• 00:00We are breathing rarefied air in terms of volatility. The markets are also going to feel the volatility for for time to come. The bigger picture is you're always looking at the systematic risk. It's been a seismic shock a seismic inside tennis shock has hit the system. This is Bloomberg Surveillance early edition with Anna Edwards Matt Miller and Kailey Leinz. It's 9:00 a.m. in London 5:00 a.m. in New York and 5:00 p.m. in Hong Kong on this Monday March 14th. Our top stories today. Panic selling in Chinese tech stocks. The Hang Seng Tech Index falls more than 10 percent. There's concern about Covid lockdowns. And the Beijing's ties with Russia could lead to a backlash against Chinese firms. China's Covid zero policy back in focus is hitting key Apple supplier Foxconn as it holds iPhone production in Shenzhen after the city is placed in lockdown for at least a week. And the US and China are set for their first high level in-person talks since the invasion of Ukraine. Meanwhile U.S. officials say Russia has asked China for military assistance. Welcome to Bloomberg Surveillance Early Edition. I'm Anna Edwards that we've Dani Burger here in London and Matt Miller in New York. Kailey Leinz is off today. And Danny it seems a lot of reasons for markets to be nervous. A lot of reasons for us to to sell risk assets. But the market is not taking the opportunity to sell it to the market focusing on the glass half full. Perhaps what diplomacy maybe can deliver instead of focusing on the war on the grounds and concern around Covid in China once again U.S. European futures holding up well especially considering what's happening in China. And let me get to that because Chinese stocks have been absolutely slammed today. Those listen Hong Kong putting up their worst day since 2008. Now as both the macro and the idiosyncratic the macro being more lockdowns in China higher Kovac cases that means a Foxconn factory that produces Apple phones is shutting down in Shenzhen. And at the same time there's concerns of demand with new lockdowns. So that's why you see things like iron ore down more than six point seven percent. But the pain is not just China broadly. It's concentrated in taxi factories shutting down 11 percent down on Hong Kong tech stocks. But you also have the idiosyncratic risk of more regulation of this is focused on 10 a Wall Street Street Journal story saying that they are facing a record. Fine. This is over. We chat pay regulators. They're saying that they violated and time money laundering rules comes to accepting illicit payments for things like gambling. Tencent falling nearly 10 percent. That is its worst day in more than a decade. Finally worth flagging the yen they're up. U.S. dollar up four tenths of 1 percent versus the yen yen at a twenty seven time low. Remarkable to see this not able to behave as a haven. Japan imports commodities. That hurts. And of course Matt the Fed hiking interest rates with the dollar becoming the haven of choice. It's pretty amazing to see that shift. You'd think that more people would flock into the yen if they're concerned about geopolitical risks. We see S & P futures up seven tenths of one percent as Anna was saying. It's pretty surprising considering the huge drops we're seeing throughout Asia that we're still bidding this market. Right now the 10 year yield rises as investors let go of that debt to 0 5 6 8. So that 10 year yield continues to climb 1 0 5 for a barrel of Texas Intermediate right now down 4 percent. So keep your eye on oil. Obviously that's where all the volatility and all the focus has been over the past couple of weeks. And then Bitcoin you know there's no arguments we made for looking at ether rather than bitcoin. Right now bitcoin the O.G. Crypto is up 1 percent at thirty nine thousand twenty eight either is up 2 percent. So keep your eye on the crypto space as we see a little bit more risk on coming into these trades. Yeah. And as you know your crypto show later on this week. More on that. No doubt later in the program. But Tomas points about what we're seeing here in Europe about how European equity markets and U.S. futures are not taking the opportunity to sell. We do see polls of CVC. It is really varied though across the European geography right now. The Xetra DAX over in Germany up by two point three percent. The IBEX the footsie made in Spain and in Italy also doing pretty well. But in the London market we see some relative weakness even though we're even there impulses safe territory. And you might not expect to see that. I can show you what's going on on basic resources because this is acting. It's quite a weight on only European sector space. And maybe this is the one policy that is helping all the risk assets move to the upside. That is that we're seeing some of those commodities come off their recent highs. That means negatives basic resource stocks but perhaps room for other risk assets to rally. So that sector down by two point two percent. The auto sector is moving to the upside though and that's lifting the German market. More on that in a moment process. This is another interesting take on what Danny was talking about about what was weighing on the Asian session. So processes Dutch listed. It's a business though that has a big stake in Tencent over in China. And as a result we're seeing that China tech story that tech weakness down. He talked about spilling over into the European trading session. Certainly when it comes to tech exposure because that's the broad picture around lockdowns in Shenzhen. There's concern around regulation and the specifics around 10 cents as well. VW to the upside up by nearly 7 percent. This company putting out earnings just after the bell on Friday. And this is the first time the market has had to react to that. So the earnings themselves and also the outlook looking fairly robust. They're talking about. Substantial hedging in place around some of those commodity risks that this kind of business faces and Telecom Italia made up by eight point eight percent and entered a story which makes a change to took about one of those Danny at this point. It seems that Telecom Italia saying yes they are going to allow senior management to talk to KKR private equity pitches for the business even though they say they prefer a s or a domestic solution a reshuffle a reshuffle a restructuring of their own business rather than that takeover option. And worried that geopolitical uncertainty means that a lot of deals have been put on hold. So good to see that some are still going forward. Now let's get a look at what else you need to know to set you up for this week. First off EU finance ministers meeting today for the Eurogroup meeting. NATO defense ministers meet in Brussels on Wednesday. Also on Wednesday we're going to get the big one the Fed rate decision. Then the next day it's the turn of the Bank of England with their rate decision. And finally on Friday it's the BMJ their rate decision. All right. So a lot going on in terms of central banks this week. But right now we're really focused on what's going on in China. They've locked down 17 and a half million residents in Shenzhen as they face their worst Covid outbreak since the start of the pandemic. Apple supplier Foxconn halted operations at a Shenzhen sites after the lockdowns and won't be producing iPhones today. And of course the market has come crashing down. Let's get more with Bloomberg's. Debbie Wu covers Tech in Asia. Debbie I really want to focus on the market first. What we saw last week was pretty incredible and it continues this huge sell off in China Tech. So yes. So what happened today is the Hang Seng CAC in DAX Hong Kong shed more than 10 percent and it is poised for the largest drop since the inception of the index back not not 20 20. And let's couple with the fact that Chinese companies are now facing a renewed regulatory woes. So while Wall Street Journal reported earlier that Tencent is now facing a record flying after the China's central bank both thought its we could pay may have violated the anti money laundering laws. So Tencent lost more than 10 percent in Hong Kong as well today. Yeah it's a really interesting story. So that's the broad locked down story. That's what that's doing to that to the Shenzhen region. And that's what markets are pricing in at market pricing and supply chain disruption as a result of that. And also there's Tencent specifics. But on that supply chain disruption we've heard from Foxconn a key supplier to Apple of course. What's the latest there. What kind of disruption can we expect to see to that business. So Foxconn has halted operations of its campuses and sends and after the government ordered a lockdown in pick up city and among all the campuses that Foxconn is suspending operations. One of that is that yucky iPhone production site although not the scale that campus is much smaller than the. And its primary iPhone production site in central China. And impact so far has been not quite limited. Other Apple suppliers in the region which are suspending operations said that thought they see immediate impact for now and we'll see what happens next. OK Debbie thank you very much. That's Bloomberg's Debbie Wu reporting on all things tech from Taipei. Now over to Washington where U.S. National Secretary Adviser Jake Sullivan said the U.S. is watching whether China provides material support or economic support to Russia. He spoke on CNN yesterday. We will not stand by and allow any country to compensate Russia for its losses. There will absolutely be consequences for large scale sanctions evasion efforts or support to Russia to backfill them. We will not allow that to go forward and allow there to be a lifeline to Russia from these economic sanctions from any country anywhere in the world. Now Sullivan is meeting today in Rome with China's top diplomat and it will be the first high level in-person talks since Russia's full invasion of Ukraine. And reporter and Bloomberg Washington correspondent joins us now from D.C. for more. Anne-Marie what is the U.S. hoping to get out of these talks to China. Well I think it's about amping up that pressure on Beijing to make sure really twofold. One news over the weekend that they don't go ahead and come to the rescue of President Vladimir Putin who's looking for military assistance from Beijing. And then second to make sure that China doesn't try to go around the US economic sanctions. And this is really the second warning we heard from Jake Sullivan on the Sunday shows. Last week we heard from Secretary Gina Raimondo making sure the chip sector in China was on guard about this and making sure that those warnings are there that they will face pressure from the United States and they will face penalties United States if they were to come. And at the behest of the requests of closet President Vladimir Putin what what do we know about the accusation that Russia asked China to provide military support including weapons. So we don't know exactly what kind of weapons these are from the U.S. government. We also don't know how they have that intel. And another U.S. official told Bloomberg that actually this request was made after that initial invasion on February 24th. But the news is coming at a time when you see President Vladimir Putin struggle as this war enters into a third week. For China though the question is really not a wants to get involved in such a very direct way. China this entire time has really been trying to walk this line. They haven't come out and condemned Russia directly but at the same time they also haven't had this support towards Russia. And if they were going to give weapons that would totally get rid of that veneer of neutrality that China is trying to project. So it's a very interesting question. And of course it comes at this time a sensitive time when you have Jake Sullivan the president's national security adviser going to Rome to have these one on one high level sit down talks with China's top diplomat. OK so we look at those meetings in the US and Chinese officials set to meet. So as you mentioned there. Mary thank you. Annmarie Horden joining us there from Washington. Now talking of talks negotiators from Russia and Ukraine are set to hold their further talks today. That's after Moscow increased its aerial attacks on western areas of Ukraine closer to the border with Poland. Ukrainians. Ukraine's president Vladimir Zelinsky says he hopes for a meeting with Putin should then represent. Representatives of our countries are holding daily talks via a video conference. Our delegation has a clear task to do everything to arrange the meeting of the presidents. The meeting I'm sure people are waiting for. It's clear that it's a difficult story difficult path but we need the path. Let's get more with Bloomberg Real Yield Agatha Cantrell who joins us now from the Polish Ukrainian border. Maggie of course it's been a really interesting week weekend. Soria A destabilising one no doubt where you are. Given that we're now seeing Russia attacking western parts of Ukraine more aggressively closer to the Polish border where you are. Hi Ana. Yes. So on Sunday morning we saw that there had been a missile strike on a base called the International Peacekeeping and Security Center. That's just over the border from Poland into Ukraine. And this is obviously caused a great deal of concern on the Polish side of the border as well. The local mayor from that area of Ukraine said that this was yet another reason why NATO needed to close the skies as they put it essentially put in a no fly zone over Ukraine. That doesn't look like something that NATO is likely to implement but is still seeing a greater amount of concern on the Polish side of the border now that the fighting seems to have it for a certain extent come closer although it needs to be noted that most of the fighting is still around Kiev and also in the south and east of the country. Is it fair to say Ali that you're at kind of the epicenter of the of the migrant crisis right now. What can you tell us about the international response to all of the refugees flooding over the border. Yes ma'am. So we're seeing so many more refugees come over the border in these coming days and we already Poland has taken in one point five million of the total two point six or two point seven that have crossed the border. The because there is no willingness really from NATO to to close the skies over Ukraine. Really a lot of the pressure comes from international sanctions that can be put in place. Like for instance we're hearing that the EU is now mulling banning the sale of cause of valued over fifty thousand euros to Russia. And sanctions like this this upping of the pressure economically to Russia is really the main tool that the EU has right now. Maggie thank you very much. That's Bloomberg's Maggie Cantrell on the border between Ukraine and Poland. Now let's get a look at some of the stocks on the move. I want to come back to this China story because China ADR is listed in the U.S. falling pre market. We're starting to get to dot com level of pain in these stocks. Billy Billy for example the tech company again Chinese listed in the US in an ADR down over 10 percent. The concern is that with more regulation coming on 10 cent according to Wall Street Journal report that will spread out as well. Now the other tech story of course happening in China is the Foxconn closure of factories in Shenzhen that make iPhone products. Apple holding up pretty well considering that it's only down about point 0 5 percent really unchanged at the moment. Perhaps there's less fear that now is typically a slow season for iPhone orders anyway so maybe it's OK if there's less production. But at one point this was down about a quarter of a percent. Finally Lockheed Martin more of the geopolitical story here according to DPA a German outlook outlet. The German government is looking at replacing their fleet of what's called tornado jets. I'm gonna admit ignorance here. This is definitely not my strong suit but it's a fleet that's about 40 years old and they might replace it with some Lockheed Martin stealth jets. So that is up 2 percent. OK. That's the free market roundup coming up. Angie Sheets Morgan Stanley's chief cross asset strategy voice. We will talk to him shortly about what's going on in markets. The markets want to be taking glass half full approach. We is what we seem to be seeing from risk assets this morning from a policy political perspective. We will talk to Bettina RINs University of Nottingham professor of international security. That conversation coming up later on this hour. Plus the 18 minutes of trading chaos that broke the NIKKEI market. You can read all about that at any big take. That's all a big take for a story for today. Go to that function on your Bloomberg terminal. This is Linda. Welcome back to Bloomberg Surveillance. This is the early edition we are simulcast on Bloomberg Radio and on Bloomberg Television. I'm Matt Miller in New York Dani Burger with Anna Edwards in London. Kailey Leinz is out today. We're just looking at a US 10 year yield right now that is rising right now to almost 2 0 8 now to 0 8 and change. This is the highest level that we've seen since 2000 18. So it's been a while since the 10 year yield was this high. And our producer in London Valerie Sarah. So a low points out that the curve is steepening right now. So the real concern was that we would see the curve continue to flatten and possibly invert. Maybe right now that's less of a concern. But we do see a break evens surging to record highs this spring. And Edie Vanderbilt right now from the Bloomberg M Live team. Eddie what does this mean. The moves that we're seeing in the bond market. I guess the volatility is pervasive. Yeah look I think this is a function of the moves that we've seen or the high inflation that we've seen that you know is now definitely no longer transitory. I think inflation is proving to be persistent than the bond market is pricing that. But I think this causes a lot of problems for portfolio managers because how do you hedge the inflation risk. At the moment. Right. Do you go with gold. Well gold is already very very richly valued. You go with commodities. Commodities are really really elevated in a lot of cases. Bank stocks have had exposure to Russia and do other things. It becomes really hard to hedge the inflation risk at the moment. And this is something that we're taking a hard look at at the moment on markets. All right Eddie thanks so much for joining us. Eddie Vander out there from the Bloomberg and Live team. You can check out M. L. Ivey. Go on your terminal if you want to follow along with markets. Also I want to point out and let me plug myself for a second. Kelly and I are kicking off a new crypto show Bloomberg Crypto Tomorrow that debuts on the Ides of March. Eddie will probably be with us on a weekly basis there. He's one of our avant garde crypto reporters. And speaking of avant garde Michael Novogratz joins us on the first program. Definitely. Tune in tomorrow at 1 p.m. on Bloomberg Television. You can also follow along on Bloomberg dot com. Just click on live TV. This is Bloomberg. Now keeping you up to date with news from around the world here's the first world news. Russia has lost access to almost half of its reserves. The finance minister told state television that the country has about six hundred forty billion dollars and about 300 billion can't be used because of asset freezes. He said Russia will repay debt in rubles until its cash pile is frozen. And the British government is set to offer a new system for admitting refugees fleeing the war in Ukraine. After several weeks of criticism the new system includes payments to households accepting refugees. Cabinet Minister Michael Gove told the BBC he expects tens of thousands of Ukrainians will be admitted into coming up. We will get back to our markets conversation. Andrew Sheets. Morgan Stanley's chief cross asset strategist joins us. Commodities Week at today. What will be the impact of the recent spike. This is back. This is Bloomberg Surveillance Edition. Here's what you need to know. That's panic selling in Chinese tech stocks. The Hang Seng Tech Index fell more than 10 percent. There's concern about Covid lockdowns and that Beijing's ties with Russia could lead to a backlash against Chinese firms. China's Covid Zero policy has hit a key Apple supplier. Foxconn halted iPhone production in Shenzhen after the city was placed in lockdown for at least a week. More than 17 million people were told to stay at home and undergo three rounds of Corona virus testing. And the U.S. and China will hold the first high level in-person talks since Russia's invasion of Ukraine. The Biden administration wants Beijing to use its influence on Russia to end the war. Meanwhile the US says that Russia has asked China for military assistance. I'm on it. Edwards with Dani Burger in London Matt Miller of course with us in New York. Kailey Leinz is off today. So there's plenty of geopolitics to talk about whether there's the war itself or the U.S. China relationship. Hey Matt what are you looking at ahead of the market. I'm I'm looking at the risk on mood that we have to kick off the week in the US. I think it's pretty surprising considering the the sell off that you've seen in China. But S & P futures are up six tenths of one percent and investors are selling 10 year treasuries letting the yield float up to one point more than two point zero 8 percent of the highest that we've seen since 2013. Some real moves to the upside some real risk on moves today maybe even IMAX crude falling a little bit more has nothing to do with that. Now we're down below 1 0 5 a barrel for Texas Intermediate and Bitcoin is rising as well. Only nine tenths of one percent right now thirty nine thousand forty four dollars. What we do see other coins in the crypto space specifically a theory I'm rallying a little bit harder today. So definitely a risk on signal. Danny we see in terms of the pre market movers. Well Matt don't you know it's that Elon Musk Musk hypothesis. Just a few hours ago he tweeted that he still holds bitcoin ether in Doge. So by helping out a little bit when it comes to free market I should say there are some crypto companies moving higher. But I'm following this thread of the destruction in Chinese tech stocks and that's spilling over into the U.S. session. Billy Billion ADR down eleven and a half percent premarket. Part of the concern is about regulatory pressures. The Wall Street Journal reporting that Tencent is facing a fine. The other concern are more lockdowns. Foxconn shutting two of its factories in Shenzhen that produce Apple products and won't be making Apple products from that factory. Apple slightly weaker so far this morning two tenths 1 percent in the premarket session. Finally Lockheed Martin up more than 2 percent. This is a report from DPA the German outlet saying that Germany government plans to replace what's called its tornado military aircraft fleet. It's been in use for more than 40 years so perhaps it's due for a change. So instead the government is going to replace it with F 35 stealth jets. And that of course is from Lockheed Martin. Nana. Yeah it's a.. Let's look at where we are on the European trading story. Then an hour and a half into the trading day here in Europe and we've got European equity markets actually on the front foot at some point. You know maybe that is a little bit surprising given the war on the ground in Ukraine and now concerns around supply chains to do with what's going on in China of course and Covid-19 there. But still we make gains up by just over 1 percent on European stocks. Of course we should focus on the Fed will no doubt do that. That's going to be a big talking point of this week. Process is down by 10 10 percent more than 10 percent. This is a Dutch company that has a big stake in Tencent one of the yet Chet Chinese tech names in focus today. And then we've seen heavy selling in Tencent because of specifics to do with that business and and reports around it but also to do with the broader lockdown story that I mentioned around Shenzhen which is a tech hub of course over in China. VW up by more than 7 percent. We got numbers out from VW after the close on Friday. It's the numbers themselves. Also the outlook which seems to be lifting that particular stock and also that talk of hedging substantial hedging they say they have in place when it comes to the higher commodity prices and Telecom Italia. Nice to talk about a little bit of emanate because maybe some business is putting those thoughts on hold at this point given the volatility we're seeing in many asset classes. But Telecom Italia saying yes they will allow senior executives to talk to KKR because that's that business that that company has been interested in buying up Telecom Italia. So we'll focus in on that in a story as well. That's all right. There's still some today on this Monday. Let's get back though to the economic fallout from Russia's full scale invasion of Ukraine is likely to include a further pickup in U.S. inflation. According to Mohamed El-Erian Bloomberg opinion columnist and Queens College Cambridge president he spoke on CBS Face the Nation yesterday. There will be an inflation component. I estimate that at seven point nine percent we will probably get very close or above 10 percent before we come down. And that difference will be all because of the disruption that Putin's war implies for commodity prices. Says supply chains and shipments. Mohammed also wrote an opinion piece for us. You can check it out on the Bloomberg type O P I and go or an I L Aryan. Let's get over to Andrew Sheets chief cross asset strategist at Morgan Stanley to get his take. Andrew we're hearing more and more people saying a 10 percent print out is a possibility. This puts the Fed in an incredibly difficult position because you've got the inflation to fight clearly but also slowing growth concerns. How do you square that circle. Yeah. Thank you. Good morning. It's nice to be here with you. So. So we think the Fed errors on the side of the inflation concerns be a part of that is we think that that Chair Powell made it pretty clear commitment that he wants to do whatever it takes to bring inflation down that that credibility is is very important. But also we think in both how Morgan Stanley is tracking the economic data and how the Fed is tracking the economic data that the economy is still fine in the first quarter that growth is tracking OK. That this this conflict is not going to tip the economy over into recession or a severe slowdown. And so that gives the Fed we think more leeway to ultimately hike rates and hike rates further up up towards a higher terminal rate that the markets currently pricing. Andrew so that's the war in Ukraine clearly will be something that will be thought about a lot by. By that particular central bank and many others that are meeting this week. What about what we're hearing out of China at the moment. Further lockdowns big lockdowns being put in place particularly in the tech focused area of Shenzhen right now. How much pause for thought does that give global policymakers around the growth story around supply chain disruption that could ensue. Yeah. Look. So this is another really good point. Is that the the lockdowns and the lockdowns in China further lockdowns in China production or yet another negative supply shock for it for the global economy for it for the U.S. economy. But that sort of negative supply shock is going to create only more inflationary pressure which we think the Fed would continue to hike rates and see to tighten policy. Because if so I think it's just one more link actually in terms of why the Fed ultimately will need to keep hiking. We'll need to hike to a higher terminal rate than the market is currently pricing. And and again well while these supply chain disruptions could be significant we don't think they are going to slow economic activity enough where they would reduce more inflationary pressure than they would contribute to. OK. And Andrew we've been thinking about that inflationary pressure because of course of what we've seen in commodities today looks a little bit different a little bit of respite from the higher commodity story. We're down more than 3 percent on Brent with 1 0 8 handle right now. But the direction has been upwards. We've seen a substantial spike up in oil prices. I know that you've been doing research on what the after effects of that that spike in oil prices might be for other asset classes. Yeah. Great. So when we look at past periods where oil prices have spiked significantly what we see is initially the market being quite weak over the next month after those those larger spikes. Those kind of 15 percent plus up moves in a month but then actually ultimately doing well. And so those spikes tend to be more fleeting for the market than permanent. That's especially true when the oil curve likes. Looks like it does today when it's backward dated. That tends to be more consistent with strong demand which is indicative of a strong economic backdrop. So I think the same playbook could play out today. We're obviously in a period still where we're seeing some weakness but the curve being backward dated we think is still consistent with actually a pretty solid global backdrop. We think it's more inflation than stagflation at this point. And if ultimately we think that actually means that longer dated oil prices can be a little bit higher front dated the front part of the curve as opposed to our forecast the back part is is lower. And let me take you to the tail risk scenario and it's one that Bank of America lays out of Russia cutting off Western oil supply. They say oil could go as high as two hundred dollars a barrel. There'd be a credit crunch. You'd see high yield base widen about 500 basis points. Andrew do you need to have preparation in your portfolio for such a scenario even if it's not it's not your base case at this moment. Yeah. Thanks. Thanks Danny. Look I mean it's it's clearly a possibility. I mean I think it's a risk the market is thinking about. I think that that might help explain why you know European assets saw such a significant underperformance over the last month. They they clearly are more exposed to these sort of energy disruptions than than in other markets. I think if we think about these risks we do need to think about you know some important factors in terms of what's priced in. And and there I think the oil curve itself is quite interesting because the oil curve is pricing you know quite a bit of tightness quite a bit of risk premium in kind of oil over the next month or two. But that oil that longer term oil price to a price six months from now or twelve months from now drops off significantly. So so yes I think the market is. You afraid of that disruption. It's not afraid of that disruption lasting for a a more severe period of time. And I think in any scenario where we're talking about say materially higher default rates oil price disruptions would need to occur for for a longer period of time. So as a portfolio hedge we would like that longer dated oil as a way to hedge against the. OK so it's not just where we spike to but also the backwardation and the structure of the oil market. That's important. Andrew thank you very much for your time. And she she's joining us there from Morgan Stanley. Coming up on the program we'll get to the geopolitics. Betty Arends joins us. University of Nottingham professor of international security. We'll get her perspective on what diplomacy can really achieve this week in the situation on the ground. This is bringing back. This is Bloomberg Surveillance Early Edition. You're looking live at the principal room coming up later today. District of Columbia math Muriel Bowser. This is Bloomberg. I do think that Putin can set a trap for China signing this huge declaration on Feb. 4 when February 4 he already knew that he would invade Ukraine and he already knew that bringing this visibility of China is support of Russia would have toxic consequences for Junior's image of Virginia's economy. That was the Ukrainian ambassador to Japan speaking earlier to our colleagues here at Bloomberg. Let's get more on the war in Ukraine with Bettina Rand's professor of international security at the University of Nottingham. Bettina good to speak to you. Thanks for joining. What is the role that you think that China will go on to play here in this conflict. Because they've been walking a tightrope up until this point trying to maintain some sort of neutrality but also stressing that the strong relationship that they have with Russia and condemning some of the violence on the ground. So how do you see the role of China developing. Seems crucial as to where this heads next. Yes it's difficult to predict that this movement of course so far China has failed to come down decisively taking sides in this particular war. And also as I read earlier the Chinese official said that Russia's request for more weapons that it was discussed in the media yesterday is American disinformation. So we don't really know at this point of course what exactly Russia requested. But of course China is in a very difficult situation. And I see this not as a China expert but as a Russia expert who knows a bit about the relationship between the two. Of course Russia and China have a strategic partnership. There are many agreements when it comes also internationally about the US's role in the world about multiple clarity and extending up to what they see as us Germany and so on. But there also is the understanding that in this relationship China is much more and has been more important to Russia than the other way around because economically of course China's relationship with the West and with the US in particular is very important. Yes. From this from this point of view I think we'll be we'll have to see obviously how China reacts. But my hunch would be that especially if China perceives Russia to be on the losing side of this war. And obviously there are indications that this is clearly not going Putin's way so far that they will be very careful about openly supplying military equipment and so on to Russia at this point. Well you know we heard the ambassador in that interview with with Shery Ahn earlier say that China is making the wrong decision here because of you know the economic ties that it's already forged with Europe. Those would have to be severed in case of. Well in case of a NATO versus Russia conflict is the bet here that you know Europe is already so entwined with Russia economically that they can't disentangle themselves. Is the bet here that that China is also that deeply involved and mashed in Europe's economy. Well that again I'm not an economist nor a China expert but obviously it's from what I know there is a lot of inter action a lot of obviously a lot of import export going on much more so actually than with Russia. Between the West and the US. And therefore I would have thought that China will be quite carefully watching also how it the US and the West is reacting to any potential Chinese involvement in this particular war at the moment because like I said ultimately Russia's economic relationship with China is less important to China than the economic relationship. And you know at least a workable relationship with the US and with the West. Bettina you wrote the book on the Russian military. I mean that quite literally wrote the book Russia's Military Revival some years ago. Now we're in a situation where as you said much reporting has been done on the slowness of Russia's military. They reportedly looking to China for help in the military. What does this tell us about the state of play of Russia's military. Well I did argue in my book which came out in 2013 that obviously the Russian military had modernized to a large extent and it was an incomparably better compared to itself compared to the Russian armed forces in the 1990s and so on. So obviously we saw our Russia performed in Crimea and also then in Syria where they showed technology stack and you had not seen before from Russia in state armed standoff capabilities. Excuse me as well. However I also said in the book that of course when it comes to operational art and overall capabilities Russia still is behind and continues to be behind and not comparable to the world's most advanced armed forces and the US in particular. And this is also something we see of course now I think in some ways some analysts had overestimated the extent to which Russia would be able to find to fight these modern combined arms operations. But having said that of course that comes as little consolation to Ukraine at the moment because in spite of not being as skilled as people expected of course Russia continues to inflict unthinkable and absolutely barbaric destruction on Ukraine death destruction of infrastructure and so on. And Bettina I want to ask you about about Russian leadership at this point. That seems to be a lot of debate as to whether this will in the end result in any change in leadership in Russia. Do you see any means by which that happens. Not not anytime soon. I think that would be my major point. It is it seems clear to me and also many people would agree with that that Russia's war in Ukraine was an absolutely massive strategic mistake on behalf of the Putin leadership. And it is irreversible in many ways. And obviously it will not be forgotten by the West by need to obviously by Russia's neighbors are Ukraine no matter how the sort of needed outcome off the off the ball will be in the long term. And Russia will be very will have a very hard time to recover from this in the long term. So I think ultimately there will be a change or there has to be a change in Russia's political regime. I mean we saw during the Cold War how the Soviet Union ended up when they basically put all their effort into a military capabilities when they tried to compete only in the military dimension not being able to compete in other ways and so on. But the point is that I would not expect this to happen anytime soon. This could be a matter of if it's okay no time soon. Bettina thank you very much. Between friends of the University of Nottingham thank you for bringing us your thoughts coming up on this program. In fact coming up in the next hour more on the war in Ukraine. The teen afford him and global foresight at head of global political strategy. That's at six thirty a.m. in New York 10:00 a.m. in London. This has been. This is Bloomberg Surveillance early edition on Matt Miller in New York with Anna Edwards and Dani Burger in London Kailey Leinz is off today. Tom Keene co-anchor of Bloomberg Surveillance joins us now with a look at what he's got coming up today in the program. And Tom you're single best chart. What are you looking at. That's one indicator of the Pacific Rim and it's suddenly the Pacific Rim. And it's real simple things over there. A little shaky of course all this coming off the war in Ukraine but much much more including Covid in China. And one of the great thermometers of the Pacific Rim is to the north and the Japanese yen and the charts real simple yen safe haven stronger yen his abruptly and with a vengeance gone the other way. And to be up to 117 yen is a big deal long ago and far away. David Malpass then of Bear Stearns now at the World Bank. Talk to me about 120 130 yen. It's sort of a shock that we would even get to 120 and a weaker end 130 is basically unimaginable. And Tom I know you're going to be talking about effect putting effort expense in sensing with some of the gas you've got coming up. But but also the geopolitics of course. Well the geopolitics is front. So it's an odd day. And in your course living in London with some of the news flow it's sort of a clumsy Monday Elsa lingo. So join us with RBC with a wonderful perspective on euro and those dynamics. And we are honored to bring people Seth Jones see us. I guess this guy is the real deal. He is the American expert on guerrilla warfare. There's no other way to put it. He's the legit special operations expert on what Ukraine needs to do. A lot to stay tuned for then Tom thank you. Tom Keene co-anchor of Bloomberg Surveillance will be back with that great lineup of guests a little bit later. And that we've been remarking on how we see quite a lot of risk appetite in today's session. European equity markets to the upside yields going higher. Despite all of the negative headlines that we keep on covering. But wait actually while we're in the three bucks let me go ahead and throw on my glasses as well because I just wanted to do this. Yes. For radio audience we are all wearing glasses that I think are maybe all exactly the same pair as well. It's your glasses edition founded Issue of the Eye. Exactly. Sorry Mako hair. Well I was just saying it's interesting to see this crash in China tech shares and still the risk appetite that we're seeing in Europe and the head of the U.S. Open. Yes absolutely. It does filter through but it doesn't dominate mode. Bloomberg Surveillance is ahead. This isn't a bag.