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'Bloomberg Daybreak: Europe' Full Show (04/13/2022)
Mike Letterman
Apr 13, 2022, 8:31 AM
8 Views
'Bloomberg Daybreak: Europe' Full Show (04/13/2022)
00:14
This is Bloomberg Daybreak Euro. I'm Dani Burger in London alongside Manus Cranny in Dubai and these are the stories that
00:21
set your agenda. Dead end. Vladimir Putin says negotiations have stalled.
00:31
As President Biden accuses him of genocide U.S. inflation hits a 41 year high. The Fed's Brainard and barking call for a quick
00:37
set of rate hikes to neutral treasuries slip. Boris Johnson and rescue cynic are fined over party gates after breaking Covid
00:47
rules. UK inflation hits the tape this morning. The IBM Z which is known at HSBC has looked at palatable uses
00:58
the language that path of least regret when they went for their 50 basis point hike. That language shine at the Fed. I think the
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tech pellet tool sets the agenda. Danny. Good morning minutes. Yeah 50 basis point move from the Arbenz
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Zee I refuse to say is that this morning I am embracing my Americanism just at least for this morning. Lee ISE 50 basis
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point move up. Is this a preview of what's to come for other central banks.
01:28
Well we have the language it's N and we want to move expeditiously. Yes we know that that's the standard. Now new Fed
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speak expeditions. I'd love to know what that means. But I'm drawn to Tom Barkin. The best path best short term path to is to
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move rapidly to that neutral range and of course your brain Brainard reaffirming the expeditious moves and then pull out.
01:49
Well we know that UBS is view of Bullard is. He thinks it's fantasy that the current policy is good. He wants to move at a
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much faster pace. So I put it to you Danny the risk is this in markets not just one 50 basis point hike but no. What is the
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risk. What is the statistical risk of multiple sequential 50 basis points from leaded front loaded fast fed.
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That's why yesterday's market reaction to a core CPI that didn't get as hot as expected was interesting. Bonds. The yields came
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off a bit but that is not what the Fed is going to be doing. They're not going to look at that and say OK the fire is burning
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less bright. They're still going to have to act in Manus. This is part of the reason why every single sentiment survey that we
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keep getting in is just so negative. Yesterday we had the NFIB sentiment survey of small businesses. I have the chart for us.
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Economic optimism is at an all time low with prices at an all time high. Here is what inflation is doing to small business
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sentiment minus the Fed. They got to act to get this picture get this picture under control.
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And if you think about spending Americans 84 percent of Americans are set to cut their spending. Let's cross the assets
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or is above 100 dollars. Putin says the talks are right and as Biden accuses Russia of genocide. So you have this movement in
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the oil market would just dying by two tenths of one percent. We are above a hundred dollars. And I think that is the important
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alpha in this story. As you saw quite a big move in your own market. Yes up 7 percent. Gold continues to rally as the
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inflation hedge takes hold. The dollar. And why does it do this to me. It was up for the ninth day in a row. It's back to flat.
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This dollar every day at 6:00 a.m. defies the notes I have in front of me. I will not be denied. CAC dollar will remain
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bitcoins up one and a half percent. Daddy the dreaded unchecked madness. I don't have unleashed on my boards for some reason.
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The market gods are in my favor. At 6:00 a.m. London time you're seeing about three quarters of a percent rise for MSCI Asia
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Pacific. Really the outlier here when it comes to market futures are you're up there a little bit weaker than the rest of the
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market down two tenths of one percent but not down massively. Yes. S&P 500 futures up half a percent. I wanted to point out
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small caps. Those are up six tenths of a percent when markets fell yesterday minus small cap Russell 2000. That was the only
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index that turned in the green. We've seen a lot of selling and some of these cyclicals small caps as of late. So we'll be
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interesting to see if finally that cyclical value like trade can come back in action. We know tech has been extremely volatile
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over the past year to date minus. Let's get to everybody standing by. We've got Juliette Saly on the IBM Z rates and the
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language used. We've got a chief Asia correspondent and a current to talk us through the hot inflation or not. And we have
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a senior reporter Mark Champion the very latest on the war in Ukraine. Danny let's start with New Zealand whose central bank
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has raised interest rates by half a percentage point its biggest hike in 22 years. Let's get more with Bloomberg's Juliette Saly
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in Singapore. So Jaws break down the decision for us and the market reaction.
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Yeah. Danny catching about 15 of the 20 economists surveyed by Bloomberg off guard. They were expecting just a quarter point
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hike. But really as Magnus alluded to they are front loading here. They're saying the path of least regret is to move more
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aggressively now rather than have to try and play catch up down the track as they grapple with this five point nine per cent
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inflation rating. A 32 year high. The RBA NZ likes inflation to be between one to three per cent. They'd like it around 2 per
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cent. They have now increased rates by 125 basis points since October. The fourth meeting and we're seeing swaps market
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suggests that you could see another 50 basis point hike about a 50 per cent chance of that coming through in the May meeting.
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Both ESB and Kiwi Bank calling for that. Let's have a look at what it did to market reaction. We've certainly seen yields
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drop. We know that the 10 year yield was holding around that six year high and we saw quite a big move. If we flip that forward
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and have a look in the two year yield in particular dropping some 14 basis points you did actually see the Kiwi rise above
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sixty nine cents on the decision. But by ANZ now saying the fact that this could potentially be seen as somewhat dovish if
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they're moving more forward now and you don't see further aggressive rate hikes down the track that is pushing on the Kiwi
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down by about half of 1 per cent and also looking at a weaker New Zealand market. Worth noting though Manus reopening stocks
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are in play. New Zealand reopening its border to vaccinated Australians. Manus.
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Can you imagine the momentum whenever China gives us that headline at. Thank you very much. Putting the IBM Z in context
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for ISE Juliette Saly in Singapore. Now the US inflation as we've been saying is the hottest since December 1981 reinforcing
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the need for the Fed to follow through on an aggressive rate hike cycle. Is that what we will get. Our Bloomberg chief Asia
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economics correspondent and the current is with us. And when you look at the headline on the core it's a battle state street with
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just with me. And they said it is folly to think that the slightly lower core than we had anticipated is going to save the
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day and slow the Fed. I think that's right. There seems to be two ways of reading it
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this morning in Asia too as you mentioned headline inflation of eight and a half percent bringing things back to nineteen eighty
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one levels mostly down to rising food prices and the cost of gasoline. But as you mentioned core is coming off as it was at 6
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1 1/2 percent. And that's reflecting a dip in used car sales the biggest dip in used car sales prices since the 1960s. But most
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economists are saying notwithstanding the softening core prices it's going to take a long time for inflation to come back down
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from where it is to get buy back down at 2 percent target that the Fed sets and therefore all expectations remain fed going
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aggressively. We're seeing officials coming out on a daily basis now talking about the need to get back to neutral as soon as
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possible. I do think New Zealand is interesting this morning. They are seen sometimes as a bit of a bellwether for global
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central bank. So going by 50 what they did will probably only add to views that the Fed themselves will also go by 50 to.
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Enda thank you very much ISE Bloomberg's and occurring now to the war in Ukraine. President Joe Biden has for the first time
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accused Russia of committing genocide in Ukraine. His comments marked a major escalation in his condemnation of Russia's
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invasion. Joining us for more on this is Bloomberg senior international affairs reporter Mark Champion. So the use of the
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word genocide. Mark what is this change or does it change anything.
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Well legally as the president said it doesn't really that genocide is one of those terms that has to be decided by a court
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but it doesn't. You know there isn't anywhere to go from here in
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terms of just the political rhetoric that a US president can use towards another country. So in that sense yes it does matter.
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And what it really indicates is on both sides there's a feeling at the moment that there's no more talking to do that it is just
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a war now. And we're going to have to wait and see what happens and who comes out on top in the next few weeks.
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President Putin also said that the talks yesterday that talks were at a dead end. And
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so the rhetoric on both sides is just getting worse. And there's just a recognition that at the moment it's a race to get arms
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into the theater of eastern Ukraine where Russia is expected to mount a large offensive coming soon. And you know any talk about
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a settlement will have to wait until after that is is done and it's seen which side comes out with more facts on the ground if
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you like. OK Mark thank you very much. Mark Champion Bloomberg senior
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international affairs reporter thanks for joining us. Let's set the agenda for the day 12 o'clock U.K. time. That's when you
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want to be focused on some of the U.S. data. You're going to get people. You're going to get those mortgage applications with
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rates at the highest level in almost a decade. 3:00 p.m.. Bank of Canada will reveal their latest rate decision 330 p.m.. Danny
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it's the E I a crude inventory report. And then a little bit later on it's all about the banks JP Morgan Q1 earnings. Well
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coming up on the program next with Manus Cranny I'm deputy CIO Tatiana Poo Hahn and market reaction to the hot US inflation
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figures madness. And later in the show we talk. U.S. bank earnings with Walter
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Todd president and CEO. I agree with capital. Don't miss the conversation. This is Bloomberg.
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But even as we work with Congress I'm not going to wait to take action to help American ground. I'm doing everything within my
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power by executive order to bring down the price and address the food price
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right now on the efforts to reduce the costs for American families. Our guest this morning is Tatyana Hahn. She is deputy
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CIO. I tell them Tatiana were grappling with the fastest inflation since 1981.
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We're grasping at straws. Some would say that core inflation wasn't as bad.
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And then we look at the narrative from Barkin from Bullard and from Brainard. And I just wonder are we getting for it ready for
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a period of not where we don't have just one 50 basis point hike but a series of multiple front loaded 50 basis point hikes
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expeditiously is Brainard. Let's get to New Rapidly and Bullard. I mean he thinks it's fantasy to talk about modest rate rises.
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Are you ready. Is the market ready for multiple 50 dips. I think currently the market is not ready for that. So clearly
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from my point of view they underestimate the risk of inflation that will actually persist in that. You know this what seems to
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be a peak now might just be you know like a plateau that we might have reached and that might stay for a long time. And so
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from my point of view I'm also much more cautious. And I would expect that the rate hikes can be much more aggressive need to
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be much more aggressive than we anticipate. What markets anticipate at the moment
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we'll talk down and let me play devil's devil's advocate with you and use the RBA NZ as as an example. You've got this
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decision to hike 50 basis points. Yes. Most economists didn't think that would be the scenario. They thought 25 basis points
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but the market reaction was pretty muted. The gains in the Kiwi dollar came back. Some of the rising bond yields. And I in New
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Zealand also came back as well. Is there not a degree where markets are prepared for these hawkish moves. So once they come
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to fruition the moves are kind of insignificant. Well obviously there's also something playing in which is about
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you know that the property funds or rates in general in general are in asset class where I think a lot of investors have already
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tried to stay out or hedge themselves and so on. So. So that's probably also another factor that kicks in here and that you
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know could mute immediate reaction. But I think in the medium term for me it's very clear actually that
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we need to work crisis in further than what we'll see today. And we have far away from pricing in a scenario where actually these
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higher interest rates and persistent high inflation will actually also depress consumer demand. And this must be you know
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this is to some extent the eventual objective of central banks loans to drive down consumption to drive to bring down
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inflation. And so clearly you know this risk is not priced in yet so.
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Yeah. After all that there could be some mitigating effect of regulation. If for instance China's lockdowns make its economy
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less hungry for crude commodity consumption but otherwise I don't see that
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it could bring down inflation in the short term. I was DAX trying to find a Goldilocks scenario. Yes it was Paul
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Donovan and I have been suitably chastised on that. Apparently I was quite literally away away with the fairies and Bank of
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America. The fund manager survey as I did have delivered a phenomenal chart. I think that goes to the heart of the debate
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for the equity market which is global growth. Optimism is at an all time low.
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They say you want to sell the reps you're calling from. Not for a more aggressive but potentially more aggressive bad hiking
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cycle. Do you think.
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Do you think the equity markets are playing Jeopardy. Are they just too rich given the growth scenario laid out in the fund
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managers survey given the sell the rep narrative from Bank of America.
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Yeah I think so because in particular if you look at you know the variations of your favorite big cap stocks they still price
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in very long term growth expectations. And if you look at the business models behind those companies you know behind these
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very large tech companies and so on. Then basically that growth has been good on consumer. Consumers have the kind of fueling
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the growth of the last 10 to 15 years. And this will basically revert in the moment where we have this longer inflation period
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and the moment where we have much higher rates. And this is totally not priced insulin.
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Well what does it mean. Talk to Yano when you have assets that no longer give you the juice in your portfolio. They once did.
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One way to look at this is over a Jones trading so they take their earnings yield of the S&P 500. Add that to the yield of
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the Treasury and that for the first time in at least six decades is giving you less than inflation. What does this mean for a
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portfolio. Obviously it's a catastrophe and it would have very long term
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consequences you know for people like me you know when I want to eventually go into retirement because it will mean that actually
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yeah you would have a very long period of time where you will not even earn the inflation rate with your assets. And it also
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means that people would be even more desperate you know to look for other ways to diversify to look for other ways know where
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they can fight it. And and and what is also very important this is I think so all of which is illiquid assets that's been played
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a lot over the last 10 years I would say. And now I think the big challenge is actually to still find your assets into liquid
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space. All right. Talk to you on a you're going to stick around with
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us. That's how China who hired deputy CIO at Tobin. Now let's get to the first word news. Juliette Saly is standing by in
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Singapore. Hi Jules. Hey Danny. Boris Johnson has become the first sitting UK prime
17:11
minister to be sanctioned for breaking the law after police find him for attending a rule breaking gathering during lockdown. The
17:18
chancellor really soon CAC was also found to have broken the rules in attending the event at Downing Street in June 2020.
17:24
Opposition Labour Party leader Keir Starmer said they had repeatedly lied to the British public and called on them to
17:30
quit. The New York City Police Department has identified a person of interest after a chaotic Tuesday morning rush hour
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shooting at a Brooklyn subway station. Twenty three people were injured after two smoke grenades were set off on a Manhattan
17:43
bound in train. Police say 10 people had gunshot wounds as a rush out of the smoke filled train led to injuries among 13
17:51
others. Shanghai has posted a new daily record for Covid cases. Chinese TV said the city saw twenty six thousand three hundred
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thirty new infections on Tuesday. That's up from about 23000 on Monday. While curbs have been eased in some areas the majority
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of the city remains under a tight lockdown. The bans even outside exercise or shopping for essential items.
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The world's top independent oil trade a vital group intends to completely stop transactions involving Russian origin crude and
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products by the end of this year. The company says volumes will diminish significantly in the second quarter before being phased
18:28
out completely. Global news 24 hours a day on air and on Bloomberg Quicktake powered by more than twenty seven hundred
18:34
journalists and analysts in more than 120 countries. This is Bloomberg minus.
18:40
Jill thank you very much. It's sunny in Singapore. Coming up the tech rollercoaster after a trillion dollar selloff. What's next
18:47
for tech. That's right here on Bloomberg.
19:08
Welcome back to Bloomberg Daybreak. I'm Dani Burger in London with Manus Cranny in Dubai. Now as yields have moved higher tech
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has fallen over the past week one trillion dollars in market value has been wiped. Now part of the story here is these higher
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yields. Interest rate hikes means that you have to discount the future cash flow of these tech shares. So if tech's not safe
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what is. Let's dig into it with our guest for this half hour's talk to on a few hand deputy CIO at Tobin and talk A. You're
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also saying that part of the reason tech is faltering is this U.S. consumer story. That's what fueled tech. So if the consumer
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story isn't there presumably it's more than tech that's going to be damaged. Where do you hide out.
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Obviously this is a very good question that everybody would like to have the answer for today but I think
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you know I think probably the right answer is just to say you need to broaden diversify. And this means today that you're
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going to automatically moving away from mega cap stocks which are you know in particular those stocks that have these
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innovations that have you know this very long duration bets priced in.
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And you know it's going to be a wide range of different sectors. It's going to be wide range of different business models behind
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that. That might help you actually but clearly be completely hiding out of you know consumer depression. It's not going to be
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positive anyways. Well if we dissect tack a little bit more. One of the risks is
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this is that the consumer in the US 84 percent are going to spend less. Wages are declining by the most on an inflation
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adjusted basis since 2006. That's the consumer side of tech. But on the industrial side of tech how do you differentiate the real
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wages which are imploding. We're showing in the GDP library. How do I disaggregate tech from consumer to let's say industrial or
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or let's say a sectorial difference. Well it's actually not so extremely easy because you might
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actually have within certain tech companies know you might have a business model that has actually both branches if you will if
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you want. But very clearly you know those companies that are really at the top today that have these very high valuations I
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think they are mostly exposed to this consumer story. You have a lot of kind of smaller tech companies more innovative companies
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that surprisingly have been punished today the most that from I kind of you know much milder ones you know that are kind of
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creating innovation today for the more industrial part of tech. And so what I would expect is you might even have a rotation
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within tech that helps the smaller ones. And that would punish the bigger ones.
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That's pretty interesting talk to you on I also wonder if in tech you buy the story at all and this had sort of been
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developing as inflation was moving higher. This idea that there because tech companies aren't capital intensive that inflation
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won't hurt them as much that they can keep their margins they can keep their prices lower again because that input of higher
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commodity prices won't affect them. I mean do you buy that narrative at all.
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Well I I buy it only very hard to you know because I mean it's obvious way that if consumers have less money in their pockets
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they'd be less likely to value every year an iPhone they're less likely to buy in your iPod and so forth. So in all of these
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things they would just kind of go away. Even if you will if you cut the price by 50 percent. It's true. And we are talking about
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actually global market you know and so it's not only actually the U.S. but it's a global market that would be affected. And I
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think that would be really really difficult to kind of compensate for those companies.
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Janet thank you for Venus being with us this morning. Tatyana Forehand deputy CIO October. Our guest on markets coming up in
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the show. We can talk you as bank earnings world toward president and CEO of Greenwood Capital joins Danny and I. Next
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we're going to talk about the risk to the a slate that was to be monster but has been ameliorated. And we'll talk about of course
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trading and big caps to small and the dividend play right here on Bloomberg.
24:21
This is Bloomberg Daybreak up on Manus Cranny in Dubai with Dani Burger in London. These are the stories that set your agenda.
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Dead end. Vladimir Putin says negotiations have stalled. As President Biden accuses him of genocide U.S. inflation hits a 41
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year high. The Fed's Brainard and barking call for quick rate hikes to neutral treasuries slip. Plus Boris Johnson and Rishi
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Snack are fined over party gate after breaking Covid rules. UK inflation is out this morning. Madness.
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It seems like the gloomiest among us have taken over. Survey after survey shows a record low of attitudes about this
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economy. The latest Bank of America survey. Pessimism is at an all time high. In other words.
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Opinions about the economy about the way forward are an all time low. Bank of America argues that that means equity allocations
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could fall even lower from here. Yeah. The Fast and Furious fad that had invoked global growth
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optimism which is what you're looking at at an all time low. And the narrative from that Bank of America survey is that you know
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that little bit of an appetizer rally that you had in January and February. Now you want to sell RIP and that's not even the
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main course for 2022. I'm channelling my inner Grinch. We know it live strong.
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I mean I don't know man. I do look at these numbers. And to some degree it does seem OK. Aren't things so bad that it's almost a
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contrarian signal that he's there. Feels like this is all gonna come to fruition. The economy is going to head towards a
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recession. The markets are going to be ruined. Or maybe it's a really good time to be a contrarian and bet the other direction
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because sentiment is just so stretched to the downside at this moment.
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I've had many great moments of contrary itis none of which have proven to be very profitable. I can assure you I can assure you
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just when you thought it couldn't get worse it can. Danny This is why we are not asset managers. Manus. Anyway let me dig into
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the market for those that are and who own it. We're looking at the MSCI Asia Pacific Index up by almost 1 percent. I should say
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the CSI thing hundred that is flat today. So we're looking at a China that is underperforming also underperforming euro stocks
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50 that sound just one tenth of one percent. Meanwhile S&P 500 futures up half a percent. Outperformance from small cap. The
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cyclicals shares doing better yesterday. Man is the only U.S. index to end in the green was Russell 2000. Get love that Ruslan
26:50
DAX Dow Jones a year lovely Russian wrote. Russell Value and you differential. Let me show you what's going on in the oil
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markets. We put on 7 percent yesterday. Putin vies to continue the war negotiations. Talks are at a dead end. The EIA and the
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US saying crude production is going to rise slower than expected. So you aren't just seeing oil build on it. 7 percent
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rally. Yes. Gold is up day six of the rally. Longest winning streak since November. Again I think it's on stagflation
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concerns. ANZ say two thousand dollars which is only 30 bucks higher than here is where they see the target for this year the
27:26
dollar. But that dollar I could think of an expletive with that dollar will not move. My note said that it had rallied for the
27:34
ninth day. It's not doing what my notes say foreign interest rate differential. I am hopeful by the end of this show the
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dollar will rise. Oh just slipping into the punch like it hurts. It's so cruel cruel king. While that is it is. It is what man is
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also on deck today. J.P. Morgan kicking off the bank earning season. First quarter earnings due later today. Investors are
28:00
going to be focused on how market volatility caused by the war in Ukraine has affected its investment banking and trading
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operation. Charlie Wells is here with us to break down what to expect. So Charlie first off how exposed are U.S. banks to
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Russia at this moment. Yes these are the headlines that we've been hearing all quarter. Right. And I think it will be
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reassuring for investors to know that actually American banks have really been drawing down operations in there since 2014
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2015. Right. So for JP Morgan Bank of America Russia really wasn't even in one of their top 20 markets. Now Citigroup of
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course was the most exposed of a large American banks. They said last month they had about 10 billion dollars in assets tied to
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Russia but that's 10 billion compared to the two point three trillion that they have. But I think what's really important
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here is to focus on those secondary effects where we know about the primary effects. U.S. banks want to get out. They know that
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they need to get out. But those secondary effects. What does the potential recession what to potential said moves being for these
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banks bottom line. I think that's what we should really be listening for today.
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So jolly good to have you with us. We're just about to have a conversation with an analyst on the banks and part of that is
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going to be about the interest rate cycle what's priced in. That all combines the net interest income narrative for 2020 and
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beyond. How significant is the speed of these hikes to the banks narrative.
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I think this is pretty important right. And I think this week we're going to hear sort of you know a Goldilocks theme. Right.
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If the Fed moves to slow these banks don't get that net interest boost that they've been talking about for months now. Right. But
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if they move too fast of course we have the risk of triggering a recession. Recessions aren't good for anyone but you really see
29:41
that spread across banks business lines. Right. You've got on the commercial side you've got slower deal flow. You've got
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slower investment banking on the comer on the consumer side. You get people you know demand diminished. You know a lot of these
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the demand for mortgages that we've seen spike over the past few years. So I think that's a real concern here as J.P. Morgan CEO
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host said last week in his letter to shareholders I don't envy the Fed.
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No I don't think anybody does. Damned if they do damned if they don't. Charlie thank you so much Charlie. Well setting up the
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bank's agenda. Let's continue the conversation now on earnings. We're joined by Greenwood Capital President and CEO Walter Todd.
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Walter we do this every quarter but my gosh there's been some spirited changes since we last caught up. Bonds are on fire. The
30:30
market is you know convulsing over rate hikes. So let's talk through
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what is changed for the banks at the top level as we go into this reporting season. What's going to define the JP Morgan
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numbers today. Let's start that. Yeah. Well good morning again and it seems like three months ago
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it seems like a year or more. Talk about the rate changes and so forth. So I think you know
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looking at the bank earnings that you talked about net interest income I think the quarter is actually going to be pretty good
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from that perspective. They should see an improvement there. I think the real concern for banks is looking forward. And you
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talk touched on the probability of a recession or a severe slowdown. And that's what the market's starting to price sense
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of the markets starting to anticipate some potential credit problems down the road. And you start to see this really in
31:25
mid-January when the VIX Bank Index diverged from higher rates. So tenure is up by 100 basis points from that point. The B.K. Ax
31:34
is down 19 percent from those levels in mid-January really right after the first quarter earnings. So I think this quarter is
31:41
going to be fine. I'm sure investors are going to focus on your loan growth and the usual suspects and so forth. But more so
31:47
when I hear about the commentary what the exposure is to Russia and what the outlook is for the remainder of the year.
31:54
Well it's one of the lovely changes also. I think last time we talked to you you were still still broadcasting from home. It's
32:00
good to see you in an office. Some normalcy there. Of course one thing that seems like it's deviated from being normal is perhaps
32:07
a mini merger flow. A lot of it being tabled. Madness was just talking about this due to the volatility due to the war in
32:14
Ukraine. How big of a bite is that going to take out of the major banks if we are seeing a mini deal flow slow
32:20
significantly. Yeah for sure I mean when you look at MDA or IPO activity
32:26
they've all slowed and will likely continue to slow. I mean the backdrop for MDA is actually
32:33
quite good despite the uncertainty given some of the valuations that have come in across the market. You know the cost of funds
32:39
while OP is still relatively good. So you know it's actually a good backdrop for him. But to your point I think the uncertainty
32:47
of the war of business confidence starting to fall. We saw the NFIB number I hear this morning that went down. That is going to
32:55
cause companies to to maybe pause and not move forward. So that's another kind of hiccup for banks. In addition to the IPO
33:03
market as well slowing. We'll come back to the Russian exposure in a moment because my
33:11
sense is that as Europe has a bigger exposure to perhaps the Russia story. But you can help us clarify that. What I was drawn
33:17
to is you talk about. I said to you my gosh a heck of a lot has changed since we last spoke. Bonds despite the yield curve has
33:24
flattened. But when you look at the relationship and you draw my attention to this which is 10 year government bonds it's in the
33:30
GDP library which is the ratchet in the 10 year government bonds with a B K X night. Obviously these two are diverging. Normally
33:41
in a rising rate is a positive for banks. We've given a lot of that back that many dealt with. Why the divergence is this. Is
33:48
this because mortgages are at risk. Because the mortgage costs are at a five year high. Why this divergence. Yeah I think I
33:57
think it's you know that's that's the big question. Right. And I think it's a lot of those factors. I mean I think the housing
34:02
market potentially slowing with mortgage rates back in about 50 basis points. Clearly an issue that I think is more than banks.
34:09
Right. If you look at homebuilders if you look at semi's if you look at transports. So all of these economically sensitive areas
34:17
which are financials are part of our going down and pricing in a significant slowdown. I these areas are down 20 and 30 percent
34:24
in some cases. So banks are just kind of emblematic of a broader issue and concern around an economic slowdown. And I think
34:32
that's why you're seeing that divergence. Now if we can see that reconnect at some point later this year that would be great. I
34:39
mean I know you've mentioned brainer comments several times but to me which jumped out at me this week is Christopher Waller is
34:46
a Fed governor. He said you know when you have a brute force tool that you're using sometimes there's collateral damage that
34:53
happens. Yes that's a pretty bold statement. That's a little bit unwise is. Yeah. Yeah it does. It does feel like some concession
35:01
there of the effect that they realize this might have. Right. Walter I'm going to do a hard pivot so just be patient with me
35:07
for a moment. I was looking through the most recent 13 F4 Greenwood Capital and I know that these tend to be outdated but
35:14
I did notice you took some exposure to Twitter. Now you can correct me if you don't have that exposure anymore but I am
35:20
interested to get your thoughts on having Elon Musk now among your peers and the largest holder of Twitter. Does that change
35:29
your opinion about the company at all. So so we do not have that exposure anymore to Twitter and a small position that we exited.
35:37
But yeah we've been we've been kind of following that there as well just because it's certainly market moving.
35:47
I actually looked at the end of the list of the 24 stocks from Danny sent me this three this morning said I'm desperate to know
35:54
what where you are on Twitter. But there's another little ticker in here isn't there. T s a. So you know Tesla.
36:05
What do you what. I mean what are your thoughts. I mean this man is now pervasive. He has the following of 80 million people on
36:12
Twitter. Do you think he could run for president. So we don't know. Tesla just to be clear. Greenwood Capital is
36:19
not for our clients but me personally. I think Tesla when you look at the Elon Musk
36:28
aside just look at the valuation of Tesla relative to other carmakers. It just seems to be a total disconnect. I mean it's
36:35
in aggregate the same value of all the major car producers in the world. And it's a fraction of the market share. We actually
36:42
have a position in it. Pausch. Based on the undervaluation there obviously a very challenging
36:49
issue right now with Germany and everything that's going on there. But we do think that IPO which we expect later this year
36:55
is going to unlock some value in that specific security. But yeah we we've never had that for and I can't guarantee you but I
37:03
could pretty much give my apologies on that. My apologies on that. I miss I miss read items read that started twenty four new
37:10
stock positions and one of em is better. So my apologies for that. When we got it wrong you have to be big and brave and say
37:17
I got it wrong. Apologies on that. Walter. Walter let me jump in here. Let me get away from the single
37:23
stock names and get away from Elon Musk. I sense some hesitancy to talk about Mr. Musk which I understand Manus Cranny. We're
37:30
having this conversation. Scarlet Fu What'd You Miss? got 80 million people follow him on Twitter. For me it's a logical
37:36
thing. It's not. Get there. He's the richest man in the world. I mean you know so he's obviously a very smart guy. So I'm not
37:43
completely off the wall. I mean you know. Yeah. Yeah. Well I mean Walter are you scared of sort of when you have these stocks
37:49
that can really really just with one tweet be it from Elon Musk or be it you know from GameStop AMC related when you look at
37:57
stocks that do move so much based on personality. Does that scare you off or do you see an opportunity to be here to to
38:05
short the stock to ride the wave or otherwise. Yes. So I mean we're pretty traditional long only manager and we
38:13
do try to find companies with management teams that we feel comfortable with and we're going
38:18
to be in for you know typically for a longer period of time. So we would we would try to avoid those those names that are that
38:25
are moving up and down on a narrative or story and not on fundamentals. We obviously saw a lot of that in early 20 21.
38:32
It's combat a little dab. It seems to be coming back here lately. But that's those are types of names that we would try to
38:38
avoid in our portfolios. All right sticking with a reliable belong only the JP Morgan's of the world. Walter.
38:46
So great to have you on the program as always. Join us again soon. Walter Todd Greenwood capital president and CIO.
38:52
Now let's get to the first word. News in Singapore is Juliette Saly. Hi Jules.
38:57
Hey Danny. President Vladimir Putin says peace talks with Ukraine are quote
39:00
at a dead end and vowed to continue Russia's invasion. There has been no word of progress for days in video link talks after
39:07
Ukraine accused Moscow of carrying out war crimes including killing unarmed civilians. Putin called the claims fake and said
39:14
the war in Ukraine is going quote according to plan. Well President Joe Biden has for the first time accused Russia
39:22
of committing genocide in Ukraine significantly escalating his condemnation of President Putin's invasion. This is the U.S. is
39:29
said to be readying further military assistance worth around seven hundred and fifty million dollars for cave.
39:36
Ukraine has repeatedly asked allies for more weapons as it braces for a new offensive by Russian forces in the country's
39:42
east. Global news 24 hours a day on air and on Bloomberg Quicktake
39:45
powered by more than twenty seven hundred journalists and analysts and more than 120 countries. This is Bloomberg Markets.
39:52
Joe thank you very much for that. Coming up the U.K. Prime Minister Boris Johnson says he's paid a fine for breaching the
39:59
coronavirus locked on roads. And we will have more on the story. Plus get the inflation print
40:03
from the U.K. today.
40:25
It's DAYBREAK here on Manus Cranny in Dubai at Dani Burger in London. So now we've got the reactions and of course Elon Mosque
40:34
is born in South Africa. He can't run for president. I never knew that actually. So there you go again. Action. That's for
40:41
different people. Not on I B I think I've got the message. I am. I'm embarrassed. I'm embarrassed myself. I didn't pick
40:49
that up because at the top of the show I insisted on saying RB Enzi and Senator Collins don't try to share the blame and don't
40:55
share the blame on the shared. Story. I should know. OK fine fine. You're right. Yeah I knew that. I knew that. I just didn't
41:01
want to correct you. Anyway let's turn away from the US away from South Africa and get to UK politics where Boris Johnson has
41:09
become the first sitting UK prime minister to be sanctioned for breaking the law after the police find him for attending a rule
41:15
breaking gathering during lockdown. Joining us now is Bloomberg's UK reporter Lizzie BURDEN. Lizzie
41:20
how big of a threat do these party gate finds pose to the prime minister's career. Well done. He looks to still be the Teflon
41:27
man because while a few weeks ago these news lines would have likely ended his premiership the most likely successor the
41:35
chancellor rarely see not because also been having a torrid time. He had his mini budget which many people across the
41:43
political spectrum criticised for not doing enough to help the poorest people through the cost of living crisis. Then he's been
41:50
criticised for his wife's tax affairs and so he's been having a difficult time even though he as you say has become the first
41:57
prime minister to have committed a criminal offence while in office. Meanwhile Boris's popularity has risen because of the
42:06
war in Ukraine. So it looks like he'll cling on for Don. We're going to get a little bit more data for you to chew on
42:13
along with the analysts CPI print. This morning we're looking at what are we expecting here Lizzie six point six percent in March
42:20
up from six point two percent in February. So again a persistent persistent trajectory.
42:27
Yes that's right minus I'm likely to be stood here in a few minutes telling you or another 30 year high for inflation again
42:35
you'll be driven by the war in Ukraine pushing up food and fuel prices adding to this cost of living crisis which is only adding
42:44
to that headache political headache for the government. And it's threatening to derail the economic recovery. Looking ahead as
42:52
this war rages on the Bank of England says that you could get 8 percent inflation in April and beyond that even potentially
43:00
double digits. So this is this figure that we're going to get today is likely to boost the case for another rate rise from the
43:07
Bank of England in May. A little bit more mortgage pain to come. Lizzie BURDEN now with the very latest on the politics and data
43:16
from the United Kingdom. Coming up LVMH has a bumper first quarter. But how is it dealing with China and the zero Covid
43:24
policy there. The details to come as organic revenue comes up for a deal. And
43:32
DeVito this has been back.
43:51
Welcome back to Bloomberg Daybreak Europe. I'm Dani Burger in London with Manus Cranny in Dubai. LVMH has reported first
43:58
quarter sales that beat expectations. Fashion and leather goods saw a standout performance yet. Attention now turns to how to
44:05
navigate new rolling lockdowns in China and rising inflation. Joining us for more is Bloomberg's lawyer right. I mean Laura a
44:12
really fascinating quarter and quarters to come for LVMH luxury goods. Break down the results for us. Yeah. Thanks Sally. Well
44:19
as you say there's renewed rolling lockdowns in China are a problem. Asia excluding Japan now contributes 37 percent of LVMH
44:27
its total revenue down from 41 percent the same period a year ago. Interesting. It was Europe. This will be highest organic
44:35
revenue growth of 45 percent because LVMH is focusing on establishing local tourism in Europe at a time when Asian
44:43
tourism has been decimated because of the pandemic. We learned that the U.S. is LVMH its largest country market. And that was a
44:51
comedic moment on the earnings call. Donnie in months when the CFO Jonas like we actually had to check with his head of columns
44:58
whether it was the US or China. Demand in the US has remained robust over the last 12 years pivoting away from the cosmetics
45:06
business but also to fashion and leather goods. Which brings me onto my next board because that is the largest part of LVMH and
45:14
it was bolstered higher by really strong sales from to you and Celine in terms of pricing single digit pricing increases it's
45:24
what the CFO called reasonable although he admitted that there's no specific science behind this. Online sales growth is actually
45:32
decelerating compared with bricks and mortar. But that's as economies kind of reopen and normalize.
45:41
Yeah and just on those price increases he said they've increased prices in a meaningful way across most brands. But as you said
45:47
perhaps the science isn't as precise given the conversation we've just had in the past hour about the global outlook. How
45:56
does that stack up for LVMH. Well look there are heritage luxury brands so they have pricing
46:03
power. But LVMH they don't really have to worry about rising oil prices. They can lock in roofs the raw material costs well in
46:10
advance. But again it's a tough macro backdrop which includes the sell off at the beginning of the pandemic the rise of Ormoc
46:17
from the end of 2021 and then Russia's invasion of Ukraine. LVMH is still achieved share price growth of close to 84 percent over
46:25
three years. So it's why the analysts remain bullish on this luxury name.
46:31
OK. Well heritage luxury wins every time in my book. Dora thank you very much. Laura writes covering the other MH numbers Danny.
46:42
There you go. We won't dig into whether you a little bit a deal or a little bit of. Tom. I remember telling 30 percent rise.
46:49
You'd never never ever tell me like you know these equity markets that they're peaking higher NASDAQ up over 1 percent. I.
46:58
I think you just flashed that. Danny so this is the European stock markets exactly moving higher this morning. Bloomberg
47:07
Markets Europe up next. This is Bloomberg.
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