'Bloomberg Surveillance Simulcast' Full Show 01/03/2023

'Bloomberg Surveillance Simulcast' Full Show 01/03/2023

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2023 could continue to be pretty challenging for stocks, fixed income is back in 2023. You have to go out ten years. Q1 will be one big and bumpy. And I think China's reopening is not going to go as smoothly as people think. As we move into 2013, we're going to start the year with a coupon on all wages are likely to rise faster than prices in 2023. So I think the purchasing power is going to be there for consumers. This is Bloomberg Surveillance with Tom

Keene, Jonathan Ferro and Lisa Abramowicz. Do you remember and remember how to do this? Because clearly I don't. What did you. Those of us. Right.

Did I get a bus? You've got about a storyteller broke down halfway. I went to Cornwall, apparently, although I took a story. Good morning. Happy New Year. Good morning to you. 2023. Live from New York City for our audience

worldwide with Tom Keene Lisa Abramowicz, some Jonathan Ferro futures are up right now by about nine tenths of one percent on the S&P. We'll catch up with T.K. in just a moment. I'll try and remember how to do this over the next three, four hours. The big question, I've got to say, coming into 2003, hitting the ground running, it's not about the U.S. data. Later this week, we'll talk about that, about China reopening and what we can expect from Chinese data in the future. Off the back of the decisions made over the last couple of weeks. That's well said, because the data that

we're getting is backward looking and it is horrendous. If you look at, for example, China Beige Book, it came out in actually a prediction of a contraction in the fourth quarter for Chinese economy. That said, look at the subway activity. We saw the same thing. That to me really says so much. Who are looking at that? New York City. We were looking at that in L.A.

in the aftermath of the pandemic. And that tells a different story. If you question said demand side, let's talk about that. Where's the demand going to show up? Is it gonna be in the commodity market where people expect it to show up or if they've stockpiled enough commodities through 2022 to maybe blunt their impact in the months to come? I don't know. The supply side question is more interesting to me. Are we going to get some supply side

relief? Look at what's happened with Foxconn and Apple and we'll discuss that in a couple of minutes time or we're going to get supply side dislocations off the back of a boom and demand back into the goods sector. It's a place where we didn't see stockpiling Emma Chandra. It's a great question. It's very complicated. You already see an easing in some supply chain ISE. Yes, iPhone, but also in some of the German manufacturing data coming in better than expected.

So at what point do we start to see that come through the crude market, come to the natural gas market and perhaps away? It's a little bit more pressure if you would like the guide to the next week or so. We have payrolls on Friday. And after that, looking ahead to next week, you've got CPI data on the 12th visit.

Then on the 13th, we get J.P. Morgan earnings as well. So you get your data and then you get your earnings and we'll find out whether we're gonna get the kitchen sink, the kitchen sink for guidance for the year ahead from the C suite in corporate America. I cannot give a kitchen sink approach if we have no clue. Honestly. Honestly, I would it this feels like a black box to me. I mean, honestly, Michael Barr coming

out and saying it's going to be a whipsaw inflation that's going to come back and other people say just buy bonds. And that's what everybody else is doing this spring. I mean, honestly, it's incredibly conflicted with trying to price a recovery to recession. It hasn't materialized. Exactly. Go figure. Figure that out. IBEX futures right now up about 1

percent on S&P 500. I was surprised to see this in the bond market this morning. Just logging on to the Bloomberg just to see this bit coming into treasuries. Lisa yields down by 13 basis points on a

10 year 374 this morning. Yeah. And how much is this based on what we saw over in Germany that we saw better than expected data. We also saw a bigger than expected decline in some of the inflation read at the same time. You're right. Maybe it's just that everyone said buy bonds. Everyone came back from holiday and said, OK, let's do it. Let's talk about it's going to happen in

the week ahead, because honestly today everyone's is getting back to the office in the U.S. and getting their feet under them. On Wednesday, we get U.S. jobs opening data as well as Fed meeting minutes. That's at 10:00 a.m. and 2:00 p.m., respectively. The JOLTS data is going to be

interesting. How much does that continue to come down? It is a jobs focused kind of week. On Thursday, we get ADP employment at 8 15. And initial jobless claims at eight thirty.

Do we start to see a tick up in initial jobless claims? Because if you look at the longer term track record, it does look like someone died and was put on one of those heart monitors. I mean, honestly, it has not ticked up. And you have to expect that you'd start to see that if you could say something like that line. It's just. Well, that's a good thing, right? You don't seem to be depressed. Look, I'm with you.

For all the talk of recession, we've got one point seven jobs open for everyone looking for one, according to the data. And we can talk about whether that data is is worth looking at in that way. Jobless claims in and around 200 K doesn't scream imminent disaster in the economy, does it? Not at all. Although I do think that probably on Friday is the more important indicator. Not only do we get non-farm payrolls at 830 AM, we at RSM Services in DAX for the December at 10, but the hourly earnings. Do you start to see it come down in terms of how much they're going up? That might be a more telling indicator, John, than even that just overall numbers of people getting hired or unemployed or job openings, because that gives a sense of how much real pressure there is in the market come into the building this morning.

No idea where Tom was. I was told he was down at Eurasia Group and it be doing a top risk thing again in 2020. Three to. Joins us now from Eurasia headquarters T.K., just abandon a guess on the first day, 2023.

Yeah. Yeah. Bremmer out with his first toppers for the year, John, and that is that the bramble gloom will drift into 2023. That's certainly what I've heard over the last number of minutes, John. An annual tradition for surveillance to

join Dr. Bremmer and Eurasia Group in celebration of their 25th year. Their top risks are a must read. We're going to cover that, of course, on the war in Ukraine. Bill Dudley will join us live. Dr.

Romer, the former president of the Federal Reserve System of New York. And very much so. We will lead with China. Looking forward to talking to Dr. Bremmer, as you and Lisa mentioned, on

China. We'll do that at the 630 moment. That conference will start in about 25 minutes. Looking forward it take. I've missed you, too. Kate, I think you Risha HQ in New York. I'm not sure if that sentiment is shit. I think I was. I think he was about to say it, but it was just that delays that often. You know, they could hear a light in and

they just kill this wife. That's what I like to think. Anyway. Miller Glassman joins us now, managing director for portfolio strategy at Goldman Sachs. Chrystia, fantastic to catch up with you, sir. Happy New Year. Let's look ahead to the year ahead. Can you tell me how big is the gap right now between what you expect and what's priced in this market? Yeah.

Happy New Year to you as well. I mean, listen, I think not much happened over the Christmas period, which still leaves us with the same problem. Risk premium very low and I think risks are high. I think we are gonna shift a bit from the inflation risk side to the growth risk side.

You mentioned China. I think that's one area which could drive positive growth surprises eventually. But there's still a lot of uncertainty on the girl's picture globally. So I think we're in the same spot where I think we see equities down in the near term, possibly recovering towards the end of the year. But I think that the key challenge is risk premium, very low equity risk premium credit spreads the VIX, and that just doesn't leave us for a good start of the year. Kristen, you said that things really

haven't changed, but one thing did change. It was incredibly warm over the past couple of weeks. Heather, that sounds like nothing else to focus on. But yes, and it has really allowed there to be an easing from some of the energy infrastructure certainly in Europe. Doesn't that give you a more positive

tone that some of the worst case scenarios haven't come to pass at all? In fact, it's been better than expected almost across the board in every potential outcome. Yeah. No, I think that's fair. I think suddenly the kind of warm winter is something that can provide relief. We see that in the currency markets like the pound. The euro has been remarkably strong over the holiday period and the dollar has been weak and a weaker dollar generally is. This is also risk on.

So I think it does feel like that is a positive. I'm not sure if I would extrapolate that and would make an investment thesis around that. The big challenge you always have is markets are priced for that already. It does feel like, as I mentioned, the currency markets have reflected that a bit.

Volatility is low. Credit spreads are low. So I always like the idea of mixing a symmetry with macro momentum. And I think macro momentum, as you said, has been maybe a bit more supportive in certain spots. But the asymmetry to to to chase that momentum right now doesn't look particularly good. David Westin Christian, you're not alone in believing that and seeing a more better outcome potentially for bonds and stocks.

There's the asymmetry of risk here. And if you go into some of the havens, traditionally it is better. But as John pointed out, we are seeing that Haven bed today. We are seeing seeing people put into bonds. We're seeing people point to the dollar.

At what point do you say, OK, it's already priced in? What are the sort of the the triggers to know, okay, this trades up. Yeah, I mean, listen, the yields have gone up in the last two, three weeks, I mean, really old certainly in the US and and that means to me to some extent the fixed income opportunity is still there. I think at the margin we are leaning to up and quality type credits. So we're not necessarily saying we would chase down the line riskier credits. But at this juncture, like tips,

investment grade credit type yields we think are still attractive. So they're at the valuation is to some extent less of a concern. But you're right, I think does this kind of outlook period has shown a bit of consensus with regards to fixed income. The other thing that that does kind of give me a bit of comfort is the flaws. I don't think we've seen a major rotation in flows out of equities, into bonds, kind of broadly into fixed income. It's been reasonably slow. And that also tells me that we're not necessarily at the end yet.

Christine, can we just get into the China questions around demand and around supply when it's not with demand? Where do you expect that demand to show up? Where is that Chinese capital going to be deployed? Where does the consumer go to get Spencer home? Does it get spent abroad? How are you even the team thinking about that? That's a really good question. I think we've been leaning towards the slightly more bearish story here with regards to the global economy, in the sense that we still have relatively tight commodity markets. And if China reopens forcefully and fast, you could see a bit of a replay of the commodity. Let inflation, which we have coming into this year or the last year or so to some extent, where we are kind of a bit more worried that it could reignite the commodity strength, which then has the kind of knock on effects on inflation with the travel bans which have been put into place, that the kind of exposure to to global travel services and these type of areas is a bit more limited. So the the Chinese economy itself seems

to be very focused on growth. And there you're likely to see a decent recovery, but it could be very bumpy as we learned in the last few days. Mobility has picked up from very low levels and and it could be very import focused, not easy to invest as a Christian.

I think the supply side is maybe the more complex question to answer right now. Do you see this as something that develops into supply chain relief or further supply chain dislocations off the back of that boom in demand? Yeah, I think it's quite interesting. Our U.S. economists actually expect goods inflation to turn negative this year. So I think on the good side and with regards to the supply chains, there is likely to be a significant relief. And and, you know, there there's there's going to be less inflationary risks coming from goods and supply chance, it seems.

And and with China reopening, you could argue there's even more relief on that front. So it's still the services sector where as a source of inflation and and the commodities parts and and from that perspective, that's more where we're looking for for the data. You mentioned already labor market data and the U.S. is the critical and and and anything related to commodities, if it's the energy crisis in Europe or if it's China opening, crowding out commodity markets, these sort of things we're watching on the supply side. Christine, this was great. Fantastic. To kick off 23 with you, sir. Christine Miller Glassman of Goldman

Sachs. It's gonna be a massive debate around that drama about what actually develops in the year ahead. Especially because it is so bifurcated between services and goods and a lot of people expecting this disinflationary outright deflation in goods.

Does that mean that you get to this sort of rebound kind of boomerang inflation later on? Did you hear the IMF managing director? Yeah. Yes, I did. I can make sense of that. So the three big economies, U.S., EU, China, it all slowing down simultaneously. I think that's a great question. It's a really great question. Are they slowing down? Yes. But have we see the nadir for China already? Katie Kaminski coming up next. Now, looking forward to that

conversation about 7:00 a.m. Eastern time. So let's call it 48 minutes away then t CAC Tom Keene sitting down with Ian Bremmer of Eurasia Group. We'll catch up with them in about 28 minutes live from New York City. Happy to be back.

Happy New Year to you, Wolf. Futures up. This is pulling back. Keeping you up today with news from around the world with the first word. I'm Lisa Matteo. In China, the economy ended the year in a major slump. Business and consumer spending plunged in December, and more disruption is likely in the coming months as Coburn infections surge across the country.

Activity in China's services sector fell the most in almost three years. Ukraine struck a Russian military facility in an occupied town, killing at least sixty three troops. It's one of the deadliest losses acknowledged by Moscow. Russia says the facility was hit by four U.S. made high Mars rockets.

The US is in talks with South Korea on ways to keep Kim Jong un's regime from using nuclear weapons. The two countries are planning for a range of scenarios to deter North Korea. South Korea is seeking a greater role in managing atomic weapons on the Korean Peninsula. But President Biden says he is not discussing joint nuclear exercises with South Korea. The National Football League Buffalo Bills player DeMar Hamlin suffered a cardiac arrest and collapsed in the field during a game with the Cincinnati Bengals. Hamlin is in critical condition in the Cincinnati hospital.

Stunned teammates surrounded him while he was being treated by doctors and paramedics. The game was postponed. 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. I'm Lisa Matteo. This is Bloomberg. Have a working relationship with CAC. Do you think he's going to get the votes to be speaker? You know, I would be surprised if he doesn't. If he gets 218 votes, he has the ability to put together the votes to be the leader of the party, and he will then be tested as to whether or not he can leave.

But, you know, he's worked pretty hard at it. It appears to me that he will be the speaker if he gets two hundred and eighteen votes. That was Representative Steny Hoyer that the House majority leader to CNN live from New York City this morning. Good morning to you. Happy New Year.

Let's get some price action for your equity market. Positive a left on S&P 500 futures up eight tenths of one per cent after a bruising punishing 2022. How many different ways have we described that over the last couple of weeks go down by promoting down by 20 percent, 19, 20 percent of the S&P? Dani Burger NASDAQ.

Even more significant, maybe even more ugly by the fact that the bond market participated in that sell off as well. And as we reset coming into a new year, I think that's where the question nice for everyone in fixed income. Is this the moment where you stop getting that move in tandem between equities and bonds and that correlation, the one we're used to, reasserts itself? The issue is that that's the consensus right now. And you're seeing that play out some of the price action this morning upon to have an actual some kind of valuation bid for individuals, whereas stocks perhaps not so much. How long did that last, though?

How much does that really rooted in goods, disinflation? We don't necessarily see in services. We'll talk about that later. Want to talk about China reopening as well. Did you see what the spokeswoman for the foreign ministry in China said about restrictions being put up for Chinese travelers out of China into places like Europe, the United States? Quote, We believe for some countries, entry restrictions targeting only China lacks scientific basis and some excessive measures are unacceptable now. That's kind of dripping with irony for a lot of people waking up to read that given what China has been doing over the last two and a half years. So, yes, that is I think a lot of people heads this is pretty rich, considering that other people have accused perhaps China's measures as not particularly scientific and not necessarily rooted in anything else. But I would say this, it is notable to

me, aside from just the irony and the richness here, there is an aspect of what kind of tit for tat do you end up dead? China, as they try to communicate a very convoluted message to their population. I've heard a lot of people tell me already this morning, look at the weak data out of China. Look at the weekday trade to China. I looked at the weak data out of China. I just think it's more important to think about whether DAX is going to be six months from now off the back of the decisions that have been made over the last couple of weeks. Do we get the ugly face of data like we got out of Europe where social mobility starts to turn down because you get people south sanctioning effectively off the back of a rising sickness. You get people calling GAO have all those kind of issues and then slowly, slowly, in the months still to come, things start to rebound and then the rebound pretty quickly.

Joel Weber, the people who are ahead of that, looking at the mobility data in the US, in Europe, there one Joel Weber. Remember, they were the ones who were ahead of a lot of the increase in economic data. So can you have the same kind of trade in China when there is a very different economic backdrop as well? It's not just Covid that's going to read a statement. So how much weakness do we need to look through? We'll pick up on that a little bit later. As I said about 10 minutes ago, T.K. is going to join us in about 10, 11 minutes time is going to sit down with Ian Bremmer of Eurasia Group on the top risk.

I understand he's going to lead with a lot of questions on China right here in New York. We look down to D.C. with Amari Hall down. She joins us now at Bloomberg. Wasn't a correspondent AMH, fantastic to catch up with you.

Let's start with that Speaker VoLTE face down showdown for Kevin McCarthy a little bit later. Will he get 218? Well, we just don't know yet, Jonathan. And that's what's so scary going into this vote for Kevin McCarthy. Remember, this is the first order of business for the new Congress. Even before new members are sworn in in

Washington, went to bed not knowing if he was able to clench the votes needed. It's 218. If every member is present, if not every every member is present, it could just be a majority.

That's actually happened in the past with former speakers Pelosi, Boehner, new Green. Greg, the issue McCarthy has, though, is that really this is infighting of the Republican Party. So even if he's able to clinch the speakership today or potentially in the next few days, because this will just continue until there is a speaker, unless they are Jihye Lee Congress, then this just paves the way and doesn't really exude a lot of confidence, the Republican Party, because he's already having to make some concessions. And Mary, what's the significance of this in terms of where the fissures are in the Republican Party and where the battle lines are being drawn? Well, it just shows how much hold you have of these hard right representatives, really, the Freedom Caucus. You have five who are coming out. These are really the no, never Kevin's. You have others that really support Kevin McCarthy that are actually donning some pins that say, OK, you like, OK, we're going for Kevin to the never Kevin's and the always Kevin's.

But these individuals of the Freedom Caucus, you have five who are saying outright, we are not going to vote for him. And then you have nine signing this letter saying we saw some the rule changes he wants to make. One of the biggest concessions is making a little bit easier to have a no confidence vote. But they're saying that there isn't enough concessions and a lot of them aren't specific. So they want to see more proof before even he takes that vote to be speaker of the House. But what this really shows is that down the line, it is going to be much easier for these individuals to have a hold on the party because they have such a slim majority. So what does this mean for policy, Anna

Maria? There's a lot of different political issues coming up in the next couple of months. Does this inform what the Republican power is going to be even as the majority in House? I think what you can see in terms of policy down the line and really September's going to be key, right? They have to sign off on another spending package or you can have a government shutdown. These individuals are really going to push for more hard conservative policies in terms of taxes. They want to make sure that the Trump era tax cuts, which in a few years will be ghost lighted, they want to make sure those continue. They also want to make sure that they are driving a very hard bargain when it comes to the fact that if the Republic of the Democrats want to raise the debt ceiling, and obviously that is going to have to happen for our nation to conduct daily and a normal financial practices that they want to make sure that there are concessions from the Democrats when it comes to spending. So that's going to be one of the key areas to watch.

And just quickly, before you run, just a bit of a kind of bill, did S.T. booty jets get to celebrate Christmas for the last week or not? Because I imagine the Department of Transportation was incredibly busy over the last several weeks. I think it's fair to say his phone was blowing up. Given the fact that so many individuals

around the country were stranded in airports, not able to get home this Christmas, and that is one that he is still going to be dealing with this January 3rd to see the consequences of this primary for sure in the months still to come. I heard some people talking about consolidation between JetBlue and Spirit. Is that going to get some pushback now off the back of what we experienced over over the holidays or or not? If they can have some better, you know, technological systems in play that don't lead at Manus Cranny there. I mean, honestly, you could have either argument.

I think the bigger questions for me are dividend payments, whether some of these airline companies can pay dividends without investing in better technological systems and perhaps better contracts for some of their workers. Then there's a question of what kind of responsibility is there for compensation to people who are left stranded in places not just this, but like also, for example, in Atlanta this weekend when Morris story, as you saw you talking about. Just get along to talk about you, about your experience, what it all airline down and what to. I think you brought it up very quickly. Go ahead. I ISE. Thank you, Carrie. I will say I actually went to Denver and

I was not flight ISE Southwest United. So canceled, canceled, canceled. Since I can't ugly. Just like it was horrible. I can't imagine these numbers. I went through them this morning. And thanks to the team here at Bloomberg for putting together, I'm going to fly away data. Fifteen thousand seven hundred flights Southwest canceled more than fifteen thousand seven hundred flights. And you want the percentage? Almost 51 percent of its total flights canceled December 22nd through December 29.

So it is brutal. I was in the airport and this person, who is a very experienced member of the flight world, said it's kind of fascinating to watch how badly this all went. It was just a cascade of horror. I mean, it was one terrible thing after another. And the fact that they couldn't get it back up and running because of the point to point system rather than a spoke and hub kind of system just highlighted how ridiculous it was.

They're passing around pieces of paper to tell people where they were going to be flying at different points. It was incredible is absolutely incredible. Would you trust them with your holiday travel next year? We'll see.

Well, I will help. For what price? First of all, with that set, isn't it? And how many free drinks, vouchers do you think? That's what it takes actually to put my holidays at risk, if not for you? I think that's what it gets. I just wonder how many perks they can actually offer people to bring them back with low prices, free drink vouchers, a free drink, fanciest thing. I just find that. I just I don't get it.

What is it with drinking in airports? Well, I think it's such a bicycle, you know, social rules that apply to immediately regardless of the time. Absolutely. Because it's somewhere. It's always 5:00 p.m., literally. And you might be flying there in Burma.

Coming up next with Tom Keene from New York, this is Bloomberg. Live from New York City. Good morning to you. Happy New Year. Has the price action to kick off trading

in 2023 A.D. with a left and a money if you want to see a whole lot more of this after 2022. Equities up by eight tenths of one percent on the S&P, the NASDAQ 100 up by, let's call it, 1 per cent higher. On the Russell, we advance by more than one per cent as well in the bond market to tens and 30s. Look like this. And I said it earlier, I'll say it again.

I was surprised to see it. It was at a front and down by about 7 basis points for thirty five on the 10 year, 375 20 yields down by more than 20 basis points. Maybe look to Europe to say CPI out of Germany, get this regional breakdown, a CPI Germany. Then you get the headline for the whole country in about an hour and thirty minutes and that's come in across the board regionally speaking. So maybe that's contributing to this bit we see in the bond market and maybe it contributes to this as well in the affects market. Euro dollar pulling back by one point three per cent.

Lisa, one of 526 on euro dollar this morning. I'm not sure how it actually moves over to the strengthen the dollar because you would think that there would actually be strength of the euro might mean that the ECB might have to go as far if you are seeing some sort of disinflation. But where you are seeing here and this goes to your question earlier, John, is the benefits of perhaps a bit of a reopening in China, not a reopening, say, per say, in terms of just abandoning Covid zero, but the upside after the Covid spikes in some of the cities like Beijing and what that's doing to some of supply chains. A big story ahead. The geopolitics of this as well, just that back and forth between the foreign ministry over travel restrictions. I find I just want to keep going after that. I just think, you know, it's a bit rich.

It's it's a little bit. A little bit. Just a little bit. Yeah. Tom Keene Dani Burger with Ian Bremmer of Eurasia Group, the founder and president at Eurasia HQ Monitor. Generally so. Good morning to you, and it is what we do at the beginning of the year, we start strong with the top brass of Eurasia Group. It is a must read. Twenty seven pages of brilliance far too

optimistic this year on the comparative strength of America. Joining us with a brief through surveillance this morning, Ian Bremmer. Bill Dudley will join us on a divided America.

We'll do that in a bit. But right now, not a divided China. G is at maximum power. Does it give way in 2023? This is power after that Congress. Dr. Bremmer, does it ebb? It doesn't.

And good to be with you, Tom. Happy New Year to you. It's always good to be kicking this off with you. You know, there's no question that both for China as the second largest economy in the world, but also with Xi Jinping having consolidated so much power in his hands and using it in ways that are capricious and are not in any way transparent. The global economy has never experienced anything like that, that level of uncertainty in the persona of one human being. We.

We've seen it with the decision to do a complete 180 degree volte face with the pandemic and zero Covid. We've seen it with a trillion dollars off of market value of Chinese tech stocks because Xi Jinping decided that he was going to squeeze them. That level of uncertainty as China re opens their economy this year with no level of data that we used to get 5 10 years ago from the Chinese even is an enormously concerning issue. This is important and this goes to your colleague in crime and this Elizabeth economy CFR now as secretary reminded Congress. Economy told me years ago, don't overestimate GS power. Have we seen the maximum? If we have, we brought down.

Do we see him weaken, particularly off the Covid disaster? We see China weaken a little bit on the global stage. Certainly the lessons they're taking for Taiwan now that they've seen the United States and NATO in Ukraine, the lessons they're taking from concerns about American economic strength, Visa vs China on semiconductors, for example, on the ability and willingness to impose export controls and the fact that Chinese have sat on their hands. Xi Jinping is not in the same geopolitical position he was in before the pandemic started. Right. But politically, inside China, he has

only shrunk. And that is a that that is the nature of the risk for 20, 20 years of Permian. You leave with Russia and with top, top 10 risks. But how does China permeate out to all the other thinking of the top risks this year? They just seem to dominate every conversation.

Well, it's not that the Chinese do. It's it's something very specific does, which is that in a time that the United States democracy and economy is actually coming out more resilient and stronger than any one out there would have imagined one, two, three years ago. We are seeing around the world a significant number of super empowered individuals who aren't getting great inputs from experts who are able to act with impunity and are not getting what they want in various ways on the global stage.

Putin is one. She is another. The Iranian supreme leader's a third and a small handful of tech center billionaires are a fourth. And those individuals are driving at this commensurate amount of global risk in the marketplace right now. Let's look at your work. GS Zero, the concept of G 20 GHG G7 down to a codified Bremmer phrase G zero or much more importantly for Americans, us versus them is the basic drama out there. How do we prosecute in two thousand twenty three a foreign policy with G.

Forget about Putin. How do we prosecute a foreign policy with China that gets something done 12 months from now? Well, two different ways on the competitive side. You lean, lean into American strength, which turns out to be national security broadly defined. So in the same way that the Germans have made mistakes for decades and the Europeans are at large and letting too much of their energy security lean on Russia. The Americans have let too much of R technology, national security lean on Taiwan a hundred miles away from the mainland. Now, what we are now trying to do, not just the United States, but with allies as well, is say we're going to redress that.

We're going to redress it because of national security. So you, the Japanese, you, the South Koreans, you, the EU, the UK, the Canadians, you're all gonna be with us on these export controls for anything the Chinese could use that would threaten our national security directly. And that's a policy that will align the G7 more broadly on China. That's important. But at the same time, Biden does not

want to be in a cold war with the Chinese as want to fight over Taiwan. He doesn't want the impact. Of competition on national security to bleed out into the broader economic interdependence of the two continents for something new here and I haven't gotten it from Secretary Blinken, I don't think I've gotten it from the Biden administration.

Let's go back to something like the military industrial complex. This is back when two lane had terrible football and they won at one point a year ago, a year ago. You know, they stunned USC last night, which was great to see. But the shock of Tulane football. I'm looking for a shock in the Bremmer world in your top risks. What's the thing our viewers and listeners have to look for six months and 12 months from now? Well, the shock that comes from a Chinese leader that is making policies. I mean, the end of zero Covid, a lot of people thought that it was going to be incremental.

After he secured power in that for that unprecedented third term in the party Congress, he didn't move away from it all. No. It shocked everyone. No one was expecting this even three months ago. Even two months ago. Why?

In response to sudden demonstrations, the information got to him and he, as an individual dictator of the second largest economy of the world, made that decision. We're going to see more uncertainty of that kind from the most powerful individual on planet Earth in 2023. Putin is in a corner. I want to finish up here on China

because we want to talk to Bill Dudley later on and talk to Mr. Rudd of Australia later. And course, focus, focus, focus on Europe. We'll do that, folks, here in a bit with Carl Bildt. Okay, fine. But is the chemistry of China change? The history, is it cities, states like Shanghai and the new Hong Kong and all that versus a federal Beijing? That's right. Is that traditional calculus still in play? Haven't seen it since Mao.

What's happening right now and at the time of Mao, the enormous amount of uncertainty in China didn't matter to the global economy. They weren't interconnected to it and they were vastly less powerful. We today have the same level of concentration of power that you had during some of the worst episodes, chapters of Chinese history. Let's respond to that concentration, the autocratic power with confidence, but also with strategic patience. In other words, take shots when you know they are important with allies. Strategically, the new policy that you see from Biden is on semiconductors and export controls.

That is containment to sea change. But in other areas of the economy, don't allow that to dictate what you're doing. Got one minute here. We've got to get back to John and Lisa and the markets very, very importantly here. Do you see a rekindling of what I'm

going to call from World War 2, a MacArthur isolationism? No ball. Not if the Republicans don't want to. It's not that they don't want it. It's that every one that throws money around in the United States strongly wants to ensure that doesn't happen. Furthermore, no American allies on the global stage want it. Not one, not one. Not the Japanese, not Europeans that

care. Batten Biden cares about that. Thirty seconds. Jon Favreau demanded. I ask you this question. You nailed Merkel in Germany two risks ago, top ten years ago. Didn't Merkel fail and Germany didn't.

Merkel is the reason we're where we are in Europe right now to choose to Carl Bildt, is it because Merkel felt Merkel failed on energy policy and now they are paying the price for that? You know, the European Union is stronger today in part because of work that Merkel did. So you have to give her a middling grade. The teaser, what we're going to do with Dr. Bremmer here, Eurasia Group. They celebrate the 25th anniversary.

And very importantly, their top 10 risks. And, John, the 11th risk that Eurasia Group came up with. Was it tough Nam would somehow find an offense? Have you got some match in endless analysis from Eurasia Group HQ at home? What's the matter? VIX.

It's out there. The match review is kick the ball from far out. CAC has to be it. Looking forward to the conference that is not at risk.

T.K. fantastic work. Canceled rights for the rights group president Ian Bremmer. Most don't come from your right. Throughout the morning, including interviews with Carl Bildt, the former prime minister of Sweden.

We'll catch up with Bill Dudley, good friend of this program, the former Newt, former New York Fed president Kevin Rudd, former Australian prime minister. Coming up a little bit later as well. I'm looking forward to all of that. Primo and China and what's going to happen with the Fed and with Betty mentioned a Fed reserve through the first 40 minutes of programming. So for those of you interested, first meeting of the year starts the end of this month decision. The first of next month. I think that probably a lot of people who are very happy that it took this long for us to mention the Federal Reserve.

I do wonder whether this year it's action and take a back seat in some respects just simply because the real economy has to take over. What happens if they just stop hiking and we stop obsessing over their every move and we actually start focusing on what you think we might be able to say? I think I may get a shout out to anyone. Give Glenn Beck economics. Who last summer said that the terminal rate could hit five. And I think a lot of people were still laughing at the time.

And here we are talking about a terminal. Right, likely to hit five and the Federal Reserve this year. Yeah. And I think that a lot of people are expecting it to stop their. I don't know if we're going to start to hear, and I suspect that we will shift away from some of the tone that we would have to overshoot to 5.5 percent or 6 percent. I'm very curious what built up the ASA sound that because there's a feeling that perhaps the price levels are really coming down faster than people expected.

We'll see. We'll get CPI next week on the 12th. Then you get some earnings from JP Morgan on the 13th before we get to all that good stuff. You've got payrolls coming up this Friday. Equity futures right now and the S&P up eight tenths of one per cent on the S&P 500. Yields are coming in Big Bear into the bond market to kick off 2023. Yields down 20 basis points. Your 10 year.

Three seventy five. Keeping you up today with news from around the world with the first word. I'm Lisa Mateo on Capitol Hill. Kevin McCarthy's chances of becoming

speaker of the House remain in doubt as Republicans prepare to take control of the chamber. The GOP will hold only a slender majority when the new Congress convenes today. McCarthy can't afford to lose more than four Republican votes, and he's opposed by a number of hard line conservatives. IMF managing director Kristalina Georgieva expects a third of the world economy to be in a recession this year.

She told CBS News that's because the three big economies, the U.S., the EU and China are slowing down at the same time. But Gore Gabr says that if the resilience of the U.S.

labor market holds, that would help the world get through a difficult year. More troubles for U.K. Prime Minister Ricci's soon neck. British Rail workers will walk off the job. Much of the week, they'll strike for five days starting Wednesday.

Nurses and ambulance drivers, they plan to strike later in the month. Unions are demanding bigger pay hikes to deal with record inflation in China. Foxconn has bought the world's largest iPhone plan back to about 90 percent peak capacity. That suggests that Apple's biggest production partner now has enough workers despite a Covid outbreak and a staff upheaval. In November, thousands of workers at the facility either left or staged. Protests against extreme Covid restrictions and pro rally driving legend Ken BLOCK has died in a snowmobiling accident near his home in Utah.

BLOCK co-founded the skateboard brand DC Shoes. Later, he began driving rally cars and revolutionize motorsports filmmaking. Ken BLOCK was 55. 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.

I'm Lisa Mateo. This is Bloomberg. We expect one third of the world economy to be in recession for most of the world economy. This is going to be a tough year for India. We leave behind.

Why? Because the three big economies, the US, EU, China are all slowing down simultaneously. That was the IMF managing director speaking to CPS over the weekend. Equity futures right now rolled in over with positive still, but we were up by about 1 per cent on the S&P. Not so long ago, about 20 minutes ago on

the S&P, right now we're up by four tenths of one per cent. That's that line on China's slowing down from the IMF managing director. I mean, Lisa. Sure.

But for how long and how quickly are we going to bounce back later this year? Have we already seen the worst of it? And if that's the case, what kind of offset does that give to emerging markets? And ironically, a lot of investors are betting against Chrystia Kristalina Georgieva saying, Ashleigh, he's been Emma Chandra. Exactly. Never. OK. You're shipping a stark warning to 2013. Okay. You're right. Agree. FH check with the M premier and a

special guest. They T.K.. John Farrell, thank you so much. This is the lead of the top prize this year for Eurasia Group and no surprise it is on Mr. Putin and Russia. With us, Dr. Bremmer. And joining us as well, someone with a

European and Russian perspective. Carl Bildt is the former prime minister of Sweden. They are very much in the news, but with all sorts of other public service to his continental Europe. Dr. Berman. I want you to brief in here before we get to Carl Bildt.

There is an understanding of Finland and Sweden on down to Turkey, this border, which you've talked about at Eurasia Group for years. What does it border that what? That Eastern Front, whatever you want to call it. What does that view look like from a rogue state? Moscow, a rogue state. Russia. Yeah. Well, it looks a lot worse if you're a rogue state.

If you find the present global order unacceptable. And if you find that you're being humiliated through acts of your own and trying to get yourself into a better position, what it means is that NATO is seen as aggressive, it is expanding, it is more forward deployed. And Ukraine, a non NATO country, increasingly has the best supplied, best deployed, best trained, best intelligence of any military, best capacity of any military on the ground in Europe. It could not have gone worse for former President Putin. And that border only looks more problematic when you as Russia do not have any military strategy to countenance it in 2023. Summary from Eurasia Group there. Go to Carl Bildt again, the former prime

minister of Sweden. Mr. Mitchell, thank you so much for joining Bloomberg Surveillance today. Carl Bildt, how alone is Vladimir Putin? I think he's increasingly alone.

I think we should understand that the decision that he took on February 24th, last year to launch this particular war was a decision taken by him. I think it was a very, very close circle around him that was fully aware of his intentions. And of course, that decision was then grudgingly accepted by a lot of the Moscow elites. However, you phrase that in the belief that he would actually succeed.

But what has been happening since then is, of course, that he has gradually failed, failed with the one part of the strategy after another. And that means, in my opinion, that he is increasingly isolated in Moscow without necessarily being an active opposition as of yet. But a lot of uneasiness around him. Carl Bildt, the tension that Mr. Putin enjoys and likes is safe, personified in your Sweden and Turkey. The distance from Sweden to Turkey has been noted throughout this war.

How do the allies coalesce around one voice? What is the process this year to rebut this rogue state? Well, I think the last year has been and I think you'll see a continuation of this year, very impressive in terms of European action, solidarity and trans-Atlantic bonds. I don't think I'm fairly certain that this food had not counted on that. He had counted on the Americans not being too engaged following what happened in Afghanistan. It counted on the Europeans being divided, which sometimes happens. And he had counted on the Ukrainians not being too big of a deal supporting.

They depended on all of these governments. He was fundamentally wrong. And now he's gradually paying the price. What do you need from President Biden? From Secretary of State Blinken, from a new American, particularly with the American politics that's new here into a presidential campaign? What do you need from America to steel for a long war? The continued American support, both in political and military and financial terms as they import the European and American support is now roughly equal. But on the military side, the American

support is, of course, much more important. And the political leadership that has to give it given by the press and the White House has been important in order to mobilize a global global opinion. And we sincerely hope that that will end. There are no indications that the country that that would continue to be the case do this important deal. There is no way ahead of us.

Ian Bremmer, we will deal with someone there who's just still in the pragmatic reality of European politics. I want to dovetail that with a new movie that's coming out all quiet on the Western Front. Another treatment of a classic book or class movie from another time. How can America assist Europe if a large part of America really doesn't want to be involved in Europe like we didn't want to be involved in 1913 with the first American LNG is making its way to Germany.

Today, the United States is doing an enormous amount there, by far the biggest military supporters of Ukraine in the world today. And American technology companies are by far the most important national security supporters of Ukraine in the digital space, in the cyberspace, in the virtual space. That's enormously important, too. That's not being paid for by the American taxpayer. Now, you put all of that together. The risk in 2023 is not that it falls apart. It's not going to fall apart this year. The risk is that Putin increasingly losing on the ground from a national security perspective, a military perspective, an economic perspective and diplomatic figure with no friends becomes like a global Iran.

He he he is the most dangerous, most powerful rogue actor that the planet has seen in your and my lifetimes. And his willingness to go after NATO to use asymmetric attacks when nothing on the ground or even in the air increasingly works against a well defended Ukraine. That's the risk for 2020 from get out front of this by questioning NATO and their commitment to their investment in NATO.

Was Donald Trump ahead on this? He helped Putin believe that there would not be a united response. Trump's America first helped lead two microns more rhetorical strategic autonomy for France and saying that NATO was brain dead. If you're Vladimir Putin, after four years of Trump, you increasingly believe for reasons that Karl mentioned, that the United States and the Europeans wouldn't care about Ukraine. We need to consider this further here. Carl Bildt, thank you so much for joining us. Former prime minister of Sweden.

We'd really like to get you on surveillance again here in the coming weeks as this story unfolds. John, I saw the news over the weekend here really overnight almost on Ukraine's attacks on troop levels in Russia. And again, this war may be off the radar. No, this war continues. You remember, Tom, nine months ago, we were talking about maybe a lasting a couple of months. And here we are staring down the barrel of another year of it. And twenty three take CAC right to catch

up. We'll catch up with you. I think in about 30 minutes time. Looking forward to that. Surprises last year for me, Lisa. Brent crude only up by about eight dollars a barrel on the year after everything we saw take place. Yeah, everybody was a bull except for Citigroup.

And Citigroup was correct, at least in terms of the scope of bullishness. What does that mean for the why are people really traveling that much less? I mean, if you go on the roads, if you go in the airports, do it, does it feel like people are actually less mobile? It doesn't feel like that to me at all. Q For you, only forecasts for the Shery Ahn crude Q4 23 WTI forecast. The median is seventy seven dollars based on our survey Brent Crude. The forecast is about 81 Q4 23. You can find that on PFC on the Bloomberg term. If you are a subscriber.

So Lisa, basically what we're saying based on these forecasts, the medium for whatever that's worth. Yeah. Is that crude is going to end the year basically where it is right now. Keep that up. I want to find out what happens with China. I mentioned this a couple of times. So you've got China on the supply side. I think it's a real conversation to be

had about whether we get further dislocations because of the demand or you get supply chain relief flicked to Apple. And what's happening with Foxconn overnight on the demand side? Where does the demand show up? Have they stockpiled enough commodities through 2022 when demand was softer to maybe avoid that big kick higher in prices this year when China really gets come in? Once upon a time, it was like a couple of months ago we were talking about how weather would actually matter a lot. It doesn't. It has mattered a lot. And I feel like we're not talking about

it enough. And how much is whether the reason why gasoline prices or oil prices or natural gas prices are where they are, we're seeing that big plunge. And how much could that reverse if that changes? Right. I mean, this is the question. Whereas the peripheral demand, China comes back on line, a little bit of cold weather.

How quickly do things rebound? A lot from New York City this morning. Good morning. That conversation is going to continue. Equity features on the S&P 500 roll over just a little bit with positive four tenths of one percent. 2023 could continue to be pretty challenging for stocks, fixed income as back in 2023. You don't have to go out 10 years. Q1 will be one big and bumpy. And I think China's reopening is not

going to go as smoothly as people think. We're moving to twenty three. We're gonna start the year with a coupon on all wages or local roads, fresh food prices in 2023. So I think purchasing power is going to be there for consumers. This is Bloomberg Surveillance with Tom Keene, Jonathan Ferro and Lisa Abramowicz. Hello, 2023. Live from New York City for our audience worldwide. Good morning.

Good morning. This is Bloomberg Surveillance on TV and radio alongside Tom Keene and Lisa Abramowicz. Some Jonathan Ferro equity futures. Positive by about four tenths of one per cent off session highs. Economists lining up to call for a

recession in the year ahead. Rameau, really warm, fuzzy stuff, isn't it, going into the year ahead and get long bonds. You heard again and again and again in the opening sequence. Bonds are back Joel Weber, which kind of makes me I know that this is kind of counterintuitive, but I'll feel a little bit more optimistic and I know that that's really strange. But you know, you have to think that if everybody is expecting Armageddon is getting better than expected data and you aren't seeing some of the worst case scenarios, does that actually mean you can lean against that, at least for a couple of months? This week in the morning so far, John, here. Why does mama bear sound so bullish on the first trading day of the year? I wonder how DAX. Yes, bad luck.

I'm looking at all of this and you see better than expected outcomes when it comes to a warmer than expected winter when it comes to a reopening in China. That, yes, is messy, but you're starting to see that mobility data change. How does that really counter some of the real bearish narratives, especially when the consumers are still spending, when you're still seeing wages going up? How much does this really create a complicated narrative that goes against some of the consensus? We get an early look a little bit later this week about some of the data through this week at a ton of it. And you get payrolls on Friday, then on to next week, just your guidance for the rest of the year, I guess onto next week we get CPI next week on a 12th, J.P. Morgan earnings kicking things off on the 13th.

And you get that first Fed decision snot to the end of this month. That meeting the decision on the first date next. I'm curious to know the balance of risks when we get that CPI report. Do markets respond more violently to a downside surprise or an upside surprise rate? This idea that perhaps inflation isn't coming down as quickly or as coming down even more quickly than people expected? What does the Fed do with that? We're not exactly expecting Fed rate cuts, but do we start talking about potentially a lower terminal rate in a more more concrete way? Neither are some of the answers.

But let's ask the right questions and your gun in that direction. We've had the conversation about how high the Federal Reserve conversation shifts now to how long do we stay there? Once we get to say 5 percent, if we even get close to that level, how long do we stay there? Because when it comes to inflation, yet peak inflation, short done call whatever comes down to what, five and stay there for how long? How sticky is this story going to be? Is it too early to move on and say, yes, 23 starts it line in the sand arbitrary date. I'm done with looking at inflation. Now I'm going to look at drugs. That's kind of the story that's been sold on the street right now is Annmarie Horden. And I'm going to be a little bit counter

intuitive here and say, how much does this really depend on oil prices? How much are people going to look back on 2022 and say it was commodity boom that people mispriced and that that faded in 2023? Or does it not, as it were, actually rear its head, especially with China's reopening equity futures right now? Positive by third of 1 per cent. For those of you just tuning in, just waking up, perhaps we were much, much higher than this about an hour ago. We were high by about 1 per cent. So equity futures might be positive now, but they have been rolling Gopher Lisa, over the last 30 minutes or so. You have to wonder what liquidity is doing, especially with such a big move. And buyers, I suppose that the equities have gotten with the bond story, which is the bet into bonds, tends to be gloomier. So I guess people are offending.

I'm not going to give it a narrative. Who knows what's going on here? It's the first trading day of the year in the United States. We're looking at this week, Wednesday. You've got U.S.

job openings dead. I'm really curious to see how quickly the number of openings per each employee in the United States keeps coming down. We know it's been incredibly inflated. Is this a sign of early loosening in a labor market that has been ultra tight Thursday with the ADP employment data at 815 a.m., initial jobless claims at eight thirty a.m. We have seen really very little increase in the people filing for jobless benefits. Is this something idiosyncratic about the nature of the employees laid off, that they're getting severance bonuses or that they're getting some sort of gardening leave? Or is this simply, again, that this is a market with far too few workers for the jobs that are needed to be done? And Friday, we get the real read on the employment picture in the United States, 830 a.m.

non-farm payrolls. How much do we see average hourly earnings continue to expand? Do we see a deceleration in the pace of that? If not, what does that tell us? How do we interpret that data at a time of really convoluted messaging

2023-01-06 16:43

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