tv Bloomberg Surveillance Bloomberg March 29, 2022 7:00am-8:00am EDT
>> i think this is fast move in the bond market has cut people off guard. >> it's been about the fed, it's been about bond yields, very unusual to be hiking this much. >> move with the times, move with the data. >> i am concerned it will be difficult for the fed to pull off a soft landing simply because they fallen so far behind the curve. >> this is bloomberg surveillance. jonathan: from new york city, for our audience worldwide, good morning, this is bloomberg surveillance live on tv and radio. futures are up 4/10 percent on the s&p 500. the difference between the two year and the 10 year is
single-digit's. tom: the spreads are coming in flatter and there is the gloom of recession but i would correlate it out to foreign-exchange dynamics. there is some important discussion of yen and what it means for em. jonathan: i know you hate the parlor game but what is consensus now. tom: i have no idea. bill dudley published this morning and every other academic has a linear who asian step at the backend is an epsilon symbol. that is the uncertainty out there within the system. the epsilon is off the chart. jonathan: a hard landing is virtually inevitable says bill
dudley. lisa: an increasing number of tinkers are saying you're seeing a different sentiment in the market which is what is the fed's instrument to transmit their policy to slow demand. has that weakness been priced into a market that is continuing to be dependent on the strong consumer? jonathan: we are still talking about talks but this time in turkey between ukraine and russia. with -- what does the market gain from those talks? lisa: people are looking at the changed rhetoric on both sides and are getting optimistic about give and take. how much are we going to see some demilitarized zone as the solution in the eastern region of ukraine? jonathan: let's whip through the broader price actions.
looking at yields, just about a low 250. the 10 year yield is up there by two basis points and looking at crude, up 9/10 lisa: how do we get a sense of whether these talks will yield anything? it's simply stock markets going up in the fact that people are realizing that folks would like to see his cease-fire and would like more time in those talks kick off today between ukraine and russia in turkey and the minimum goal is to improve the humanitarian situation from the ukrainian side and russia wants to remove the most heated language. how much of this does vladimir putin want. we will get the house price index as well as the home price data for the month of january. we are coming off the highest level on record, 20%
year-over-year in this goes directly to how much consumers pay as far as mortgage cost in securing a rates. how much can they have their base income eroded with these costs? this speaks to the u.s. confidence board. this will give you a sense of the same kind of pessimism we saw from the university of michigan survey. we are talking about a potential downturn. the labor market is hot. we have 11 million job openings and expected to stay around that range. how can we be talking recession or downturn when you have this type of reaction in the labor market and people getting raises at a rapid pace? jonathan: thank you. in the building, julian a man u well of evercore.
-- julia emmanuelle. >> it makes sense given the fact that is the only verified bull market we have right now is the bull market in hawkish and us. he basically went from zero to 360 miles per hour starting in november. remember how many rate hikes we were pricing in in november and now we are pricing in nine and looking at 250 and fed funds at the end of the year. from that perspective, and i think it is the market waking up to this fact that the 40 year old market in bonds is over. as we see it, it may be a bit overdone in the near term particularly because of the
volatility market in equities is telling you the may not be that level of concern perhaps because there is too much bearishness in the equities. jonathan: i don't believe there is a big war between people in bonds and equities. they sometimes have these conversations. they tell you different things. how are we supposed to price a bull market with the fed and the praise hikes. >> the uncertainty factor is absolutely enormous and literally everything as individuals and we as investors inc. about. when you go back a number of weeks ago, the equity markets discounted it. you saw a lot of d risking and a lot of bearishness play out and as we've seen over the last several weeks, it appears as if you may be making a tough in the
commodity markets and that completes the circle between the equity markets and fixed income. tom: julian emmanuelle, how does nominal gdp filter into corporate america? you got all this inflation we are dealing with so how is it filter in to the micro data you guys are famous for? >> there is still going to be profits on a nominal and real basis this year and when you add that together, you're looking at somewhere north of 9% growth. tom: you are modeling 9% eps growth? >> even as ed took his gdp numbers down, he still ahead of consensus at 3%.
and we are starting to price in the base case for a european recession. estimates in the s&p 500 have risen year to date even if you strip out energy. lisa: is your that that the fed goes 1.5% on the rate hikes and then retrace? what is the base model you are looking at? >> i think this goes back to the uncertainty. we are not pounding the table and screaming bulls. we actually took our price target down from 5100 at the beginning of the year to 4800, recognizing the fact that this kind of geopolitical tension will be a multiple compressor if not for years to come. in an environment, if we're able to stave off recession in the u.s. and we believe we do, you will get that earnings growth
which, when you think about the reopening, the fact that i'm in the holding becoming normal, it sets the stage for further growth into 2023 which supports equities. ed has a balanced view. he understands the degree of risk and that there is no way to downplay the horror of what's going on in ukraine and the fact that it could change psychology. it hasn't because american psychology in particular has been very resilient. tom: the only reason hyman hired you is he wants everyone in the office to love ice hockey. >> at is a tennis player which i do as well. tom: he's like gung ho ice hockey. >> left side shooter as we
discussed. jonathan: we should move on. julian, thank you. did you get the wrong guy? tom: no. he likes tennis but every time i go there, they like hockey. jonathan: is julian a hockey guy? he sounds like a tennis guy. i think you confused them. equities up 4of 1% on the s&p 500/10. nasdaq futures 100 are up as well. this move and apple over the last 10 days, 16% rally in 10 days. it's a massive company. tom: it's like they've gone up
like walmart. it's really tough to bennigan's revenue growth and profit optimism. you get run over every once in a while. lisa: how much does this become the new haven a downturn? that was one of the most shocking assertions this morning. that could be the new cash. jonathan: i've got the number off the bloomberg, over $400 billion added to the market cap of apple over the last 10 days. a monster move. tom: i think we have broken two items at the house. we are on a first name basis with the new product will stop jonathan: from new york city, this is bloomberg. lisa: keeping you up-to-date
with news around the world. peace talks between ukraine and russia are underway in istanbul. the main goal of moscow is the liberation of the do region in ukrainembas. the senate is now passed its version of a long stalled bill to help the u.s. semiconductor industry and boost competitiveness with china. that's set the stage for negotiations with the house which is passed its own version. the measure includes $52 billion to bolster chip manufacturing. the house committee investigating the insurrection at the capital has voted to recommend contempt citations against two former president trump advisors. the former deputy chief of staff dance give me know and former trade advisor pierre navarro defied severe -- subpoenas to testify. they say the supreme court must resolve legal and constitutional
issues. police and london will issue at least 20 fines to government officials close to prime mr. boris johnson who broke lockdown rules. his junior staff is expected to be targeted in the first round. police have been investigating a dozen gatherings on government premises including the prime minister's apartment. actor will smith has apologized for slapping chris rock on stage at the academy awards. he said he was out of line and the academy of motion picture arts and sciences has opened a review of his behavior and says it will explore possible consequences for his actions. global news, 24 hours a day come on air and on bloomberg dictate, powered by more than 2700 journalists and analysts in more than 1200 countries. this is bloomberg. ♪
>> it's ridiculous. nobody believes we were -- we will take down putin. nobody believes that step the only war that's worse than the one intended is the one that's unintended stuff the last thing is i don't want to engage in a land war or new their war with russia. i can still express my outrage about it. jonathan: the president of the united states is setting the record straight but is it with the media or his own white house? tom: these are delicate things
restraint. we do see an attempt to win over some centrist sentiment on capitol hill. it increases spending on veterans and lowers deficit spending by trillion dollars. it accomplishes the savings, if you call it that, the lower deficit spending by taxing unrealized gains. we know that will not see the light of day. if this is existential tuesday, not a lot of this stuff will see the light of day. jonathan: some journalist worry about doing this because of access but i think we should do this.
what is going on? joe: the walk back to came saturday night was very quick to respond to what the president said. i'm not entirely sure what the outrage was to begin with as it was pretty consistent with what the president had been saying. if you called b put in a war criminal, a killer, a pariah and a butcher, pretty obvious he doesn't deserve to run his own country, that's not to be confused with regime change. the white house press office was concerned and we heard emmanuel macron complain of doubt it and there were worries this might hamper negotiations. the present yesterday doubled down about walking anything back. he did seek to clarify what his intentions were. maybe there is a little bit of paranoia in the press office with the present speaking off-the-cuff. lisa: and perhaps paranoia about job security as the president
popularity drops. joe: let's see with the election results are. there is history on the side of republicans. i don't know the people will get fired for this but inflation remains the story in the budget i referred to does not acknowledge inflation post november. the projections in this document go back to november before inflation and the big jump in gas prices. the white has me to look in the mirror and continue to challenge it self on this issue of rising prices because it's not being reflected in this new proposal. lisa: we talked about support for shale and oil drilling given the fact that we still are seeing oil prices highly elevated stop how much focus is there in the white house on this on trying to bring down gas prices? or will he stay higher or even
-- or will they stay higher even go higher? joe: last night, nancy pelosi talked to her caucus about different ideas to bring down gas prices. we talked about a possible gas tax holiday which is not entirely likely. they are talking about maybe vouchers but not got the highway trust fund which is what the gas tax is for. as the white house tries to manage domestic gas prices, it's trying to unlock lng for europe. this will not be solved in the near term. jonathan: i'm wondering if they are trying to make policy or look for something to campaign on. j ioe: on capitol hill. they know how to count votes.
joe mentioned with the nail in the coffin last night saying you cannot tax things you don't have. it's kind of an elementary perspective. jonathan: pretty bizarre sometimes the conversation in washington, thanks for catching us up. lisa: way to pump up morale. jonathan: politicians are ridiculous in the best of times. tom: we are getting into the silly season of elections. the primaries around these elections will have some surprises. we are on the edge of april. jonathan: got a fed that is not doing the white house any favors. lisa: they are between a rock and a hard place. the image -- the administration has to look like they are being hard on inflation and are
looking for who to blame but a fed report came out yesterday in san francisco saying if you want to see why inflation is high come is because of fiscal policy, not monetary policy. so there is a bit of buck passing. jonathan: many would say chairman powell is to blame. the president is vulnerable and exposed in many days going into the end of this year. lisa: the people said they tried helicopter money and actually led to an elation. -- it led to inflation. complicated issues don't read well in electorate that doesn't deal with nuance well. jonathan: inflation is the number one issue right now for many americans. consumer confidence hit decade lows again on friday.
jonathan: live from new york city this morning, good morning. here's the price action on the s&p. after three days of gains, up 0.3%. apple very much in the mix. 7% of the s&p 500 single names. we've added $10 billion to the market cap. speaking of unreal moves, let's talk about the bond market. twos have gone from 1.43% at month end last month to 2.4% now. we got all these pockets of
inversion, threes, fives, sevens all trading above tens, and two aren'ts and -- and twos aren't far behind. financial conditions are getting easier. less restrictive, not tighter. is that a problem for the federal reserve? was at the objective to tighten conditions? lisa: does fed chair jay powell want to see a credit market weaker? does that present a problem for transmission of their policy, forcing them to go further than they would like to? jonathan: that's why they are lining up a series of 50 basis point moves over at citigroup. this is an issue, isn't it? what is going on in fixed income, and treasuries, the little pockets of yield curve
inversion, we are pricing in these big moves, yet financial conditions are not getting tighter. they are getting less restrictive over the last couple of weeks. tom: there is a growth overlay here, too. the terminal value on all of the central bank malarkey is you've got to figure out what the growth dynamic is, and that is a massive mystery. i would say most so for christine lagarde in europe. jonathan: we will talk about that mystery in just a moment with subadra rajappa. let's welcome back romaine bostick. francine: good to see you --romaine: good to see you. risk sentiment this morning is positive. this is more of a rotation rally out of the turmoil going on in the ukraine. tesla shares up about 1.8% of of an 8% gain yesterday, the biggest one-day gain we have seen for tesla going back to the end of january. a lot of talk now about apple.
those shares relatively unchanged in the premarket. they are up for 10 straight days, the longest active winning streak for an s&p 500 company, and there are only two other companies in the russell 2000 that have matched that when streak. that is gamestop and palo alto. if gamestop does for -- if it does in higher today, that is the biggest when streak since 2015. of course, the waiting that it now has, dominating the nasdaq 100. a couple of things to keep an eye on here. just crossing the wire a little while ago, elliott and brookfield management earlier this month made a bid for nielsen. that was apparently rejected. dow jones now reporting that that has been increased. fedex up about 215%, announcing
that fred smith will step down, as anticipated. after the bell, we've got a lot to go over. a lot of earnings, and putting micron and lululemon. tom: away from the banks, an important phase of the earnings season. thank you so much. on fixed income come on the mysteries, subadra rajappa joins us with societe generale. the dynamics of equities is simple. down we go. the vix at 36. up we go with a huge growth rally. is there any presumption of price down in fixed income and the idea that we get a hail mary of lower yield and higher bond prices? tom: i think we are starting to reach some -- subadra: i think we are reaching some key
resistance, but to me, all of the focus is on the curve, as you guys have been discussing. the twos-tens part of the curve is very close to inverting. it could invert by the end of this week. it could invert the first half, if not sooner. tom: the idea of a flat curve or a true inversion or a depth of inversion. do you predict a certain negative amount which gives us that depth of inversion, which signals recession? subadra: i don't think there's any sort of magic number we are watching. what typically tends to happen is when the curve gets flat or inverted, you tend to see that in about a year's time, you start to see a meaningful
slowdown in growth. the inversion starts, and then as we progress, it is just moving towards the front end of the curve. chair powell is looking at the three-month-10 year part of the curve, saying that is not inverted, so we are not concerned, but the twos-tens is saying that the three-month part of the curve is going to start moving higher, and that is the next sort of progression for front end of the yield curve to start to flatten. regardless, i would say within a year's time, you will see the impact of the flatter curve on the broader economy, and that typically tends to leave to a -- to lead to a slowdown in growth. lisa: -- sees a bond market without pricing in a soft landing. you agree? subadra: like you were
discussing earlier, conditions broadly speaking are still very accommodative. so what the bond market seems to be a little bit ahead of itself and expressing concern about the health of economies. that is where it gets tricky because it is going to be very hard for the fed to be able to raise rates from the zero lower bound to 250 basis points in a matter of six to eight months and not have the economy have some sort of hard landing. that is where it gets tricky. , and that is why i think it is really hard to know. lisa: basically, the bet is that the fed will have to backtrack on some of the hawkish and us, that they won't be able to go that fast, or else they will be able to and the economy will have accelerated to enough of a degree that it will be able
to hold there. are they pricing and something that seems impossible? subadra: i would agree with that in the sense that the fed is very eager to raise rates very fast, at least frontload these rate hikes because they can. the unemployment numbers are very low. the economy generally speaking is very strong. the growth trajectory for this year is very strong. they are very eager to frontload these rate hikes. we have to see what happens in the latter half of the year, after they deliver 50 basis point hikes at the may meeting and perhaps at the june meeting, and announce a runoff in the balance sheet. we will have to see how the market reacts. if the market still holds outcome of the could probably raise rates. if not, they will have to pause sometime in the latter half of this year or perhaps even early next year. so i think the fed is very keen on frontloading these rate hikes. whether they can keep a sustained pace of hiking this year and well into next year is yet to be seen.
tom: we are not there yet. we are a little bit away to three digits from a positive yield on the german two-year piece. what does that signal? subadra: that the world is getting to a nonnegative bond yield environment because of the inflation dynamics. inflation is not just a u.s. story. it is a global story. you are starting to see jgb yields start to pick up again the yield curve control restrictions there. so i think the general trend, especially in europe, the inflation dynamics are a lot more pronounced because they are dependent on russian oil, and i would say they have a greater propensity to go into a recession because of their dependence on russian oil and
commodity prices in general. i think the move now reflects the reality of the inflation dynamics and the global inflation dynamics with risk bonds getting out of negative territory across the world. jonathan: thank you, subadra rajappa of socgen. i would love to sit and talk about the german bond market, but getting some interesting headlines out of these negotiations between ukraine and russia from the ukrainian side. offering to discuss crimea from the ukrainian side. the ukrainians saying zelenskyy and putin can discuss separatist areas are get those headlines coming through moments ago. tom: there it is, official. the stream of headlines here amid war in these negotiations is the distinction, these are not negotiations in a vacuum and separate what is going on. as we speak, i'm going to call
at 3:00 p.m. in mariupol, 3:00 p.m. in kyiv, and crimea, so it is an ongoing story. jonathan: one negotiator said the following, that crimea and donbass remained disputed territories. they were seeking guarantees outside of crimea and separatist areas. there's a feeling that this is going in a certain direction where maybe we can strike some kind of cease-fire and hopefully maybe even a peace accord further down the road. that is the hope at the moment. lisa: absolutely. how much are we going to see the result of that in a new borderline in terms of what is russia and what is ukraine? jonathan: we need to get the russian side of how they thought these talks went, but certainly that is the ukrainian position at the moment. tom: ruble spikes stronger now, down to an $85 handle. jonathan: this is bloomberg.
>> keep you update with news from around the world, with the first word, i'm lisa mateo. peace talks between ukraine and russia have ended for the day. ukraine is seeking a cease-fire. russia says it wants what it calls liberation for the donbass region in eastern ukraine. president biden has renewed his efforts to per se -- to persuade congress to seek taxes from the largest corporations and wealthiest households. it includes a modified wealth tax and eliminates the carried interest tax rate for investment funds. key members of opec have a message for the u.s. trust us. they see oil prices would be even more volatile if it were not for the cartel strategy. opec and its allies, including russia, meet thursday to decide on output levels for may. so far they have resisted calls from the u.s., japan, and europe
to pump more oil. the ftc has sued to stop into it from telling per -- stop intuit from telling its customers on turbotax at its services are free. the ftc says customers spend time and effort on turbotax only to find a have to upgrade to a paid service to complete their returns. intuit says the ftc claims are not credible. 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 lisa mateo. this is bloomberg. ♪
they will sharply cut military operations near kyiv, to cut military activity near the ukrainian capital, according to interfax. talks have just wrapped up in turkey between russia and ukraine. that is from the russian side. from the ukrainian side, the same kind of constructive language. this is the first time from both sides we are hearing a constructive tone. off the back of this, dollar ruble makes a move down to about 85. the truman -- the german two-year breaks out. just coming away from the market conversation in europe with a more constructive tone to these talks. that is the indication from these headlines, anyway. tom: i agree, there's a tone here that is more constructive. the safe havens give way. weaker swiss franc, and gold was at -30, now -35. safe havens on the move. jonathan: a putin-zelinski
meeting if possible. and may happen with foreign ministers, according to the russians, reported just moments ago. that is the latest. so it looks like perhaps we are just making a little bit of a move, some progress forward on talks. $111 on brent. tom: an extra ordinary 30 minutes for "bloomberg surveillance." we will speak oil here, and then we hope to go to europe for the movable headlines on ukraine, and then we come back to an important discussion with abu dhabi in the next hour. paul sankey joins, lead analyst, sankey research, with all of his expertise on hydrocarbons. we are scheduled to speak to the oil minister of abu dhabi. how badly does saudi arabia, abu dhabi, and the rest of the persian gulf need russian
support for their oil economics? paul: they don't. i think they are sticking with the opec+ agreement. they need them to make decisions because they have to be unanimous decisions within opec+, so within that construct they need to maintain those clients to russia, but overall, they are really the only two major oil-producing nations that have significant spare capacity, so they would be in position to change strategy if they wanted to unilaterally, but it would end opec+. tom: what is their power to suggest to mr. putin and russia, with all of the challenges they have, enough is enough, let's get this fixed? paul: i can't imagine anyone is not telling vladimir to back off.
i think it is going to have a perverse effect, which is if he does act off, he likely survives in power, and he has opened pandora's box now of the world's wetlands on russian energy. the mistake is made. essentially everyone is going to move as fast as they can. russian oil is a different thing because of the way that oil is traded. we could see that coming back into the market, and that is why you will see oil trade off. lisa: these headlines are moving markets quite significantly, certainly on the yield space. the idea that there will be a dramatic cut back in military presence, military action by the part of russia near kyiv and a couple of other locations. how much will this actually change the backdrop for higher commodity prices? does this bring russia back into the mainstream, or has that ship completely sailed? paul: i think it has sailed. this remember that the sanctions
were self-imposed, essentially. we have only just work through real u.s. sanctions. the europeans never really got it together apart from self sanctioning. i think what it will do is allow the self sanctioning to start. that is just a you can start hounding russian oil without much fear as you did when shell screwed up a week after the invasion. keep in mind that the oil market fundamentally was really a $95 to $100 market before the ukraine situation. the ukraine situation is $110 to $150 oil market. there is still a crisis with distillate, especially related to european natural gas, so we are not going back to $60 yet. lisa: what is your base case if what we are seeing reported
right now is true and that these talks have yielded significant progress that could lead to some sort of cease-fire? what is your base case for brent? paul: i think we will still be above $100, no question. whether or not i will stick with $110 to $140, i think i probably will because we are going into the summer here. got to remember there's a global distilled crisis. you've lost a lot of barrels terminally basically because of interruptions to the flow. additionally, if we get heat back from china, we get what we lost on china's covert issues. jonathan: there's a difference between things not getting worse and things getting better. would you say that this is a good indication that things won't get worse, but ultimately, no real indications that things get better, talking about the
oil market and sanctions? any reason to believe that sanctions come off soon? paul: i don't think so. i think the pressure will remain on putin as long as putin is still in power. while wildcard bit into outcome was that putin would be deposed, and that would change everything because presumably, if you got a vocal democrat into russia, i think the west would fall over itself to welcome them. but as long as putin remains in power i think there will be tough sanctions. jonathan: paul sankey, fantastic timing to get you on the show right now. just to wrap things up for you if you are tuning in on bloomberg tv and radio, for the first time, a constructive tone out of both russia and ukraine following talks in turkey. ukraine says there is ground for a meeting between leaders vladimir putin and president zelenskyy. russia says that meeting is possible and russia pledging to sharply cut military near kyiv. this is the market reaction off the back of it.
dollar ruble with a 10% move, going lower and lower as i speak. looking at the moves elsewhere, we've got a german 10 up 14 basis points, a two-year very close to breaking into positive territory and staying there, now back into negative territory, but only just. a big move on crude. if you get the move in brent about 3% off the back of this, i have to stress there's a difference between things getting a whole lot better for the oil market and things just not getting worse. tom: i like your asymmetrical analysis. i think it is very important, with brent crude off the 15% ugliness we saw a month ago. maybe we can't frame out that this morning it is good news, not with the tragedy going on in ukraine, but maybe it does not get worse, particularly with that key headline of russia abandoning coming down from belarus south down the river to kyiv. guess what? i guess that is over. jonathan: for the first time,
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>> i am very concerned that all of these higher prices will lead to different spending choices and for people to pull back. >> i'm very impressed and surprised at how resilient equities have been. >> we still have to focus on what the central banks are going to do. >> i am more focused on the overall level of rates and most importantly the shape of the curve. >> this is certainly shaping up as a very different economic cycle from anything we have seen in the recent past. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. tom:
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