your central-bank positions are coming right up.
6:14 am
6:15 am
6:16 am
6:17 am
>> not since the 1980's had we seen these kind of reversals. >> the fundamental story is
6:18 am
solid. >> bloomberg,ast as numbers and analysis you trust . >> great opportunity to talk in the last week and i asked specifically how she sees the issue of the fed and the risks of climate change. i thought she was so sensible and reasonable when she said we need to understand climate like we understand other risks. jonathan: the democrat from minnesota, from new york city, i'm jonathan ferro. futures are negative, a little more than 2%. facebook making up about 5% of
6:19 am
that index, facebook down around 20% this morning. euro dollar is negative. bank of england decision coming up and 42 minutes time. after that, we will hear from the ecb. tom: we will dive into that. jack fitzpatrick is with us from washington. the president will be in new york city. what is the goal of the handlers on the resident on a presidential visit to manhattan today? >> the political goal clearly is make clear the president and other democrats such as the mayor of new york, eric adams, supports funding for the police. they are going far away from anything you heard about defunding. the president is expected to talk about funds that went to
6:20 am
state and local government and how that affects police on the street. the president sometimes speaks extemporaneously. the focus is the opposite of a defund the police message from the president. tom: what is the response of liberals to that and the fury of 18 months ago? >> they haven't had that much of a loud response on that. if you look at the legislation they work on in congress, it's a bit more pro-police from democrats then you might expect. there is more grants for police and spending bills and they are bringing back earmarks and you have democrats with your marks specifically for the local police departments. that's one issue that has fallen off the table for the progressives. lisa: we've been hearing a
6:21 am
message before the senate hearings about the supreme court nominees and it's been about combating the progressive wing. >> republicans will test the extent to which these nominees focus solely on laois and most the top republicans are focused on sarah bloom raskin and the extent to which she focuses on some sort of regulatory role and climate change which is a major concern for republicans. there will be questions about lisa cook's experience and whether it is relevant to monetary policy but there will be poking and prodding from republicans on how exactly are you focused on the core issues
6:22 am
of inflation or to what extent do you shift toward somewhat of a regulatory role on behalf of the progressives? lisa: we have heard from the administration a number of different narratives around inflation, that it represents a strong economy and a byproduct of what we saw from the stimulus and will fade. what is sticking? >> they are really pushing on the message that this is very much a product of supply chain malfunction, for the lack of a better word stop the fact that the pandemic is still in issue, the global aspect of this. it would be more convenient for the industries and and democrats if they didn't have to say yes, this was a product of the fiscal response. they want to take credit for the unemployment rate dropping but to say they had to spend money
6:23 am
significantly, you cannot just pin it all on that stuff if they make headway with the supply chain issues in the reduction of inflation, that would be the ideal because they don't want this to be tend on their legislative agenda. tom: it's january and the entire tone from you and others is almost in april or may of an election year. it seems the election year is being accentuated early. do you feel that in washington? >> i might feel the opposite way. it already has become february, by the way. the fact that they are working on key legislation and haven't given up on some portion of build back better. you look at the congressional schedule, this could get late into the year. they face a time crunch and they could simultaneously be trying
6:24 am
to push forward major legislation at a time when they want to get out on the campaign trail. they will get even more into campaign mode over the next few months but how will they get there? jonathan: you're welcome back any time, sir. you and i have been talking about this over the last few weeks that the big issue with international banks is the tension between russia and ukraine. domestically, the focus is on education, crime and inflation. crime and education will be part of the presidents mission today in new york. tom: i will suggest a goes back to the late 60's and early 70's where richard nixon co-opted this theme from the democrats. people have never forgotten that and when necessary, there seems to be a concern raised in
6:25 am
america, it all of a sudden comes out of nowhere and launches from the center and that's what we see today. jonathan: the republicans at the moment are having great success. lisa: some of the issues facing the nation now are pretty nuanced. if you can just say someone is not doing a good job, it's a message that gets across. we have seen that from some of the fractured messages across the administration. tom: this is the head of the ioc, is he the gold medal winner? this is a guy that one metals from west germany a generation ago and he's the one front and center for the ioc. you know there will be some politics injected into this. jonathan: it's already massive pressure on the likes of nbc on the covers of this event to bring up human rights abuses and
6:26 am
it will be a big issue for the next few weeks. from new york city with futures negative a little more than 1%, equity futures are negative in the bank of england that ecb are just around the corner, this is bloomberg. ♪
6:27 am
as a business owner, your bottom line is always top of mind. so start saving by switching to the mobile service designed for small business: comcast business mobile. flexible data plans mean you can get unlimited data or pay by the gig. all on the most reliable nationwide network.
6:28 am
with no line activation fees or term contracts... saving you up to $500 a year. and it's only available to comcast business internet customers. so boost your bottom line by switching today. comcast business. powering possibilities.™
6:29 am
6:30 am
jonathan: your equity market is lower and the s&p is down by 1.2% form -- from the likes of facebook. the nasdaq 100 is down by 2.3%. facebook is souring sentiment. we will focus on that and the price action. facebook is down about 20% in the premarket. facebook is getting hammered and we will talk about that later. let's talk about the bond market. let's focus on the u.k., the yield on the two-year is up
6:31 am
slightly. it's the first time in 17 years we have had back-to-back interest rate increases at the bank of england. tom: each of these stories is so different. to fondle them together is incorrect. jonathan: i would agree. tom: each story is shockingly different and nuanced. the u.k. is closer to the u.s. tom: let's have a conversation with david blanchflower. he is definitive on the labor markets and we are thrilled he can join us. i want to start with the
6:32 am
ramifications of central banks pausing in each of their own way if the fed doesn't raise rates are 14 times, if boe goes up twice and then pauses for christine lagarde pauses and never gets started. what happens to us if central banks pause? >> they don't seem to be in concert. the ecb is now the most dovish. the fed is not raising ranks -- rates. it's unclear what the data look like but inflation is raging in real wages are being hit so people on the street are being hurt considerably. inflation hurts, unemployment hurts, the alternative to inflation is also hurt so this
6:33 am
is the world that we are in. the man on the street is not doing so well and central banks don't early know what to do. inflation is rising but real living standards and consumer confidence is down so is very complicated. the economics will drive the policy in many ways. it's being driven by the fact that standards of living are being impacted stuff described the present tom: reality of raising rates given negative wage growth. this is your wheelhouse. how do you affect that policy? >> this is a tough situation to be in. the first meeting, the fed said they would raise rates and didn't and everyone thought the last meeting they wouldn't raise rates and they did. the reality is it's complicated.
6:34 am
i don't make really understand what's going on. it's pretty confusing. i think communication is what's driving everyone's confusion. the central bank doesn't know what it's doing and there credibility is shot stop i'm concerned what you would do in this environment of wage decline. raise rates and rates will fall even further. six months ago, real wage growth was about ticks percent and now it's minus two. these are very rapidly changing conditions. they are trying to raise rates because of the worry of exploding wage -- wages.
6:35 am
i think we are in a world of confusion. jonathan: what's bizarre in the you k is when i get the call later for my mom, she will not talk about the rates, she will talk about gas. even in the bizarre moment we are in, the u.k. energy left -- has put up the cap. we will also get interest rates and then the chance it will offset some of that, what are we doing in the u.k.? >> the rise in the national insurance tax in april is affecting things so you are raising job expectations and dealing with this rise in energy prices. you are trying to deal with the fact that these energy companies are collapsing around us. the big debate in the u.k. is
6:36 am
all the oil companies are doing incredibly well but there is a big to date across the political aisle that perhaps the thing to do is the impact on the energy sector. politically more viable than taxing jobs then to tax oil companies. people are really going to care about energy prices and this will impact the popularity of government and whether the prime minister is still in office. lisa: if you are still a monetary policy committee member in the bank of england, what would you do? >> what i would probably do is sit back and perhaps think about but -- maybe not reinvesting the maturing assets taking it slow. why are you raising rates in
6:37 am
this confusion in the united states? the thing for the market what is the bank of ignore -- bank of england signaling what's coming? they don't really know what it will impact. i think i would ugly say perhaps we will not -- i thing i would probably say perhaps we will not reinvest but we don't know what's coming. we have no historical precedent and in some sense that's the fed's position and the ecb position. we will see the bank of england raising rates again and again in six months, they go oops in reverse. the thing is to have a consistent story. you are waiting and watching. people are really hurting so there rising energy prices and taxes coming up and more people
6:38 am
going to food banks than have ever been in worrying about paying the bills. i would stay out of the politics and weight. lisa: it's hard to understand the pellet -- the politics. in the u.s., there is a divergent story essentially from the ecb that the longer inflation remains, the more people belief in inflation will cause it to become insecure. why is not that the story in your but everything else is going up? >> i think what goes up does come down. i was trying to look back at the u.k. when the last time we had inflation was in september, 2008. it was about 5.5 or so. within nine months, it was down to one so the expect tatian of
6:39 am
what goes of actually does come down is classic so the answer is people can change their spending patterns and stop buying things and ultimately, i would expect inflation will come down especially if the economy is slowing. that will reduce the demand and reduce prices. my suspicion that in a years time, we will be talking about very low or very high inflation but that's a credible probability in the bank of england cannot ignore it. jonathan: when you are criticized because you stick to the same script all the time stop our audience would like to understand what conditions you would need to see in the united states for the federal reserve to raise interest rates? >> i want to see a strongly tightening labor market and i
6:40 am
want to see it based upon the employment to population rate. it looks to me that the u.s. he, me is a long way away from full employment. there's been a temporary shot going on but i want to wait and see what adjustment will take place. if you look at employment to population rate, my guess is the u.s. economy is about 8 million jobs below full unemployment so waiting and watching seems the right thing to do and given that forecasting isn't possible and i'm concerned about the collapse in consumer confidence which now predicts recession and whether that's true or not stop the misunderstanding of what's in the labor market and the fed raised rates wrongly in 2015 and 2018 so i am still waiting to see the labor market showing
6:41 am
signs of vast employment growth. right now, i would probably be concerned where powell has been in be concerned whether inflation is embedded but i don't get is. jonathan: i'm looking forward to your tweets and about 20 minutes. thank you as always. the bank of england decision is about 19 minutes away. a minute after that is when twitter will be very active. lisa: he has a gloomy outlook which i can relate to. 9 jonathan: lisa loves it. futures down by more than 1%, from new york, this is bloomberg. ritika: we are likely to see one of the biggest one-day market
6:42 am
cap wipeout's for any company ever. 180 billions is about to be lost in market value. the company gave the first quarter forecast that missed estimates. in the u.k., the cost of living just got worse. domestic energy in the u.k. climbed. u.k. energy regulator has put dozens of utilities out of business. all three of president bynum nominee to join the federal reserve say they want to focus on inflation. there's a senate confirmation hearing today. fourth quarter earnings and
6:43 am
analysts expect earnings and they want to buy back shares and they promised to raise its dividend this year. how big is the new jeff bezos super yacht? it will have to be temporarily dismantled. global news, 24 hours a day, powered by more than 2700 journalists and analysts in 100 20 countries, this is bloomberg. ♪
6:44 am
6:45 am
6:46 am
6:47 am
>> global wages continue to rise over the last two weeks.
6:48 am
what happens in other countries matters here in the u.s. and we have to watch very carefully. jonathan: your equity markets are down by more than 2% and facebook is getting hammered. to central banks are still to report, we get the bank of england and then we get the ecb. tom: it will be interesting to see the two different stories there. jonathan: we've got live coverage outside the bank of england. tom: let's do the pandemic right
6:49 am
now. we go to south africa. cape town is over 7000 miles from auckland, new zealand but we are focused on new zealand where they announced a plan to open up new zealand. how far are we from other nations saying enough, we are done, we will open up? when do they do a new zealand? >> in this region in south africa, we have lifted more restrictions in south africa. we are seeing a number of countries like botswana and zimbabwe around south africa in this post omicron, post eltel position where so many people have had the virus, vaccine coverage is low but we are
6:50 am
coming out on the other site. in this region, you will see more restrictions lifted. this is a really young part of the world so much has an average -- so malawi has an average age of 18. >> we knew there would be a lag in the u.s. and we knew there were be a hospitalization wave and we knew there would be a loss of life and yesterday, we had 3600 deaths. we are not out of it yet. we still don't have high enough immunization rates and we still don't have heine boosters, particularly for people over age 65. that's a big part of the reason we are not there yet. tom: how do you respond to the regional nature of the recovery in the united states? how does a road develop all the different regions you people are
6:51 am
expert on, how do you adapt to that into march and july? >> i think you're going to see declines in the places that had omicron first the northeast. they will continue to go down in terms of new cases. in parts of the country, omicron continues to search. -- search. the loss of life will follow that in the same fashion. as a country, i think we will be in a different position certainly by the end of february/early march. barring another variant with more trans bis -- transmissibility, we will be coming out on the others of all of the regional spikes. as we have seen before, we will see warm weather will change the
6:52 am
dynamic as well. we now have some other changes with modernity getting full approval for their mrna vaccine and novavax has applied for emergency use, over 90% efficacy. we now have applications to the fda for the under 5. so all of those will matter. lisa: what will happen as the olympics kick off? >> when you contrast what's happening in this region where there never was high enough vaccine coverage but we're was so much more transmission and so many more people got infected and these are young populations, china looks terribly vulnerable. because they went with a zero covert approach in their initial
6:53 am
vaccine turned out to be low efficacy to the new variants they are, really not protected. despite their strict approaches and control and intense surveillance, they have an enormous number of people who are vulnerable to this virus. that now looks like a vulnerability, particularly as the olympics get going. jonathan: as always, thank you very much. turning back to the you k, in about seven minutes, we get a decision from the bank of england and looks like a back-to-back interest rate increase. tom: you mentioned the growth rate of england. is the united kingdom growing? jonathan: the forecast from the bank of england is 5% growth. that's the survey of economists and whether that holds up given
6:54 am
what's happened with higher interest rates and energy prices remains to be seen. lifting the cap on energy prices will hurt a lot of families. they are trying to do something on the fiscal side of things to offset that pain. lisa: what is a rate hike going to do in this model of politics and energy prices? i don't know the answer to that. each central bank is coming up with their own version of why rate hikes matter when we don't understand inflation and don't understand how it will add growth. tom: i'm watching bank of england on tiktok and it's very armitage -- informative.
6:55 am
they are showing the bar in the old bank of england building. jonathan: i know what you mean. it's toward the tentpole. is that what you mean? tom: if you say so. jonathan: the nasdaq 100 is down a little more than 1%. we also need to talk about the ecb. lisa: we've been talking about how the upside surprises will come from the ecb and how they look a 5.1% in reese. at this -- increase. we've been talking about the wage dynamic which is not there. how much is central bank hiking signaling to consumers they are on and getting tightening? jonathan: facebook is -21.5%. it's a signal.
6:56 am
amazon is coming up after the close. next, the president and ceo of merck. from new york, this is bloomberg. ♪
6:57 am
6:58 am
6:59 am
7:00 am
>> we came into the year pretty optimistic about the economy. we have a similar view for february. >> i think we will look back and say this was europe's year. >> the focus really will be on the ecb. how far can the ecb go? >> i know it is a very popular narrative that the ecb has to act. >> all christine lagarde can do is to slow down the process. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. jonathan: from new york city, for our audience worldwide, good morning. this is "bloomberg surveillance ," live on tv and radio. alongside tom keene and lisa abramowicz, i'm jonathan ferro. facebook getting absolutely hammered in the premarket, taking down the nasdaq by more than 2%. we need to talk about the bank of england. they hike 25. some people want to even more than that. tom: for those in


info Stream Only

Uploaded by TV Archive on