Bloomberg Markets Full Show (03/23/2022)

Bloomberg Markets Full Show  (03/23/2022)

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From the financial centers of the world. This is Bloomberg Markets with Alix Steel and Guy Johnson. It's 30 minutes into the US trading day on this Wednesday March twenty third here the top market stories we're following for you at this hour. Bonds catching a bad global bond. Returns have dropped. Eleven percent from a high at the start of the year today. They might make a comeback. President Biden he heads to Europe. The president set to meet with European allies to discuss the tough on Putin messaging and hawks everywhere. More messaging from the Fed. While Wall Street calls for 50 even 75

basis point hikes. We speak to San Francisco Fed President Mary Daley from New York. I'm Craig Walker with Guy Johnson in London. Alix Steel is off. Welcome to Bloomberg Markets Guy. It's all about the bond market right now. It is. You wonder whether this dip buying in the bond markets can't quite believe I'm saying that but maybe that's actually what is happening today. How long it lasts will wait and see. We're getting better

data heading the Bloomberg terminal critics. Let's just bring everybody that gets the question of what happens next with the bond market. New home sales coming through a little light at 7 7 2 CAC on the month of the month on month number. Last time round negative 4.5. That's been revised lower. Negative eight point four. So

some slowing down in the U.S. housing market. Negative 2. This time around interest rates are starting to rise. Supply is limited but starting to come back. So maybe we're starting to see some relief there. But if we actually see what happens with the housing market the transmission mechanism from the Fed to the housing market maybe it could work a little bit faster. But let's get back to our question of the Day. If you're selling bonds which which isn't happening today what do you buy. Let's bring in Bloomberg's Katie Lyons making another guest appearance and Bloomberg's Marcus Ashworth joining us from Bloomberg Opinion. Marcus let me come to you first of all. I was going to ask you if you're selling bonds what are you buying. But let's talk about buying bonds. Is there a debt buying opportunity in the bond market. Spot on. And the whole

point is if you want to get into this trader moving out of bonds you want to do it at the right opportunity. I don't think it's now for a couple of reasons. One was a massive sell off. So therefore I think there's a chance of a little correction at least not seeing the trend isn't in place. It clearly is. But we will find a range at the moment. We're probably at the point of talk about real range at the moment. And secondly it's Japanese year end and that often is a period where you see a lot of selling into it and then it's that they'll stop buying again quite actively.

So I think timing wise this is probably the best time to exit bonds. Equally we do exit bonds. There are other types of bonds you can buy like fruit floating rate notes which maybe offer you a little bit more of protection for yields as they go up as yields go up. And I think that sort of thing you have to go out of bonds. The two yield on U.S. treasuries is very attractive. So there will be some dip buying on that anyway. And there are all sorts of dividend type stocks or bond like equities to go into as well. Well listen we've got Kailey Leinz into the conversation here. I'm curious what the bond market moves mean

for the equity market because it does seem like two guys point to at this point. There is this tradeoff. If you're not getting returns in the bond market maybe you hop into equities in this kind of. There is no alternative legacy that we haven't quite shaken off yet. What's your take. Yeah just Tina live forever. Forever I think is the question. And that was actually what John authors in our Bloomberg opinion piece raised yesterday. This idea that yes the Fed being aggressive in rates moving higher in theory could be a problem for equities especially growth equities with those higher multiples. But at the end of the day it's going to be worse for bonds. So it's all a story of relativity. And if

bonds are going to fare worse than maybe it does drive you back into the equity market. Of course we're always trying to assign some kind of narrative to the equity action. Why would the S&P 500 be up 5 percent in the days from Wednesday after the Federal Reserve finally hiked rates. Now there's this idea that maybe that is your inflation hedge that these companies have demonstrated an ability to exercise pricing power. So if you're looking to hedge inflation

and you don't want to be in the bond market perhaps you do so when it comes to some of these equities. Kylie do you think that the market and you've been talking to a bunch of people all morning and I'm interested to get your take on what they're saying. Does this feel like post facts rationalisation. We're in a situation where we're selling bonds. We don't want to do is we're buying equities and then we're going to justify buying equities by saying that an inflation hedge. Yeah. To a large extent yes. Guy. And it comes back to the idea of assigning a narrative because at the end of the day none of us really know for certain why markets are moving the way that they are. But

also it's a story of if people want to stay invested where are they going to go. So I know your question of the day is what do you buy. Maybe another question is do you want to buy anything or do you want to stay in cash. That is the question we have been asking pretty consistently in recent weeks. The answer largely is cash. In this kind of inflation environment maybe not. You have to go somewhere. Let's bring Marcus back into a guy I don't know if you know this but Marcus and I met when he was teaching me what an island reversal was back into the technicals. He remembers that was couple of years ago. He does. I never forgot. Marcus let's talk a little bit about the direction in terms of bond. You said that

it kind of seems like the direction is kind of set in stone at the moment the idea that bonds are going to keep falling yields continuously higher. But what about the geopolitics of this all when you started to see some of those headlines come out on Russia on Ukraine. You did see this global bid for bonds and specifically into the U.S. Treasury market. Could we see a revival of that as the war rages on. Well we may see little as I said I think I think it's pretty good time to probably to buy bonds or something not to be selling them here and they'll maybe get some rationalization will be a flight to quality for it. But the reality is it could just be a bear market rally in that sense for bonds. But I do think you should be buying equities generally and should have been for the last eight years rather than bonds regardless. So it's a question of your timing here. And that's all I'm trying to say is that it's about timing. I don't think you should be

panic out of bonds. Right. Right. This. You've missed out. I'm afraid I like what's buying equities that we better. Probably little to opportunities to buy it. But you know generally speaking you know there always a set of other ways of getting better exposure in bonds. I certainly do think also some people as I said that to you U.S. Treasury yield it's short. You could park your money. It's not going to beat inflation but it's not gonna be a bad place to hide. OK. This is what makes the equity market. Has the equity market over the last few years been driven by high liquidity coming out of central banks. And if it has been driven by liquidity coming out of central banks doesn't that liquidity being withdrawn necessitate equities to come lower. No it doesn't necessitate. But there's no doubt every asset price has gone up because of central bank liquidity. And

let's face it not a lot of liquidity is gonna be taken out. It's a little bit and you know in essence that there will be a real crack. I don't think there's quite so much that Fed put on the knees. The equity markets. The markets will feel like it right now. No indeed it doesn't. Certainly in the bond market. But there will come a point where they may have to be one. But equally it's the combination. When they start doing quantitative tightening we can answer that question. And I think that's the more important point is where they start hiking rates. Clearly there's talk of 75 basis points. It's not going to happen but

that allows them to do 50. And I think that's the way the Fed gave the game. The last few months has been absolute tax but they've been by far the best central bank of the major ones. But for sure the low. Well indeed. Marcus Emma Chandra one last question at you here. Bear with me. You are a trader. Before you were an opinion columnist. I'm curious about coming back to our question of the day for not buying bonds. You don't really want to buy equities if commodity is the way to go here. Despite the volatility we had a guess on surveillance earlier saying it's actually good to include commodities have kind of that hedge as a part of your portfolio. What does the investor community really thinking about that. Oh

I would think this is you've missed your timing on that very much so. I don't know enough about commodities to confidently predict that one but I would say you shouldn't be rushing in to buy quantities. Now we had that trade a few years back remember. I think 2012 when the CRB index jumped several started switching money into commodities. It didn't end well and I'm not sure this one. I think you've missed that on commodities. I think you do buy stocks. I have no I've always preferred stocks over bonds in

that sense. And I think that's that will play out to pay out. It's just your timing. You should be taking your time here and not panicking. We want to move into cash. That's fine. But you should be waiting for opportunities to buy equities at the right point. Still. Well good stuff. Marcus Ashworth of Bloomberg Opinion and

Bloomberg's Kailey Leinz we thank you both for your time and for your insight. A quick recap here of those headlines we got at the top of the hour. February new home sales coming in at seven hundred seventy two thousand. The estimate there was eight hundred and ten thousand coming in a little short. But we do still know that some of that data is booming and coming a little

bit off of its peak. We'll of course watch the rest of the data to see if it follows the same trends. Coming up stocks halt their fall and bond stabilize from an unprecedented rout. What do investors do next. We'll talk with Wells Fargo Securities equity analyst and a horn. This is Bloomberg. Back to our Question of the day. If you sell bonds what do you buy. Where do you go. Joining us now is Anna Hahn Wells Fargo Securities equity strategist. Anna thank you so much for joining us as always. Let's put that question to you. If you buy bonds is equities essentially the only alternative or is perhaps the equity bid a little bit more based on fundamentals. What is your

take. I think it's a mix of both. To be fair people are always asking what do I do with this cash given the inflation measures. You don't want to just stick it under the mattress at the same time. When we look at the equity market I do think that there is a play to be had given especially Paul's comments on Monday that they're open to a 50 basis point hike. That's going to spur probably real yields. So you might want some of that cyclical exposure in your portfolio. Nevertheless if people are buying bonds are we back into

basically having to deal with Tina. There is no alternative. So we have to buy stocks and we're in a position where somebody is just pointed out in an email to me. A lot of funds have mandates in terms of how much cash they can carry Anna. So they're selling bonds. They've got to buy something else and they have to buy equities. No it's a fair point. Really. People are wondering where do I put this cash to work. So for us we still think there are opportunities in the equity market. And whether it's because people feel there's really nothing else or there really are some value opportunities here especially given the massive correction we've had in the beginning of the year. I think that there is

still something to be played now. Our price targets forty seven fifteen. It's not very much higher from here but it's still upward and bullish. So I think if you're going to play there is equity that you can put into your portfolio and particularly in more than value oriented and put a little quality twist on it as well so that you can. That's whether through any credit stress. Analysts talk about the impact of commodities especially we know the margins have had a pretty good run in the last couple of quarters as we start to see a lot of these companies really pass on the cost to consumers. How long are they going to be able to do that when you have forecasts of oil hitting as high as two hundred dollars a barrel. Food prices continuing to be on a

tear. What's your take simply on the pressure that might be put on those margins. Well what we've already seen in the last quarter with earnings season is that margins are under pressure with work. Your earnings you saw margins actually compress a little quarter over quarter sequentially. But that being said I think that some of the larger companies

you saw were still able to pass along price. They were still able to grow some of their bottom line. Now when you think about the market as a whole though the smaller companies did have a bit of a tougher time. So if you're worried about margins I think that's how you can kind of defend yourself against that. Look towards the companies that have more of that pricing power. They have more size that they can kind of throw their weight around to say. But at the same time keep in mind

that even with higher prices we've also seen higher wages and that also helps for their consumer side. Even the quality names in this equity market do you think that they are going to produce returns this year that exceed inflation. We'll only think about quality really where quality tends to outperform is in times where we have credit stress or easy credit spreads widening. Now we have an interesting is with this exhaustion a shock with the war with Russia and Ukraine. You saw credit spreads kind of widen here but they've also been coming

in in the last several weeks. You look how it was versus March. The ISE credit spreads have come in from about 140 basis points to maybe hundred twenty. And on the high yield side you saw that shrink from about 400 basis points to 350. Those kind of moves are telling you that there's still risk appetite and credit is still healthy in the US at least. Okay. So those are good signs that yes equity is going to outperform inflation this year. I think for us look again our price target is up about 5 percent here. So if the Fed really continues with the more aggressive

rate hike schedule I think they still have a chance. But at the same time it really depends on if the Fed can maintain that aggressive schedule that they do and really bring down inflation and grab inflation and face it head on. And it seems like there is a lot of meshing of this idea that decelerating growth could very easily turn into demand destruction and then ultimately a recession creating appearing bearish view for stocks right now. Whereas what's your take simply on the possibility of a recession the possibility of demand destruction to your point earlier on wages how much the American consumer and American companies can actually weather that storm. Well so far what we've heard from corporates and on the corporate side and earnings is that they are pretty healthy. They are still seeing you know earnings growth. And we do expect at least for the S&P 500 companies that EPS growth will continue

to be positive. Now that is our base case scenario. Something we have to consider is what happens if this war really spreads and China gets involved. U.S. has a lot more exposure with China. So if they get into this mess we end up in a situation where perhaps we need to put sanctions and corporates in the US again more exposed to China get involved. Now that could be more of the tail case scenario. But it's something to consider. And that could push us more into dangerous territory. Something keep in mind as well that people are watching is really the yield curve. And when you see that yield curve flattening and the potential for it to really invert later in this year that too is something that kind of in the back of people's minds people relate to a recessionary scenario. And then keep in mind as well with rates at where they are now. The Fed is raising them. But to have the

power to cut and ease on a monetary we first need to raise rates. So I think that to those monetary tools being where we are being a little bit concerned that if we were to get into that territory we don't have as much ammo really to help ease markets again. And how much of the gains of the last few years have been driven by central bank delivered liquidity and if that liquidity is going to be withdrawn can't we assume that the opposite will happen. Well I think already the market priced in some of that. You saw as we start expecting rate hikes the market kind of started to slow its upward pace especially in the beginning of the year even before the situation with Russia and Ukraine. You saw the markets were falling and kind of pulling back as we priced in that expectation of monetary tightening. And you're absolutely right. I think monetary easing on top of that fiscal stimulus

was really a big driver of equity returns in the past year. So we're going to have to get used to not having that support. And really the training wheels coming off the bicycle. Great catch up with you Anna. Thank you very much indeed. Anna Hahn of Wells Fargo Security Securities. The training wheels training wheels are coming off. It's gonna be a bumpy ride ahead. Still ahead on this show though ten cent declaring the end of an era. The Chinese social media giant reporting its slowest growth on record. Details to follow. This is Bloomberg. It's time for the Bloomberg Businessweek to look at some of the biggest business stories in the news right now and which could go up to the world's largest food maker will quit making food in Russia. For now Nestlé is suspending manufacturing there. It

also will quit selling brands like Kit Kat in Russia and focus on essentials such as baby food. Multinationals are being pressured to fully exit Russia following the invasion of Ukraine. And it's one of their biggest transactions yet in the cannabis industry. Fresco Labs plans to buy Columbia CAC for about two billion dollars. The transaction will expand

Chrysler's presence from 10 to 17 states plus the District of Columbia. Crisco will have several well-known marijuana brands. And in China Tencent has declared that the reckless era attack is over. The social media giant pledged to embrace the government's new model of stricter oversight after reporting its slowest growth on record 10 cents. Revenue grew just 8 percent in the latest quarter. And that is your latest business flash. Thanks very much indeed. I want to talk more about Tencent. Let's bring in Bloomberg's Ed Ludlow back with us. Ed I'm really curious as to what is happening at this company. We've had a massive regulatory crackdown. The company is now talking about an era of healthy growth.

I don't know quite what that means. Could you dig into the details. What is the picture going forward for 10 cents in this new order that it finds itself with. Yeah. We're 12 months into pretty significant regulatory crackdown from Chinese authorities. And the message from Tencent executives is that they're playing ball. They recognize that there's a new paradigm. They called it where authorities in China won't accept growth at all costs. What that means in real terms. If you look at not just a 10 cent by Alibaba others you know losses in the past would be covered by the capital markets. They would come into fund losses. That's no longer going to be the case. So that's kind of the messaging from executives the fundamentals.

This is a really difficult environment for growth. You know they had single digit top line growth for the first time since 2004 when they listed the ad environment isn't great. And when you combine that macro picture with what authorities are doing the way that transcends business is structured it meant that they struggled. So what does this mean. If you can just broaden this out because we heard from Ali Baba yesterday. They were actually increasing their buyback. They were super confident on where their performance was going. But for investors that are outside of

China that regulatory crackdown is still kind of this over for operating an overarching shadow. So what do investors do with that. Yeah it's interesting. And on buybacks 10 cent kind of declined to comment during the earnings call that they have no plans to initiate a buyback. And that kind of read from the street is that the bottom line is very messy with Tencent because of what's going on. Right. That they be on net income you know three times profit what the street expected. But they also divested JD shares and the markets kind of looking at this company and thinking you know what is the problem. What is the

fundamental problem. Well they're having to comply really strict regulation. You know for example on the gaming side gaming is 30 percent of revenue but it only grew by one percent in terms of that top line growth. You see that the profit I was talking about yes it was triple the estimate but it came from a onetime gain of divesting JT JD as well. It all comes back to is where does growth come from in the future for this company under this new paradigm and where does it come from. Advertising. Tough gaming. Yes. If fintech. Okay is that the future here.

Yes. But how do they manage it in the context of regulation. So if you take fintech for example and we have those businesses did really well but they're also under the specter of regulatory scrutiny. So for example in fintech the company talks about having to work more closely with authorities and perhaps even set up a separate financial holding company to exploit growth in that business on gaming. We're about eight months into a license holder. The Chinese authorities won't allow new titles to be released partly because of child protections but also because of the broader regulatory crackdown. The good news Tencent says is

there's a pipeline of content in the domestic market which should boost growth in the second half of this year. Very. Finally how are they managing the situation in China. Tencent is looking outward. It's trying to grow its international business. But to do that they are having to invest and that's having an impact on margins. The good news they say is that in this new

area of healthy growth this new paradigm margins will be stable. Even if you don't get that top line growth and as we know guys everyone is hungry for that top and bottom line growth. Yeah. And they're about 30 seconds here. Very quickly I'm curious about that growth. Like you mentioned outside of the country where else content's that really go to kind of optimize its brand essentially around the world. What markets aren't they tapping here. Yeah gaming is a big part of that. So for example working in collaboration with international brands like electronic cores working as a publishing house investing in talent outside of China those are all elements that the company says they'll double down on. But again you've got to spend to

make that happen. Well fascinating stuff. Bloomers at Ludlow we thank you so much. Coming up President Biden he's off to Europe where he'll try to persuade U.S. allies to impose tougher sanctions on Russia. What does that mean. How do you treat it. We'll of course talk to an expert Henry and a trade evader partner. She's the director of economic policy research there. She joins us. That conversation is coming up next. This is Bloomberg.

For an hour into the U.S. trading session Bloomberg's Abigail Doolittle is tracking the moves a little bit of red on the screen a little bit of red on the screen but it's hard to know whether or not it will last. It sort of seems as though we may see a move back toward the rally we had yesterday and last week. Right now though the S&P 500 critics point down about four tenths of one percent off of the lows. And again there's this sense if you take a look at the shares of Apple which are higher up more than 1 percent that maybe Apple because of its big weighting could lead the S&P 500 higher right now. Interestingly we have bonds bid just a little bit. That 10 year yield coming in 2 basis points up. This monster move higher one day. A trend

does not make. So we'll be keeping our eye on that. Pressuring stocks most likely oil. Oil up four point three percent on some of these headlines coming out of the Russia Ukraine war and then copper also bid. So the commodity complex in general. Well bid as it has been this year. If we take a look at one of the mega cap tech stocks the surge in yields hasn't been holding all of them back. In fact take a look at Tesla in the month of March. This is really pretty incredible. We have this 34 percent rise earlier in the premarket. It had been down after yesterday's 8 percent rally but now it is higher again up up and away. That's

true too for the mean stocks. Remember them. The meme stock mania is back. We take a look at the shares of GameStop up 14 percent. This after Chairman Ryan Cohen up his state to eleven point nine percent. The activist investor also the founder of Chewie. It seems he has a very good way. Everything he touches turns to gold.

Investors want back in on that stock. That was up 700 percent last year. Speaking of up 700 percent guy this is pretty amazing. I actually had not heard of this one. Dan Curtis our producer put on Mullen Automotive on this board up four point four percent in the month of March. This stock is up 700 percent. So again I mean stocks they're back. Absolutely. That's quite the rise in this kind of environment. Abigail great stuff. Thank you very much indeed. I come back to

that one. I want to break a bit of data the setting the screen right now. Crude oil inventory data out of the United States. Been watch very carefully at the moment. The inventories fell by 2.5 1 million barrels. This according to the EIA a Bloomberg does a survey coming into this number. It was expected to fall by circa

600000 barrels. So we are. Many orders of magnitude higher in terms of the draw that we're seeing here pay attention to this. Obviously what is happening with crude right now is that we're seeing significantly higher prices. We're through 120 again nearly 121 on Brent. We're once again seeing oil prices rising sharply. Then you're going to

throw in the geopolitics the debate in Europe about whether or not we are going to see oil sanctions gas sanctions being applied to Russia is raging right now about to enter that debate. Is President Biden. He's on his way to Europe right now. He took off a little while ago from Joint Base Andrews. He is now on his way across the Atlantic. He's going to have summits in Brussels with European and NATO leaders. Plus he is then going to go to Poland. Obviously Poland front and center in this growing refugee crisis. And Poland also front and center when it comes to the issue of sanctions very much at the hawkish end of

the spectrum. Let's go to Poland now. Maggie Cantrell joining us now on the border of Poland and Ukraine when the president arrives in Poland. What message is he going to be given in terms of what more needs to be done to hit back at Russia. Hi guys. So as you say Poland is definitely on the hawkish and when it comes to the European Union's position on sanctioning Russia further. Poland sees Russia as a security risk to themselves as well and they're keen to push this themselves. And

Poland is itself very reliant on Russian gas. But the prime minister moved here and other Polish leaders have already pointed out that they are doing their best and have been doing before this crisis. They've also they've been pushing to wean themselves off Russian gas. That has been a strategy for a while now within Poland. And so the 55 percent of their gas market which is currently reliant on Russia. They're trying to wean off as quickly as possible. And so it's clear that when when Biden comes to comes to Warsaw he'll be met with a very hawkish message on Russia's actions from from the Polish authorities. There's some comment here from Russia. Russia saying the expulsion of diplomats from Poland won't go unanswered. My

question to you is what are the consequences of that. Is there something that Poles are particularly bracing for when it comes from Russia. It's not really clear what Russia meant by that it won't go unanswered but it might be something like the tit for tat expulsion of diplomats. But when it comes to those diplomats itself it's important to notice that this isn't just a Polish concern. There's been a clampdown on espionage from the Russian side in the EU especially in Eastern European nations because they see this as a security risk. They've stepped up counter

espionage operations against Russia. And this is also a clear concern to Poland which borders Ukraine has a large land border with Ukraine. And they see these sometimes there is a possibility that there could be further risk to their own security with the war going on in Ukraine. Bloomberg's Abby Cantrell joining us from the border of Poland and Ukraine. We

appreciate your reporting so much. For more on President Biden's trip to Europe. We welcome Henrietta Trays Mehta Partners director of economic policy research. Henrietta thank you as always for joining us. My first question to you is we know that sanctions are very kind of tough when it comes to actually sanctioning energy and other commodities just given the dependence on Russia. But what about tariffs. What is the take from Washington on tariffs when it comes to addressing the commodities space. Great question. And as we know from the 2018 to 2020 period there is unlimited basically capacity at the administration level to shift tariffs around to impose new tariffs to carousel through a rotating basket of tariffs. And that's something that the speaker of the House has introduced in the last couple of weeks to strip Russia

and Belarus. I even heard that there are some in the Democratic caucus who would support stripping China as well of their permanent normalized trade relations status which keeps them in the column one category of tariffs across all goods that are imported. So that's everything from allies agricultural commodities imports of shoes or backpacks or whatever particular product lines can come in. And the differential between column one and column two on the harmonized tariff schedule is robust. Two and a half percent is the import tariff on a number of goods coming in from Russia if not zero. If you're in the PNTR status

if you moved in column two you can see that rise to 18 and a half percent 45 percent or even higher. And that discretion is something that they will leave with the administration to permanently be able to cycle through as they see fit. And as the war escalates. So the tariff move in particular is something to be watchful for. And we're advising clients to expect to come

once the Senate passes their version of the bill as early as this week. Henrietta when it comes to realpolitik though do you think tariffs are going to be enough to dissuade Vladimir Putin that the administration is making it very clear that this is not going to become a hot war without that kind of commitments. Do you really think that Russia is going to be deterred. Well I don't know that deterrence is something you can get just from terrorists. That's why you're seeing the sanctions spread across individual oligarchs across the capital market space

banking kicking them off swift kicking them off the dollar clearing exchange. This is something that also has a carrot component. You also want to watch that piece of the long term viability of Russia is tethered to their energy sector. It's a near-term hit to the EU to a much limited extent to the US as well from the energy the LNG perspective natural gas. But when you are evolving off of that reliance and a reliance on fossil fuels by say reducing or even increasing ethanol requirements to make more corn more soy go into your blend. Those are moves that the administration can take that permanently harm Russia in the longer term. Well not an immediate deterrent like say you know implementing a no fly zone that would obviously escalate and cause the United States and NATO allies to go to war with Russia directly which is something everyone wants to avoid at this point. So it's a deterrence for the long run in the near-term returns obviously is focused on shifting personal opinion inside

of Russia hitting the oligarchs trying to trying to jam them up as much as possible. You're eliminating trillions of dollars in wealth in the blink of an eye. Across the top elite sectors of Russia. So that's another piece of the term. But this is wholesale economic warfare. Henry and it took us a little bit about the timeline here because you do have messaging coming from Washington the idea that cyber attacks might be coming chemical weapons might be deployed. A lot of this idea that a lot of the infrastructure needs to be built but that all takes time. What is the perspective in Washington when it comes to the timeline of how long this conflict will actually last. Are we talking about weeks months years. What's the take. The way that they're observing this war and this invasion is to throw everything at

the wall which suggests that they're anticipating that this will continue for a while. When we start talking about creating a situation with Spain where they buy our genetically modified corn for the first time in hundreds of years. That's a long haul commitment. And this is I think going to be permanent. As far as Russia is concerned for the foreseeable future the question is more do we incorporate China now or do we wait to see them instituted some sort of an invasion of Taiwan or keep that distinct as of this moment. What you're seeing from the Ambassador Tie for instance of the USTR a new trade agreement reached with the U.K. to shift steel tariffs off take those 25 percent and 10 percent tariffs off after the Trump

administration imposed them. Those are material changes. Building on her efforts with the E.U. and Japan they are in this quote from a timeline perspective quite a while. At this point I would anticipate it is the most prominent factor of Biden's administration for the remainder of his term which is obviously another two and a half years. Biden's on his way across the Atlantic right now. He's going to land in Brussels a little bit later on he's got an EU summit to

attend. He's got a NATO summit to attend. He's then going to be going to Poland. What is the objective of this visit right now. Is it to provide help and assistance to the EU on the energy front. Is it to coalesce the unity of the group. I'm just kind of wondering what is a win for Biden on this trip. It looks very much to me based on the posturing I'm seeing from the administration that we are expecting to see some material sanctions updates delivered from this next couple of days worth of travel to Brussels to Poland. That's going to include everything from giving an optic of the NATO allies all being together something we have not gotten yet. So that I think will be very optically impactful continuing to rally support amongst embattled EU allies who are dealing with critical gas price hikes and shortages and then also keeping optimism and support alive here in the US where support for these sanctions is very high and it's going to need to be managed for the future particularly as we battle inflation here. But what I'm sensing

from Jake Sullivan and from other leaders in the administration's office is that an announcement on energy policy is forthcoming. I think there are a number of options here. You could see increased production in the United States announced. We all know the Democrats have been talking about maybe the Defense Production Act requiring more production hearings to talk about what the energy companies are doing in terms of pricing. We all know that that's something that's left to the gas companies individually localized around the nation. But I think it's going to be most importantly for the investment community some sort of an announcement on the energy front which is going to do to increase supply and then also carrots as we mentioned whether that's from allowing the 15 standard or ethanol subsidization of the blending requirements to shift things along those lines is what I'm expecting. Many NASA really insightful thank you very much indeed. Henry ISE Entrees Veda Partners director of economic policy. Thank you very much indeed. Coming up I want to come back to those crude

inventory data which we've got really worth digging into these numbers to crude inventory down by 2.5 million barrels according to the EIA US to the point we've just been making U.S. gasoline exports have climbed to their highest level since 2018 according to the data. That has just been released. The US is exporting significantly more energy over the last period. Will that continue. Judging by what we just heard I think the answer probably is yes. We get

more on these inventory data in just a moment. This is Bloomberg. This is Bloomberg Markets could tell you're looking at a live shot of the principal room coming up at Thomas DiNapoli. The New York state comptroller. That's at 1:00 p.m. in New York 5:00 p.m. in London. This is Bloomberg. Keeping you up to date with news from around the world his best right arm which could get to Russia's climate envoy has become the highest level official to break with the Kremlin over the invasion of Ukraine. Has learned that Anatoly Chubais has stepped down from his position and left the country to buy as one of the few 1990s era economic reformers who remained in Vladimir Putin's government. And one of the two flight recorders from the China Eastern plane that crashed Monday has been found. That's according to China's official news agency. The black boxes are key to figuring out why that Boeing 737 800 plunged

out of the sky at close to the speed of sound before crashing moodiness as it's grown. Navarro's vaccine produced a strong immune response in children under the age of six. The large final stage trial showed modest effectiveness in reducing Omicron infections based on the results. But it will ask regulators in the US and overseas the clearance of the vaccine

as soon as possible. Global news 24 hours a day on air and on Bloomberg Quicktake powered by more than twenty seven hundred journalists and analysts and more than 120 countries and which could get 10. This is the guy pretty well read. Thank you so much. Let's get to the oil story. Latest U.S. government data shows crude stockpiles fell by a little more than two and a half million barrels. Let's get more on those numbers. We're joined now by Sheila Tobin Bloomberg Energy Report. Sheila thank you for joining us as always. We saw the stock piles drop but I think we also saw exports climb quite a bit. Given this the

geopolitical situation can you walk us through those numbers. So you rightly point out that the export numbers did go up significantly. I mean that's in part because WTI which is the U.S. or benchmark it's been trading at a significant discount to international Brent crude oil. So when that happens usually a buyer or refiner will want to choose whatever's cheapest in the market. They will try to look out for U.S. or WTI linked crudes. And that's probably one of the reasons why we've seen these rise in exports. That's right. Let's talk a little bit about what's happening in the U.S. economy right now. What can we deduce from the data. What is the demand picture. Well right now I think demand has been pretty

steady. We haven't seen the kind of destruction that the analysts have been warning us about for now. I think gasoline demand is holding steady and there might be some a little bit of weekly noises. But on a four week level we are keeping steady. We saw it. We did see an equally sorry gasoline export jump is probably because people are trying to look out for alternatives

whatever else that has been disrupted as a result of the the Russian war. And for now I mean I think we should expect to see these types of extra strong exports until people find very stable alternatives and possibly even if the Russian war ends. Let's talk about some of those refined products in particular. I'm looking at our top live blog for our audience. You can check this out a t l ivy go where you can join us here and talk to get Sheila's opinion live. You do have gasoline inventories falling. You also distillate inventories falling a little bit. So speak to us a little bit about what's going on with distillates and

other refined products. So we are right in the middle of turnaround season. This is when refiners in the U.S. they conduct repair work. This is seasonal repair work that happens every year or every few years. Plants go down for this. And when that happens there's less production. And that's one of the reasons why you see inventories coming down for this. We just saw a large like tranche of refineries that complete it turns out in the Gulf which is our refining belt. Now we're seeing that happening in the Midwest. So I think this will all be concluded before the summer driving season. When that happens we should start to see a little pickup in inventories not just in distillates but also in gasoline. Gasoline is our strongest

demand driver for summer. It's only with diesel in the United States over here in Europe. There is a real and growing concern that there is going to be a significant shortage of diesel a lot of it comes out of Russia. What's the picture with the states. I mean for now we have been somewhat shielded by it. I mean I know I realize that we do bring in some Russian imports but our consumption of Russian products isn't quite as significant as what you see in Europe. So when all these sanctions were set in all the shops shunning of oil Russian oil supplies happened. What happens is they have to look for alternatives. And one recent development has been U.S. markets newer carbon markets sending diesel. You know like

after a while it has not been seen recently. And it's a reversal of a of a longstanding trend where Europe sends us diesel. So we should see this carrying on for a while once again until some other alternative more stable source of supply starts to show up somewhere else. But for the meantime it'll be the U.S. trying to send more of the additional their. We're certainly short of it right now. Sheila thank you very much indeed. Tobin. Joining us on what is happening with the energy story stateside let me bring a few other elements into the mix right now. Ursula von der Leyen the president of the European Commission speaking over the last few minutes saying that she will talk to Biden about prioritizing LNG gas exports from the United States into Europe. Now critically we need the infrastructure on both sides to be able to make that happen. But as we speak we're also watching gas prices surging sharply to the upside. European gas showing by 34 per cent this off. We

heard a little bit earlier from Russia that Russia is going to prioritize payments in rubles not dollars. This pertains to its new enemies in this conflict. And as a result of which there is now concern about whether or not those payments will be possible. Gas is coming off a little bit. It's now up by 24 percent. But as you can see a significant surge. That's the

Dutch gas price up by 24 nearly 25 percent right now. This is Bloomberg. It's time for the Bloomberg Businessweek to look at some of the biggest business stories in the news right now and which could get a new home sales in the U.S. fell for the second month in a row. That suggests that high prices and rising mortgage rates may be keeping potential buyers on the sidelines. Purchases of new single family homes dropped 2 percent in February to seven

hundred and seventy two thousand annualized rate. One of the favorite meme stocks GameStop has kept its rally going shares a video game retailer up today after rising thirty one percent on Tuesday. GameStop chairman Ryan Cohen disclosed that he has raised his stake in the company to almost 12 percent. And UBS group will allow some of its U.S. employees to work remotely overtime. The Swiss bank estimates that about 10 percent of its workers in the U.S. to go remote. More than 70 percent will be in hybrid roles. UBS has more than

20000 employees here in the US. And that is your latest business. Guy. Thank you very much indeed. Okay. What do we got coming up for you today. We saw these spring statements from the U.K. governments most particularly really seen that the chancellor of the exchequer. In a few minutes time we're going to be talking to a man that works for him. The U.K. Treasury Minister John Glenn will be joining us.

The expectation was that really Sinek would have a lot of money to play with here in terms of helping out providing assistance for the poorest in society in terms of the rise that we are seeing in energy costs and food costs. And just about everything that wasn't actually delivered upon. Why. One of the reasons rising interest rates the U.K. is expenditure on debt is about to go absolutely through the roof. John Glenn will be joining us shortly. This is Bloomberg.

2022-03-27 18:35

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