tv Bloomberg Markets European Open Bloomberg March 31, 2022 3:00am-4:00am EDT
driven by harder than expected inflation data. francine: this is what the futures are looking like. the focus on these features is the dax, getting some 0.5% so we get oil dropping. we know that the white house is looking at releasing stockpiles. for the moment, europe seems stable. tom: 180 million barrels is what is being considered to release from the white house. we will be watching for updates on that whether they do make that decision. inflation and that data. we had french inflation data and germany and spain all building up for a tougher environment for the ecb. the markets pricing in a move for 0% for the ecb from october to december. dax up 0.5 percent and the ftse
100 gaining 0.2%. 1.3% coming in above after surveys. the spanish ibex gaining 0.2% as well as the french cac. that is as we look ahead to the french election season. let's look at how things are playing out across assets. we saw the pressure on equities markets in the u.s. yesterday. the worst quarter we have seen since march of 2020 and that is one the pandemic got underway but traditionally, april is a better month. this quarter that we are heading into is traditionally a better quarter. you see losses for this quarter a little under 6%. this is your 10 year yield, just a move up of one basis point for the u.s. 10 year, and the german
two year inching to positive territory for the first time in a few years. we continue to watch the inflationary impact across the euro zone. brent at $109 per barrel. it may be looking at the strategic reserve with the coordination with the iea. francine: it would do a lot to maybe temper a little bit of inflation across the board for european producers. this is the picture for sectors. energy down one .5%, telecoms all the way down, but we have auto parts gaining, construction, travel, material, and media. they're looking at the bond rout and what happens in europe and what happens firmly on oil prices and the correlation between that and equities. tom: some of the individual names, h&m, what a group of
earnings for this retailer. they have exposure to russia and china and they are talking about the pandemic affect. continue to watch this one. the estimates have been above a billion so i big miss for h&m. it is still blocked in china. losses there of more than 7.5%. abb, the industrial company gaining 1%, adding to their share buyback program. brewin dolphin, this is an rbc takeover cash deal that they are looking at and it has been agreed at more than 60% premium so we will see the how that opens. let's go over to mark cudmore and mark, you are laser focused on the oil story. mark: absolutely, it is all i
can talk about today. this is the chart of wti over the last 10 years. we removed that weird negative print from last year. the pink or purple line is the five-year average. the slow declines and that has been the destruction of the shale industry of the u.s. so it is a massive excess supply and opec did not cut their supply either. there is a bit of a crisis and now it is much stronger. now we are above $100 a barrel and i think these are unsustainable levels. 180 million barrels is a large amount. this is an interesting one and it allows them to adapt the market a little quicker. also important relative to the release last year is when the timing of this comes. we are seeing some little fines of demand destruction.
in china, we are talking about the lockdowns, consumers are getting consumed by inflation and we are going to get more supply reaction. the other story we are seeing is that russian supply is not cutting out the market to extremely but it is being rerouted to asia. another thing is the rick case in the u.s.. after this kind of shale industry was killed is that it will not be able to take up the flag. that is a reasonable view. there is a counterargument that it does become much more efficient so they are now focused on where they can get the most oil, get the most out of oil on those drills and they are increasing supply overall, so the fact that this is a low recount could be a bullish factor but it could still rise much further. personally i think oil prices are unsustainable up here over the long-term but who knows. francine: thank you, mark
cudmore. we also have the main questions about when vladimir putin cuts off supply and it is not so easy to divert the flow from the east. bloomberg has learned that the u.s. is planning to tap into its oil reserves as inflation and supply shortages loom on the prices paid -- prices. for more on all of this we are joined by bloomberg's andrew james. how much does this release impact prices in the short term but also the longer-term legacies? >> as mark mentioned, this is a big release. we have a 30 million barrels release in march. we have seen a big drop in oil today.
we were down seven dollars a barrel at one point. this is undoubtedly going to have a big impact. it is not going to replace all of the missing russian oil out there. the other interesting thing about it is the timing. we made an official announcement on this out of the white house later today, but it is on the same day that they have the monthly meeting and the bets is that the u.s. has become increasingly frustrated with the alliance over the last few months that it won't cut more. they wanted more last year when rebound -- one demand rebounded, they wanted more after the war, but they haven't got it. tom: one country that might get
russian oil is india, and they are on the impression to absorb more this cheap oil. what is the update there? >> it looks like russia once india to take at least 15 million barrels. there is a pre-existing contract between rosneft and indian oil, allowing it to take that much. the russians are also offering the indians a rupee-ruble transaction and they bypassed that system where the russian messaging bank system. the indian refineries are not geared up to take a lot of russian crude just yet just because of the varieties. in the short-term they can take some but they probably can't take a huge amount of russian will. francine: that is interesting, diverting the flow has not been straightforward. thank you, andrew james.
meanwhile, we are getting press moves. tom: let's start with h&m who came out with disappointing earnings. the estimates had been for over a billion krona in the pre-quarter. the stock falling almost 10%. they are blaming the pandemic but they are also significantly closed out of the chinese market on the e-commerce platform. the ceo saying that regarding china, we are still in a complicated situation. they also have exposure to russia and belarus so the pressure on those shares for this retailer on the back of that miss in earnings. the other stock we are looking at is a takeover and we are looking at brewin dolphin. this is an all cash offer by rbc. you are seeing that in the share price jumped today, gains of more than 6% -- 60%.
just two stocks on the move today. let's get into the key markets driver with kristine aquino and fabiana fedeli, cio of equities at m&g. let's start with you, christine. what it may mean for equities and there certainly seems to be getting a bid on the back of the stocks oil. kristine: it does seem like a positive that the u.s. is taking steps to ease that cost-of-living squeeze that consumers are facing on the ground at the moment. we see spending on oil and energy, one of the big household spending funds that consumers really face still. at the moment that sounds positive. i wonder and the longer-term how much this will really do to ease that inflation pressure on consumers because we know that it is not just about the energy factor. we know that prices for
everything that consumers care about, that is all rising, and we also know the cost of labor and the labor market in general in the u.s. is quite hot. it might decrease the urgency for the federal reserve to deliver the buffer of 50 basis point rate hikes. francine: between inflation and some of the known unknowns, including the possibility of stagflation, how do you build your ideal portfolio? fabiana: i am concerned now. i am concerned that markets are far too complacent about what is happening. if you look at the current scenario, there are some outcomes, one that the conflict persists. this is going to continue to push inflation up and potentially hurt demand. this would end up in a recession. not only a recession in europe
but also on a global level. if this conflict resolves, we could see improvements on the price of commodities that have been pushed by war. however, that will also depend on how long the sanctions last and could be much longer standing impact on the overall economy. equity markets at the moment are not really pricing this in. tom: highlighting the potential risks on the market. bring you back in about the inflation prince in the euro zone. -- inflation prints in the euro zone. do you think the ecb is going to have their hands full on this positioning and act more aggressively? kristine: there is that risk. investors are gearing up for that meeting to be a big ones in terms of the signals we are getting from the ecb.
we have seen markets bump up the expectations for rate hikes. you are seeing 100 basis points coming from the ecb over the next year. they have also slightly moved about the -- about when the era of negative rates will end. traders are really expecting the ecb to ramp up the policy normalization process. i am not sure if the ecb will want to grow as quickly as markets want to, so that will be that key balancing act. francine: thank you very much. kristine aquino and fabiana fedeli stays with us. coming up, the biden administration says that president putin is misled by his military leaders. this is bloomberg. ♪
to a similar meltdown. still with us is fabiana fedeli from m&g. is mr. roubini overdoing it in the face of these equity markets? fabiana: i don't think so. he has always been bearish on the markets and overall the markets on the backdrop, but he is right now. inflationary pressures are high. we don't even think that the bond markets are really present -- pricing them all in. there is still room to have negative prices and central banks are walking a fine line here and they might just stay behind the curve, which does not help inflation. there is a serious risk on the global economy not only in europe or the u.k. but much
broader risk. francine: you are very diplomatic. also the fact that he is calling it right could make investors worry. do worry about stagflation as a base case scenario? fabiana: it is not a base case scenario it is clearly a higher risk of it happening. at the moment when you look at equities, we have just seen markets move forward with inflation, we see expensive valuations. the truth is, if we are in a real recession, what generally happens is that equities will underperform under asset classes within equities and the markets that are perceived to be safer such as the u.s. will do better. the strong result will also be likely to -- related assets but
at the same time right now the u.s. market is at an all-time high in terms of valuations and that makes the choice more difficult for investors. tom: how do you insulate your portfolio in this environment? fabiana: if you look at a multi-asset portfolio, when i was on the program before the conflict, we talked about taking money off the table in equities and putting it into cash funds on the side. we did expect volatility in the markets but not to this extent that we had to come, but we were hoping to deploy the cash balances. right now we are underweight equities in the portfolio. we still keep those cash funds and we haven't deployed them yet. we have been short duration on the bond side and we have been adding a little bit to that in the latest movement on yields. and we have seen equities very
diversified. we look at long-term themes and we also make sure that we are very selective. francine: what is your favorite head right now? -- hedge right now? fabiana: it is difficult because at the moment the commodity prices have been difficult in this kind of scenario, but they are probably more prone to coming down to some extent. there are certain classifications right now about hedges. francine: thank you for joining us. coming up, we get an update on how covid is impacting the chinese economy. that is coming up shortly and this is bloomberg. ♪
combat inflation. equities getting a bit of solace on that. tom: another major story on inflation and oil is the situation on the ground in china, particularly shanghai with the lockdown and the economic data that is looking miserable. this is threatening to disrupt global supply chains. this shows that lockdowns bring manufacturing and other industries into contraction. this data already points to strains in the chinese economy without already factoring in the strain -- the lockdown from shanghai. tell us about the strain on the chinese economy. >> china has seen its worst outbreak since the pandemic began more than two years ago and as you mentioned the data that we got from march that showed manufacturing and
nonmanufacturing territories, these numbers preceded the lockdowns in china and they closed on march 25. hopefully there is an impact to the technology impact but it is helping capture what is going on in shanghai so it is all putting more pressure on china's economy and a test of its ongoing aggressive dynamic zero strategy that the authorities have to control the virus. we know it has been difficult given the contagious aspect of omicron. it is worst likely still to come for april. francine: does that mean we will have to see the chinese authority step back on the chinese fiscal and monetary agenda? enda: i think so. the backdrop is a growth target
of 5% and they would have trouble to meet that. now you consider that growth that was set for december for china, i think experiencing omicron, we are seeing nothing but growing destruction now in many parts of china through parts of february and march. there are all indications that are weighing on consumer sentiment, these are complications for manufacturers. china is trying to keep production on track but we have to see more efficient being needed and a central banks will have to bring down interest rates. they would also see more policy divergence. china's economy is going in the opposite direction. francine: more on the pmi report, they dropped and you see the subs are increasing. thick you for joining us from hong kong. coming up, we talk about the
francine: welcome back to the open. 30 minutes into their european trading day. crude tumbles as the white house weighs a massive release of reserves to battle rising gasoline prices. russia offers oil to india at a discount. the white house has put in has been misled about the war in ukraine. and russia is backing off of demand for gas payments in rubles. it is all about the release in
stockpiles and what that means for inflation. tom: the bond market selloff in europe quite pronounced yesterday on the bet that the ecb is going to step up more aggressively. we were looking at losses of up to 17% that have been impaired, now looking at losses of about 5.6%. we will see of muted optimism around the conversations between ukraine and russia can get us closer to a ceasefire and whether inflation becomes less of a concern. so far it is very much front and center. you are seeing that with the white house plan of releasing oil reserves. euro stoxx 600 up .2%, part of that is going to be down to softer oil prices in the last 12 hours or so. we are waiting for biden to potentially outline and sign up on those plans.
the dax gaining .6%, the ftse 100 up .1%. h&m very bad set of earnings weighing on the retail sector. and within the financial sector, brewin dolphin in a takeover by rbc, 60% premium or so and that stock rallied. let's have a look at sectors. we will have a look at basic resources and retail. brewin dolphin in the u.k. will be playing into that story. h&m fell almost 10% on the back of terrible earnings, the pandemic is being blamed and they are hit in china and have exposure to russia. energy down .8%. that's how the sectors are breaking down 30 minutes into the trading session this thursday as we close of the quarter. francine: damage in ukraine is worsening across the content and with record inflation data that
keeps soaring. hotter than expected prince from spain and germany yesterday. joining us now is benjamin jones, director of vector -- macro research at invesco. do you expect this trend to continue? benjamin: good morning, yes, i think so. we have been surprised for the last year or so now with the inflation prince from europe, and i don't see that changing at all. the italian number we see it shortly will just be another surprise. a lot of it is coming from supply-side dynamics, oil and food being the major driver. it is difficult to predict what is going to happen with oil on a day-to-day basis. we will continue to see those
surprises and upward pressure on inflation certainly in the short term. tom: what are you seeing in terms of the data around demand? the strength of demand, and at one point -- what point that starts to be eroded by those inflation numbers? benjamin: a lot of it is supply, but we can't discount the demand side. we have to look at the import numbers in the u.s. and we see that there is still very strong demand there. in the immediate term that is going to hold up because we have consumers that are flush with cash and they can continue to spend. it is difficult for the mentality of consumers to back away from that spending and i think it will take a little bit of time. that means we won't get the inflation coming down too
quickly. my fear is that this runs and runs, and that the fed has to tighten into this. sometime in 2023 is when it stops. francine: are they behind the curve in the ecb? benjamin: i think probably a little bit. we probably should have gone a little earlier given the expansionary fiscal policies we had last year. that would have been a good time to start to tighten. higher rates are not immediately dampening consumer spending. yes, they probably should have gone earlier and that means now they are going to have to go faster and harder unfortunately. tom: the argument had been that the wage picture in europe is
different to the wage picture in the u.s. i remember speaking to the former head of the ecb a couple months ago making that point, is that changing now? benjamin: we are starting to see glimmers of it, the spanish numbers are getting greater wage pressures creeping in there. you are seeing it come through in germany with the negotiated wages being adjusted. it takes a little more time, but i think there are signs that you are getting wage pressures creeping in. you had a week or two ago the italian striker -- trucker strike. it feeds into the same thing that potentially wage pressure could creep up. if we do start to see wage pressures coming through in a significant way, that
potentially can adjust longer-term inflation expectations. francine: if you see these kind of inflation numbers and when you look at span, the 9.8% print was pretty stunning. if you don't pay her workers, you will lose them more. benjamin: you absolutely will. given that we have a tight labor market and workers have options. this shift will have to start to see those wages start to grieve up. it depends on how much of these energy prices can be offset by fiscal measures. and that can alleviate a little bit of the pressure in the short-term, but it doesn't change the longer-term. so i think wages are the key thing we are watching in europe at the moment. tom: what are the inflationary
fx of additional fiscal spending on defense and support for refugees, almost 4 million across the board are from ukraine? benjamin: defense spending tends to be significant. it is not just defense spending, but infrastructure spending more broadly. longer-term, you could argue that could be disinflationary if removed or more renewable energy sources, that is a long way down the road. that is not going to ease inflationary pressures in the short-term. it is going to add to those pressures. with all the fiscal spending, that puts extra pressure in. you could argue that refugees
coming into europe ultimately eases some of the labor tightness we have spoken about. but unfortunately most of those are women and children, and they don't immediately hit the workforce. that is again inflationary in the short term. tom: benjamin jones, director of macro research at invesco, breaking down the inflation picture as we continue to get that data. back to stocks. h&m and this terrible set of earnings for the first quarter. the stock is down around 8%, at one point down 10% on the back
of first-quarter results. pretax profits coming in at 282 million swedish krona, the estimates had been for more than a billion. they are impacted by the events in china. the ceo saying the situation remains complicated and blaming the pandemic as well. another story in focus is a broom and often, a cash offer by rbc -- brewin dolphin, a cash offer by rbc. the jump in line with the 60% premium that was offered. francine: i had to do a double take. m&a has swept through the whelp industry. -- wealth industry. there is the danger of overpaying.
francine: welcome back to the open, we are 43 minutes into the european trading day. the dax getting .4%. if you look at global stocks, still on track for the worst quarter in two years amid concerns of growth slowdown and higher inflation with the war in ukraine threatening volatility. today may be a reprieve because oil is dropping and the biden administration could be considering a massive release of stockpiles. hungary goes to the polls on april 3. opposition parties are uniting in an attempt to oust the prime minister. the eu is threatening to withhold funds over rule of law issues.
how is the war actually upending orban's campaign to stay in power? >> we talked about this realignment triggered by the war in ukraine. this is a place that shows you the contradictions the government is facing. when you look at central and eastern europe, hungary is the odd one out. hungary has made it clear that it wants to stay neutral in this war, so it will not act as a distribution hub for weapons in ukraine. and he has said that he is not in favor of an energy embargo from russia. a lot of this reflecting the relationship that orban has with putin. he was one of the last leaders to go into moscow and have a friendly discussion with putin. he said sanctions would be counterproductive, that russia is still a great power and you therefore have to have a
constructive relationship. normally, hungary and poland are very connected in their politics. right now, it is the opposite picture. the polish have been hawkish on russia, and the hunger aliens -- hungarians finding themselves in an awkward place. tom: you are speaking to the german finance minister about the question of paying in rubles. an announcement made that the russians are backing off, what do we know at this point? >> we will have to wait and see. russia has said many times we are going to do a, and really you get b. the germans have said that the russian leader indicated there would be no changes, that the contracts that are stipulated in europe for russian gas can
continue to operate as normal. they will continue to get paid into gazprom bank, and after that it is up to russia whether they want to change that into rubles. the primary has only said there is an ongoing discussion about the new payments but russia is demanding. many critics particularly in brussels will tell you that it changes nothing. the reality is the european union continues to finance this war because they continue to pay gas for russia. the germans say they don't want to do this to turn their economy into a recession. francine: maria tadeo on the ground talking first about multiple fronts. let's get the first word news. laura: the u.s. is weighing a large release on oil to combat inflation. the biden administration is exploring a release of roughly a
million barrels a day from reserves over a period of several months, adding up to as much as 180 million barrels. the plans are accompanied by a push for the iea to coordinate a global release by other countries. the u.s. claims to have intelligence adjusting vladimir putin is being misinformed over the war in ukraine. according to the white house, advisors to the russian president are effectively afraid to tell him the truth about the performance of his minute -- military. >> we believe putin is being misinformed about how badly his military is performing and how badly the russian economy is being crippled by sanctions. laura: apple and meta provided customer data to hackers masquerading as government officials. the companies supply details
such as addresses, phone numbers and ip addresses. jamie dimon has received almost $56 million of stock from an incentive program the company valued at half that much just three years ago. he collected chairs from a performance award dating to january 2019. it was helped by surging business during the pandemic. 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. this is bloomberg. francine: laura wright with the first word news. this is bloomberg. ♪
strong. the wider health of the economy will be damaged by the high oil prices. this sooner or the earlier the war in ukraine can be brought to a conclusion, the sooner stability will return to energy markets. not just for consumers, but the airline industry and the wider european economy as well. >> i don't want to belabor the point, but i wonder if it impacts the consumer, if you still have that 20% which is hedged, as there a level of oil you are looking at, yet $150 or higher that if sustained would start to impact origins and -- margins and consumer demand? >> i don't think in the near term. we think demand will still be strong. if oil prices remain high, the
scare will be next winter. you will have rising energy demand coming into the winter period, european economies will be undermined by higher oil prices and concerns over supply. that means we may be looking at undermining consumer confidence. we think the summer will be strong, we are well hedged in ryanair. if there is a concern over consumer spending, it tends to favor the low-cost airlines in europe like ryanair, but as an industry we need a resolution of the ukrainian situation and we need more stable energy prices. tom: that was the ryanair ceo speaking to daybreak anchor dani burger on pent up for travel.
ryanair currently trading up 3.2%. h&m and agrium set of first quarter -- and a grim set of first-quarter earnings. they are facing hurdles in the chinese market and have exposure to russia. they are going to have to pass on price increases as a result of inflation. the stock is down 8.2%. brewin dolphin with an all-cash offer from rbc with a premium of around 60% and the share price jumped this morning reflects that offer. francine: i am really into the hacking stories, they were given documents that say we need your legal data. and it was a bunch of kids in london. tom: they have not found anyone,
but they think it may have been someone in the u.k. apple is focused on security, and then they react to this attempt. francine: sometimes it is the most simple hack that works the best. tom: they are also on the chipped front looking to add supply from china and building up financial services. francine: is it diversifying, or just trying to make sure they have china on their side? tom: good question given the size and force of that market. getting the chinese government on site is something apple would be very effective at. francine: i think this is after a key japanese partner was not able to deliver. tom: building additional