Bloomberg Markets Full Show (12/02/2021)

Bloomberg Markets Full Show (12/02/2021)

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From the financial centers of the world. This is Bloomberg Markets with Alix Steel and Guy Johnson. Thirty minutes into the US trading day Thursday December 2nd here the top market stories that we're following for you at this hour. You got some Apple angst. The company warning that suppliers that the iPhone demand is actually slowing around the holidays is a supply issue now turning it into a demand issue. And Biden has those winter virus plans. The president will announce new measures today as markets whipsawed over the last 24 hours on news at the first Omicron cases in the U.S.. And here comes the oil OPEC. Plus I will pump 400000 barrels a day in January. Market drops like a stone walk. I speak to Jeff Curry of Goldman Sachs. I'm here. I'm Alix Steel my co-host in London Guy Johnson. Welcome everybody to Bloomberg Markets. Guy

oil also kind of wimpy. On the one hand they're going to pump more oil in January. On the other hand they do say they can adjust it if they need to. Yeah it's an open meeting. That's where they're leaving it at the moment. But I think few people expected that this would be what would be out would be the outcome of the OPEC meeting does kind of feel like the Saudis who clearly have lost their element of surprise Alex have maybe done a deal with D.C.. We'll wait and see. You

think. How do you figure it's like it doesn't. It doesn't. Well I think I figure I guess I had an NPR release. We get this this deal here being done in terms of adding extra extra barrels to the markets. That feels like something. It's certainly going to prevent another SPL release isn't it. It's going to leave opaque in control of this process rather than having to worry about what's happening with the suppliers. And it does take the temperature out of this whole issue of higher oil prices. We'll see. We'll debate that. I'm not I'm not sure I agree with you on that one. This could get fun. We're

going to talk to Jeff Curry later on guy. Yep we should certainly talk about that. I wanted to get the other thing that you mentioned in the headlines as well and that is what is happening with Apple confronting a new problem as the holiday season heats up. It's a problem that it hasn't really had to deal with for quite some time. It's hard to deal with the issue of supply chains now. It's having to deal with the issue of slowing demand. Yes Apple is slowing demand.

The Giants apparently telling its suppliers that demand for the iPhone 13 has weakened. We've got a great shot here. Looking at the correlation between what is happening with Apple and the S&P that is certainly dealing a blow to the tech giants record setting rally. Its correlation to the S&P now turning negative. We've obviously had a lot going on in terms of the markets over the last 24 hours the arrival of Omicron as well. Apple in some ways is a safe haven. But it's interesting that that may be starting to break down as well. So here to talk more about what is happening with regard to Apple's woes and how Omicron may play into that kind of story consumer behavior what's happening. Alex Webb Bloomberg Quicktake Bloomberg

Daybreak NIKKEI also joining us. Well he's our international economics and policy correspondent. Alex let me start with you first of all. This feels like a big deal. I can't remember the last time that Apple took seriously about slowing demand has had to do with supply chain issues. We knew about that. But now a demand slowdown. How serious really is this though.

Well we did have a they did issue an actual warning at the moment. This is reported from sources our colleagues reporting this. They did have a profit warning a few years ago where they looked. He said the demand was not as good as expected. This here is really about demand catching up with supply that we already knew that they had perhaps reduced their expectations for what they were going to be able to produce because of the semiconductor salt shortage. So that means that it's perhaps

getting harder for people to buy iPhones for Christmas or over the Christmas period. That demand is therefore getting pushed into next year. Now the expectation was that it would be pushed into next year and it would arrive perhaps in the first half as you get closer to the new iPhone the iPhone 13. What we have right now wasn't a considerable upgrade from its predecessor. The iPhone next year is expected to be a more substantial good next year. Basically essentially it has to be good. Right. That if that demand is going to pick up next year you're going to have a real bonanza next year. Again assuming that supply chain can cope you probably need to have a meaningful upgrade in order that investors don't start to get a bit skittish about whether this demand story can continue. Yeah. It's so interesting how the market is not following Apple. I

feel like that's a bit counterintuitive to what we've seen. Hey Mike what struck me with this story is the fact that it could be a demand issue not a supply issue. And I appreciate it. Alex is saying that it's a short term thing. We're waiting for the new upgrade but a demand issue is not. We've been talking about 18 months. No it's not. But the question is how does it break down.

We really don't know. As Alex noted there were not the same kind of expectations for the third team because it wasn't as new or breakthrough a product. But then on top of that you layer the pandemic and the fact that people got lots of money and spent a lot of money on electronics in 2020 and 2020 one of the first part of the year. So maybe we've pulled forward some purchases of electronics like iPhones that leave people not needing to buy as many at this time. And

then there is the supply chain question. Know the Chinese have the no virus policy. So they have a tendency to shut things down very quickly. If we see Micron spread there then that could cause more problems for the electronic suppliers. Mike is there any chance that there's also an inflation factor here that people are seeing price rises more broadly and as a result of which that maybe takes away some of that desire to spend money on discretionary items. Do I need to upgrade my phone or can I wait. You know that's a very interesting question guy. Because the iPhone came along in 2007 and since that time we really haven't had an inflationary question. And so it hasn't been thought of as a discretionary

item now. Alex may have a better idea of this than me but people have thought they had to have these phones. Now maybe we're getting to the point where the incremental changes on the phones do become something of a luxury good. And if they are going up in price people may say nah I don't need that one. Right. And then to be fair I think they force you to upgrade. And I'm just getting mad about all that. Hey Alex what do you make of the fact that the rest of the market isn't rolling over on something like this after yesterday's really big sell up into the close for a headline that we already knew was coming and Apple down over 2 percent at one point earlier this morning. What's up with the rest of the market. What do you make of that. Well perhaps some of the trading on Apple has gone into a lot of other stocks in Apple accounts for huge amounts of the of the trading volume disproportionally affluence has I think of the two biggest in the world. And I know I'm no markets expert. It

wouldn't surprise me though if some of the trading is heading elsewhere. Now talked to Mike's point. I think that I personally don't see a correlation with inflation on Apple sales. We don't forget. Still gonna see a record Christmas quarter record holiday quarter. It's going to be 6 percent. Analysts are expecting a 6 percent jump in revenue this quarter. If we were really concerned about inflation I think those would be corrected down. Apple would be having to think about whether sales this quarter effect will only encourage though Apple to think about services. It is a more predictable revenue stream.

It allows them to basically just generate an annuity. More and more people are flocking to Apple because of the services. Will this if we are going to see maybe demand for hardware softening. Will that kind of reach up in terms of the efforts that Apple is making. The key thing actually to remember with the services is that they drive purchases of the hardware. Right. So the service

is what we're talking about here is we're talking about photos. We talk about music. We're talking about iCloud. We're talking about the app store the app store. If you have games that are on the app store and they require high processing power that is encouraging people to buy highest back iPhones. You've downloaded games from the app store you bought got your photos

and videos with the 13 is is I guess we'll all experience it slows down because the software gets better. It was the 13 a big enough jump to justify such an upgrade. There are still some games that there are games out there who do play games on their smartphones. There are some games and some features that one better than iPhone 13. It's got a faster processor but the more stuff more services you get from Apple the more keenly tied you are to those devices the harder it is to trade it for an android. Now the upgrade cycle is a different question. That does seem to be slowing down. Yes 100 percent. Hey Mike last

question to you real quick. And this ties into jobs tomorrow. We've noticed a distinction between the jobs market and the confidence there versus consumer confidence. Consumer confidence rolls over but confident the labor market holds up. Is this part of that story. You know it's hard to separate all of this out. There's been a lot going on. Inflation certainly is an issue. And oil prices what you pay at the gasoline pump or what you're paying for food have been a major issue for people that depress their feeling about how things are going when the stock market rolls over a little bit too. People start to think maybe things aren't that good but then when you ask them about their jobs their individual situation is pretty good. There are a lot of jobs out there. So people are kind of two minds about this. And so the old Alan Greenspan adage is

probably the thing to watch. We watch what they do not what they say now. Fair enough. All right guys thanks a lot. Really appreciate it. Alex Covid Bloomberg Quicktake. And limericks Michael McKee. Thanks a lot. We appreciate you guys. All right. Coming up investors bracing for December volatility. That's all due to Annmarie Horden variant. We've been speaking with even Debit Monsanto's CIO. He's joining us next. Her take on what do you do over the next few weeks. This is Bloomberg. Markets rebounding after the biggest back to back sell since October of 20 20. J.P. Morgan chief global market strategist says that Macron could actually be a catalyst for steepening not flattening the yield curve rotation from growth to value sell off in Covid and locked down beneficiaries and a rally and reopening themes. I feel like I've heard this story before.

They're reviewing the recent sell off in these segments as an opportunity to buy the dip in cyclicals commodities and reopening themes and positioning before those higher bond yields. Well joining us now for her take is Ethan Devitt on RTS. I owe you. I've heard this narrative before for a while. So why is it happening now. Is it the right call. I've definitely also heard it before. And what we're seeing is the propensity to buy the dip. And why are we buying the dip. Because it's just so

much money sitting on the sidelines. It was a statistic that came out last week that showed that the flows into equity funds this year were larger than the accumulative flows of the last 19 years. So clearly we have a large appetite for risk. A lot of money sitting on the sidelines that's just ready. They're poised to buy into risk which it needs to do because that's a

persistent low interest rates. Persistent low interest rates. Let's talk about banks. Say we don't end up with low interest rates. Say the Fed actually. Some would suggest and Bill Dudley is certainly in this camp. Do we end up with rates significantly higher than where the market is anticipating. How do I position for that even if even if it's a

tail risk. That certainly does seem like rather remote Taylor Riggs at this point because what we've seen from the Fed and any central bank is a real hesitance around any type of tightening of any kind even in the face of quite obvious inflation indicators. But how you do this portfolio is you maintain you stick to the knitting you contain your allocation your core allocation to fixed income. It won't have been making much money recently. It's in

the portfolio as a ballast as an anchor as a form of deflation hedge. That's when that fixed income will start to come through. And this is true. Interest rates do rise initially. That may be a little bit of a hit to that any existing fixed income. But they will ultimately be where you want to do. And that's actually may be quite a problem for equities if we do see a steepening yield curve because we will see a rotation out of equities into some finally some yields in fixed income area. Yeah I'm really skeptical as to what would actually trigger that. You'd have to have the real yield actually move more towards zero. Under what conditions economically do you think something like that could actually happen.

We'd have to see I think persistently higher inflation much higher than what we've already seen. We haven't even reached 5 percent in the UK yet. We've seen six point two percent of the US. If we see repeated prints like that then clearly the transitory narrative which has been put to bed already and by Chairman Powell will well and truly be cast aside and we will be looking at how to manage for a persistently higher inflationary environment. That to me is the only trigger I see. I see markets

is still being fragile. They are resilient but fragile. They've been resilient in the face of a lot of geopolitical news. And in fact politically any kind of news that doesn't seem to move markets at the moment they seem to be just wanting to go in one direction. But the fragility is what we see in the demand for bonds. Bond demand has not really subsided despite the low interest rates which tells me there is a lot of desire to protect against and hedge against a flight to safety. So because of that the fragility. Well let's talk about that fragility we haven't had a credit cycle we haven't had a company is going to

the wall in a meaningful way. If we all going to see even slightly higher interest rates what is the sensitivity of the credit market to higher interest rates. What is the sensitivity particularly the bottom end of the credit market to slightly higher interest rates. I don't think we have a particularly high sensitivity but we've seen very low rates of defaults and credit really unrealistically low rates of default. There probably is a desire a need to not normalize that and still for credit portfolios to stand up. The reason those low rates of default did not were the

case and did not come through is because we saw this artificial stimulus and a desire to kick the can down the road and essentially extend pretend and not see. Not enough force companies to come to reckoning. So I don't actually see the fixed income is going to be that sensitive to a change in rates at the moment. In the long term yes. But right now it's simply been circling around a somewhat unrealistic situation that's persistent. In the meantime volatility is still picking up.

Yesterday's price action was real interesting. I'm wondering how seriously are you gonna be taking the price moves now and the next few weeks as we're just living off of his own NIKKEI headlines here. It's really interesting because this has come at the end of the year we're coming off a year for records have been set. And almost every month we've seen new highs and set in the Nasdaq and the S&P. So as a result even though these shark bites of volatility are surprising and certainly have sent a chill through markets we still have a significant bank of equity returns to joy year to date. So I say that will they will continue to be some profit taking but also preparing for 2022 laying out the teams of 22 and looking up where the portfolio needs to be exposed maintaining that core exposure across both the stay at home stocks as well as the as that as the economy reopening stocks and also I believe playing the theme which is coming out of COP 26 the focus on electric vehicles energy renewable energy and the energy transition. But those are themes

that I think we'll have a lot of legs as we move into 2022. Thank you very much indeed for your time today. Really appreciate your analysis even if monitor. See I. Oh thank you very much indeed. Next we're gonna take you to Southeast Asia. The Southeast Asian company grab listing on the Nasdaq after completing a spark merger. It's now slightly down to around 11 bucks with the opening price of around 13 0 6 10 who link grabbed. Coke Holdings co-founder will be with us next. This is a delivery company. This is a transport company. Think about Uber. If you're thinking about what this business is like we're

going to find out what grab does next. This is Bloomberg. So the South East Asian right hailing and food delivery giant Gramp has gone public. It's done so in a 40 billion dollar deal. A spank deal and is now trading on the NYSE under the ticker. And this is appropriate grab. The company operates across four hundred sixty five cities. It does so in eight countries. Joining us now whaling Tom Grabbe co-founder and Bloomberg's Emily Chang. Emily over to you guy. Thank you. Thank you so much for joining us. Congratulations. Obviously big day for you. You are a long way from those plastic tables you used to set up at gas stations to recruit drivers. As Guy said this is a huge back

deal one of the biggest IBEX of the year. Why is back given what a tumultuous year it has been and why now. Thanks for having me. Having me back on air Emily on your question. We chose the path that enabled us to get to the most important objective first which is to get the best investors for all day when CAC table. And with that based on our plight investors that were attracted to the long term growth opportunities that we've seen and the very low redemption rates that happen during these back process we are actually extremely happy with the outcomes that we've achieved as well. Now it is a very sorry Emily.

You've turned grab into a super app including delivery payments but also of course ride hailing. How worried are you about a resurgence of Covid and on Ukraine right now. So I think a critical part of grabs growth trajectory over the last two years has been our super up strategy that has enabled us to be very resilient to the Covid challenges to share a bit more. But what it is a think about grab as Uber Jordache and Venmo all in one now from the day from the day when it starts

when you wake up all the way when you go to bed you're able to get your breakfast pay for meals send your friend gifts buy groceries and war. And why that is really important is because it enabled us to have things like shirt fleet strategies with our largest driver partner network in the region which enables all drivers if their super ups to decide if they want to transport people deliver food or groceries seamlessly and app and therefore enabled us to very quickly pivot from mobility to the. Over the last two years. Now with this super up strategy we're very confident that we can continue to serve the needs of Southeast Asia's users and our partners despite whatever challenges code it continues through throughout us. All right.

All right. Still the losses widened to nine hundred eighty eight million dollars in November for the third quarter. Revenue also declined slightly. When do you expect Grabbe to become profitable. So a bit of context. A large portion of the last quarter's results were because of non-cash expenses. There were more than seven hundred million dollars of it much of which will actually no longer be required with the DPRK that we just went through.

Now for us the other important thing is that growth and profitability are not mutually exclusive. And you've seen that consistently from us over the past few years where we've consistently developed very high top line growth while also making very significant progress on our bottom line profitability. For example our mobility segment is already segment a bit positive with market leading margins. Our delivery business which is a very young business only three years old also is a bit the segment positive for various markets that we have. Ultimately for us what matters in our portfolio allocation

strategy is that we will continue to invest into areas that we see huge tremendous opportunities in and very strong momentum behind. So Southeast Asia is one of the fastest growing economies in the world one of the fastest growing digital economies in the world. Where do you see the most growth coming from and what new areas do you see grab investing in. A great question. So the two key areas that we're very excited about the first of which we endearingly call ACE or anything you can eat where we're expanding beyond our food delivery specifics to include things like dining takeout and also groceries. When you're thinking of cooking home basically we want Southeast

Asians to think of grab whenever they're thinking about food that's when they're the second important area as financial services. Because in the region six out of 10 south six out of 10 Southeast Asians are still unbanked. Pull in the bank. And we see a tremendous opportunity to use technology to make financial services more accessible and affordable. For example right now we provide critical insurance coverage for driver partners for as little as 10 cents per ride. Ultimately as you said it is a huge growth opportunity in talking to Asia. Our core businesses alone have a total addressable market of one hundred and eighty billion dollars by 2025. And that doesn't even include our new growth areas and investment areas like did you banks and

groceries. Good evening it's Guy in London. Thank you for staying up so late in Singapore to talk to us about all of this. It's fascinating. Emily and I were talking to Uber a few days back and Dara was talking about his latest idea which is to look at the logistics industry basically creating a marketplace for drivers of trucks et cetera. I'm warning you. That's an area that would be of interest to you as well in your region. So for us right now. What we have is the largest driver delivery network in the region and that to us is the logistical backbone for Southeast Asia that we believe can continue to support the e-commerce growth that the entire world is seeing. So for us it's very much still focused on our driver partners and delivery partners. And we look forward to seeing what Dora continues to

book build as well. Hi it's Alex here in New York. Emily mentioned and asked about the resurgence of a new variant on Micron. And I wondered if you could give me sort of what you're noticing on the ground. Are people staying at home more. Are people going to work more. Can you give me an idea of how the chessboard is being set right now. Alex it's a great question and to be honest it's a bit too early to tell. We ourselves have not seen any particular changes yet but the days are just early. So maybe over the next few weeks probably some of these trends will start to become life.

Describe strategy in Indonesia willing. This is obviously a huge economy and you've got go to their established homegrown tech competitor. You know what is the plan to take them on. So Indonesia is our most competitive market and it's a market that we actually entered relatively later. At the same time we are already the leading category category leader in the market in all of our core businesses mobility delivery any payments. So for us what has enabled us to do this is a couple of things. One I'll continue partnership with local partners like Imtech

who have enabled us to continue to serve local Acehnese in different ways that we were not able to afford to. I'll continue partnership with our local government partners. For example during Covid when things were very dire we together with the government in Indonesia actually set up more than 50 vaccination centers to try and encourage recovery. And this is really important to us because one when the country is doing well we do well. And if there's anything that we can do to build this continued trust that we already have with them that will always fall well short term and long term. Beyond that I think all deliveries market and o category leadership there is a really important one that we're going to continue investing to and we are quite excited about. And this super out strategy to talk about earlier where we have ship fleet strategies and local

hyper local technology investments that enable us to really have strategic strategic advantages that are really difficult to replicate are things that we'll continue building on. I think that if I can. So we have to leave it there. But that was a really great conversation. We very much appreciate if we think tank grab co-founder. Thanks a lot of Bloomberg's Emily Chang. Thank you as well. We appreciate that. Grab stock now trading at ten fifty six that eleven. No one was this spark IPO price. Well we are one hour into the U.S. trading day. Powerful rally right around the highs of the session. Bloomberg's Abigail Doolittle is here. But what's moving the market and I made this point before Apple's lower stock still higher. You know I'm amazed by that Alex because you typically wouldn't see that because we do have the S&P 500 to your point a very powerful rally up nine tenths of one percent after a brutal two days for the S&P 500 the worst since October 20 20. And yet its biggest component its

biggest weighting. Apple down two point nine percent. Typically you would not see that. But the correlation on Apple in the S&P 500 broken down through yesterday. Apple was actually at an all time high. So a little bit of an evening out here. Some of the top point was for the index. On the other hand Visa and JP Morgan Chase. This of course as yields are higher. But one of the big stories on the day. Oil. Take a look at this intraday chart of oil. Super interesting. It had been higher. And this of course after having been down for two days the worst November the worst month since March of 20 20 selling pressure having to do with fears around the variant economic demand of course the strategic reserve release.

And then you see today a big big drop lower. This of course as it was said that OPEC plus will be holding with their output hike in January and then off of the lows. So it seems like investors just needed that news to finally come out. Not such a surprise given the fact that OPEC plus there had been some posturing that they might do that in response to the reserve release. Nonetheless you still see oil is below that 200 day moving average. We had this kind of action guy early last year at the end of last year I should say weaving around. Yes. The 200 day moving average. It'll be interesting to see if that's what's going to happen or if it's going to be more dramatic and along the lines of 20 20. Right now it looks more

like some healthy consolidation around that 200 day moving average. Abigail is going to be our next subject. Thank you very much indeed for setting it up for us. Bloomberg's Abigail Doolittle on what's happening in the markets right now. Get more on those moves related to the OPEC plus meeting. We'll do that with Jeff

Curry. Jeff is of course Goldman Sachs global head of commodity research. That is coming up. This is Bloomberg. It Bloomberg Markets you are looking at a live shot of the principal room coming up Josh Silverman FTSE CEO will be joining us at 5:00 p.m. in New York 2:00 p.m. in San Francisco. This is Bloomberg. So as you mentioned oil falling though now bouncing back after OPEC plus agreed to proceed with a January output hike. For more on this story let's bring in Jeff Curry Goldman Sachs global head of commodities. Jeff what do you make of the decision. Well I think it makes a lot of sense in the current environment. I mean one there was a lot of tensions between with the U.S.

administration that were highlighted by the SPRO coordinated SPDR announcement a few weeks ago. Second it takes the pressure off the administration to cut a deal with Iran that would have provided barrels in the first half of twenty two. And then third the shale producers are budget game right now for their CapEx programs for for next year. So the net of this is means less spare capacity in OPEC and likely less shale or less Iranian oil. So it reinforces that medium to longer term supply driven

bullish story. But yeah. Near-term it's a blow to sentiment and to fundamentals. But looking where prices are relative to the underlying cost structure it's pretty hard to argue that go much lower than where they are today. Yeah but Jeff it feels like if they really wanted to kind of throw a line to President Biden they would've increased production given that that was on the table before. I'm. Well you know I think the market had priced in. You know no production increase for the month of January. So the fact that they're increasing by 400 a day is above market expectations. And I have a feeling you know all of this Omicron uncertainty developed over the course of the last week. You know we were down almost 15 dollars a barrel in one week's time. One thing I want to emphasize here that made it much more vicious than what

we've seen historically is that you had a negative gamma effect going on. There's very little liquidity in this market right now. The producers have to Delta heads the strikes at the different or excuse me that dealers have to hedge the strikes and where the producers hedge out. And as that market starts to follow they have to sell more and more and more and more that amplify the magnitude of the sell off. So at this point right now it's pricing in a disaster scenario around Omicron. You know we estimates pricing and like no plane flying around the earth for the next three months. So you know the markets overshot to

the downside. So Jeff where are we. Year end. Yeah I think it does point right now. You've had a lot of investors take risk down. It's been a very good year in commodities and you can see it in the liquidity in the market overall. We would think that it wouldn't be until after the

first of the year that you see risk come back into this market. You know the medium term story is very much intact. In fact you could argue with the lower prices. It's even more positive than what it was before. But near-term there's still a lot of uncertainty around you know with the Omicron. I think the willingness for investors to come in and put high levels of risk on right now is pretty limited. I would expect it to be a grind higher going into year end with the real potential upside after the first of the year. Hey Jeff I also wonder what's going to happen with volatility because if anything that we know we know

that OPEC hates volatility. They want a stable oil price that helps them really foresee what demand's going to be if we continue to see the volatility that we've seen in oil. What kind of rhetoric or action do that we may see from all that plus. Well I would argue you're developing a volatility vortex in many of these energy markets as the liquidity drops off. And you know investors get discouraged in the space that reinforces higher volatility. The higher volatility then discourages less

investment and less liquidity. So it's just a vicious cycle in terms of creating a higher level of volatility. You know the only way you're going to stop that volatility is through increased investment in increased liquidity through more investors coming into the space. But the hurdle rate between Omicron and all the recent developments just gets pushed higher and higher. So you know it'll be difficult to tame the volatility as we go into the winter months. It probably won't be until we get to the backside of the winter sometime in March that you could really start to turn down the volatility. If you're in the United States and you're looking at the SPRO release you just coordinated would you conclude from today's reaction that it was a it did work or is this something else happening here that the Saudis want to turn the temperature down. They don't want this this sort of relationship to continue in the way that it is. I'm just don't understand the kind of the

back channel here. Well let me ask PR announcement right after it. The market rallied in the market was still positive until you got the Omicron News. Once the Omicron News hit that's when you created that vicious downdraft because you think about the immediate reaction to shut down borders which impacts oil. In fact we look at the two commodities that are hit the most here.

It's oil and cocoa. The two that are sold in there are ones that don't travel through jet and cocoa is sold primarily in airports for the commodities most exposed to international travel where the ones get the hardest here. And so when we think about you know the SPDR release the market has shrugged it off was rally. And I'd argue really what we're witnessing here is the uncertainty generated by Omicron but also what made the downdraft so vicious is no liquidity. And then you had a negative gamma. In fact on top of that I'm asking for you. Let you go. We had a J.P. Morgan seeing twenty twenty three. One

hundred. Forget all oil. Bank of America says we could see spikes next year to 120 for Brent. What's your upside risk for next year. You know the upside risk I think is substantial going into next year. I think putting a number around it's very difficult because there's going to be a lot of volatility due to all the reasons we talked about. And right now the market's repricing carbon in terms of thinking about where that equilibrium is. He gives a lot of uncertainty.

In the 2000s I threw out a lot of numbers. I don't think you know there's that's very useful. So I know I'm going to see the way I like to describe to our investors. Get on. Buckle your seat belt. Hang on for the ride. And this last week didn't demonstrate to you why you have to have that seat belt snug tightly. I don't

know what else. I'd argue yeah it's going to be a lousy Sharpe ratio but the upside potential here I think is enormous. Hey Jeff really appreciate that analysis. Jeff CAC Goldman Sachs global head of commodities research. I love seat belt things like that. All right. We'll continue the conversation on commodities edge. Later today we'll talk about OPEC. It's also

my conversation with Rasmus Back Nelson a trafficker as global head of decarbonisation. How the company is working on cutting carbon emissions from the shipping industry which is one of the hardest sectors to decarbonise. So really interesting stuff coming from him. That's at 1:00 p.m. in New York time 6:00 p.m. in London. For now we want to check in on Bloomberg First World News. Here's what I can. GUPTA Thanks Alex. U.S. Secretary of State A. thinking warned of serious consequences if Russia makes

a military move on Ukraine. Blinken met with his Russian counterpart Sergei Lavrov today in Stockholm. The Kremlin says it sees a growing risk that Ukraine may attack Russian backed separatists that House Democrats have come up with a short term spending bill to try to prevent a federal government shutdown this weekend. The bill would fund federal agencies through February the 18th and would have to pass both houses of Congress by midnight Friday. That will require cooperation from Senate Republicans who have the power to drag out the process. And Pfizer says it expects its kind of ISE vaccine to hold up against the Annmarie Horden variant detailing just how well it protects should be available within two to three weeks. There are some additional mutations but the clinical significance of those mutations is unknown. So I think we really have to wait for the beta and I don't expect that there is a

significant drop. If there is a significant threat then Pfizer has a playbook to develop a new vaccine companies 24 hours a day on our on Bloomberg Quicktake powered by more than twenty seven hundred journalists and analysts and more than 120 countries. And which could get to this is beanbag Alex. All right Rick. Let's see where the virus is right now. President Biden is going

to announce new actions to combat the coronavirus later today when we get the latest now. Joe. MATTHEW BLOOMBERG WASHINGTON CORRESPONDENT We get a little bit of the readout of what we're gonna get. Walk us through some of the highlights. Yeah look the president's working with the tools he has here Alex and they will sound familiar as it's gonna be at least a couple of more weeks before we have real data on this new variant. But the president did promise to speak today and he will from the

National Institutes of Health just outside of the nation's capital here. Among the announcements that we expect is increased testing for those coming in from out of the country. We've got a little bit of a preview on this earlier in the week. They'll need to show people will need to show a negative test within a day of getting

on an airplane to the US. There may also be a follow on test required following three to five days and possibly a quarantine could be included there as well. But the president will also call for an extension in the mask mandate for trains and planes and other public federal spaces and will also call on private insurers to cover the cost of at home testing. That's the bulk of what we expect to hear. I was in the White House briefing room Alex yesterday when Dr. Fuji came out in front of the reporters to announce this first U.S. case of Micron here and even though we knew it was coming we knew what he was going to announce it came with a certain sense of drama. And when the president speaks today the real job will be expressing confidence but also maintaining calm. Alex. So I'll pick up. Thank you very much indeed. Bloomberg's Joe Matthew joining us on what is happening in D.C. a little bit

later on. You can of course catch Joe on Bloomberg Radio's Sound on weekdays at 5:00 p.m. New York time. The U.S. government's is urging of course vaccinated Americans to get their booster shots as the ever growing variant threatens the the threatens to spread basically. Let's look now at the science behind making these drugs and how they become more effective. Richard V. Centra CEO joins us now. Centers. Software is basically helping to determine how many drugs are made how they behave and what happens in these different populations. William thank you very much indeed. Santora. Obviously modelling all of this. Talk to me about what you see in front of you right now. We're

worried that our current therapeutics our current vaccines don't work well enough. What can you tell us. Yeah. Thanks very much Richard. You know Satar is a company where we we model the effective drugs in the body. And when the pandemic came along we created our vaccine simulator which has received an already one hundred award. And you know what we used to we use that for is to look at the dosing the size of the dose and this time between doses for different vaccines. We've calibrated it against lots of clinical data and we've shown that it's been pretty accurate so far for the existing vaccines. It's not surprising I think

that Covid ISE has variance. I think it's still pretty early in terms of the science in terms of what's what. I'm crunches is really like but the simulation capability is there as if if and when we have to develop new vaccines. I'd say that one thing we say is you know the idea that we need to take boosters is absolutely is absolutely shown

by the software. You know it's a very good recommendation that's gone out now. Yeah. And then to that point do we know yet. And how do you help this answer. What they're what drugs go bad like what vaccines work best together to create the best protection in general among Covid and then the variance. Yeah we've done a lot of modeling recently looking at combination vaccine. So what happens if you get maternal first and Pfizer second or if you're

outside the U.S. and you're looking at some of the other vaccines. And you know what we've seen is number one is it's a good idea. You know there's certainly no harm to it and it's good from the standpoint of the vaccine supply. But we've also seen some indication that that is actually it's actually leads to a better immune response in some cases to take to take it to sort of mix the that the vaccines that you get in your different doses.

In terms of just understanding the process of getting new formulations ready and out there into arms there are and the scientists have been talking about this a great deal over the last 24 48 hours. There are certain biological processes that cannot be sped up i.e. this hundred days looks like it's fairly fixed. What is your sense of whether or not we could speed that process up whether or not actually A.I. whether or not modelling by simulation could help us accelerate some of these processes. Yeah I'd say that the development of these vaccines is almost a miracle in the history of mankind. How fast this happens. So it's kind of amazing we're talking about. One hundred days and can we speed it up. But I would also say that the answer is I mean you know there's a lot that's known about this disease right now and about the vaccines. And they're there. Their

mechanism of action. So you know we certainly certainly modeling will help. We're already working on it. And you know I think you know there's a lot of people around the world not just people working in pharma companies but also our regulators looking at how to speed this up and deliver new vaccines if they're needed. But I also think is interesting is we're learning with the different variants how the vaccines interact with an individual's immune system like the patients in South Africa who did have the vaccine were also HIV positive and they reacted differently to different variants. How do you help us figure out how an individual can respond to a certain vaccine or a certain therapeutic. Yeah that's a great question. So one of the things you can do it by a simulation is look at getting the right those to the right patient. And when you do that you're looking at

what are the other factors that might affect the patient. So you know we've looked a lot at people of different ages people with different comorbidities. And we can certainly look at things like what are what's coming out South Africa where we're potentially some people who have been exposed to other viruses may may be maybe more susceptible to it. But I still think that you know that you know I'm icons really only been discovered fairly

frequently and fairly recently. Excuse me. And from a scientific standpoint people are scrambling to to to find out what the real facts are here. So you know I think the good news is with bio simulation and with all of the tools that are available we have a lot with a lot we can bring to the table here. But you know this is going to play out over the next few weeks as we get more more data about this new variant. One of the critical things we're still trying to understand is

how regulators will deal with new versions of the vaccines. It looks like it's going to be a similar playbook to the one we use for flu. But what combine simulation do in terms of allowing regulators to smooth this process. Well you know one of the one of the interesting things right now is it's very difficult to do large scale clinical trials on new Covid vaccines because so many people have been vaccinated. So if by a simulation we can start to ask questions about you know these new vaccines. Will they have different effects in different populations of people such as children or elderly or like I say like we were talking before about people with different comorbidities and you know we can get it that a lot faster than trying to trying to organize a trial of you know tens of thousands of people that that that is increasingly getting quite difficult just to find patients to do that. William thanks a lot. We really appreciate it. William Frey Tara CEO thank you very much for the insight. This is no. It's time for the Bloomberg Businessweek to look at some of the biggest business stories in the news right now. IBEX could get

to Apple has a problem it wasn't expecting with the iPhone 13 Bloomberg said. The company has told suppliers that demand for its use device has weakened. It's a signal that some consumers have decided against trying to get the hard to find them. Apple has already cut its iPhone 13 production go because of a lack of pods. China is on the verge of lifting an almost 3 grounding of the Boeing 737 Max.

Chinese regulators have lifted the law safety related obstacle to bringing the Macs back issuing an air worthiness directive. China was the first country to ground the plane back in 2019 after two fatal crashes. And it is the world's second largest aviation market. The top bosses at Goldman Sachs have come to believe they're not getting paid enough. They're looking for

ways to boost their eight digit pay packages. Amongst the ideas pledged to award CEO David Solomon and his deputies getting a cut of the richest rewards thrown off by Goldman's own blank check companies able to crush it for incentive packages and have some success. And that is the latest. This is such a guy Alex. All right. Thanks so much Riddick. So guy I found the story by by Cyd Neeraj and fascinating. Now we might look at it and say yeah OK whatever they want more money. Ha ha. But in actuality these banks are losing a lot of talent in high end management talent to go run hedge funds or go in private equity where the pay is astronomically different. And this is a real kind of competitive job landscape. Wage inflation scenario. It is. But think about where it started as well it all started with junior bankers particularly Goldman Sachs junior bankers. And then it spread elsewhere. And what we saw was the lower ranks getting the biggest piece of the pie. I

think it was only inevitable at some points that we would see the senior ranks maybe making the same point. But I think your points about effectively kind of buy side sell side are well founded. And I think if you work for a big publicly listed sort of sell side company maybe you're actually looking at what is happening on the buy side and going I want a piece of that pie. I think we need to jack things up a bit. Well especially when you're an executive management and your pay is disclosed and

you're going to get heat from you know Washington D.C. or you can have to go testify and get heat from your pay package et cetera. That's going to be very different. And then there's a great anecdotal evidence in the story that James Gorman of Morgan Stanley said he was going to take a pay cut the same time that David Solomon was going to get a pay increase. And so they had to put that off. And then you had the Covid to happen. So there's just there's there's a lot in there. And we saw Greg Glenn Kelly. I never thought I'd see that happen. Yeah I've been dying to know what Elizabeth Warren's attitude to this. I know what this was about. Warren's attitude to all of this is going to be.

But Will we'll see other firms follow suit. Well I think yeah it is unsurprising at this point to me post the post the junior bankers saga that this is happening. Yeah. No I Emma Chandra. That's a really good point. And just take a look at the overall market situation. What I also find interesting is just how well certain equities are holding up. I mean a flatter curve but financial are still doing well here in the US. Let's talk about what is happening over here in Europe as we head towards the close we got around 35 minutes before the end of trading here in Europe. We are seeing some ripple into the tech sector as a result of what is happening with Apple Assembly. The chip sector down today delivery in the delivery

space. That's interesting given what we're seeing with Omicron maybe actually the recent rise and the return to sort of stay at home stocks begin to unwind. I'll bet Aston Martin losing its CFO the market reacting really violently to that. Coming up on the European clothes Hugh Kimber is going to be joining us. Looking forward to that conversation. This is Bloomberg.

2021-12-05 08:46

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