tv Bloomberg Markets Bloomberg February 10, 2022 1:00pm-2:00pm EST
1:00 pm
secretary-general yen stoltenberg and reiterated that ashington is ready to impose swift severe costs on russia if the kremlin takes any aggressive actions against ukraine. moscow has repeatedly denied it plans to attack its neighbor. senator joe manchin is throwing more cold water on president biden economic agenda after this mornings historically high inflation data. he says it is beyond time for the federal reserve to tackle the issue head-on he says congress and the administration's proceed with caution before adding more fuel to an economy already on fire. consumer prices rose last month by 7.5%, the biggest year-over-year increase since 1982. bloomberg has learned donald trump's son-in-law jared kushner held talks with saudi arabia's defective ruler in recent weeks. he also met with top officials
1:01 pm
from saudi aramco. kushner formed a close relationship with saudi crown prince mohammad bin salman on during the trump administration. kushner has been criticized for seeking investments from some of the middle eastern countries he dealt with in the white house. global news 24 hours a day, on-air, and on bloomberg quicktake, powered by more than 2700 journalists and analysts in over 120 countries. i'm mark crumpton. this is bloomberg. ♪ matt: good afternoon from new york where it is 1:00, 6:00 in london, 2:00 in hong kong. i'm matt miller. welcome to bloomberg markets. here are the top stories we are following from around the world. full coverage of today's cpi print which showed inflation coming in hotter than expected,
1:02 pm
a 40-year high. what it means for the federal reserve's interest rate trajectory as jim bullard backs a supersized hike. how is credit factoring into the fed's equation? we will discuss with meghan graper. and we will hear from the chair of aston martin and owner of formula one team as well, lawrence strahl on the launch of the new car. let's get a check on what is going on in the markets. equity indexes, the s&p is down 40%. it had been down less but moving on these headlines we are getting jim bullard right now, to your yield of jumping up to one. a 19-basis point move. we have not seen something like that since november. a big move especially at the front end of the curve. the u.s. two-year now at 2.0398.
1:03 pm
the u.s. 30-year also at 2.3381. big moves in rates. that leads me to summing the caught my eye today. market swaps show a full point of tightening over the next three meetings. that is what the world would like to see. if you look at the interest-rate probability on the bloomberg, wi rp, will show you that. what the market is pricing and right now rate hikes through the end of the year. this is a number of rate hikes we are expecting. expecting almost two in march, three in may, closer to four in june, up to more than six for the full year. that will be changing through the day after this interview. sam the was fed president jim bullard, the interview i'm talking about, he supports raising interest rates a full
1:04 pm
percentage point between now and by july 1. he would like to see 100 basis points in the bag, that is the direct quote. he said i was already more hawkish but i have pulled up dramatically but i think the committee should do. a lot of the other quotes were more striking. let's dig deeper into the inflation data with the senior u.s. economist for bluebird economics. what struck me is that he said there was a time where we would have moved and now on this and done something immediately. was that a little bit of a slight that the federal reserve is not moving quickly enough? >> they are also still adding accommodation through the balance sheet. it would be really interesting to see how they hike rates and continue to buy assets. i guess they will just move more aggressively in march, and that is what the latest data is telling us, they may consider a
1:05 pm
50-basis point hike in march, will move at each and every meeting after that. today's cpi report pushed the probability of a 50 basis point hike already after the release, and the latest comments from the fed official is telling us that they are considering that. the fed has about two weeks before the march meeting, so i think we will hear much more from the fed official in the next couple of weeks. just to see xavier becerra acting to the latest cpi data, which was quite surprising to the upside, broad-based, and in certain categories that are very important for the u.s. consumer. matt: it is not a surprise to
1:06 pm
hear a hawkish tone from jim bullard. what happens when the next that official, one who is more dovish, comes out and says we are not doing 50 basis points at our first meeting back. yelena: the markets will move on that. i think that that is seriously considering what they are going to do at liftoff. they are data dependent, and the data is telling us that things are moving in the wrong direction in terms of inflation. the january report exceeded expectations. it was concentrated in that only certain things that could be omicron related, but we will see inflation continuing to push higher in the services sector, driven by reopening of the
1:07 pm
economy. we still see a lot of price pressure in the goods sector. it is not updating as much as we would like it to. matt: so it is not terribly transitory is what you are saying. what do we see at the end of the year? yelena: there will be some transitory components that. we do expect inflation to peak in february actually, so we expected to go even higher in february and then moderating into the middle of the year where we see around 6.5%, and toward the end of the year, but we expect that to be around 4%, much higher than the 2% target the fed has. matt: one of the interesting things from the bullard interview, he says, as a general
1:08 pm
principle, i see no reason why you cannot remove accommodation just as fast as you added accommodation. especially when you have the highest inflation in 40 years. is it really likely that the fed can perform quantitative tightening as quickly as it did quantitative easing? it doesn't really have a covid crisis behind it. yelena: at least that is not what they been saying. they would like to do it in the background, watching the paint dry. maybe the paint will dry more quickly but they still really want that to be on the back burner. there is really much less certainty about how the markets will react to quantitative tightening than to rate hikes. they still think the interest-rate is the primary tool, and this is what we should focus on.
1:09 pm
the probability of a 50 basis point rate hike has increased tremendously after today's report on cpi. matt: we hear from a lot of market participants that qt could be much more painful. we went to 4 trillion after the financial crisis and came down barely. i think they only got down to 3.5 trillion, maybe not even that far, before going back up to 8. is this a case we keep hovering near the high watermark, or does the fed's balance sheet ever have to come down? yelena: it will grow into the economy. the economy grows as a percentage of gdp. it will go down gradually, even if you don't do anything, if you keep it constant. but i think the fed will do it the same way they did before,
1:10 pm
obviously, at a slightly faster pace. they will set up differently from the previous episode but given the size of the balance sheet, i don't think exit sales are in the fed's plan. they will start with interest rates and that will be the primary tool that the markets have to understand how they work. matt: thank you for joining us. very interesting market moves. senior u.s. economist yelena shulyatyeva. unilever board it would take to years to return to pass probability because of the worst inflation that it has seen since the financial crisis, eroding the benefits of faster growth. we will speak with the ceo. >> we think it will peak around the middle of the year. we are anticipating 2 billion euros in the first half, another
1:11 pm
1:13 pm
1:14 pm
investors and investment-grade corporate bonds. joining us is meghan graper, managing director at barclays, along with bloomberg's and hammond. let me first ask you when you make of the comments we just got out jim bullard. he said he wants to see 100 basis points increases from the fed by july 1. he wants to see, implied, at least one 50 basis point move. what do you make of that? meghan: it is consistent with market expectations. it is clearly a market on age. speaking about the direction and data, reading the fed commentary, has been suggestive of a more gradual pace. with today's numbers, indication that we are moving with a 50 liftoff. ed we start of the year with so
1:15 pm
much volatility and noise in the background. i wonder how that is affecting the supply of investment-grade. we had a strong january but where does it look like right now? meghan: it is a market that's been on edge. in terms of what we are seeing as it relates to receptivity for the new issue calendar, investment-grade, demand still has some wind in its sales. while this volatility is justified, keeping some subsets of investors on their hands and increasingly selective, that vol is also contributing to a seller that others are viewing as a yield center buying opportunity motivated by another 25 basis move higher in treasury yields by a credit index that is as much as seven points wider in the last two weeks, and what has been an underwhelming start to
1:16 pm
what has been an extremely patient post earnings calendar. matt: i just want to interject and act, when you say demand still has wind in its sales, do you mean for debt or money? do you see more companies that become an issue or more investors want to hold the paper? meghan: a combination of those factors. if we take the supply side of the equation, the consensus view, particularly following this morning's numbers, is that we will see wider spreads and higher yields into that march meeting. make me the risk reward for waiting for investment-grade borrowers in particular heavily skewed to the downside. that supply acceleration which to me overwhelmingly to find the supply that we saw in the fourth quarter, that is visibly persisting into the turn of the year, so much so that january marks the second most active
1:17 pm
start to a year on record. we printed 150 billion in a matter of 16 business days. i think what is potentially more telling is that two thirds of year to date borrowers had already tap the market in the fourth quarter. 24% of them have doubled down in rapid succession, having been in the market as recently as december. there is a rush through the gates at the onset here. i think on the other side of the coin, where we have seen a value proposition is with broad-based buying across the maturity spectrum in february, decided to bit from what we have seen in january where there was a hiding out in the front and, much more defensive play, that sellers of anything 15 years and longer. the emergence of some of these moves has been immobilizing the same factor, particularly for the international bid.
1:18 pm
that is helping to underpin enabling this to what has been a willingness to buy from the cash side. ed: how much are people thinking about putting forward their funding needs into 2022 when they look at what we may see, whether four or five hikes through the year? meghan: i think that is where you are seeing this repetitive issuance. 70% of the january calendar was from the bank and finance universe, which is true to seasonality, but the banks are really putting their money where their mouth is, taking chips off the table, even though they have reduced funding needs over the course of 2022. pulling forward ahead of this march meeting i think makes prudent sense. you are seeing that frontloading of issuance very much playing out real time. ed: of course i have to ask, what is the use at the moment? we saw companies loading up with so much through the years, a lot
1:19 pm
has gone through m&a. when i think about the environment for acquiring, using some of this new capital they are raising, i wonder where does it go? it is not clear that you will go out and find a great use case for it this year. ed: liability management as we move into this post corporate earnings blackout window is likely to be a catalyst for an uptick in issuance as we think about the differential between existing average coupons and existing yield, which is still running 65 basis points aren't even on the heels of these recent moves. the ability to try and have interest expense savings is very much still in the fold. paired with a flatter yield curve, extending a maturity profile here, makes liability management exercises a piece of the equation, arguably the more
1:20 pm
visible and more telegraphed component to the four calendar ties to that $185 billion announced event related financing, and even without running up 100 billion year-over-year from barclays stance, still ample room for additional m&a capacity, particularly from some of the higher-quality corporate's to our supported by the strength of their underlying fundamentals but also be significant more chest that continue to sit on many other balance sheets. all that said, the real risk is that we are surprising to the downside in the first have given the more limited debt components to those exercises, given how much cash is still on hand. equally as a function between the lag between these announcements and the ultimate funding exercises and regulatory sign-ups. matt: thank you for your time today. meghan graper of barclays. and hammond as well.
1:21 pm
1:23 pm
matt: earlier we spoke with aston martin team executive and f1 team owner lawrence stroll. lawrence: 2022 has the biggest changes in rule regulations, chassis. it's a brand-new car for everybody, goes to a ground effects car, which means the air goes on to the car rather than over the car. i have said many times, this is our second year in a five-year plan to get to be fighting for
1:24 pm
world championships. i recognize what it takes, putting the right people, right tools, by processes in place to be fighting for world championships. we are currently under construction, building the newest formula one state-of-the-art campus. the last one was built 19 years ago. it will be the latest and greatest. we have been hiring, like any other business, maybe formula one even more so, it is about having the best people. we have hired about 300 people in the last two years. all of this is on our journey to be fighting for will championships. matt: your son, lance, is piloting one of the cars alongside sebastian vettell. he podiumed in the last season. do you expect to be getting a first-place finish, will you win
1:25 pm
a grand prix in 2022? how do they get along, do they work well together? lawrence: they work extremely well together. significant difference in age, so seb has that experience. lance, even in his early 20's, did his 100 grand prix in abu dhabi, so he is getting the time that he needs. but they do work well together, they are great teammates. as far as finishes go, for us, it is early days, the second year of what i told you is a five-year journey. a new set of rules, we don't know where it will all play out, but we will all find out shortly in six weeks at the first race. matt: can i ask you if you think the new rules will make it more exciting? when i first started watching formula one, they were 12, 10 cylinder engines, you could feel it in your chest, and it was exciting. that is what really drew people
1:26 pm
to the sport rather than the drama of the interpersonal relationships. as we get closer to formula e, what is going to bring in the fans? lawrence: i do agree with you, those visceral formula one cars had a very special appeal. clearly, as automotive manufacturers, there is an notification component to our future. i do believe the hybrid system that we currently have, a great combustion engine, and electrification, and i agree, not quite as exciting as a v12 or 10, but understanding where the world is going, probably the right thing to do.
1:29 pm
1:30 pm
is time to reach crucial supply chains. at least six auto plants near the canada border have temporarily halted work as the impact begins rippling through both nations economies. today, federal, state, and local law enforcement agencies across the u.s. are bracing for the possibility of even wider protests. social media channels are buzzing with plans for a u.s. trucker protest vaccine rules in solidarity with canadian drivers. u.s. senate delivered a major legislative victory for the #metoo movement. lawmakers clear the bill passed by the house to guarantee that victims of workplace sexual harassment or assault are free to pursue lawsuits in court. the legislation will transform how businesses resolve allegations of workplace sexual harassment and assault. president biden has said he would sign the measure into law. the house oversight committee is opening an investigation into
1:31 pm
former president trump's handling of presidential records. the move comes after the national archives retrieved 15 boxes of documents from the former president's mar-a-lago resort. the archives are being looked into to see if any of them are classified. the european union and the u.k. are trying to resolve their differences over cross-border trade. diplomats see little chance for any substantial progress until after a key election in northern ireland in may. global news 24 hours a day, on-air, and on bloomberg quicktake, powered by more than 2700 journalists and analysts in over 120 countries. i'm mark crumpton. this is bloomberg. ♪ jon: i'm jon erlichman.
1:32 pm
welcome to bloomberg markets. matt: i'm matt miller. here are the top stories we are following you from around the world. u.s. inflation is surging. prices increasing the most since 1982. we will discuss what that means for the fed's interest rate trajectory as jim bullard backs a supersized hike. inflation up, and so is bitcoin. isn't that supposed to be a hedge? we will ask perianne boring on how digital assets could help transition to a more global and inclusive economy. and as more organizations transition to going green, canada's ccp investments . jon: let's get a quick check on
1:33 pm
what is happening with the major averages. we have seen the u.s. market stooping to their lowest levels. tsx tractor stay in the green. you have sectors like energy and materials, financials that were managing relatively well. but they have started to pull back. the bigger story in stocks is that continued weakness we have seen in technology and reaction to the inflation data. in percentage terms, the nasdaq 100 having a rougher day than the s&p 500. let's get into the for what it's worth segment. we've been talking about the inflation story. annual inflation moving to a four-decade high. at the top of the hour, we have some video of grocery stores. prices for food have been skyhigh. we have heard the story throughout earnings season, as
1:34 pm
we look at the performance versus estimates. maybe a little bit of a different reaction if we were more in line. employment costs, we have seen that reflected in the numbers. maybe things start to change in a different interest rate environment tied to housing, but it feels like from shelter to food to what companies have to pay up for their employees, inflation is all around us. matt: to be fair, we already had inflation at a four-decade high, it is just there again, and higher than before. the fact that we have these big prints is eye-opening, slightly surprising, but we knew there would be a lot of inflation when we saw governments pour trillions of dollars into the economy right at the onset of the pandemic. one thing that people question as we see these big numbers with 6, 7 handles, why isn't bitcoin
1:35 pm
rising, isn't it supposed to be an inflation hedge? may be those who saw it that way place their bets in early 2020. in that case, the hedge has worked well, but let's ask an expert, perianne boring, founder and president of the chamber of digital commerce. testifying before the senate earlier. lately, especially as bitcoin seems to move in parallel with risk assets, the idea that it is an inflation hedge seems to be thrown out. perianne: i will talk about bitcoin specifically. bitcoin is a non-correlated asset. if the stock market goes up, it may go up, it may go down, it is not correlated. in 2018, the federal reserve
1:36 pm
issued a report recognizing that. it said that bitcoin may emerge as its own asset class and be used for diversification purposes. and that is what we are seeing professional investors who are investing in digital assets like bitcoin turned to bitcoin for. we find that when you add a small amount of bitcoin to a particular portfolio of stocks and bonds, it will decrease the volatility and the risk of a portfolio but increase its performance. bitcoin has been the best performing asset tan out of the past 12 years. it is volatile, 100%. there is a lot of criticism around that. but if you zoom out, look at it monthly basis, it can look incredibly volatile. if you zoom out, that volatility trends upward.
1:37 pm
in the past 10 years, the average annual rate of increase in bitcoin has been 200%. this is a long-term hold investment. jon: the volatility, one of the subjects we are watching on capitol hill, and as matt was alluding to, you been talking to lawmakers about the road ahead for cryptocurrencies. you faced a number of questions, people just wanted to get more information on crypto. what was your take away from those conversations you were having on capitol hill? perianne: yesterday, the senate agricultural committee held a meeting on additional assets. the chair of the cftc testified
1:38 pm
as well. one of the key issues that was discussed, being debated amongst the policy community in washington today, is the oversight of the digital asset spot market, who should have jurisdiction over that part of the market. for my opinion, i would argue that the spot market are already regulated. one of the topics that we walked through in the hearing was what the regulatory landscape looks like. there is no lack of regulation. there is some misunderstanding that these are unregulated industries, unregulated markets. that is not true. they are regulated. but there is regulated fragmentation. the irs is regulating this as property. you have doj who oversees criminal statutes in the
1:39 pm
implementation of aml, kyc, the bank secrecy act, the sec regulating some of these assets, securities, cftc regulating them as commodities, and that on top of all of that you have the state money transmitter licenses and requirement that also play a role. matt: but maybe not well. if you look at the problems that you see in tether, what is backing the coins, the problems that you see in defi. if you are an investor in the space, you have no doubt been ripped off numerous times. maybe even problems with an fts. nobody understands what they are, who owns the assets. it spans such a broad space. it is really the wild west.
1:40 pm
perianne: i don't agree with that statement, this is an incredibly innovative technology ecosystem, and you bring up a lot of different topics from stable coins. there was also a hearing on tuesday in the house financial services committee about what the future of the regulatory environment for stable coins should look like. you mentioned tether. they are outside the reach of the policymakers in the u.s. the concern that people have about stable coins, in my opinion, are vastly overblown. the majority of u.s. companies who are operating stable coins that are backed 1-1 to the dollar are not leveraged, backed fully by cash equivalent in reserves. these are important conversations, but we have to break it down into different types of innovations, make sure we have the appropriate regulatory oversight that does not harm innovation.
1:41 pm
that is a big part of our message of this regulatory fragmentation is not helpful. it is really holding back american global competitiveness. if businesses do not understand the rules of the road, if they don't have clear guidance, if they don't understand who the lead regulator is in particular areas of this ecosystem, it is hard to operate a business here. that is why 95% of digital asset trading volumes are happening outside of the u.s. but the majority of these projects, the ip, is developed here. if we don't get a regulatory strategy, unified strategy, it can make all the difference of what our technical future looks like here in the u.s. matt: a conversation that we will continue to have. thank you, perianne boring. the chamber of digital commerce. we are looking at session those right now in terms of stocks.
1:42 pm
the dow jones down almost 400 points. this after our interview with st. louis fed president jim bullard who says he wants to see 100 basis points of hikes by july 1. that means over the next three meetings, implying that at least one of those meetings you see a 50 basis point hike if the other two are 25. it would be unusual to hike 33 and a third basis point at each meeting. also said in the past, the fed would have acted and now and maybe come in with an emergency rate hike. i think that would surprise the market, that would be the real shock and awe. the two year yield up 20 basis points in one session. this is bloomberg. ♪ on. this is bloomberg. ♪
1:46 pm
jon: this is bloomberg markets. i'm jon erlichman. we mentioned at the top of the hour cpp investments with assets totaling more than $430 billion is committing to reach that zero greenhouse emissions by 2050. the company will continue to invest in oil and gas companies as they transition on the basis of supporting viable green initiatives instead of blanket divestment. with us now is the global head at cpp investments. let's start with the timing on this commitment at all that came together. >> absolutely. as you know, this is something that is part of 10 years of
1:47 pm
incorporating climate change, other esg considerations into our investment decisions. we were one of the founding members of thetcft, the first pension plans issuing green bonds. we have, today, $67 billion of green and transition assets in our portfolio. this is really the culmination of the thinking that we've been doing for some time, as well as a recognition of the acceleration we are seeing across government commitments, regulation, innovation and technology that will enable the transition, and changes in consumer and corporate behaviors as well. matt: when i hear someone set a target for something so far into the future, 2050, is as far ahead as 1994 is behind us.
1:48 pm
i have a feeling that people are not serious about meeting those targets. we may not even be her in 2050. why not do it sooner? >> i am japanese, so i plan to live to 100. [laughter] as an organization, we thought very carefully about this. we have a long history of setting long-term strategic targets consistent with the long-term investor that we are. in addition to making the 2050 commitment, we have also said that we expect our $67 billion of green and transition assets to grow to at least $130 billion by 2030. we have got a closer term target as well. jon: i also want to talk about energy related assets, the strategy there, considering we
1:49 pm
have seen some blanket divestments from pension funds, how did you reach that conclusion? perianne: great question, jon. we have always said that we don't believe in blanket divestments that are disconnected from investment decisions. our believe is that the optimal transition is one that will reduce emissions by taking a very pragmatic approach to economic abatement but also recognizes the acceleration we are seeing in technologies, including carbon capture, storage, sequestration, including the changes we are seeing in consumer behavior, the acceleration of regulations, the metrics in markets that will assist the transition. matt: great to have you on, thanks for joining us. deborah orida, the chief
1:50 pm
sustainability officer at cpp. half $1 trillion under asset management. uber laid out an ambitious future but investors seem to have doubts. kriti gupta has the details. >> the stock was up 5% this morning. now it is down 4% in intraday trading. this has everything to do with the ambitious announcement, $5 billion of adjusted earnings by 2024. this is after revenue had risen 83%. they also posted 118 million current active users, the highest in history. uber does a lot of things. they are actually looking at bookings at 106 5 billion to 175 billion by 2024. but it is that ambition that he will see built into the market, questions about can uber bullet off?
1:51 pm
1:53 pm
matt: this is bloomberg markets. i'm matt miller. right now, we are going to head down to florida. ed ludlow is following elon musk around -- sorry, he is in texas. what do we expect to hear from -- what is his official title at tesla now? chief super king or something? >> we expect to hear his latest and greatest about human spaceflight into space. behind me, you cannot escape it, that is the latest veneration of
1:54 pm
starships. 120 meters tall. he gave the speech in september 2019, outlined these grand visions. human tesla within a year. none of that happened. you think back to may of last year where they went six miles into the air and landed successfully after four fireballs. so when are we going to the moon, mars? what is this thing behind me capable of doing, and when? jon: the update on starship is highly anticipated, but star link has been creating some chaos. there have been some concerns on several fronts with the satellite ventures. ed: there are around 1500 starbucks satellites in consolation in orbit. spacex have been pretty unstoppable, already did six missions over the last 30 days or so. this is an example of them meeting difficulties.
1:55 pm
the satellites were disrupted by a magnetic storm, they were within earth's gravitational field, and they were damaged. if you look at when they plan to launch again, they will do that at a pretty rapid clip. it is a pretty minor disruption for them, but it is a noticeable blip, one that they don't normally have. matt: his official title, by the way, is techno king. what is his official role at spacex? lead designer, we hear that he is very hands-on. ed: incredibly hands-on. during that presentation in 2019, this is what we are bracing for. he gets incredibly technical, goes on tangents. he doesn't just talk about rocket science but he goes into human physics, astrology. he relies on a powerpoint which often seems to go rogue but he often makes bold predictions.
1:56 pm
it will be interesting to see what those productions are tonight. jon: we will wait for your reporting later on on starship. i was looking at ed earlier, and his hotel room had starship pictures. when you are in texas, these days, i guess it is hard to avoid elon musk. thanks for watching. this is bloomberg. ♪
2:00 pm
lower prescription drug prices, saying he is seeking to cut costs at a time when inflation is surging. the president said it is an easy thing to do and can be done with the stroke of a pen. he also addressed gas prices. >> i am going to work like the devil to bring gas prices down. i am working to make sure we strengthen the supply chains. mark: the president is seeking to address gas prices, drug prices, and other pocketbook issues ahead of the midterms law enforcement agencies across the u.s. are bracing for the possibility of a protest by truckers that could carry into march, potentially including a cr
37 Views
IN COLLECTIONS
Bloomberg TV Television Archive Television Archive News Search ServiceUploaded by TV Archive on