tv Bloomberg Surveillance Bloomberg March 11, 2022 7:00am-8:00am EST
♪ >> crisis has certain put a few legs of support under the inflation risk scenario. >> it isn't just oil that is rising. it is natural gas, food, metals. >> the ability for central banks to control inflation in this environment is certainly a question. >> knowing where that line is between doing enough to slow the economy and doing so much that you overdo it is very murky right now. >> we could endlessly debate what the terminal rate is going to be, but it has got to be higher than where we are. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. jonathan: equities with a bounce. from new york city, for our audience worldwide, good morning. this is "bloomberg surveillance, live" this is "bloomberg surveillance," live on tv and radio. alongside tom keene and lisa abramowicz, i'm jonathan ferro. tom: we are going to have good
conversation on this throughout this hour, so please stay with us on that very informed conversation. as you mentioned, there's an equity lift as well. i see at a crusty safe havens and some of the commodities as well. i would respectfully suggest none of it matters. what matters is a full-scale war, and we see how that adapts to the president's speech this morning. jonathan: but we hear from the russian president and the reality on the ground in ukraine. here's a line from the russian president. "there are certain positive developments." vladimir putin earlier this morning. tom: our reporters all across the continent of europe, and the single thing that i think gives pause on a friday morning when we are all worn out is the bombing of airfields 94 miles in western ukraine, close to the polish border. jonathan: this is just 50% of the story. lisa: we need the other half
from the ukrainians. a lot of international strategists have come on this show and said they don't see as clear of an offramp, especially if russia does try to get additional troops to the troops that are out there to escalate further. given that right now, we have to treat any news we get with a bit of skepticism. jonathan: yesterday, the russian says russia wants serious talks with ukraine and belarus. what happened in between, a change of interpretation? a shift in substance? lisa: what is the offramp? is at the idea of assuming a posture of neutrality, as our story suggests, that that message has helped vladimir putin get to a more conciliatory place, or is there something else in the works? if we are talking about this without the prospect for a cease-fire, has anything changed? jonathan: futures higher on the
s&p. on the nasdaq, up 1.5%. on the bond market, back through 2% on the 10 year yield. crude off session highs. euro-dollar showing a bit of strength on the euro side, 110.11. lisa: reassessing what we heard from madame lagarde yesterday, coming out and talking about possibly accelerating the taper of the pandemic era purchase program. they are all hoping for a diplomatic resolution. the reason why we are being pessimistic or skeptical is not because we don't want it. everybody wants this. european leaders are finishing up a two day meeting in versailles. they are trying to figure out a way out of this while preserving some of the ukrainian land as we deal with these images of destruction. how do they plan for an era with less russia dependence?
at 10:00 a.m. in the united states, we get the she can sentiment survey for the month of march -- the michigan consumer sentiment survey for the month of march. it is already at the lowest level since 2011. how much will it deteriorate from here? president biden discussing further potential actions by the u.s. to hold russia accountable for what it is doing in ukraine. how much does he use this as a time to message the need for americans to absorb the higher costs of actually tightening the screws on russia? we are seeing the inflation expectations for th next five years to rise to the highest levels. how much can we attribute this to higher gas prices? how much are we looking at a very different regime, even as the likes of treasury secretary janet yellen has said we are going to have to expect a very uncomfortable rate of inflation over the next 12 months? a different tone than what we have heard from her in the past.
jonathan: thank you. team coverage begins with bloomberg's annmarie hordern at the white house and maria tadeo in versailles. let's go through miss calmly and carefully. -- through this calmly and carefully. the words of the russian president moments ago. your interpretation of that from vladimir putin. maria: this is complete whiplash from everything we have heard from the russians until now. yesterday foreign minister sergei lavrov was still denying a war in russia. ukrainians said they have no interest in a cease-fire, and this is so crucial because ukraine said they are not going to debate or talk or give anything until there is a cease-fire on ukrainians that continue to be bombed. this is also happening at a time in which president zelensky is
saying i worry that russia is going to do a false flag attack on marie paul -- on motor you paul -- on mariupol. this is a big country dish and from everything we have heard from russia so far. you have to look at his actions. the other thing, very quickly, this is happening in a press conference with lukashenko, saying you do not have to justify yourself for anything, and vladimir putin agrees. it is also happening at a time when the russians are welcoming especially fighters from syria to fight in ukraine because the war is not going well for him. the economy is wrecked, and he promised russians a quick victory. that is not the case. tom: annmarie hordern, on mitt romney and 40 republican senators, their basic theme is let's go. i could go to maria on this question, but you look lovely, and i am going to go to you.
what do we need to do to appease 40 senators who say let's go? annmarie: overnight we did have the senate as well get through the funding for the government that came with more than $13 billion in aid for ukraine. i believe what senator romney was speaking about in that moment is about those fighter jets. tom: exactly. what are we going to do this morning? annmarie: at the moment, i don't see moving a position on fighter jets. a lot of that comes down to the fact that the pentagon believes russia would interpret that as the united states entering this war. that would mean united states military firing against russian military, and that is why at this moment, you do not have those fighter jets moving from really any nato country because really, it is about who touches them last that goes into ukraine that they are worried about, that the russians will take that as an escalation and provocation. lisa: what is coming of the versailles talks? what is your sense of the big
conclusions at the end of the meetings today? maria: what we know is we will not get a full ban on energy. it has been made very clear that some countries in europe have sanctions fatigue. they want to see the full impact of this, and they believe this is going to hurt the russian economy. a lot of officials behind the scenes will tell you the changing tone from vladimir putin does not respond to diplomacy. this man has wrecked the russia economy, and the pain is yet to come. the other thing is whether or not they still believe there could be a diplomatic solution to this. there have been a number of officials that say russia has not attempted diplomacy. it is just the language. they will only go back to the negotiating table if they believe they are going to lose the war, and putin needs to save face. whether this is why we are seeing this language remains to be seen, but we really need to
stress this is a war that is not going well for russia. he promised a quick victory. he said ukrainians would be happy to be liberated by russia, and it has been the complete opposite. jonathan: let's push forward to 10:15 eastern time. what do you expect to hear from the president of the united states? annmarie: are jenny lennon broke the scoop last night on what the president is going to say, and that is ripping russia basically as a neutral trading partner, getting ready it -- getting rid of those wto rules. the u.s. doesn't import that much from russia, but they are talking to g7 and european union to work together to do this. this is just another escalation. i think it just proves the point that the united states is not going to stop when it comes to sanctions on russia, and already this morning, another oligarch has come out and criticize the kremlin for the tit-for-tat
response in these sanctions, saying they should be more pragmatic. jonathan: there we go. and marie, thank you. annmarie hordern, maria tadeo, thank you very much. the losses piling up on wall street and we slowly are getting the picture of it because it has taken some time. it will take more time. this from the financial times this morning, the lead paragraph. blackrock its securities holdings because of the attack on ukraine. tom: the news flow is absolutely extraordinary. joel lovington moments ago from bloomberg intelligence published
a summation of what this crisis will be. it is full of tension. david wu, legendary at bank of america, now with his own shop, goes to the mathematics of something i am not a fan of, and that is value at risk, or var. david wu looks for a global var shock. he says this is exalted in us and hewed -- is exalted us -- is exogenous and huge. jonathan: the reporting this week on blackrock and pimco this week alone. lisa: especially if the determination committee for derivatives counts russia in default, and you see a lot of covenants triggered and you start to see the actual losses get realized. how the financial system handles that at a time when central banks are not going to swoop in necessarily as the fed or ecb put. lisa: good morning -- jonathan: good morning to you all. heard on radio, seen on tv, this is bloomberg. ritika: keeping you up to date
with news from around the world, with the first word, i'm ritika gupta. president biden set to call for an end to russia's preferred strayed status today. the move would clear its wafer tariffs on russian imports. the president cannot unilaterally change russia's trade status because that power lies with congress. the u.s. senate has passed a spending bill that includes $13.6 billion in security and humanitarian aid for ukraine. that was part of the $1.5 trillion measure that will keep the federal government in operation for the rest of this fiscal year. federal agencies see a 6.7% increase for his signature. economists surveyed by bloomberg expect third-party makers to be cautious when it comes to raising interest rates. the central bank will raise rates next week for the first time since 2018. economists also say the fed will
signal a faster pace of hikes, though they may be cautious because of the war in ukraine. blackrock reportedly has taken a hit on its russia's security holdings. the vast majority of those can't be sold in the wake of the russian invasion. blackrock is the world's largest asset manager. global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'm ritika gupta. this is bloomberg. ♪
>> we engage with the president. it was very last minute before he announces the war to get a cease fire. it is not accessible by anybody. jonathan: emmanuel macron alongside chancellor schulz of germany, pleading with the russian counterpart, demanding a cease fire. they did not get it. that line, the conditions he put on the table are not acceptable by anybody. futures up on the nasdaq up
1.6%. yields up to .218% higher. the quote, "there are certain positive developments as far as negotiators from outside informed me." vladimir putin alongside his fellow russian counterparts. tom: we will continue to monitor up to the president's speech in three hours. christopher harvey joins us, head of equity strategy at wells fargo. i want to go to the wonderful david wu, now retired, who says watch out for the global var risk. explain the risk models banks have and what they can do to their equity portfolio given the exogenous shock of this war and global slowdown. chris: you have certain normal distributions, or ones you would
say with normal type returns. in types of shocks or very unexpected periods, those returns go outside of those norms come outside of what to expect, and that causes all sorts of havoc. the other thing is correlations typically go to what? correlations start to compress. so basically what happens is it is very hard to find protection, and that is one of the things we have been talking about in the capital markets. tom: here's the accounting maxim. can balance sheet write-downs of debt and frankly of equity go over and destabilize the system enough where var is at work? christopher: i think the u.s. banking system is exceptionally
well-capitalized. i think they're exceptionally well positioned towards this situation. i don't see anything dramatic or systematic to hurt the banks at this time. i am very confident about the balance sheet at the u.s. banks. jonathan: how do you know when we are in a bear market? what do you look for? christopher: we will look to the credit markets. before we see a bear market, one of the things we begin to see is pushback in investors, pushback on credit. so when you bring a new issue to the market, what you see is more pricing concessions. you will see how it trades. those are all indicators that risk appetite isn't quite where you wanted to be. the bigger picture is you are always looking at the systematic risk. how much systematic risk is in the system. that is more of an art to than a science. when we look at balance sheets, corporate or consumer balance
sheets, they are in very good shape. that is typically not what you see before a big bear market or a recession. to enter the question, the first place we look is ease the credit markets and the new issue market and how that trades and what types of concessions are required to fund yourself. lisa: how much have we already shifted to pricing in a growth scare versus simply something of a shock boosting inflation? christopher: that is a great question. i'm not sure i have a great answer. thought we would have a 10% pullback. how much of that is growth? how much is that geopolitical? it is hard to say. we don't know the tail end of the geopolitical. we don't know how this is going to come out. it is great that putin said some positive things, but we are still at war. we are not still at war, but there is still a war going on, and this could go on for days, for weeks, for months.
if that is true, that is very different path than if we get to a resolution in days and weeks, so it is hard to tell, but obviously what i will say is if you look at when the war started , the equity markets were down about 5% in the three weeks before that. since the war started, the equity market is down about 1% or 2%, so there was a lot of anticipation. now, as things go worse, i think there's a lot more to go. lisa: given that uncertainty, how wide is the band of possible forecasts for your end for the s&p? christopher: we are still sticking to 4715. we were one of the lows on the street coming into this year. we have not changed that number. we are looking at earnings, looking at margins. we are beginning to worry a lot more about margins than we did before. but right now we are pretty comfortable with 4715. if this does spiral into
something much bigger, if it does drag out much longer, we will have to monitor it and reevaluate, but right now we are very comfortable. jonathan: did you ever think three months into the year, the 4715 would start sounding the lish? christopher: no, i didn't. at the beginning of the year, people were telling me why aren't you pushing up your price target, and we really bowl on the street at the end of last year. we thought there was going to be a multiple. we got pretty close, but not quite there. but i did not think we would be turning bullish this early in the year. jonathan: we appreciate your time, chris harvey of wells fargo. chris is not alone for sure. just getting a headline from the ukrainian leader, urging for spring farming despite the war.
lisa: it really recognizes how important ukraine is to the world food market, ukraine and russia providing 86% of wheat imports to ease a -- to egypt. if they'll get out there, this could lead to hunger crises across europe and across the world. the fact that he is saying you need to get out there and plow the fields because that is important for this world is really telling. jonathan: waiting for a response to what we've heard from the russians this morning. i don't see one just yet. tom: the tours fear is -- the twittersphere is out there in foreign-language is i don't understand. what i can say is there seems to be some discussion going on with mr. zelensky right now, and we will bring that to our audiences when we can. i need to emphasize, people like chris harvey, it is tough to do their job right now. jonathan: big time.
jonathan: one line from the president of russia, there have been certain positive develop and's. we want to hear that from ukraine to get a more complete story. the bond market story looks like this. a 10 year yield back through 2%. yields up to 2.0163%. olds higher by three basis points. the call from goldman overnight, tighter financial conditions, lower consumer sentiment, and then slower european growth. put it altogether come you get a downgrade for u.s. growth from 2% over q4. tom: i think the critics have
been to harsh. getting rate for that fed meeting. jonathan: precisely where i wanted to go. yesterday at the ecb, a cut to the growth outlook, and then an upgrade for the inflation outlook. does the fed repeat the act next wednesday? lisa: how does the central bank respond to stagflation? this is the central banking nightmare because there is no good answer in terms of rate hikes. jonathan: crude, wti, and print off session highs. brent through $110. would you believe that we've got a weekly loss on our hands here? the biggest weekly loss potentially of the year so far given everything that is going on. the range on this one, shout out to brian sullivan for this one because this is not my line, this is his. a $30, $40 range on crude two
years ago, that has been unreal. tom: it is a good point, but the ranges have widened out, and that is normal given crisis. jonathan: that is your cross asset price action. let's get you some single names. we can say good morning to romaine. romaine: keep an eye on oracle. it's revenue missing some targets. however, they did give an estimate for the cloud business, saying growth for the full year is going to be in the 20% range. that is giving some investors a little bit more confidence this year. the shares are still down 2%, but well off the lows of what we saw any post-market yesterday and in the premarket today. docusign more than tripling in 2020. down 70% now off of that all-time high. it looks like it is going to lose another 78% from where it closed yesterday. the earnings were actually good. the problem with the forecast they gave was for revenue growth
that is going to be much lower than what we had seen during the pandemic. wework, which finally came back to the public market in october, providing earnings this morning. the numbers themselves don't matter as much of the forecast for about 3.5 billion dollars in consolidated revenue for the full year. let's take a look at what else we have. rivian automotive also came out last night as well. the company only produced 2500 cars since the start of production. the street was looking for 40,000 to 50,000 cars. mcdonald's on a six-day day losing streak. shares higher by about 0.9% in the premarket. major league baseball and that tentative contract agreement giving a little but of a boost to some of these tv networks. disney shares up 1%. tom: i would also note the 10 year real yield this afternoon moving from that gram-negative
1.00% up to a -0.87%. we are looking at ukraine. the war, some of the news is flat out grim, and it folds over to the repricing in the bloomberg world. the repricing is most critical on the buy side, where the assets are held, and that includes columbia threadneedle. joining us now, and at husseini -- joining us now, ed al -hussainy, their global rates strategist. ed: i think investors broadly are crystallizing their losses on russia holdings, and the good news so far is that we have not seen spillover effects, particularly the natural liquidity, the natural cash more broadly. we are seeing margin calls in the grand scheme, but they are
not really dragging it -- really triggering a massive run in the asset management business overall. tom: i look at one of the thermometers here that is elevated, but rage bound to a worse statistic. explain the pressure on the buy side to reprice troubled debt. this that come from guys like you? do you call up the managers and say you've got to reprice this? how does that happen? i mean bonds, bills, notes, and bonds that are going to be marked down. where does the pressure come from to mark them down? ed: ultimately, the asset owners. by and large, if you look at russian assets, there's a collective decision here in terms of asset owners saying we do not want exposure to this
risk, regardless of how it unfolds in the short term. there is a broad movement out of russian debt and equities in the investment world. there's a broad movement of companies out of russia as well, so we see physical assets in russia getting written down. altogether we are taking the slice of russia in the system out of the equation. lisa: at what point do we shift into something that looks like a growth scare? i wonder at what point the recession talks that we have been hearing percolating up through yield curve discussions start to become that much louder ? ed: we are kind of their right now. the consensus view on u.s. growth is starting to weaken. if you look at the fed expectations, the fed has a print of about 4% for 2022 growth.
i think that might get marked down a bit next week. but i'm march, we are preparing for household balance sheets, the labor market coming into this year, so we have some buffers before the risk of recession becomes real. but i think that trending usually happens when things are good. unemployment some 4%, the yield curve almost inverted. lisa: i am looking at the interest rate expectations for the rest of the year. do you think that the rest of the complex for bonds and everything else has factored in seven rate hikes? ed: i think we have done a pretty good job. the move wider in credit spreads, investment-grade, high-yield, we are about 15
months wide now. most of that move has not been because the undermining what tori -- undermining. lisa: we have this and fortunately high-impact rate growth for the time that we could get significantly higher. ed: the biggest question in debt markets is will the fed have to raise debt funds above 2%. if you -- if we have to price that, how quickly do we have to price that in? it is not really squeezing from a growth perspective. if we have to go there, that is a rapid repricing. that very likely inverts the
curve very quickly, potentially as early as the second half of this year. jonathan: we've got to leave it there. thank you, as always. ed al-hussainy of columbia threadneedle. two year yields have risen 40 basis points from their dip in march. they conclude with this line. we expect 200 basis points of hikes in 2022. tom: do we agree that we are going to see something here in five days? jonathan: you've got to believe 50 is part of the story for one month at least. i believe they have changed their story. it is not 50 basis points in may that they are looking for that move. this is frankly before a war in ukraine come but it is a meeting
that will be ever more fascinating. jonathan: in response to your question, if you push through 200 basis points of hikes with twos-tens around 25 or 30 basis points, what do we end with? lisa: that really will have a dampening effect. you wonder what the balance sheet response will be to try to calibrate that yield curve response. jonathan: equities higher by 1.4% on the s&p. yields back through 2% on the day, and crude backing away from session highs. wti just about holding on to $107. there are certain positive elements as far as no cedars
from my side informed to me. and we wait. we wait for that response to what we've heard from the russian president this morning. tom: i really want to emphasize that the new slow this morning is extraordinary. james glassman realistically calling for an attack on putin this weekend. jonathan: what you hear and what you see, they are two very significant team at bloomberg news. global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. -- at bloomberg news. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. ritika: the united nations says
2.5 million people have fled ukraine since the start of the invasion a little more than two weeks ago. millions more are said to be displaced within ukraine. the majority of those fleeing the country are entering poland. the richest man in russia is dissenting over sanctions. the building air warns that moscow's retaliatory measures risk backfiring. in china, xi jinping reported we want to ensure that it can retain control over efforts to reform the economy. shares of london-based abdication and publishing company saw the most and 22 years today. the formal global management firm says that is evaluating a
possible cash offer for the company. it has been undergoing a long and rocky turnaround effort. major-league possible -- major league baseball reach it and live -- reached a tentative labor agreement to end it 10 month lockout. the deal of hurts potential disaster for a sport that was already coping with a loss of tv viewers. global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'm ritika gupta. this will speak -- this is bloomberg. ♪
we have to have massive investment in renewables, and strategic investment to secure our independence. jonathan: ursula von der leyen, president of the european commission. good morning. futures look like this on the s&p 500, up 1.52%. on the nasdaq, up 1.5%. the view from the russian president, there are certain positive develop its. seconds ago, just got a message from annmarie hordern, and excludes that one-on-one with the foreign minister of ash and exclusive one-on-one with the foreign minister of ukraine. -- an exclusive one-on-one with the foreign minister of ukraine. tom: moving from mr. biden over to mr. kuleva, i can't say enough about the overlay this friday in kyiv, the new
slow. it is not grim, but the new slow is hugely dynamic right now. jonathan: i'm sure that's what it's felt like over the last few weeks. looking forward to catching up with the minister later this morning. tom: kriti gupta now with a chart on oil. kriti: we have been talking about the impact of russian barrels that potentially won't be bought from europeans, from americans, but let's talk about where the u.s. really praise a -- really plays a role here. this is 2019. take a look at the ramp up. that is really my chart of the day. it shows the u.s. output compared to the drop off in 2020. we talked about why the u.s. shale ceos aren't ramping up production, and they said those supply issues, those labor shortage issues, it means there is a lag else into the market, and it will take a year to get that investment coming to get
that output to really ramp it up. the problem is you have to make a big call on simply are these prices extremely high right now, are they going to be this high, and that is the struggle that a lot of that sector is dealing with right now. tom: thank you so much. greatly appreciate it. so much more through the morning. what we know is commodities are a tangible. they fall on your foot and they hurt you. we got a tangible response, and darwei kun of dwsg -- d arwei kung was with us of the ws the other day. darwei kung is with us now. on this friday, are there orderly markets in your world? darwei: we do see the market is relatively orderly, but there
are certain markets not trading right now. for example, as of now, that does have the impact on overall investment. we hope to see that resolved very soon. . lisa: when we are looking at some of the expectations you had of sanctions went into effect, you could see brent going up to $150 a barrel. we are not there yet. we tried to flirt with that territory in the immediate aftermath. do you think retracement has been justified based on the marginal response kriti gupta was talking about and possible from oil producers in the middle east. darwei: we do see the commodity oil price to be $130 should russian barrels be displaced and not be able to come back. the latest report we have seen has about 10% of the russian production as being rejected, not being delivered in the current month.
we are not sure if that can be replaced, so if those barrels cannot be replaced, we definitely see higher price from here. the big question now is what is the replacement possible for such disruption. is the disruption limited to just what we see now, or could it get more extensive? the impact of the sanctions continues to grow industry. lisa: all of these discussions about bringing iranian oil supply back on market or potentially improving shale production really isn't the story. it is saudi arabia. that is really the only producer that has the capacity to replace russian oil. do you agree, and do you see that is becoming the bigger focus? darwei: i do agree that saudi arabia has a very large role to play. saudi arabia has one of the best
spare capacities available to be added into the current supply, so it makes sense to focus on that. at the same time, we think more holistically across all of the possible replacements, also the volume of displacement i could take these. the current session in the u.s. and the u.k. does not preclude the oil globally. you will have to find a new home if that -- a new home or you if that is not the case, that will make those barrels much harder to be delivered. i'm not sure if we can find replacements for that at this point. tom: the phrase is long and wrong. forget about that. sometimes your long and right. when you are in a trend commodity and you get a constructive movement like this, how do you know when to sell? darwei: it is a very hard question. i do think it is prudent for
investors to thing about taking profit. jonathan: would you sell oil -- tom: would you sell oil here? darwei: one way we can benefit from oil price movement is to start looking at exposure. there's clearly a big gap between the front, the more recent delivery dates versus the later delivery dates. some of that we think will eventually normalize, so we are looking for ways to take that. tom: it means tuition payments. just to you personally, that feels like a personal story. thank you there. just going through the contract table, the april price, the front month contract, $107. let's go to march 2023. $85 a barrel. that's not the kind of thing that darwai is talking about.
tom: the current market is the media coverage. jonathan: off one line this morning, we are still going off the same line from the russian president. they are waiting for a response from ukraine. tom: i'm looking at the havens, and the havens do confirm that move. gold under $2000 nicely, swiss franc weaker. we await headlines in a war-torn ukraine. jonathan: 11:30 eastern time, and marie sitting down with the ukrainian foreign minister one-on-one. what do you want to hear a couple of hours from now? lisa: what the breakpoints are to get to resolution. are they going to be able to allow some of the russia friendly regions to break away? that might be really the place that people are looking for. tom: this --
♪ >> this war is exacerbating trends we were already seeing. >> there is no equilibrium for the market. >> there's no doubt there is more vulnerability in the forecast. >> the risk of punching a more negative growth outlook is certainly one to be considered. >> the fed wants growth to slow some. they think it is going faster than sustainable. but they don't want to overdo it. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. tom: good morning, everyone. on an eventful friday, on radio, on television, i look at one headline from putin
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