tv Bloomberg Markets European Close Bloomberg April 19, 2022 11:00am-12:00pm EDT
is this move higher that we're seeing in yields that does seem to be spooking equity markets and we've seen a little bit of that in europe. equity markets coming off their earlier loads. this is what we have from the european energy names gains 1.2% despite the fact that at one point, the oil price downs by more than 2%. so despite that, we're seeing elevated in the oil prices. the euro yen. i know a lot of our focus has been on dollar-yen, the weakness the japanese curbsy, and that will remain the focus. this is a broader, bigger picture story that we're talking about when it comes to the various geographies and their interests.
kailey: absolutely. some central banks tightening. the d.o.j. not so. it's also remark to believe look at the action here in the u.s. today, anna because if i told we had bond yield surging across the curve you might expect tech would be lower within the equity market. equities are up across the board. it is around session highs. even as we are seeing this dramatic action in the bond market. 10 year yield up. 291 is where we set. while the 30-year yield is dancing around 3%. it breached earlier for the first time since 2019. it is up about six basis points but a bigger move at the short end of the curve. not even at the long end. you are getting a curve flattening. 2.53 the highest since 2019, anna. anna: more in bond markets,
let's bring in tatjana greil-castro, a portfolio manager. tatjana, thanks for spending time with us here. we've seen the bond markets sell off. this has been something of a antenna for week after week. how far through this story are we do you think? given that the fed is still quite near the beginning of a rate hiking even though it is well telegraphed outside of china. where do you think we are on this story? tatjana: good afternoon, everyone. that is the one on everybody's mind. where are we, when it comes to the communication by the central banks that they clearly, even though they have only allowed to raise interest rates once, the market has been anticipating that interest rate rise are more to come. so financial market conditions have already tightened
significantly. some if you compare to where the state fund rate is now to where the two year is, so a lot of this has already been accepted. and this is anyone's guess but the big thing was at the moment, the central banks especially the fed is in the driving seat. so they can talk interest rates higher. and that is because they say our main focus is on inflation,ment and then we need go see what it is for economic growth. so they have been very successful in driving interest rates higher in anticipation of the rate hike. and when you look at what a two year is at the moment, it is actually just about not even neutral range. we hear a lot from the fed saying that we should go beyond neutral. so there's been a risk that interest rates can sell more.
and begin the shape of the curve, inverted. now we are out of inversion some one of the sort of issues there is just maybe over the medium term, the market is correct and the central banks won't be able to raise interest rates as much as they're now indicating or what they say they want to do. but that is only a medium to longer term outlook. so sat the moment, listen to the franks. kailey: there is room for rates to go higher. how much higher? tatjana: sorry. some of it's probably the speed of the tightening and we have to see to what extent the central banks can keep their pace that is now anticipated with a 50 basis points of rate increase in
may. how many more can they do at that pace? so that will be some of it. and i can see the benefits of that. because really what we are trying to do is bring inflation under control without doing undue damage to the economy. and there's a reasonable strat jai to entertain. and then clearly, that could bring interest rates even higher. so we have to consider that it's over time as inflation is coming down, and as the economy is cooling that rates are going lower. but i think what the market is overrelationship -- anticipating is the long run effect of it but we need to focus on the short term. anna: ok. where do you think we will get to, tatjana? where do you think the yields
need to get to to entice buyers back in to that market? at what point do buyers say i know inflation's this high but i'm going to get back to sovereign debt? tatjana: lookings we already see a lot of movement and clearly hedge the higher interest rates are going and the more expensive it takes over the long period of time. so what i would anticipate is there would be more volatility in interest rates and the positioning because they want to keep hedges running for a very long time given the current level. but which we have seen around easter. a lot of hedges were taken off, that lower yields and a few days later the hedges are being put on. and i think we are continuing to see that. now, you know, that is just positioning. given central bank's rhetoric and if the expectation that inflation will remain way above
their target, continues to hold, i wouldn't be surprised if -- the 10 years is close to 3% but a shorter part the market that we are reaching around 60%. how long we say that, that's the question. kailey: a question for sure. obviously, tatjana, we focused a lot on sovereign bond markets in particular. how alined with sovereign or misaligned are they? tatjana: if the market is worried about the regs, you have to be careful on which company you invested in. and this is the analysis that our credit analysts are carrying out and spending a lot of time on and just two aspects of it.
one is how can producer prices be passed on to their customers? and that it's not necessarily the consumer. that is often the distributor. and the other thing is supply chain. which is clearly highly -- but how a supply chain issue affecting the profitability of corporate. so this is just one area to very closely focus on. and all in when you look at the spread level the high yield investment grade. i would say that the best is the u.s. investment grade at the moment. yes, you have high currency hedging cost but all in, i think it gives you good risk, good reward to being awarded. kailey: tatjana, thank you so much for joining us. tatjana greil-castro, thank you very much. coming up, we'll turn to the war in ukraine. ukrainian forces are bracing for
kailey: in ukraine, president volodymyr zelenskyy says a long anticipated russian offensive has begun. russian forces are said be targeting the donbas portion in the eastern part of the country. joining us to discuss, shawn belle. an advisory to consult si firm and security solutions. thank you so much for your time as we turn our attention to the donbas, what do you expect moving forward? >> trying to just walk into ukraine, very wide. i've got a bit of a bloody nose at the then of that. he's decided to focus his effort.
unfortunately, i think it could also end up a brutal battle. the ukrainians up for now and we've been watching and admiring their tenacity and bravery at booting russian forces out to kyiv and many other areas. but of course, now they are fighting in donbas. the ukrainians will still have that same spirit and they will be bolstered by to the performance of their colleagues. but the russians are much closer in borders. they've got their supply lines easier and they will be able to focus their might on one area. kailey: so i know -- anna: you can use slight images to where they are apassing their troops, sean, but what kind of
assessment does this give you of the relative power and what kind of assessment have you made? sean: it is difficult to directly compare because ukrainian military have about a 10th of the size of a defensive budget. but if you're doing an attack which is effectively the ukrainians have dug in, the ratios are five to one. so russia would need five times as much force as ukrainians to prevail. and you've got the ukrainians who definitely have the spirit and bravery and tenacity whereas to date, we seen the effects of russians conscript army which are ineffective. so i think this will be a crucial battle. but the one thing all analysts seem to agree though is that it is going to feel the full mite
of russia. putin would not have been happy that he did not prevail in phase one. i can only imagine the guidance he's been given to his generals for phase two. so we're expecting a particularly ferocious and brutal battle. kailey: ok, sean, the full mite of russia. would that include in your -- you, nuke, biological weapons? they said they're going to stick to conventional ones. sean: first of all, i wouldn't believe any word that the russians say at the moment. they're consistently lying throughout. most military analysts, i've lived in through the cold war and the military in a cold war and we were training and the prevailing view is that if you recall the whole idea of nuclear weapons is mutually destroy weapons. the presence stops them from being used. and in the prevailing view seems to be that while putin, might be
backed into a corner, it would be a big leap for him to suddenly decide to use nuclear weapons. and besides, if he wants to secure the dombas region or any of ukraine for russian territory, leveling is not the exact way of doing that. and nobody can see inside of putin's brain. it is evident that russia has used these weapons to the past. it's used in syria and overseas. but once again, i think it would potentially turn the dial on nato's commitment to ukraine. and at the moment, it seems unlikely but i can't see inside putin's brain and he's been hurt by the failure of phase one and the last of the -- recently. anna: and given what you're
expecting in the east to the country, what should the resupply or the supply of munitions to ukraine look like? given the threat that it faces. what should it look like? sean: i'm trying to listen to president volley and what he's asking for -- president vella vella and weapons, weapons, weapons. tanks missiles are where the focus lies. i know that a lot of nations have been helping. the u.k. has been applying a lot of successful javelin and missiles. but unfortunately, as you probably well aware, you can't buy these off the shelf. they are coming out of war stocks from the nation piece involved and the fly supply chain is not unlimited. and of course also, because this new offensive is right across the east to the country, it means it's easier for russia to
resupply across from its border it is much more difficult for ukraine to do so. there is a little bit of talk about tanks and heavy ammunitions. what worries me about tanks is most western tanks are packed full of very sensitive technology. and that takes fair bit of training to learn how to use. and in the battlefields of ukraine is not the place to be learning about how to operate such technology. kailey: let's talk about air space. volodymyr zelenskyy has pleaded with the u.s. and with nato to create a no-fly zone over ukraine. that is something that he did not get from them. can ukraine even with more weapons keep control of the air space for much longer? sean: that's a great question. i mean, two key questions are is nato any closer to imposing a no-fly zone? it's very hard to see that.
i think the arguments have been well rehearsed but n.c. state would have to -- nato would have to do it in russia and that would be killing russian soldiers on russian soil. in terms of president zelenskyy and how he combats the pour that's being launched against him, they have been very successful particularly the handheld version because they're infrared. the aircraft that they've been targeted, they're targeting doesn't get a warning that these things are on their way some therefore, they can be very successful. part the challenge is any radar-based systems are generally quite easily targeted by the russians. and therefore, it's quite difficult for them to make a rebutted contribution. we will have to see. but more surface-to-missile
missions will be on the wish list for president zelenskyy. anna: how long are you expecting a conflict in donbas to last for? i'm sure this is a difficult evaluation to assess and there's been a lot of talk about may 9 being a symbolic date in the precaution calendar because of the victory in the second world war against the nazis and so some are suggesting he won't say a swift victory. does anything you see tell you this could be swift? sean: i don't think any analysts describes the view that putin is driven by some calendar date. i have no doubt that the ninth of may is important for russia and victory in europe day. but i cannot see how he can expect to make any statement or drive a agenda of his ukraine campaign. with that being said, if he manages to secure mariupol before that date, i have no do it that will feature. in terms of how long this will
go for, that's a very difficult question to answer. most defense analysts believe there are three outcomes from this fight. one of which is russia brings its forces to bear and quickly overwhelms the third of the ukrainian forces that are currently situated out in the donbas region and capitalizes. that seems unlikely. the second is that russia had just battered its way across the ukrainian forces and eventually comes to our grinding halt. and the third one is this goes on for weeks and maybe months until a gruesome stalemate. and then potentially into negotiations. but it's virtually impossible to say i think so much of this is about the fighting spirit. and ukrainians are fighting on their land, to defend their land and they've proven to be amazingly courageous in that venture whereas the russians are
anna: let's take a look at the european equity markets. and this is what we have. the stocks are down by 1% but that high got a lot of die venter. the daxon is fairly flat. and it cushioned a little bit by the presence of energy stocks. energy is a part of why they're outperforming. this is bloomberg. ♪
markets: european close." european markets coming to the end of their trading day. so this is where we are across the european space. equity markets moving lower today. pulling back from earlier lows. the ftse 100 and the dax flat as. the cac is down. if we show you how this session developed, we have to come off those earlier lows a little bit earlier on u.s. morning time. and as we come to the u.s. morning, we recovered a little bit from those early lows but we are still in thing territory. and one of the big thing is bonds market. this is the global story. we seen both of those charging levels we have been seen since 2015 as the bonds market
sell-off continues. and the treasury environment very key to that. and this is a number that is moving very fast we have a negative yield on the german debt product. this is the european energy sector. so companies trading in that space. and they are doing pretty well today. up by 1%. we saw a callback in the oil price that it has elevated and helping those in that second tor. yen weakness and we talk a lot about the weakness between central bank policy and the fed and the b.o.j. there is a difference between the ecb and japan and there's the story around japan more broadly. it is starting to worry officials in the pace that we're seeing those moves. just to reiterate the sector performance. we've got autoparts up by 7% helping the german market.
and to the other own the spectrum. real estate, would be the worst performances when higher interest rates are so much part of the story. let's think about the individual companies in focus today. and christmas day project is a gaming design company. and they .ed the markets what is they had to say at the end of thursday trading session. henkels, down by 1%. they've had news around russia pulling out of their russian business. and sapp is not doing business in russia anymore. that's a big scene. kailey: stopping production
entirely, salon this. they have been operating at a low level for weeks. this war is about two months in. let's bring in greg who covers auto here for us at bloomberg. craig, we will ask you that question. why did it take so long for stellantis to make that move? greg: a lot of these automakers were pretty quick to shut down operations and we saw an exodus weeks back. we've heard from stellantis's c.e.o. carlos tavares to make the point that he wants to look out for his employees who are not necessarily to blame for russia's invasion of ukraine but this is still a case where a lot
of the industry has sort of made the calculation that they do not want to be seen continuing operations, as long as this war is going on. really, you saw one of the laggards before stellantis was another company with major french business in renault that they were really concerned about shutting down their substantial operations in russia. and what we saw was threats of boycotts and talk of that both here in the u.k. and even out of politicians in ukraine. the reputational risk of that outweighinged their risks of pulling out of that market. anna: so to some extent, the decisions are being made, of course because of the geo policy but because of business concerns.
greg: yeah, it's been a real issue getting part those factory and going to be an issue for speaking of renault, they have a venture the maker of a major manufacturer in russia, a huge employer. they have made plans to resume production despite renault saying that they're going to explore options for that business going forward. so some questions as to how helpful renault is going to be in that. but we pay be in a situation where we're not seeing any sort of meaningful car production in running back for some time. kailey: there may not be anyone left to produce there, craig let's talk about what's going on outside of russia because the war in ukraine hasn't only impacted that economy. we know it has impacted europe's economy as well. the real cost of living crisis in many parts of it. food price inflation, what is that going to do likely to car
sales in europe? greg: we'll get fresh numbers tomorrow morning. we have real issues with the semiconductor shortage here in europe. major disruptions to wire harnesses who were being made in ukraine with thousands of workers that have been displaced or had disruptions as a result of the conflict. so, really, expectations of those supply constraints continuing to be an issue but also some concerns about whether demand is going to take a hit. if some of the cost of living, you know, crisis that you're referring to really takes hit to consumer's wallets, there's an open question as to whether or not demand will be as strong on the other side of the supply issues being resolved and that's a real concern to the industry. up to this point, that's no been
a problem because we have had an issue of supply till not being able to meet demand and pricing continues to be very strong. anna: when it comes to where it manufactures, supply chain difficulties, and cost of living crisis and it is the best today and up against not very tough competition on that front. what do we need to know about the sector and as we get into the half of the earnings story? craig: what we're going to see is the automakers is still going to be very strong we saw out of volkswagen some preliminary numbers just last week. some interesting numbers to watch in terms of hedges and commodities. that was a big story for their initial, you know, preview of earnings last week. whether or not that applies to some of these other automakers that are making big commodities as a result of their shift to electric vehicles and wanting to be hedged for that.
but the part suppliers are where the pain is going to be felt. because they don't really necessarily have the ability to bring incentive costs and marketing spending down. there aren't that many vehicles on the lot to sell. and there's not cars or mouths to feed then. anna: thanks for joining us, craig. ftse weak been a little bit. dax resilient. the autosector is doing pretty well. the cac is down.
but one solution to supply problems in the oil market, the nation of guyana. it's been the theme of the biggest offshore oil discoveries in years. 10 billion of barrels have been confirmed and joining us now is the vice president of guyana, bharrat jagdeo. mr. vice president, thank you for your time with us today. what role do you see guyana playing and potentially filling the void of russian oil? >> we are hoping to increase production rapidly. we're moving from discovery in 2015. the production of about 800,000 barrels per day by 2025. and we are hoping to accelerate the production, given the setzer target of the world some we believe guyana could be a major supplier of lights with crude to the world to the future.
kailey: ok. it's good speak to you, vice president. anna: let me ask you about the conversations you have with the u.s. administration. clearly, many would like to see choice of where they get their energy supplies and guyana might be preferable to some others. is there anything you want to hear from the biden administration to allow you to push forward with the production? v.p. jagdeo: yeah, we would like to have a supportive environment to grow the industry in guyana. we were told that we should not develop oil and gas resources. the secretary general said that there should be no funding for development of these resources. we have argued that countries like ours have a transformational opportunity and therefore, even though we all support in that zero -- net zero target. the world needs, the world has
great demand for fossil fuel at this point in time. so the environment has to be supported. we recently had one of our development bank from a private company that is supplying the oil and gas industry here in guyana. so we would like the u.s. administration and the international community to create a supportive environment so that we can clear a greater role in the world energy security. kailey: what investments do see from the rest of the world from the middle east, for example? v.p. jagdeo: we have seen investments from everywhere, and not just in the oil and gas sector. in the hospitality sector, and now, agriculture. so we are hoping that the interest in guyana that has been caused because of this major discovery of oil and gas
resources here, there was -- to capitalize that on that attention. so, investments and other parts of the economy to and i dare say we've been very success semifinal at that. but we've just seen the largest -- we just approved weeks ago the largest investment -- single investment in guyana. $10 billion for the exxon/mobil. so investment is pouring in but we hope to channel it in the many other sectors so that we can have a diversified economy. anna: the private businesses that are going to be playing a role in nats, vice president. you mentioned common. what is the latest for leasing new oil licenses? will common be allowed to bid or do you want to have other players? v.p. jagdeo: we have been very cautious of this, even when we
are contesting the elections. prior to now, their licenses were issue on a first-come, first-served by a from the moment we discovered oil, we decided we would have to auction these bids for new areas. we're in the process of determining whether that auction will take place with seismic studies done by the government of guyana or without seismic. and our utilizing those resources until a national oil company and getting a strategic investor. we have not made a determination whether we would allow, should we go to the bidding rules. the auction rules is common -- exxon and the others to participate because they have explained about the high level of concentration. so that decision has to be made by the government of guyana.
and we are anticipating by september of this year, we will make a determination as to which way we will go. kailey: mr. president, let's talk about oil and what it means for the growth of your economy we got the latest report out of the imf earlier today. it estimates guyana will grow 43.5% this year. that is a remarkable number. how does that track with your own estimates for growth this year and next year as well? v.p. jagdeo: we are starting from a very blow level of growth. our g.d.p. it is just about $9,000 and we have had a struggle to get it there because 20 years ago, it was close to that of 80. and this would mean -- a huge growth in g.d.p. we have to be very cautious because globally, many people
think that we are stream nag windfall. but at this point in time, after two years of production, we have received about $700 million in revenue from this sector. we have not spent any years yet, though we have budgeted for this year, the first one to utilize some of those resources because we wanted to pass strong, sovereign wealth legislation, which you get late last year. but it's not a whole lot of money coming in at this point in time. so we're doing a couple of things. we're trying to team expectations nationally that where people want more spending to be done because the resources are limited at this point in time. they will go rapidly in the future and globally, we are allegation saying to people we have not steve received a lot of
money as yet but more will come in the near term. anna: clearly, being rich in and natural resources can be a blessing and it can also make life difficult in some senses for some countries how do you make sure that guyana does not fall victim to some of the negative forces that can follow? v.p. jagdeo: yeah. because we are aware of that, weare determined not to vote on that. that is why the diversifyization of our economy is so crucial at this point in time depending on education, on health care, on infrastructure, and ensuring that the sub facial portion of the resources are saved for the future. these are all-important aspects of ensuring that we don't squander the resources. and then strengthening the accountability preservations in
our sovereign wealth legislation so that there would be no test of these resources. kailey: vice president thank you very much for joining us thanks to bharrat jagdeo the republic of guyana, vice president for spending time with us on bloomberg tv. anna: you're looking at a live shot of the house of parliament investment the u.k. we are still waiting for boris johnson to speak to lawmakers he is set to apologize today in front of parliament. he was fine by the police during the lockdown in the so-called party gate scandal. he was the first sitting prime minister to have broke then law he is set to apologize. we're waiting for him to arrive and we will bring those statements to you when he arises. >> i say it again, every case is determined case-by-case.
kailey: u.s. stocks are extending gains even in the face of higher yields. riddle me that one. what is going on? >> not just a 10 year yield tackles 30 year yield, too. that's really the concern here when you see the 30-year yield in today hit as high as 3%, the 10 year yield is not far behind. that's going to be a key concern in the way of inflation. what does this do to u.s. demand for house something right now, not really an issue when it comes to housing but in the long term, something to watch. let's talk about the riddle and that is stocks higher yields higher as well. nasdaq 100 rally. there's no surprise as yaw see a spring bounceback action. if you needer out and look the correlation, it is coming back
what's happening in crude oil. i'm going to end by talking about the major issue, the imf, cutting their growth outlook. it's about slowing growth specifically in china as well. kailey: thank you very much, kriti. here's where we're watching for the next 24 hours. anna: in about 10 minutes, charles evans is scheduled to speak at the economic club of new york. earnings after the bell. we will hear from netflix and boeheim -- ibm. president biden speaks in new hampshire about investments, infrastructure law. we are still waiting for prime minister boris johnson to make that apology in the commons. kailey: that will come any minute now. german ppi and euros own car sales. we were talking about craig
trudell about earlier. and existing home sales as well as the feds. and from airlines players, united will be reporting as well. prock per and gamble. and we are you are, heineken will be reporting. what we're going to be monitoring is mask mandates after that ruling yesterday. a federal judge overturning the mandate. a lot of the airlines, uber and lyft saying there will no longer be a mandate but here in new york, the mass transit will be included. coming up, former u.s. treasury secretary jack lew will be joining balance of power with david west on on bloomberg television and radio. this is bloomberg. ♪
business, this is balance of power westin. -- power with david westin. david: tower bloomberg audiences and television audience worldwide. it is a busy day at the lighthizer that is where we start with joe mathieu, host of sound on, so joe, bring us up to speed. the president had a big video call a lot of allies involving ukraine and then i think he got out of town. joe: that's right. just wrapped up that call a short time ago from the situation room. speaking with our european allies about the war in ukraine, the battle for dundas getting way. both delivery of weapons to ukraine and potential next round of sanctions were both on the agenda. call lasted a little more than an hour. the president is now about to leave the bubble, heading outside of washington shortly on hi