tv Bloomberg Surveillance Bloomberg March 31, 2022 8:00am-9:00am EDT
>> the slowdown was inevitable. the question is, does the fed hike so aggressively now that a recession hits? >> they were highly confident that we can avoid recession the next 12 months. >> the downside risk at the moment. >> i think that moves with -- i think that means we have room to move higher. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. tom: good morning, everyone. on radio, on television, and eventful day. yes, jobs data in 30 minutes.
nobody is really focused on it. we are looking at oil and looking at a continued war in ukraine. jonathan: at first you don't succeed, try again. considering a monster release according to the team down in bloomberg. could be up to 180 million that could be announced today. we will hear from the president a little bit later. tom: the track record on these efforts is sketchy, to say the least. jonathan: gap lower, gap higher. that has been the story in this crude market. does size make a difference, or do you just price this in further down the road? ultimately, you can't do this forever. tom: rude question of the week, lisa abramowicz asking greg valliere about a one term biden. valliere publishes today on whether there's another term. that is how important some of these domestic positions are. lisa: and it is not an accident
you are talking about this with the oil reserve release, or the suspected room we will hear about later today. how much does the price of oil determine whether joe biden and the democratic party will be able to eke out a win not just in the midterms, but the longer term of a presidency? tom: we will get to enter sheets of morgan stanley any moment. let's go through the data. i've got red and green on the screen. i've got down negative, s&p positive. the vix sitting at 20 as well. jonathan: on the session, positive about 0.05% on the s&p. on the month, up by more than 5%. on the session, yields in four basis points on the 10 year treasury. on the two-year, that's where the price action has been. think about where we started the month. we closed out february in the low 14 -- the low 1.40's.
it has been a massive move. we've got pockets of inversion, and the spread between two's intense right now -- between two and tens right now is just to basis points. tom: the oil is insult caves at four locations on the gulf of mexico. what do they actually do with it when they release it? jonathan: they sell it into the market, don't they? tom: i guess. jonathan: some of it ages as well and you have to replace some of it. tom: petroleum engineering. jonathan: bramo knows more about this, and javier blas knows way more. lisa: i am completely ignorant on this. jonathan: we missed that conversation. tom: we are a font of knowledge this morning. let us save ourselves with andrew sheets come across a set strategist at morgan stanley. you combine it so nicely, the
fractious debate of morgan stanley, and your single phrase is solid growth. what does solid growth mean for my 2022? andrew: good morning. solid growth to us means growth is lower than where it was in 2021, but when he 21 was a very high bar that was extremely strong global growth, and 2022 we think will still look pretty reasonable by the standards of the last 12 years. we are still looking at u.s. gdp growing around 4% this year, and even though we think we have a disappointing first quarter in china, growth will still be pretty reasonable and chinese growth will we accelerate as the year goes on. we are thinking about a year much more like 2005, where inflation is higher, policy is tightening, and then something
where growth is really falling off right now in terms of what the market needs to deal with. jonathan: the research you have put out recently is that we have rice and higher interest rates, but not the gross risks associated with it. can you help us understand where you think that needs to be priced a little bit more? andrew: this is something we will be talking about for the next six months. i think what the yield curve is discounting is higher odds of a growth slowdown, which we think is correct, and that certain asset classes are going to be more vulnerable than others. when we thing about the overall equity market, the equity market -- for another 18 to 24 months.
that tends to see a pretty bad risk reward and the curve inverts, when the odds of a recession are rising, and that search to really underperform after yield curve inversion. we think that favors some more defensive positioning within u.s. equities, things like health care, utilities, and then some of the non-us developed markets we think could be in a better place because the financial conditions there are easier area policy is under less pressure to tighten in europe and japan. jonathan: i fund the banks' call fascinating at the moment. can you walk me through how you and the team are walking through the financials. andrew: it had been a favorite sector for a while, and the reason for that is a function of both we've had a very large interest-rate move that helped the sector, but also financials
as you start to get later in the cycle, loan growth is strong. with the market often thinking if the odds of recession are rising we need to price in a higher risk in him around higher loan losses between 18 and when he four months out, we think it is a lot more balanced here as those factors are competing against each other, and that leaves us more balanced and looking to reassess. lisa: where do long bonds sit in your portfolio given the call that we are in the same kind of environment longer-term, even given this lift? andrew: i think the backdrop flavors -- the backdrop favors a flatter curve. that is the way our interest-rate strategists are thinking about that, and that we could even have a dynamic where
the two-year rate -- the 30 year bond does not rise in yield from here. again, as the market is looking at a very strong, structural demand for longer-term duration, as overall yields rise, the funding position of engine funds gets better. that increases the desire to buy long-duration assets, so we think longer-term investment grade bonds offer better value here than high-yield. we think some parts of the emerging-market credit index, thinks to the longer duration which would certainly put ourselves in the curve flattening outperforming. lisa: i know you have been building cash and that morgan stanley's approach generally has been liquid assets. what signals are you looking for to shift that to deploy more
into risk? andrew: one, the equity market has clearly rally back very quickly, more quickly than we expected. certainly lower prices, but more specifically higher equity risk premium would be helpful. what we have seen in our measure is a real compression of the equity risk premium, a large returning of equities relative to bonds in a short period of time. i think more space opening up there would be helpful. i think the investment case in europe could be a lot cleaner if we saw somewhat more certainty around the direction of the conflict in ukraine, and that could certainly improve the risk reward as we think about that market. i do think at some level, the die is cast. we do think we are in a later cycle environment, low and
employment, tightening policy is a part of that. we think this later cycle environment is often one where one wants to be closer to home in their portfolio allocation, but we would be looking for greater risk premiums to emerge in equities, credit that we think would compensate for those risks before deploying cash. jonathan: just quickly, how is london? when i call family, they talk to me about every -- about how everything costs at the moment. they tell me prices are through the roof. what does europe actually looks like from your experience in the u.k. at the moment? andrew: we talk a lot about stagflation. i think the stagflation story varies. you have very low inflation and japan, quite good growth still in the u.s. i think the u.k. is closest to that stagflationary outcome.
you see very large cost-of-living increases bite, even starting next month. at the same time, inflation is still very high, and where the current account deficit is still large, the bank of england has a real challenge to it. on a structural basis, we are thinking that the pound will weaken against the u.s. dollar, the canadian dollar, and i think the u.k. does face a tougher macroeconomic backdrop than the european union or the u.s. jonathan: andrew sheetz, awesome as always. thank you, sir. opec-plus just wrapping things up. 400 to the 2000 -- 432,000 barrels a day, and line with expectations. here's the quote. opec+ hurried through its last meeting at just 13 minutes without discussing the issues dominating global commodities markets. beat that record by a minute and thursdays talks, cording to a delegate. how are you meant to take these guys seriously right now if that
is how long they meet for? tom: we need team coverage on this, a road trip to vienna to get the full story. jonathan: this is bloomberg. lisa m: keeping you up to date with news from around the world, with the first word, i'm lisa mateo. the biden administration is weighing a massive release of oil from u.s. reserves to fight inflation. bloomberg has learned one million barrels of oil a day may be released for months for up to 180 million barrels. president biden is set to speak today on efforts to reduce energy prices. meanwhile, opec and its allies are refusing to engage with the energy crisis triggered by the war in ukraine. at its meeting today, the opec+ coalition is expected to stick to its schedule of gradual oil output increases. that was reached last july and has been followed ever since. saudi arabia has prioritized relationships with russia, which co-leads the opec+ alliance. vladimir putin is offering to
come are my's on his demand that customers pay for natural gas in rubles, according to germany and italy. italian prime minister mario draghi says the russian leader told him current contract could stay in place and the conversion to rubles will be done in russia. some of your biggest airlines are renewing their call for more government aid and legislation to help the industry decarbonizing. i ag, easyjet, and ryanair gathered today in brussels. they argue that money is needed as airlines make the costly transition to cleaner energy. 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. ♪
>> in the longer run, and i mean a month or so, i think the oil markets will basically recover in terms of supply-side. jonathan: the former u.s. energy secretary. from new york city this morning, good morning. futures unchanged on the s&p. the final trading day of q1, 2020 two. futures up 0.3% on the nasdaq 100. negative three basis points on the two yet -- the u.s. 10 year. on crude, lower by more than 6%
to $101.30. reports that the biden team is considering a massive release of reserves to combat the price at the pump. tom: from scenic west hackberry is where we will get those millions of barrels, and that is about the strategic petroleum reserve, and it is something that will affect the global price of oil. we are advantaged with all of our coverage founded by stuart wallace, javier blas, and the rest on hydrocarbons, and we get excellent views from kpmg, regina mayor. i've got to ticket to your visit in recent days to the united arab emirates. we spoke to the head of their energy policy, who stayed on script. i need you to get off script. what is the power of the persian gulf to affect global price and
diminish mr. biden's efforts to lower price? regina: the opec+ producing nations definitely have the power to reduce prices right now. i was struck by that, that there is spare capacity in both saudi and the uae, but there is a sticking to the script that all of them are focused on. they have an agreement. that agreement has been in place, and they are sticking to the agreement. i think that gives a little bit of a buffer from some of the external pressures that might be facing them, and then when you ask each of them independently, the uae will say we are just 10%, but there is an agreement. so i am not surprised. tom: take us to a "bloomberg surveillance" conversation with the secretary of energy a number of months ago, and the point of the argument was the one price
of oil. is that true, that mr. biden and the four salt caverns have to do with a global oil price, or can they manage a u.s. price? regina: i think the challenge for the u.s. administration is that gasoline prices more closely correlate to the global oil price versus wti. so while we do have abundant u.s. supply, which we still have a challenge of getting out of the ground, the price of gasoline pivots more closely with the price of brent, and that is where opec+ and some of the other suppliers come into play. lisa: we are looking at this oil reserve release potentially that could amount to 180 million barrels after all of the months are added up. how does this actually reduce the strength of the u.s., basically diminishing the reserves and propping up prices even further later when they try to rebuild them? regina: a great question, but if
you believe some of the other analysts like was referenced earlier, there's a belief that for the end of the year, supply markets will balance. if there's an opportunity to diminish son of dutch diminish some of opec's influence in the short-term and ease prices for consumers, than that is a wise decision to take now. i worry less about what it does to our defensibility in the future and the cost exposure because i think the markets are poised to settle that in 2022, 20. 23 -- 2023. lisa: what does that assume, the end of what is going on in eastern europe? bringing back on some of the russian barrels? for other sources as production increases in the u.s.? regina: all of the above, plus the current price is an incentive to non-opec producers,
so a lot of plays are in the money, and i think people will do what they can to bring more supplies to the market so they can monetize. think canadian oil demand, investments in mexico. there are other sources of supply that we have their that i do believe will come into the market, and that is what folks are counting on to help ease the supply crunch. jonathan: what is the spr for, and is this the right way to use it? regina: i don't feel qualified to comment on that because i think is a lot about our defense of our country. fuel is a really important commodity. i remember the 1970's, sitting in the backseat of my parents' car for hours on end waiting to be able to fuel up our tank of gas so that we could drive around a small island.
i think that is what it is intended to try to buffer, and gosh forbid that there would be a large conflict, we have those supplies, and i think it is pretty important. jonathan: that is an import conversation at a moment like this. is it to manage price, or is it for a real supply scare when we really need it? is this the right time to be using it? tom: paul sankey would be want to talk to about this. it is about the microeconomics of supply and demand, the way it lines up. on radio, i am crossing my hands . it is different in oil. they vibrate in that gap that is determinate of that cross. it is tiny. it is a very sophisticated phrase i learned from javier blas. jonathan: crude down a little more than 5%. you nailed it. if you take some questions, i am sure people will ask about that. mckeon -- michael mckee in
five minutes. we will get some data. jobless claims, 196 thousand is the median estimate this morning. that number staggeringly low. just phenomenal, some 200,000 expected again. tom: population adjusted, it is a cultural statement, a social statement. i'm not really sure what it means. but i don't have a chart in front of me. the population adjusted chart over 30, 40 years is stunning. jonathan:jonathan: even if you don't population adjusted that, 187,000 is the lowest we have seen going back to the 1960's. 196,000 is what people are looking for this morning. lisa: a lot of people asking about the part is the patient rate. how many people have dropped out? how many more could get back into the market? how much is that number representative of the overall pool of that population growth? jonathan: mike mckee is going to break down that number for you in a moment. that is the moving target into
jonathan: michael mckee just said it is not about jobless claims, it is about the pce data. tom: so rude. jonathan: they do not know the real michael mckee. the academy would ask him to leave. he is going to stay. [laughter] lisa: the bloomberg academy. tom: we are waiting for the data. jonathan: still waiting for economic data to drop. please drop. michael mckee, good morning. michael: the internet is slow today. we are waiting. jonathan: there we go. michael: jobless claims back cover 200,000 to 202,000.
last week it came initially at 187,000. that is not a surprise. a lot of people thought jobless claims were overdone last week. 187,000 was revised up to 188,000. we are still extremely low. the pce numbers, the deflator on a month over month basis up .6%. that is the same as last month. it pushes the year over year deflator, the pce index to 6.4% from 6.1%, with estimates. it shows the inflation problem continues for jay powell. americans made more money. the personal it comes for up .5% after no change last month and spending up .2% after a 2.1% aid the month before. it looks like we've made a
little bit more money that we held onto it. that will be the question is how fast does the economy slow down in the face of higher interest rates even if americans have more money. a lot of predictions are we will be spending down the savings rate. at this point it could be what is happening, but as long as people are replacing their incomes, they will still have the capability of spending. jonathan: on the equity market we are up .1%, no big changes. the nasdaq 100 up .4%. yields lower into the data. on the 10 year we are down four basis points. crude software going into all of this because of our story about a possible monster crude release from the ministration. does or three basis points. tom: that is where i wanted to go. michael mckee, one observation
on gdp and combining it with the jobs report tomorrow. nominal gdp was 14% in the fourth quarter. it landed gdp for this quarter and eight -- for this quarter ending is 1%. has nominal gdp gone from 14% to 6% in this present quarter? michael: this is the omicron effect. it is also about the pandemic at omicron it really slow growth in the first months of this quarter. that is getting looked beyond by analysts because they are saying that is the effect. we want to see what happens this month. the month of march. we just got the february numbers. jonathan: are you with us tomorrow? michael: i'm with you tomorrow from washington, d.c.. tom: very nice. jonathan: are they doing the
lockup? is that back? michael: i just figured it was a way to get an expense account trip to washington. part of the surveillance jet. -- borrow the surveillance jet. tom: we will do that. i do not know if we have the jet this week. nila richardson with adp. let me start with richardson 101. are we a fully employed america? nela: no. we cannot be as long as one million workers are still on the sidelines in the labor force participation rate is below pre-pandemic levels. that goal is moving. what is full employment with a smaller workforce? it is defined as the level of employment with the largest number of employed people the economy can support without additional inflation.
that is going to be a moving goal as inflation hopefully comes down over the course of the year. lisa: i was going through the data and possibly the most interesting aspect was real personal spending. we are looking get negative numbers. people are not spending as much as inflation is going up. is it a signal or a blip? nela: you cannot answer that in one yes or no. consumers are bifurcated. low income consumers spent what they have. that is a good sign for spending going forward. hi income houses spent when they feel confident about the economy. there are indications consumers are knocked on of it with they should this high. it is a mixed picture in terms of where the increase in income
landed. if it landed with a low income they need that money to keep up with rising you'll and food prices and you might see that translated into consumer spending. lisa: if the fed were looking at this data, do they get comfort from cigna decline in real spending? do they want to see a deceleration in demand? nela: they want to see a deceleration in inflation, not so much a deceleration in demand. you cannot have one without the other. they want to see an economy that can grow. i think they're very careful about where demand is being contracted. they would like to see it in house prices, in rent, not necessarily in income and wages. that is going to be the challenge that they have this very blunt instrument. they cannot control where the demand is in this economy. tom: you go into the secret
combine of adp and you calculate all of the payrolls at all of the corporations using adp. what are corporations doing right now? consumers 70% of the economy, i will let you tell me what corporations are. what does adp and you see is the action of corporations right now? nela: trying to figure out how to hold onto their people. we have a very low jobless claims number. it is awfully low. you ported to the cultural notion of this -- you pointed to the cultural notion of this. they are reluctant to get rid of people because they do not know if those people will come back. we have a very high quits rates. job openings are hovering a
record high. hirings are not keeping up with openings. right now everyone is very focused, big clients, small clients on maintaining their people and hiring in a highly competitive environment. lisa: let's end where we began the show, on restoration hardware and this call they had when they through the kitchen sink at their expectations growth would decelerate in their business outlook would deteriorate. how much is that representative of the larger corporate universe in the face of inflation and the consumer where they are versus a more specific or ambiguous story? nela: as this recovery matures, what we expect is a shift in consumer spending from durable like furniture over to services. that is what we are waiting for. the problem is that service increase is capped by employees.
if services cannot find the headcount, especially in leisure and hospitality, then we are not going to see the growth. it is the same macro story in terms of durable goods like furniture. it is also about the transformation of the economy through the recovery back into services. jonathan: always in education. thanks for being with us. nela richardson of adp. in two weeks you get cpi data. the day after, earnings season, the unofficial start with jp morgan. important days coming up. tom: what we have heard from people, including julian emanuel, is revenues, earnings, but they will look at that ratios and margins down the income statement as a determinant forward. jonathan: president zelenskyy speaking get the moment.
the european tour of parliaments continues. seeking new sanctions for e.u. membership. what else is left? tom: i would talk to boris johnson. mi right that the u.k. has led the way on this? jonathan: on individuals? i think london and the city has led the way so there was pressure on the prime minister to do more on that front. tom: i think it is movable and fluid and nobody knows where it is going. i am looking more at the war news. you look at the live feeds from all of the different newspapers, including bloomberg's wonderful work and you want to know what the russian troops are doing. to me the hallmark on a thursday of this week is the silence from along the black sea. jonathan: we are all thinking of the disconnect at the moment between the words we see in the headlines that shape the market, and the actuals on the ground. this week no different from what
was up play out a couple of weeks ago. you hope for a diplomatic breakthrough. it looked like we might have them, and then what you see on the ground, the action is so different. the nato secretary-general backing that up this morning. tom: i will say this. what i am stunned by his the openness of western intelligence led by the head of the secret service of the united kingdom yesterday. jonathan: 20 binance away. will be talking -- 20 minutes away. we will talk about this crude move with brian nick from nuveen. this is bloomberg. lisa: keeping you up-to-date with news from around the world. the biden administration may use
the strategic oil reserve to help with inflation. bloomberg has learned the u.s. may release roughly a million barrels of oil per day for months. the total release could be as much as 180 million barrels. president biden is said to speak today on efforts on energy cost. ukraine says talks with russia are set to resume on friday. the negotiations will take place via videoconference. in person talks in turkey did not produce a cease fire or major progress towards a broader peace deal. russia did agree to reduce military activity in northern you rain. barclays is the latest bank to raise compensation or its u.s. workers they would get a pay hike from $17 an hour to $20.50. it applies to employees mainly at barclays consumer bank. toyota it will be likely the number one roi maker -- number one automaker in the u.s. for the second year in a row.
they'll become clear tomorrow when most automakers report first quarter sales number. shares of h&m fell today on a two year low. the swedish clothing chain reported a sudden slow down at revenue growth due to the war in ukraine and earnings missed estimates. all that complicates h&m's efforts to clear out a six year inventory buildup. global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. i am alisa matteo -- i am lisa mateo. this is bloomberg. ♪
actions, not on its words. russian units are not withdrawing, but repositioning. russia is trying to regroup, resupply, and reinforce its offensive in the donbas region. tom: the gentleman from norway with nato. he will not leave nato and go back to norway to run the central bank. he will stay with nato for a further tour of duty. jobs day tomorrow. 14 stories to cover. a single headline from reuters with a little bit of bloomberg first word follow-up. russia payment on a dollar bond out eight years processed by jp morgan. lisa, i guess we assumed it was processed eight u.s. dollars. lisa: we do not want to make assumption. that has been the big question.
it was a for hundreds 40 -- it was a 447 million dollar coupon payment that was due. certain bondholders have received payments for other coupons that were due. what is interesting to me is this week's call by russia that they would offer to buy back some of their dollar-denominated debt in rubles. how they try to play with this without defaulting? tom: we now turn to maria tadeo. it is 50 degrees in the rain in an election driven budapest. snow scheduled for the sunday election. his the nation gripped by this election given war on 80 mile border four hours east of budapest? maria: it has been overshadowed by the war. at the start of this campaign victor or bond -- victor orban
wanted to make this about the issues he liked, family values, traditional family values. that had shifted to ukraine. the way this election is now being framed is this is war or you vote for orban and you stay neutral. his rivals will tell you his a puppet of vladimir putin and he has destroyed a lot of foreign policy. tom: the zeitgeist overnight was reporting including jeezy hq, the espionage -- gchq, the espionage unit of the united kingdom, about letting your prudent not being informed by his military staff. what veracity do you give to this. how in the dark is mr. putin? maria: at this point it is difficult to know or understand
what he thinks and feels because we rarely hear from him. everything is done in such a way to send a political message to a western audience. we've not seen a lot of vladimir putin lately. that matches the intelligence united states has put forward, and now the u.k. saying there is a problem about the information being read to vladimir putin. zelenskyy gave an interview to russian journalists a few days ago and said i am 99% sure he only went in on ukraine because he was given the wrong info. he was told all of ukraine was crimea to point out, they hate zelenskyy. all of this was false information. the boss of military intelligence in france has been fired today because of the flawed intelligence the french had before the invasion. the french said they did not see this invasion happening. lisa: we had the call from
president zelenskyy of ukraine for additional sanctions. what could be on the table? maria: we have talked about the energy situation for weeks. by now it is very clear of the european union is not willing to go there unless we see major escalation. that would be chemical weapons used on the ground in ukraine. for the time being, and i spoke with the german finance minister, they want to see the full impact. there is little bit of fatigue. a number of governments will tell you we cannot been a position where old sanctions will penalize our economies more than we do with russia. this point you may ask me are we going to see anything significant this week? i would say probably no. tom: maria tadeo, greatly appreciated. her support in the eastern european elections. it is time to look at what i think is spaceflight but it is
celebrity free tourism. the fourth launch of -- there are not star players on the new york giants. jeff bezos other things to do. there is a set of tourists. i think -- we are not where jeff bezos wants this to be. lisa: it was not for lack of trying. he davidson of saturday was supposed to be on this flight but about at the last minute. tom: who is peter davidson? lisa: there is a question about space tourism and how the intersection of national space programs works with space tourism as we enter a new era of exploration of discovery on many levels. tom: you compare it with what we observed yesterday with kazakhstan with the return of the russian and united states astronauts from and i will call the space station, i do not have the official name in front of me. both landing.
we will do this in texas. jon ferro will have complete coverage of this with ed ludlow on bloomberg television. jonathan is steeled for this. lisa: give not asked about a road trip to space. is that something new would ever want? tom: i have not thought about it. what i question is if they go up to near space, if this is space. i would defer to the old school. lisa: existential thursday. tom: are they doing their inner john glenn or is it something different? with great respect, it is cool that mere mortals are going up there and not grizzled military officers. lisa: i am trained on the oil markets today. i want to understand how long this drop in oil can be sustained. tom: if i watch the martian this
weekend does that count is spaceflight? lisa: it depends who your company is. tom: jobs day tomorrow. coming up, space coverage with jon ferro. this is bloomberg. good morning. ♪ >> welcome back to another miami open update from tennis channel. the women semifinal lineup is set after wednesday's action. newly minted world number one is just disco wins away after she reached the semifinals. the polish start is now unbeaten in 15 matches. >> having to defend a straight is pretty tricky but i am glad i can play well and i'm healthy and can compete. >> she will face the american
>> everything you need to get set for the start of u.s. trading. this is "bloomberg: the open" with jonathan ferro. jonathan: live from new york city, we begin with the big issue. new sanctions on russia. >> we are continuing to look at options to expand and deepen our sanctions and anticipate we will have more for you on that in the coming days. jonathan: wrapping up the pressure abroad and looking to alleviate the pressure at home. bloomberg reported the white house is considering a massive release of crude from its reserves. fruit traded chart -- crude trading sharply lower on the news. at one full and 30 eastern time -- at 1:30 easternim
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