guy: tuesday, the 24th of may. the countdown to the close starts right now. >> the countdown is on in europe. this is bloomberg markets "european close," with guy johnson and alix steel.

guy: 30 minutes to the close the price action looks like this. equities under pressure but not as much as they are in the united states. the media sector is down on the back of snap. retail is down on the back of a whole host of things. you have treasure -- travel and leisure also giving background. the dollar is down today, and that move accelerated on the pmi data we saw out of the u.s. it all basically speaks of the same narrative. what is interesting is the euro-dollar has a bid. i'm not sure if what we are seeing is your strength or dollar weakness. hubbell a combination. we are back at 1.07. people are saying possibly 1.15. we'll hear from christine lagarde in a moment. we are seeing this on both sides

of the atlantic. the u.k. to year, as you can see, down by 14 basis points today. the story here is about what is happening in the service sector. a huge deceleration in the u.k. service there was we deal -- was revealed today. this is an economy that looks like it is floating on the edge of recession and the market is certainly repressing the front-end. probably the best indicator as to where the market the bank of england is going to go. doesn't look good over here right now. alix: also repricing the front-end as well, but maybe for a different reason. the s&p down hard, trying to make another low here. take off as well. the first gap had to do with those negative numbers out of snap. it pervasively put a negative path on all advertising companies, like google, etc. the second step down had to do with home sales coming in really hard. you have weaker pmi's, services and manufacturing, all of that on the next leg lower for the

s&p. the nasdaq 100, 1 of the heaviest hit, down by 3%. that money moving into the bond market, yields lower by about 14 basis points. now you are seeing 12 basis points lower, but like you mentioned, the dollar not getting that safe haven bit today. it is different. you have to wonder if that is helpful. if the dollar has peaked, well that be a help to its equities? guy: absolutely. especially what you said about going on with the fed right now and compare and contrast what is happening at the ecb. christine lagarde was in dabo's today. -- davos today. she coal -- she told francine lacqua the ecb is not in panic mode. this is the conversation they had at the world economic forum. christine: we are at a turning point. we have all the components in place for that. we are turning our back to

negative interest rates. we are moving very lightly into positive territory at the end of the third quarter. then, of course, we will calibrate, we will establish exactly by how much we want to do that. francine: when you talk about no longer negative rates, does the market know this could mean positive rates? christine: when you are out of negative, you can be zero, you can be slightly above zero. this is something we will determine on the basis of our projections, on the basis of our forward guidance. i think there are good reasons to believe all three conditions will be satisfied in june and further on during the summer. francine: where are we in the third quarter? could we be above zero? christine: when i'm saying, i stick to. we will be out of negative interest rates, most likely, before the end of the third quarter. francine: how do you see inflation developing? there are so many unknowns because of the war. christine: there are a lot of

forces, and some of them, you know, counteracting against each other. you have the war, which in and of itself is a drama and has massive economic impact, not just in ukraine and russia, but for the rest of the world. we have energy prices which have gone up significantly and represent a big chunk of inflation. we have food prices. there is a whole series of things going on growth and pushing inflation up. francine: how likely is it the eurozone goes into recession? christine: we don't have that as a baseline. you must've heard that sentence before. we have the adverse, you know, various alternatives there on the basis of apathetic goals such as boycott of oil, interruption of gas supply. that clearly would have a significant impact on the economy. for the moment we are not seeing a recession in the euro area.

alix: i was ecb president you go. guy: weirdly they are pointing the camera at me, so let me pick up. it happens. these things can be confusing. christine lagarde earlier on in dabo's. -- davos. the recession is not the baseline. the pmi data are going to be watched to determine if it will become the baseline. it is increasingly looking at the baseline out of the u.k. my exhibit a is what we saw in the pmi data today. the pmi data on the services side actually holding up. the forecast was 57.4, so we are softening, but it is the news out of the u.k. which is maybe the indicator. u.k. services are absolutely cratering. they are heading in that direction rapidly. 51.8. that is down -- let me get my numbers correct -- down from 58.

so, this is a huge move that we are seeing in the u.k. in terms of the deceleration. wasn't that long ago we were up in the 60's. so we are really coming down quickly. the u.k. economy potential -- potentially teetering on the edge of recession. chris williamson is the ihs markit business analyst. chris, talk to me about the compare and contrast of what is happening in the service sector. u.k. number looks ugly. the euro zone number is holding up, but given the cost-of-living squeeze, how sustainable is that number? chris: it certainly looks like something that is prone to slowing. you have to remember the eurozone is seeing a bit more government intervention in terms of energy prices than here in the u.k..

it has small loans available to households, but in europe there is a lot more effort made to shield households from energy prices. that is playing a role here, i think, but there is also timing. u.k. had the omicron variant earlier, and released restrictions earlier than the euro zone. when you talk about u.k. services pmi numbers, not so long ago that was the key moment of that rebound, that opening up of the economy. the eurozone is still enjoying that pent-up demand, so that should come in the coming months. alix: what is the tipping point? what is going to move you up tomorrow -- to look more like the u.k.? chris: it is just a matter of

time. i think it is more shielded than the u.k. in some respects. the manufacturing sector will be vulnerable. we saw falling orders as a result of the war in ukraine. but in the u.k. you have brexit, which is dragging on exports in the u.k. so on both sides of the channel you have got manufacturing being dragged down. the key to watch out for here is just how resilient eurozone numbers remain in the coming months as the crisis continues to rage. guy: chris, are these economies that can take big rate hikes? still have five rate hikes this year. you have got a debate -- a debate at the ecb about whether

or not we should be seeing 50 basis point hikes. holtzman out talking about that today. is the market mispricing what is happening here? are these economies that can take such rate hikes or do you think ultimately both at the bank of england and ecb are going to have to back off? chris: it's looking like a got a bit ahead of itself -- without driving these economies into quite significant downturns. look at the u.k. pmi numbers today. i think the housing sector is a red herring, because what we saw in the service sector, actually financial services, with companies complaining about the prospect of tighter monetary policy, hyatt -- higher interest rates. you have also got business services growth slowing very sharply.

in the u.k. the fastest-growing growing sector is consumer services. likewise in the euro zone businesses are getting concerned about this tailwind, and it leaves this picture of, what have we got left? what is going to drive growth now? businesses are growing gloomier. alix: we look at a downturn then, chris. how severe is it? how bad does it get? do you have any visibility into how long things can last? chris: it depends on how the central banks react as well. i think the pmi in the u.k. is signaling .1% of growth at the moment. [indiscernible] may be a few points off of gdp. your second quarter in the u.k.

numbers could very well be negative. if you get rate hikes in that as well you could exceed in q3 as well. less so for the eurozone. you have some more resilience. it is not as aggressive as we are looking in the u.k. at the moment. so, less chance of recession there. guy: chris, one final quick take away, if you would. what is the data telling you about how sticky inflation is? chris: there are some positive signs. supply chains. yes, there are still a massive problem. the shanghai lockdown continues to plague them. that is bringing down inflation

quite markedly now. that almond -- that element is beginning to use some of its potency. on the other hand we have the energy price spike, and assigns of goa -- growing wage pressures. labor markets. you have energy taking over as the predominant driver toward inflation, but how long will that last? you will get the inflation peeking and that will roll that inflation over on a year-over-year basis and wage growth, and easing as well. alix: really great to get your perspective. chris williamson, ihs markit chief business economist. coming up, we are going to head back to davos for a sit down with brian moynihan bank of american -- ryan monahan, bank of america ceo.

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tom: we welcome each of you to the world economic forum in davos. it is like a one-week vacation where it starts raining at the ferry and it just keeps raining. lisa: it gets harder, actually. [laughter] tom: how many times can you go around the merry-go-round in martha's -- martha's vineyard. joining us is brian moynihan, chairman and chief executive officer of bank of america. you were the only guy here in good spirits because the celtics won. brian: it is quieter. lisa: deafening. tom: lisa has some specific

questions. i want to talk about your messaging, which has been test-quality, test messaging of what banks are doing in davos, what banks are doing for their employees, for the people. you are sending a clarion call of $22 an hour. when you walked in the door years ago did you actually think we would be talking about banks leading on minimum wage? brian: i'm not your 25 years ago it was as relevant, but when the team took over in 2010, we made a pact that no employee would be near the poverty level. we have been moving wages up since then. the second thing we did -- and we moved up a little faster given the things we advance this year, from $21 to $22. it is a set of principles. goes much broader than that. we have health care. our teammates at lower earnings have had no health care increase

since 2011. the premium has been flat. tom: did they have a tv show at bank of america? i stand on this set years ago with a health care executive who got home health from his board because his people were near the poverty line. you are up to $22 an hour, and yet you still have to reattach the elites and wall street banking to the american people. how are you doing on that and what is the mandate this year to reattach wall street to main street? brian: at the end of the day we serve our clients, whether they are general consumers, wealthy consumers, small businesses, and investors around the world, and that is how you attach yourself. start response growth. we have to go, no excuses. our mission purpose, whatever you want to call it, is to help our clients live their lives. that is where i think we in the industry -- and we are not alone here.

the financial crisis where we were the cause, and my first davos around then, and it was not a fun place to be for a bank. now where banks step in and help across the board. with financing industries. that is because we have a great liquidity. all of the rules, the stress testing. tom: does elizabeth warren know this? brian: everybody knows it. lisa: there is good social business, and there is good business business. a lot of higher wages have to do with a lack of employees. how hard is it to hire qualified employees? in the rank-and-file, in new york city? brian: our turnover back when the team to cover was probably near 20%. it came down to 15%. we got it down to 12% right before the pandemic. we came out in the pandemic in the first day we sent everybody home, everybody keeps their job. we moved them around, we did all

of the stuff. it moved back up to 12%. last week we announced a 7% wage increase for all of our employees under an hundred thousand dollars in the company. based on years of service. we are talking about career building. $22 an hour is not just $22, it is -- it keeps going up. also tuition reimbursement in advance. tom: do you have a tv show? [laughter] brian: think about the benefits if we announced today for teammates under two and a $50,000, we will give them $4000 to buy an electric vehicle. a key to all of this is to your point, lisa, stabilize an employee base. we have 200,000 people, 14,000 call operators, 25 thousand people in operations. having people work for 20 years is a lot more effective operation. lisa: in the investment banking world, you are dealing with a

market that has seen a pretty big selloff and big disruption. we are expecting a pretty big slowdown in certain investment banking services. you expect bonuses will have to come down, and horror -- and how hard will it be than to retain that talent? brian: those calling network in those narrow areas, we pay bonuses every year. those colleagues ebb and flow. that is what they do. they know who they are. our team is gaining market share in a difficult market because the pools are down and they have done a good job. on the trading side we are more than holding our own and the trading revenues have been solid. lisa: how much do you feel like you have to keep up the bonuses in order to preserve staff? brian: those will adjust. we will see how the year comes out. it is still early. tom: who knows what it takes? with us, brian moynihan, he is chairman and ceo of bank of america. we welcome all of you across

america and worldwide. brian, i want to talk about digital banking. he goes back to when the red sox were winning and the pandemic spread it all up, right? how i risk is the branch system? when you look at digital banking and the success you have had, and others have had, do you co-op businesses to make it bigger? do you build them yourself? is it digital first at bank of america? brian: we have been digital first for 15 years. just took customers -- you can't get ahead of your customers. and we are high touch and high-tech. you need those branches because certain people want to go to branches, certain types of tasks people get confused and want to go in and cash is important. between today and tomorrow 200 million dollars will go on of our eight teams in cash. takes all kinds. the question is, how do you optimize it? we run that huge consumer

business, largest in the country. it is phones, digital, branches, everything else. customers, we have engineered them digitally and the consult of tasks, which are important, have expanded the branches. we have 4000 branches, and by the way today we announced our 16th branch in utah. he didn't have any three years ago. tom: do you build digital platforms -- and these are just names. affirm, uplift, the airline people. different digital platforms that are nascent. do you acquire them? do you learn from them? what is the acquisition strategy of general knowledge? brian: we acquired -- we acquired a company that had a specialization in certain types. we will do that, but that is really not, you know, we cannot

make any acquisitions, so we built it. we built it in partnership with some people. zelle was built by the industry. tom: we get the earnings in real time and we have to look like we are smart. your zelle statistic is stunning. brian: what isz -- what is zelle doing? the dollar volume is flat. all of the little checks are going by way of zelle. if i owed you money a lunch, i would pay. tom: what? he goes to children. [laughter] -- it goes to children. [laughter] alix: i do want to get your pulse. you have a birds eye view. you find it a good time to keep seeing those credit card borrowing band at a time when consumers are feeling cramped by

inflation? brian: let's pull back and just look at it overall. there are a couple of key points. number one, the account balances of consumers pre-pandemic to now our multiple figures. we had $3000 in average collective accounts, and that would've been 1000 to 2000 dollars, now it is almost $4000. a person who had 3500 dollars on average now has $13,000. he grew 5% in april from march. what you are seeing is more -- consumers have more money in their account. the idea they spent the pandemic money is not true. the second question is, do they pay down their credit card balances? lots of borrowing capacity. the third point is, are they spending? in the first two weeks of may consumers spent 10 more -- 10% more than they did last year in may. the consumer spending -- people

say it is inflationary. a percent more transactions. tom: i don't want to interrupt because we are going to extend this to 45 minutes. this is the real monahan. this is the bank nerd giving us the operational stuff here. lisa: this goes to the heart of one of the economic questions of the moment, right? everyone is talking recession and stagflation. we were speaking with bob prince. what you are saying does not scream recession. brian: that's why said, we were talking earlier, this makes the fed's job art and easy. hard in that you have consumers in good shape, not overleveraged, home values went up. so, you know, prices went up and people didn't borrow down, so that is the good news. bad news is, what is going to slow them down? if you look at tsa travel sunday, it was up by 10%. that is the number of people who went to the airport. so what is going to slow them down? nothing right now. the fed has this very difficult

thing of getting to the slow down without slowing things down too much. the second thing is, the unemployment rate is low. michael harden is a good economist. tom: he's ok. [laughter] brian: he has this year meant to hide twos, but it is slowing down next year. the id is the fed's work slows you down. the problem is, he still has unemployment at 4%. you are saying, wait, you can't slow a consumer down because they have money to spend. so that is the difficulty. i believe if we are going to manage this flow, it is going to be a tricky execution. and there are things outside their control. a pandemic resurgence, something going different in the war. tom: ryan monahan with us, fired up about banking in davos. lisa abramowicz and tom keene. this is been really enjoyable to talk to you away from fed speak.

i give lisa andjon -- i give lisa and jon grief over the parlor game of guessing the fed. do you sit and guess the fed? brian: if they quit publishing dot plots i could probably save 50 people. tom: is there too much information nowadays? brian: the work they do on it, they have been in -- been very transparent and that gives the market comfort, but the fact is it does lead to a lot of mental mistakes of who's dot is whose. they work on the facts. you know that. a vice chairman once said, a group of ceos, you guys are nuts. we have long-term views, but we work meeting to meeting. they are dealt a deck of information and they have to make a decision. by the way, 350 basis point rates? that is unprecedented speed. by the way, tom, he will -- you

will remember this in 1980 they went up 10 points in one year. it is going to be interesting with the consumer being in this good shape. tom: i want you to speak to america, though, about the complete focus on jerome powell and the fed. we are talking bankers like you, microeconomic professors at round university, is your crystal ball any better than lisa abramowicz? brian: i can look at what our clients do. our small business originations are up 30% year-over-year. are they worried about inflation? yeah, because the paper says worry about inflation. but the other day if you look at their behavior they are worried about supply chains, they are worried about getting labor. that is what goes on in a small business. these are 12 million of them. i think the key is not to get caught up in the -- if 10 years it is 300, or $280.

traders that is, but is the underlying economy moving? are people moving from in-home purchases back to the store? are they going to vacation instead of buying extra goods and hoarding? all of that behavior is changing and that is natural behavior. lisa: before we let you go you were talking earlier about elon musk and how you were sympathetic to his view on esg and being overly complicated, and in some cases inaccurate with respect to what it was measuring. how would you hope that would recast it and what isn't not touching? brian: it is the metric system and the proliferation of metrics. we announced metrics that we had 150 companies incorporating. 150 total. need simplification so people don't argue about doing the work, do the work. these numbers go across the sustainable development goals. the big four accounting firms

developed them. all companies can do them. we are on the second year. the problem is when you move to other thing the proliferation of metrics puts more energy in to meet things and it does to change behavior. you need to move on environment. we have to stay with oil companies to help them make the transition. we have to bring new energy on. it is the work. the reality is, people would say i like this better than that, the answer is we run our company. tom: what is the best practices at bank of america? brian: for years she did research that clearly showed if people scored poorly on esg scores, if you avoided those companies as a portfolio manager you would miss 98% of the bankruptcies. if you are a manager and you can avoid the real office, that is a game. what we are doing is helping the trading process. do you want us to do charity,

which we do $500 million a year? do you want us to take our $60 billion expense base and aim it to make things happen? that is what is going on. tom: we have gone too long because we had to have the duck boat come to the studios. bynum -- brian moynihan, think you so much. lisa abramowicz and tom keene, and back to you. guy: an umbrella definitely require. i hope they packed those bloomberg umbrellas, because it sounds like they're going to be needed. as mr. moran handset, snow is definitely quieter than rain. let's talk about what he said on the consumer. it was my real take away from that conversation. it is a take away i've heard from bank ceo after bank ceo that have traveled to davos. the consumer is in great shape, and that is going to make the fed's job difficult. alix: they said nothing is going to slow the consumer right now. and saying that actually

deposits are up. maybe people have not spent all of that stem -- stimmy money. is it just a shift really from the pandemic winners who have reopening trade, in essence? guy: it's interesting to see the slowdown and services, but it comes down to what we have been talking about the last few days. it started with walmart, it went into target. i think you are seeing it in snap as well. the topline is ok. i keep reiterating that. that speaks to the solid consumer. the consumer is spending money. the problem is, in the middle we are seeing costs going up. the margins are being squeezed. therefore profits are lower. that is what the stock market is having to adjust to. not necessarily a consumer slowing, but a profitability story that is slowing. alix: what is also interesting is that ryan monahan said small business original nations --

originations are up 30%. now we get a reading that is not necessarily is positive. have small businesses get hit first and they are front and center in that tight issue with margins, as well as the demand side. and they are seeing demand weakness, but if you take a look at what he said, maybe there are still stabilization signs in different parts of the economy. guy: you have to go sector to sector to figure out what is happening here, but small businesses, less robust, they have less ability to trade through that difficult margin environment. let's talk about where we are in europe. we are closing today. it is an ugly close in many respects. on the continent, that backs down by 1.7%. u.k. is really interesting. we are going to talk about the u.k. energy sector, but you are seeing some of the energy stocks doing relatively well. i'm talking about the big names here, but you are also looking at some of the commodity stocks doing ok as well.

advertising is under pressure. that is the big picture story. let's show you what is happening in terms of this session and how we develop. clearly snape has had a meaningful impact. then we trade sideways. as the u.s. market starts accelerating on the downside, we see another like lower, then we drift sideways. first it was snapped, then it was the data. that is the data there, the pmi data out of the united states earlier on. with the double whammy it kind of got people moving to the downside more. but a real bid coming into the front end of the bond market. we show you what is happening with the breakdown. you have banks, telecoms, basic resources doing ok. travel and leisure is down hard today. retail is down and media is down hard as well today. that is the reaction to the snap numbers. let's talk about individual stock stories.

wpp group down. it is the advertising. companies are talking about trying to protect their margins. and of the days they are going to do that is cut costs. one of the cost they are going to cut is reducing ad spend. then we are going to see a windfall tax in the u.k. this has really hit the u.k. energy sector today. harbor energy, the operator out of the north sea, down by 4.21%. now we are apparently talking about this idea that the chancellor could also in the u.k. be looking to tax may be the generating capacity we have here. this is a bunch of european companies, not all of them are listed here, but drax certainly is. it is down by the dashed down by nearly 14%. how we apply a windfall attacks when we are going to see another leg higher in energy costs later on this year, is going to be a

really difficult balancing act for the chancellor. alix: as you are talking about it, rishi sunak has ordered officials prepare plans for a windfall tax on power generators, as well as oil and gas firms. officials are looking at approaches taken in other countries were similar taxes have now been introduced. all of that making the environment that much more tumultuous is that 2800 pound rise in energy cap we are going to see. that is an enormous amount of money people are going to have to spend on their energy bills. how do you -- how you offset that may be leads to that wonderful tax -- windfall tax. joe, is that the line i have to draw? we have to have a windfall tax to help the people pay more? >> the government line has been, if there is not -- enough investments, that is when the windfall tax comes in. today the focus has been on the

powergenerating sector. we have this other big part of the u.k. energy sector which has benefited from high prices. they are making normal profits as well, so should they be taxed ? if you take a holistic look at the sector that is also in scope. that has hit shares, like you mentioned, and it is a question of the government. are they ready to do something that is seen as -- as unconservative? we will have to see. guy: how do you make a shift as boris johnson said up in moscow, to a more sustainable future, if we are taxing these profits? is it one of the other? joe: another idea is, do we graduate the tax such that if you invest more you get tax last? the u.k. government is trying to encourage investment, but there is that political pressure coming from the other side. crucially, they are not saying

specifically how the gains from this windfall tax would be spent. would he go to consumers? would it be the government trying to put money into investment projects? that is unclear. there is worry it sends a signal to future companies you could be hit by taxes as well. guy: the other piece we got today with -- today was from offgen. we will see a massive rise in the price of regulated energy this year. is that going to encourage a windfall tax or is that designed as news to help the treasury move away from tax? i'm trying to understand how to interpret that through a political filter. joe: that is deafly going to encourage some kind of treasury announcements. whether that is direct supports to consumers, the question will be, how to be funded? this is going to be billions of pounds of help. i think that news today should make people think, ok, an announcement is coming quite soon from the chancellor, sooner

than we thought before that announcement. guy: great stuff, as ever. joe mays on the increasing potential for a windfall tax here in the u.k.. u.k. stocks are now done for the day. let's take a quick look and see how the auction price has treated us. in terms of the ftse 100 let me get the charts up to see what we saw during that auction, last five minutes of trade. being us a tiny speck to the upside. finishing down by .4%. the dax down by 1.8%. the cac down by 1.6%. more to come at the top of the hour on bloomberg radio. the cable show, alex and myself, five :00 p.m. in london. you can find us on digital radio. you can also find us on itunes. if you can find us there, podcasts are available. you can listen little bit later. coming up, jane shoemaker of janus henderson investors is

going to talk about how investors should be positioning ahead of higher rates in europe. that certainly seems to be the narrative from the ecb today, and a slowing economy. we will take a look at what the pmi is telling us as well. that conversation next. this is bloomberg. ♪

ritika: this is bloomberg markets: european close. coming up, joining bloomberg news at 2:30 p.m. this is bloomberg. >> rates getting into positive territory is a good thing, in my view. we can take a step there. real rates are still negative, so therefore i do think from a policy perspective it may not be as bad to make those moves.

it builds when you need it again. guy: ralph hamers speaking in davos. just up the road from his office. a view there on what is happening with the story on interest rates in europe, it is heating up right now. today we have had two different views. do you go slow or fast? this afternoon we have had holtzman weighing in, saying the central banks should be looking at 50 basis point increases. that would be appropriate according to him. you have also had from latvia talking about the idea that we should be seeing 50 basis point rate hikes as well. that is in contrast to the glow -- to the go slow message we are getting from christine lagarde, the president. meanwhile you have also had the bank of france saying a 50 basis point hike is not the ecb's consensus.

this is earlier. >> the 50 basis point hike does not belong to the consensus. but we have sentiment in this direction. nobody knows exactly where it is, but if i think in real terms it is probably between negative one and a zero, which means between one and two. guy: joining us now is jane shoemake, janus henderson portfolio manager to talk about what is happening in europe. jane, this case is a difficult one to manage. have a eurozone economy that is doing ok but starting just so -- starting to show signs of slowing down. you have an ecb that wants to tackle inflation. we are going to see policy being tightened. what impact is that have on the way you want to invest in europe? is there a fear that the euro

slowdown comes quickly and you don't want to have a part of that? how are you thinking about how you invest in europe right now? jane: i think as dividend investors we are focusing on pre-cash flows and dividend yields. europe is one of the high-yielding markets globally, as is the u.k.. it has been really out-of-favor. the u.k. in europe have massively lagged united states. we have seen so far this year, particularly the u.k., is that they held up slightly better to some extent. europe has been impacted by the war on its borders. regarding interest rates what has been interesting is some of those bond proxy sectors, typically the sectors people perceive to do badly when interest rates rise, have performed really well. a good example is telecoms have been strong this year. health care. again, we have to think about the nuances when we are investing. i think it is a time for active

selection on stocks. alix: do you attribute that to the fact the market does not think the ecb is going to hike as much as one might think, or do you contribute that to idiosyncratic factors? jane: the consensus is that the ecb is going to hike by about 1% this year. so we are going to be at .5% by the end of the year. the market is already pricing in that. that is in the market already. but i think people are failing to recognize is how cheap some of these stocks were. they have been so out-of-favor. telecoms have been really poor for a really long time. it has been all about the tech stocks, it has been all about growth. what you see now is the market starting to switch and look at some of those areas where basically investors have not wanted to talk about them, they have not been interested. us as value investors have been out-of-favor. but we have seen this year is some of that rotation.

in my personal view it has some way to go yet. what we saw today with snack is another example of lockdown stocks that did incredibly well, and investors overextended their expectations of the growth and the valuations have paid for those. it is brutal when those stocks disappoint. guy: in a positive yield environment in the euro zone do i want to pivot the banks? since this conversation has become hotter with blog post from christine lagarde talking about neutral rights by the third quarter, banks have been really big out's. is that a trade you want to latch onto? does that have legs? do we go further from here? jane: things have been interesting. they had a good end to last year and then they have done nothing for most of this year. things have been a bit of a laggard in what usually would be a positive environment for them. i think that expectation now in europe is that we are going to see some moves and quite a

significant shift in policy direction. i go back to the fact that these banks are very, very cheap. they are treading on cheap multiples, have been for some time. as long as you don't get a total collapse i think in recessional growth the value is there. what people have been worried about is the fact we might be going into recession, they are not going to be able to loan, are people going to take out more mortgages? there is the two aspects to it, but the valuation support is underpinning those, i think. alix: real quickly, euro-dollar,. he or wrong -- euro-dollar, parity, or $1.10? jane: i'm a value investor, not an fx expert. clearly we have seen the dollar raise. guy: how does that change the equation? jane: we constantly, over the

long-term as equity investors it generally doesn't make a huge difference. in the short-term it can. alix: there is your fx hedge. thanks a lot. jane shoemake of janus henderson. we appreciate it. this is bloomberg. ♪

alix: here in the u.s. we are off the lows of the session. let's tape a -- let's take a deeper look with abigail. abigail: there is a little bit of hope here. it was a lot of red on this screen, but the s&p off of the lows, down less than 2% at this point. that means the social media group and new york index down off of their lows as well. earlier the index down more than 5%. now down a little bit less than that. the social media group clearly under pressure. the worst day since march 2020

on snape's negative pre-announcement on the macro environment eating into ad spending. he also have the home index down after new home sales for april really missed the mark. now at a post-pandemic low. now the apparel group also under pressure, down three .3%. abercrombie & fitch down 20% on a big mess. everything having to do with operating margins. a surprise loss. the worst day ever. however, over the last three days, of course yesterday was the second day for the s&p 500, freddie have been down, but there was a late day recovery. right now over these three days we have a small gain for the s&p 500. will it turn into more? we really don't know, but again it is interesting to note that during as for one reason to think that maybe the bulls are not as strong as some longs might help, this is a look at the goldman sachs unprofitable index relative to the s&p 500. it is down for a seventh month

in a row. yesterday, guy, during that big rally this index was down 1%. some of those more momentum stocks were not participating. want to be interesting to see how today shapes up. guy: looking forward to the close. thank you very much, andy. snap is down by 40%. let's talk about what this means, where we go. mandeep singh joins us now. $30.44? an overreaction? mandeep: snap has not seen the downturn of a global financial crisis. in 2008 it was only google. that was the big digital player. snap told her investors they were going to grow 30%. now that they came out with the pre-announcement saying macro issues will result in a much sharper deceleration, goes to

show maybe the company didn't see this coming but i attribute it more to the company not experiencing a downturn of this magnitude before. alix: how much did you feel like it is syncretic with snap and management stuff and how much is it macro? mandeep: the social media space is tough. if roadblocks is doing well and is coming at the expense of some social media companies. if tiktok is doing well and is taking away engagement. in general social media is a hard space to maintain that engagement, because consumers are fickle. they will keep changing platforms. at the end of the day advertising is highly cyclical. what we are seeing right now is not that surprising if you look at the prior downturns. whenever we have a macro slowdown advertising does get hit. so this time with digital ad spending it is no different. it is just that in prior rounds it was just google. that was the digital ad player. now we have more, and time will tell. alix: really appreciate it.

that stock, down 40%. mandeep singh of bloomberg intelligence. for me in guy, that is wrapped up for our show. we have "balance of power" coming up next with david westin. guy and i are headed off to our radio show. you can join us on digital radio, the cable. you are looking in a market off the lows, but we are still down one point 7% on the s&p. this is bloomberg. ♪

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♪ >> from the world of politics -- >> if china were to do something, that would be the end of the alliance system that has kept the most prosperous and most populous part of the world stable for three quarters of a century. >> to the world of business.