Bloomberg Markets Full Show (03/18/2022)
From the financial centers of the world. This is Bloomberg Markets with Alix Steel and Guy Johnson. With 30 minutes into the US trading day this Friday March the 18th. What do you need to know. Here are the top stories we're following for you at this hour. Biden and she talk about Ukraine. The president of the United States is expected to tell his Chinese counterpart that he must stand on the right side of history. Ukraine's president Zelinsky cites quote substantive talks on EU membership. We're going to speak this hour to Kiev ambassador to Germany. And stocks are bouncing and the curve
starts to inverse. Fives are below threes for the first time since 2020. This is the Fed's Chris Waller calls for a series of 50 basis point hikes. From London. I'm Guy Johnson with Gina Martin Adams in New York. Alix Steel is off today. Welcome to Bloomberg Markets. Gina we got a lot to think about this Friday but let's focus on that inverted curve. What signal does that
send to stocks. Look I think the stock market's been watching these forwards invert for a while. Clearly it increases richer recession. Chances are recession probabilities within the next couple of years but it conflicts with the real time data and that's creating a bit of disturbance for the stock market. Also I think we want to respect what the commodity market is telling
us. Commodity prices have been a big driver of stocks over the course of the last year to date anyway. And stocks and commodities made their major change made a major change in early March. Oil prices peaked. Wheat prices peaked. Stocks bottomed at that time. So as long as we get some stability emerging in commodity stocks are going to take that as a pretty positive
sign. And inflation is not going to be a remarkable risk as we were thinking just weeks ago. Absolutely. I do find it fascinating as well relating it back to what is happening with the war in Ukraine. Both the S&P and the stock 600 both now up since February the 24th. This is data hitting the tape right now. I think it relates as well to the inflation story that Gina is talking about housing a huge part of the inflation basket over in the United States and something of a lagging indicator as well on where inflation is going. Existing home sales. Remember with mortgage rates now at 4 percent. The number is in at six point zero two which is a little light on the survey. No it's certainly down from the
prior number which has been revised lower as well. In terms of the momentum month on month that means that we now have a negative seven point two percent downside move versus an expected negative six point two. You want to bear this in mind because they say housing shelter a huge part of the US inflation basket and it takes a while to get going. But once it gets going the momentum is certainly there. Gina. Talk to me about this housing story though in terms of its usefulness as a guide and a gauge in terms of where the US economy is going. What we through what you see from an equity market perspective. Yes. So the
housing market absolutely is one of the leading indicators of the broader economy. Typically housing prices start to suffer or housing activity starts to suffer as rates move higher. But it is a lagged impact. I think what we might see this spring in particular is a rush to borrow in advance of rates getting even higher. If an inflationary psychology is truly embedded in the US this spring will tell us whether or not that's the case. Because if inflationary psychology is embedded consumers will
rush out to get capital while they can while the getting is good so to speak. While rates are low even though they're moving higher they would anticipate that rates would be extremely high over the next couple of years if they really believe that inflation is a problem. Absolutely. Let's turn back. Now to what is happening with this call between the presidents of China and the United States. It kicks off just after nine o'clock. We're now getting a readout from CCTV over in China as to how the Chinese have seen that. Assuming it must now have concluded that I can't guarantee that this according to CCTV. This is what President Xi is saying. Conflicts confrontation are not best beneficial to anyone. She is saying that relations between nations should not resort to arms and the international community should value peace and safety. Let's get Annmarie
Horden read on this. No way to founding Washington D.C. today to be found in New York. Amira your read of what we're getting. It's early days and these are I think fairly inconclusive comments. What is your read on what we're getting now from CCTV on what she has been saying to President Biden. Well this is definitely coming from the Chinese side right. And we have known
that China has refused so far to condemn Russia's actions. At the same time not outright support it on the diplomatic front. So very similar to what they've said. China has said they want peace and they think that there should be a diplomatic way forward. This comment about international community should value peace. It's kind of the rhetoric we've heard from China. What's more interesting is relations between nations should not resort to arms. What we have known so far from U.S. intelligence is that Russia has been asking Beijing for those arms and potentially wish
China willing to go there. We know that President Biden today in this call which if it wrapped up would you see some headlines from CCTV means they've spoke for 60 Minutes because the White House has told us that that call started at 9 0 3 a.m. Eastern time. It is now 10 0 5 a.m. Eastern time. Those headlines just came out at 10 0 3. So about 60 minutes that would put this call if that is correct. And we'll find out from U.S. officials as well. But that was the
message President Biden wants to bring to Xi Jinping do not arm Russia. And also there will be costs for Beijing if they get involved in this war. And really given this is pretty consistent with the rhetoric that we've heard so far. How much confidence can we attribute to the headlines that are coming out today. Do you see any any even minor tweaks in language that we can kind of hang our our hopes on. So far I don't see any minor tweaks but it's a good question because sometimes a lot of the U.S. officials will question what China says versus what potentially they may be doing behind the scenes.
We do know that President Putin is incredibly isolated and he wants to look to his friend in Beijing. And early in February they came out with a new level of their relationship saying this relationship has no limits. And really for years that they've been building up to that relationship. They both want and view the world differently. They don't want a U.S. version of the
world where the U.S. has a lot of influence and power. They view the world where they each individual superpowers around the world should have their own spheres of influence. So you saw four years them just going cozy closer and closer together. This is a really important conversation because this is really the United States warning China to not get involved and potentially try to convince China to put pressure on President Putin to end this war. Jake Sullivan had a very long conversation in Rome with his counterpart a few days back. That was a call that was expected to put pressure on the Chinese. Clearly this call was necessary between the presidents. Why was this call necessary. Well Jen
Psaki yesterday talked about this and this is something that President Biden even talks about a lot. He wants to speak and will meet with anyone. Right. That's kind of his whole shtick. I will sit down with anyone. And if diplomacy is a way forward we are going to go that route. So this was really a way for President Biden to be direct and frank with China. There's no reading between the lines here with the press. United States saying this will impose costs on you and probably imploring China to use their power because right now as I've said President Putin is isolated and this is one place he is looking for help. And how much is China willing to come to the help of Russia. We do know that China looks out for China. While they have a tremendous amount of trade with Russia over the past few years between energy and arms etc. It dwarfs the size of trade
China has with the European Union and the United States. Amari great stuff. Thank you very much as ever. Bloomberg. Bloomberg's Annmarie Horden joining us on the readout from this call. Ashley says We'll probably get the US side fairly shortly. You'll get an idea of their perspective on what just happened. Well we've been speaking about that clearly. We've been focusing as well on what has been happening with the markets which from an equity point of view are now starting to climb. The NASDAQ is the session highs were up by around seven tenths of 1 percent. The S&P just flipping into positive territory.
European equity markets climbing off their earlier floor as well. The footsie one hundred now back to fairly flat CAC and DAX down by around half of 1 percent. Up next we've got to talk about these equity markets. These equity markets on either side of the Atlantic on our basically flat from the 24th of February when the invasion took past. Our question of the day is a fairly straightforward one. It's one that echoes a comment from Goldman Sachs a little bit
earlier on. Our markets too sanguine. Now on the Ukraine risk. We'll talk about that next. This is Bloomberg. As to what's happening in these equity markets equity markets on either side of the Atlantic basically recouping their losses since the start of the world Ukraine but the S&P and the stock 600 are both higher. Let's talk about this now and this huge
turnaround that we've seen. Abigail Doolittle over to you. Well guy you know this week is really very impressive looking at the best week for stocks basically going back to November of 2020. That election rally you can see the S&P 500 up five point two percent the NASDAQ 100. Even a little bit stronger up 7 percent. The Golden Dragon China Index up 28 percent. Its best week ever. Not surprisingly. And then finally of course have the Russell 2000 also participating. So it is a round rally that we have
here a broad rally I should say. Now that is mainly recouping a lot of the losses around the Ukraine war. However if we take a look at the S&P 500 on the year there's more work to be done. You can see here the S&P 500 still down about seven point two percent. Again basically making up what has happened since a Ukraine war. This of course is that investors are contending with so many different issues. I would argue that the Ukraine war as tragic as it is a humanitarian crisis it's been more of a headline issue for stocks whereas the real issues have more to do with the Fed which of course we were digesting right now. Inflation among other issues. One reason to think that we could see stocks continue to climb continue to go up maybe not all of
the year to date losses. But we started taking a look at this chart I think early last week maybe the week before. It seemed improbable at that time. But you can see the RSI is climbing. You can see that the S&P 500 had been going down. That's a bullish divergence. You can now see that the S&P 500 has broken that downtrend climbing toward the 200 day moving average. Who knows. Maybe four to five hundred forty six hundred. We'll go back and make new highs. That seems less likely with all the
uncertainty guy. But it does certainly seem that we are amid some sort of a strong rebound rally. Have a go. Great stuff. Thank you very much indeed. Perfect sets up. Before we carry on this conversation I want to just bring a couple of things to you Governor. Interview in a Bank of Moscow the Russian central bank talking about the fact that the bank is getting ready to gradually resume trading in Moscow. Local bonds are going to restart next week it looks like potentially Monday. The Bank of Russia is looking to look to purchase some of those bonds. There is concern about the monetization effectively of
the the Russian bond market. We'll see what the Vatican turns out to be the case. And then you got the LME Copper Industry Group recommending banning Russian metal. That is obviously a further self sanctioning process that we've already seen in other asset classes as well. But let's get back to our question of the day on markets now too sanguine on the risks that the war in Ukraine now poses. Abigail just laying out what's happened in equity markets. Let's bring into the conversation alongside Gina Romaine Bostick remain. What do you think is behind this incredible turnaround we've seen in stocks initially shocked by the conflict but then bouncing strongly. I think it's more about the idea of how much is economic growth going to be affected by
this in the US as well as in other developed nations primarily in Europe. And I think the knee jerk reaction about three weeks ago is that this would have a material impact. I think as people have sort of step back and looked at the progress of the war and more importantly looked at how that's fed through into commodity prices as well as other economic activity I think the worse case scenario is being priced out. Does that mean it's sanguine. I'm not sure I would go that far but I don't think the market is expecting at least from the war in Ukraine a significant economic downturn. I totally agree with you. I mean because I think that the the immediate gut check reaction in the market is oh my gosh this is super inflationary. And then the reaction in the market became. Yeah but if it's so inflationary what does it do to growth. And we see that in the charts really consistently.
The market has followed the commodities landscape. But something else that has strikes me and that is sentiment shifted pretty materially over the last couple of weeks as well. When you're talking to your guests and you're interacting with your contacts are you sensing that the sentiment got overly bearish with respect to growth. Absolutely. And I think there's also sort of this general sentiment here that there is some degree of insulation at least. Let's just focus on the U.S. market for one
second that there is some degree of insulation here from some of those effects. Maybe you'll have certain stocks in certain sectors that will suffer a little bit. But broadly speaking when you look at the broader market there is this idea that there's enough resiliency there in our economic conditions in consumer spending. And I do actually think there's a lot of people do have some degree of faith that the Fed if they don't necessarily get inflation completely under control they'll keep it from going completely out of control. Right. Gina I guess if you look at where the markets are IBEX it's still down by seven point thirty five percent year to date right. It is significantly off its highs. Much of that may be
down to remember saying what is happening with the Fed and its ability to manage this situation. My question to you is I wrote he's got a hold up. What is he going to take to knock equities down for good. Because they keep getting up off the canvas. Time and time again. Yeah. Well I mean consider the fact that the average stock in the S&P 500 is down 20 percent. And an equal weighted index of the S&P 500 valuation ratio is actually now below pre crisis five year average. So we did a lot of work in the S&P 500 beneath that big headline. It's just hiding in the mega cap. So-called defensive stocks
kept the overall index relatively afloat. So I think that dynamic is important to consider. But you're spot on guy. It's all about earnings for the equity market frankly. You went along later pricing in much tighter policy in the January drop. Now it's kind of gaming out the earnings scenarios.
How much does inflation really degrade the earnings outlook. And so far analysts are telling us this is an inflationary story but not a gross dampening story. Well can I just pose a question on that point too because is there anything that's shown up in the data the official data that we look at that seems to suggest there is a significant economic dampening effect out there. Yeah inflation is higher right. So it's personal consumption. So as household savings household wealth. And on top of that anyone who wants a job in this market can probably get one. Now that's the short answer. There's just nothing in the leading indicators
of the economy that suggests risk is imminent. The one thing that is showing risk right now is the financial markets. U.S. equities down the bond the forward yield curve starting to invert. Investors themselves are nervous but the economy is showing incredible resilience so far. Now everybody's gaming out. Well
at what point does the economy no longer show some resilience. Most of our work says you've got to get to at least one hundred and fifty dollar oil before you see some degradation in the consumer outlook. Companies are telling us they're able to pass on cost increases reasonably well outside of select sectors and select industries. So until those indicators really come up the equity market may prove to be a bit more resilient than anyone is anticipating. See we get a few 50 basis point hikes and see how the market copes with them. We'll find out. Maybe we'll talk about that
later on the program. Remain great. Thank you as ever. Yeah. Romaine Bostick. Great stuff. Thank you very much indeed. What's next. We're gonna carry on with this question. Markets too sanguine. Maybe. Maybe not. There's a lot of things out there to think about right now. But the Ukrainian risk is certainly one factor that we've got to take into account. And it looks like it is still a significant one. David Leibovitz of J.P. Morgan Asset Management joining us to continue the discussion next. This is Bloomberg. Twenty one minutes past the hour let's carry on our conversation. A markets are equity market specifically too
sanguine on the Ukraine risk. Stock 600. The S&P now higher than where they were when Russia invaded Ukraine. Let's bring into the conversation David Leibovitz J.P. Morgan Asset Management global market strategist. David what do you think. So you know it's the question that we're discussing with clients in the current environment. What I would say is to us whenever
there's a geo political issue we always try to identify the primary transmission mechanism to the economy. And as you said in the prior segment obviously in this environment that transmission mechanism is higher energy prices. It's not though just about how high energy prices go but more so how long they stay there. And I think you know a big part of the volatility
that we saw over the past couple of weeks was really driven by what was happening in the energy complex. You know as investors have realized that oil is going to continue to flow and in the case of the United States we're actually in a fairly solid position to weather this shock both in terms of our ability to generate more oil supply in our own backyard but also given the consumer's financial position and their their ability to absorb this shock. You know it feels like people are recognizing that this is more of a bump in the road as opposed to a pothole. Again assuming that energy prices continue to move lower as
opposed to moving back to the higher end of their recent range. David notably the tech sector has started to show some signs of life in recent days after really leading the downdraft in the S&P 500 anyway. So far this year. Give us your sense of sector strategy right now. Is it time to migrate back to growth yet or should we be sticking with the value trade. So for for us we
think that growth the assets particularly profitable growth is a great way to build a kind of core and defensive allocation within a broader equity portfolio. I think you're taking a step back when we look at what markets have done this year by my lights. You know what's happening in Eastern Europe as terrible as it is from a humanitarian and a social perspective still very much noise for the market. Whereas on the other hand the Fed has sent a very clear signal and obviously got going with rate hikes in the middle of this week. I think that you saw the baby get thrown out with the bathwater as it pertains to tech. And again some of those mega cap names those more profitable names that to your point earlier have done a lot of the heavy lifting as the S&P tries to climb itself out of this hole. You know we do think that there is
value there. But we don't want to completely run to that side of the boat. Know we like the idea of owning profitable tech. We also like the idea of owning things like industrials materials and financials given our expectation for higher interest rates and a more robust nominal growth environment this year. Curve starting to invert. We've certainly seen that within the last hour fives and threes. You got Chris Walla talking about the necessary necessity maybe for a series of 50 basis point hikes. That strikes me as being beyond where the market is currently priced. If that was to come to bear if we were to see those kind of more aggressive moves maybe they're front loading but aggressive moves nevertheless from the Fed. David how does that
change your thinking. So first for us you know it's important to take a step back and recognize that the risk of recession in 2023 has risen relative to where it stood at the beginning of this year. It's certainly not our base case view. But when we think about the risks that exist on the horizon a Fed policy error is is really front and center. You know I think it makes sense for the Fed to have gotten going here in March. We do expect sequential hikes in May
and June. The idea of shocking the system with a 50 basis point hike up to me is somewhat inappropriate. I think it's important to recognize that a lot of the inflation we're seeing in the current environment is a function of the supply side of the economy. Higher interest rates really only impact demand. And so you know a 50 basis point hike isn't going to unclog the supply chains. It's not going to deal with some of these issues that have been driving the inflation that we've seen over the past 18 months. And so to me that the Fed would be better off sticking with 25 basis points and potentially trading some rate hikes later on this year for an accelerated reduction in their balance sheet in an effort to keep that curve upward sloping and prevent the inversion signal from really undermining investor risk appetite.
Yep. Still don't know whether the Fed feels it's going to need to generate that kind of demand slowdown though to get inflation back under control a lot of people are concerned about that. David great to catch up. Have a great weekend. Thank you very much indeed. David Leibovitz of J.P. Morgan Asset Management thank you very much. What we've got coming up for you. SALES of previously owned homes in the United States. Existing home sales have fallen to a
six month low. We're gonna talk to the chief economist at Rialto dot com Daniel Hale. Fast conversation next. This is Bloomberg. So we're an hour into the U.S. trading session. U.S. stocks generally bid NASDAQ Sony on the front foot. We've got to expiry today which in theory should be taking a bite out of equities. But as I say there is the Greek. Let's find out why. What's going on. Abigail Doolittle over to you. Interesting that you're talking about that with that triple witching guy because yesterday Kevin Kelly of Kelly ETF he told me that the strength we've had all week that has something to do with triple witching. And because of that there's reason to think there could be follow through to next week. But this is the week that has been for the Nasdaq 100 up nearly 7 percent the best week since November of 20 20 as investors seem to digest oil falling. The Fed meeting inflation lots of different factors. So we do certainly have gains on our hands.
If we take a look at other asset classes a little bit of a different picture. I was mentioning oil falling. We do have your crude down 5 percent on the week. We have the Bloomberg Commodity Index down itself down 2 percent making that very interesting as the dollar is down about seven tenths of one percent. Typically that would help commodities. But with the big
run that we had seen into commodities into ahead of last week really it seems as though there's a bit of a cooling there and then bonds a huge move here. Talk about a cooling. We have that 10 year yield up 15 basis points but well off of its highs where it was on the day of the Fed meeting I think around to twenty five or so now at two point one four percent. And reason to think it may continue to drop. We'll save that chart for another time. However let's take a look at the S&P 500 and another reason to think that a rebound rally could be ahead. I love this chart. It
is the Fed's balance sheet and white relative to the S&P 500 anytime period you look at it. It's very very interesting. Business is a close close correlation between the S&P 500 direction and that Fed balance sheet. You can see though this year that the S&P 500 hugely volatile as the balance sheet just went up ever so slightly. It now may seem guy that investors are using cooler heads to realize that the Fed's balance sheet is not disappearing right away. And you can see that S&P 500
starting to break that steep downtrend. How high it goes. We don't know. But it does seem as though there's maybe a bit of a relief rally here. Absolutely religiously coming from Morgan Stanley as well as your own suggesting that may be actually the balance sheet roll is going to be slower than the Fed hikes that's going to leave a lot of liquidity in the system which may put further pressure on the curve to it. Maybe not signaling that a recession is on the cards for the U.S. economy. Abigail great stuff. Thank you very much indeed. Abigail Doolittle on the markets. Let's talk about what is happening in the housing market right now. February turned out to be a little bit of a tough month for
the U.S. housing market relative to recent performance. SALES of previously owned homes fell to a six month low. With us now to walk us through what is happening here. Remember rates are rising. Bloomberg International economics and policy correspondent Mike McCabe got you. You'd immediately point to rates rising and say that's the reason. But remember the Fed's only raised rates now for a little over 24 hours. But the market front run the Fed front ran the Fed. And you can see what's happened. We had a seven point two percent decline in existing home sales
in the month of February 7 percent for single family homes which is the one most people follow. Prices though continue to rise up 2 percent. And that just adds to the overall inflationary pressure. And people say that's going to continue for a while. Now one of the reasons for that is that there's not enough supply one point seven months. There's not enough homes for
people to buy. But this was the winter season. We're going to get into the spring selling season. We'll see if more people put their homes on the market. If they are they're going to find a little bit less support from the Fed the yellow lines down there. That's the mortgage bond buying that the Fed was doing. And you can see how in the crisis the red line is when Covid started that pulled down mortgage rates and the Fannie Mae acceptance rate. And now they're going the other direction the market pushing against those Fed bond buyers because they were anticipating the higher rates that we've got now. Rents are still going to keep rising for a while. It's built into the system. Inflation is
there. But we may see a slowdown in lending activity. And the reason for that is refiners are being affected by the Fed's move. We're seeing refiled over the last couple of weeks go down significantly. That's going to take money out of the system out of the the overall spending possibilities for Americans. So that may have an effect on growth going forward. This is all what the Fed wants to see happen. Housing autos the two interest rate sensitive sectors of the economy. So in that sense it's going according to plan. It's just that nobody knows where this plan is going to end up. Yeah. I wanted the Fed knows Mike thank you very much indeed
Bloomberg's Michael McKee. That window on refire is certainly closing pretty rapidly. Let's get more now on the housing market and what is happening here. Danielle Hale realtor chief dot realtor dot com chief economist to get the dot com in there. Danielle great to see you. Mike laying out what's happening in this market right now. How would you characterize what is
happening here. Is this a strong market or a slowing market. That's a great sign. It's actually both right now. So it is slowing from being very strong. So now we're just at a strong stand point. We've got a very large number of young households the millennials that are in peak household formation years. There's more than 45 million of them. And that's been the case for the last few years and will be the case for another few years. That's a very strong segment of home buyer demand that is
sensitive to things like interest rates and home prices but is still going to be pretty resilient. People buying homes when it's the right time in their lifetime especially when we're talking about owner occupied home purchases. And so I think they're going to get creative and find a way to navigate these challenging economic conditions and still find a way to get their foot in the door especially since as Mike mentioned rents are rising and are expected to continue rising. So they're going to have to live somewhere. And renting is also a costly options. I think that's going to keep housing demand relatively strong
even in the face of some some serious challenges. Daniel where are we in terms of overall affordability when you combine things like personal income growth with rising interest rates and rising house prices. How does the current landscape compare to say pre pandemic times. So home costs are taking up a bigger chunk of funds. That's true for both mortgages and for rentals. You know rising incomes are certainly helping but it's not enough to fully compensate for the one two punch that we're getting from higher mortgage rates and higher home prices. If you look at the most recent data
according to Freddie Mac mortgage rates just cross the 4 percent threshold for the first time since May of 20 19. That means between higher home prices and higher mortgage rates the mortgage cost a three hundred forty dollars for a typical buyer. So that's a lot. It's roughly split half year by higher rates and half by home prices.
What is that what do you think the effect will be from now if we keep seeing rates going up so we go to four to five percent five to six percent. What does the market look like if we continue to see higher rates. The Fed is certainly still talking about the idea that it's going to it's going to hike significantly from here. The market is already to a certain extent front run that. But it's your expectation that rates will go higher by how much and what impact you think those even higher rates will have.
So do you think mortgage rates will go a bit higher but not as high as the Fed funds rate will go. Because as you mentioned mortgage rates have anticipated these increases. This is perhaps the least surprising Fed rate hike in history because Jihye Lee essentially told everyone what he was going to do before they did it. In this case the Fed telegraphed their intentions very clearly. The market has reacted. And so we've already seen mortgage rates run up. I expect we could see maybe four and a half percent or so by the end of the year. But mortgage rates are really far ahead of the Fed funds rate at this point. And so I don't think there's going to be the same pressure to keep pushing rates higher. That said with home prices as high as they are every
increase in mortgage rates is going to be felt by homebuyers. And so we are likely to see home sales rebalance to maybe a slower pace certainly than what we've seen in recent years. Back to your excellent point earlier about rental costs accelerating and slow making the cost to own a home perhaps less onerous than we might all all imagine in the relative scheme of things. Can you take a bit deeper than the headline number and talk through where that dynamic is playing out most profoundly at the regional level in the United States. Though we look at the areas that are seeing the biggest home price increases whether it's home prices or rents it's typically in the Sunbelt. Many markets in the South Florida especially has
seen substantial rental growth. Miami was our number one market in the most recent rental data and that means with rents rising. Homebuyers are really motivated but at the same time home prices are rising and mortgage rates are rising. Making those costs higher. So people are kind of stuck in between those two markets and we're seeing it with low inventory and lower availability of homes for rent. It's likely that prices are just going to go higher for both renters and homebuyers. Is this a market Danielle. That needs to be calmed. You know we definitely have a mismatch between demand and
supply. There are two ways you can fix that. You can cause demands to pull back or you can figure out ways to get the supply to meet that demand. You know it's an open question about how you know what's the best way to tackle that. But it does seem like the Fed's best ability to try to address that is by raising rates which is likely to demand. Can you talk to us a little bit about that supply where are we seeing the greatest restrictions or limits to supply over the over the course of the country. And how might that change going forward. Because I'm struck by this notion that maybe supply is also constrained by pure inflation if they can get inflation under control. We could actually see some degree of supply reprieve. Yeah that's a good question. So it's hard to say how much is
pure inflation versus supply chain challenges that we know are ongoing in the wake of the seismic economic shifts that we've seen over the last couple years. If you look at housing construction for example housing starts numbers were up pretty substantially from a year ago for both single family and multi-family. So that's a good sign. The challenging thing is that builders had a hard time pushing those completion numbers up as much as that starts numbers. So that suggests there's some supply in the pipeline and we just need to get that construction finished and out to the market so that buyers and renters can both take advantage. But as you noted builders are facing rising costs as well particularly on the labor side of things and
materials. Side of things are getting inflation under control. We'll certainly help them get to market at a more reasonable price point. Danielle we'll leave it there. Thanks for your time today. Really useful to figure out what's happening here. Danielle Hale chief economist at Rialto dot com. What we've got coming up for you. President Xi says relations between nations shouldn't resort to arms. What exactly does that mean. That's the latest
readout we've got from the call between the two presidents. According to CCTV President Biden and she started their core hour and a bit ago hour a half ago hour and 40 ago. We're going to discuss with Ukraine's ambassador to Germany Andre Melnyk. What relations between Ukraine and the EU should look like what the West needs to do next. That conversation coming up. This is Bloomberg. So breaking news within the last couple of minutes we've been watching for this headline very carefully. We are now reporting here at Bloomberg that Citigroup has pushed through Russia's 117 million dollar and the dollar here is critical coupon payments.
This was something we were watching very carefully to see whether ultimately despite payments whether or not these funds would make their way through the financial system whether the plumbing would allow that and ultimately out to their final recipients. It looks like that progress has now been made. Originally to JP Morgan then to Citi then dispersion ultimately happening. We'll find out whether or not all of the various recipients will have received their coupon payments. But you can't consider this to be a one and done. There are a series of payments coming up. There is a larger I
think there are two larger ones coming up next month that we're going to be watching out for very carefully. There was some concern that ultimately Russia would try and pay this but then basically blamed the financial system for not allowing payments to be made. The rating agencies were very clear that were that to happen that would ultimately result in a default which would have long and significant implications for Russia. But it looks like at the moment that the plumbing is working. The assumption has to be that JP Morgan and Citi were working hand-in-hand with the US government in order to make this happen. The original sort of landing site for this money was in London and then obviously going out further from there. But it looks like
regulators governments have been working with the banks in order to allow this to happen. But as they say this is going to be a recurring issue and a problem that we're going to have to continue to watch out for whether or not this payment sets the benchmark. We don't know yet but certainly a huge and current issue that we need to continue to watch very carefully. Let's stay with this subject and talk a little bit about what has been happening visibly. Relations between Ukraine and Russia. Talks
obviously. Ah ah ah ah. At a very sort of delicate stage. How much progress is really being made. The Russians are saying that the Ukrainians are stalling. The Ukrainians obviously have their view. A top aide to Ukraine's president President Zelinsky says the peace talks with the Russians are going on but the pace he says rather slow. He spoke to Bloomberg's Maria today at the
talks continue. Unfortunately the progress is not that fast as one good credit respected and definitely right here only talks that ideally should take place in the terms of a ceasefire which is not the case currently. Joining us now to discuss what is happening here is Andre Mane like Ukraine's ambassador to Germany. Ambassador thank you very
much indeed for spending some time with us at this difficult time. Ambassador the talks between Russia and Ukraine obviously front and center. We've obviously got talks taking place as well between the Americans and the Chinese but there are also talks taking place between Ukraine and the European Union. President Zelinsky a little bit earlier on talking about substantive progress being made in the talks between Ukraine and the European Union. Ukraine would like to see the membership of the
EU as being an expedited process that process towards that happening happening quickly. What can you tell us about the talks between Ukraine and the EU about membership. How advanced are they. Ambassador I'm assuming that you can't hear me we will come back to that question. Andre Main let the Ukrainian ambassador to Germany will fix the technical issues and talk more about this deal. Let's talk about what's happening with the Russian economy
right now. Elvira Nabeel into the head of the Russian central bank talking earlier on about an effort being made to restart the market. Their local bonds are going to start retraining. It looks like we are going to we've seen the plumbing working and Russia being able to make payments on those two euro bonds. But the big question remains what happens to the German to the to the Russian banking system. What happens ultimately to the liquidity in the financial system. You'll be watching this quite
carefully. What do you think the Russian bank. What kind of state do you think they're in right now. I think it's a state of distress already. I know from what we hear what is happening in on the ground in Russia is consumers generally going to the bank trying to withdraw capital as fast as possible to shelter themselves from what is becoming a very big growing risk of ultimate defaults and certainly tremendous disruption to the financial sector at large. At the same time you've got to wonder ultimately how the companies that are trading actively on exchanges around the world now not trading ultimately what happens to their access to capital. This is a complete sea change for an irrational Russian economy that had become
significantly more globally integrated over the course of the last decade and change. Now it's just all of a sudden complete in total isolation. And I think that's going to create ripple effects throughout the economy. We're already seeing it on the ground real time. This is not just about U.S. and European companies pulling out of Russia but also some real time distress emerging among companies and businesses in the Russian economy. Just in terms of. What the relationship between emerging markets and developed equity markets. We've been hearing a lot over the last few days about the risk not only of a Russian default but we could see a series of defaults in the emerging markets. In the past we've
seen central banks reacting very strongly globally to such events. How big a risk. Having a tail risk. Could that be. It could be an enormous tail risk. I think that we want to be careful as to how we classify emerging markets because you've got these giant blocks within emerging markets that are relatively sheltered from risks of default. Right. You've got equity funded markets for instance like the Indian market. You've got China. The Chinese market one of which obviously marches to the beat of its own drummer with policy rates even easing. So I think it's difficult to say emerging markets at
large are at risk. Certainly some of the emerging markets with high foreign ownership of debt some of those with already high interest rates and large inflation pressures could come under some degree of distress. You've got some really interesting things going on with markets like Brazil and Mexico which generally benefit significantly from rising commodity prices. What happens in a landscape where commodity prices are rising helping to elevate economic growth there. But still debt cost of debt could rise as a result of what we're seeing globally. I think that's a big question for investors and certainly something of a conundrum for some of those other emerging markets that don't necessarily react one for one with what's happening specifically in Russia. Gina we're going to come back to this we'll talk more about it.
Hopefully we'll be able to bring the ambassador back very shortly as well. A headline Crossing the Bloomberg right now. The she Biden call has ended this according to CCTV in China. We awaits hopefully in the next hour for a readout on that call. Equity markets fluctuating. So the NASDAQ is still positive. It's up by around half of 1 percent of the S&P now dipping back into negative territory. Generally though it's been a pretty positive week.
European equity markets what now. An hour and a half away from the close negative but well off their lows. The footsie is basically flat. The CAC on stand by two tenths of one percent. We are seeing oil prices coming up a little bit which is significant. Brent up by let's call it two tenths of one percent.
And we're seeing a little bit of dollar strength as well. You got one 10 27 on euro dollar right now. But equity markets up across both sides of the Atlantic. Differences between different markets obviously in terms of what we're seeing here. But the stocks 600 is higher. Right. What we got coming up for you Rebecca Chesler the state's re to carry on the conversation about whether or not these equity markets are being too sanguine. This is Levi.