>> good morning from bloomberg's european headquarters. i am dani burger alongside manus cranny live from dubai. this is "bloomberg daybreak europe." manus: ukraine's president spooks markets with a quip about the date of an attack by russia. oil warning. citigroup says crude could spike 10% if there is a russian

military action in kiev. props -- plus, no rush. christine lagarde reiterates a gradual approach for any ecb action. bullard calls for frontloading rate hikes. i put it to you these markets are grappling between the extremes of shock and aewe from an activist fed and the risk of conflict in ukraine. mr. calame of edge puts it clearly and this is what he says. there is a risk of conflict, it is high, but it should have a limited impact on global equity markets and would promptly push central banks into a dovish position. dani: i will take the other extreme. a limited impact, a polar vortex says morgan stanley. this is the risk of a potential war, arises and energy prices would destroy demand and in our view and perhaps hit several economies into outright

recession. polar vortex is the word. manus: indeed. let's get into these markets. let me show you cross asset allocation. it is about commodities, about oil, and the movement. we are going to kick it off with the equities story first of all. . dani: let me take you to the european equities which fared far worse than the u.s. yesterday. it is all about geopolitical risk. down about 0.4%, just want to point out tech is doing better. flat against a down market. are we back into this environment where you flee to the safety of tech and selloff for more risky value shares again if you are concerned about geopolitical risks? manus: there is movement to grapple with. chinese authorities are trying to grapple with price rising, change the narrative, change the agenda. it collapses in singapore.

the clean hedge in the event of conflict at an eight month high is the gold market. and do you want tn or swiss in the basket? -- want yen than the basket? looks like swiss is on the move as the hedge of choice. investors are quite literally on tenterhooks about the ukraine situation. the president spooked them with a video message. take a listen. >> we are told february 16 will be the day of the invasion. we will make it a day of national unity. a relevant decree has been signed. we will put out national flags and we will show our unity to the entire world. manus: his office later said it was sarcasm and it was more about the rest of the world predicting the date of an attack by russia. sarcasm costs. how quickly did they roll this backend what is the significance of the zelensky joke?

dani: i know president zelensky of course has taken a lot of heat today being told this is not the time for irony or sarcasm, but actually, if you look at the video, particularly in ukraine, this was a video that was filmed in which a lot gets lost in translation. what he is saying is we have been terrorized for weeks. we are being told the invasion is happening wednesday. i'm telling the ukrainian people this is unity day. we need to rally around the country and say we do not want war. a lot of the importance is of the message he was delivering to the people of ukraine who for weeks by the way have been terrorized about news of an imminent attack. in terms of the meaning beyond this, if you look at russia, the messaging coming from the kremlin is very different with sergei lavrov telling vladimir

putin that he believes there is still a way for dialogue and that he would recommend continuing talks with the west. those talks are going to continue today. we have olaf scholz now on a plane by the way as we speak to russia. this is going to be the first time let a mere prudent and olaf scholz meet -- vladimir putin and olaf scholz meet in person. the question is can the german chancellor deter the russians at this point? dani: thank you for keeping us updated. oil is retreating from its highest since 2014 as traders way russia's intentions toward ukraine against the main outlook. geopolitical risk, potentially higher u.s. supply, and the potential for a revival of the iran nuclear deal could tamp and bullishness about the commodity -- dampen bullishness about the commodity. a lot for equity markets to weigh. does the $100 oil call look like it is still within reach? >> when you look at how much oil

has gone up the last few months, one of the best-performing commodities so far this year, i think that $100 oil call, this is a down day. folks are still digesting those comments from the ukrainian president. they are also digesting russia saying -- or pretend rather -- putin saying they will look at a diplomatic approach at the border, but when there is 130,000 troops on the border to the ukraine, the market is going to be looking at that until that the escalates, there are risks of price shocks. any data we get out, we might get data from the u.s. showing inventories drop more than expected where there is an outage somewhere or more demand from gas than we thought. that could get you to the $100 range. we are fundamentally is an a tight market and because of that , any indication or anything

that happens with russia or ukraine could see the price of oil rise further. manus: thank you very much. the pboc is pumping more liquidity into the system. the move spurred gains on the csi and the shanghai compass it. giving some of those back, issues down 0.5% -- asia is down 0.5%. they are driving the truck a different direction. >> they certainly are. we know there is policy divergence. liquidity injected through that mlf, but they left the one year mlf, the white line on this. it is a big toolkit the pboc has. most economists do not expect it remain there for long. bloomberg economics saying you

can see another cut in the second quarter and potentially the third. we know the central bank is really trying to stimulate the economy. when it comes to market moves, it is a down day across asia. we are grappling with so many things. you see the selloff in iron ore. ukraine tensions and so many factors going into this market. you have seen the csi 300 propped up by liquidity up by 0.5% and that is important because yesterday it deepened further into bear market territory. nowhere for investors to hide in these markets more broadly. you have the safe haven yen being bid, the best performer in terms of g10 currencies this morning. dani: nowhere to hide, the warning from juliette saly this morning. we had results in top of our court -- corporate news. bhp reporting robust profits for the half year. has been facing choppy iron ore prices and also expecting

extreme volatility in markets to continue. but it is optimistic about demand from china. let's bring in martin ritchie, our industrial commodities reporter in shanghai. what were the key takeaways from bhp results? >> it has been a big day for iron ore. we had the record half your profit. that is thanks to higher iron ore prices during some of last year. now iron ore prices are tumbling almost 15% in singapore. you have this tension between quite strong demand going forward from china's stimulus, which the bhp ceo alluded to today against china's efforts to try and tame commodity inflation. it has summoned iron ore

companies for meetings. it has warned about speculation. this is a very volatile environment. what mike henry said is look, supply and demand is going to determine what happens to prices here. that is a warning shot to chinese authorities who are trying to keep prices lower. manus: thank you very much. it is going to be a volatile year for iron ore prices. martin ritchie, our industrial commodities reporter. let's get the first word news. she is back, it is juliette saly. >> justin trudeau has invoked emergency powers for police to quell protests against vaccine mandates. the government is seeking to choke off funds to protesters, broadening anti-money laundering rules to cover crowdsourcing and cryptocurrency platforms. an important bridge with the u.s. reopened, but protests

continue to gridlock canada's capital city. hong kong says it has no plans for a citywide lockdown to bring virus cases back to zero. carrie lam says public housing estates will be used for isolation facilities and officials will seek hotels for the same purpose. this has local media says hong kong will announce 1500 confirmed covid cases today. intel is closing in on a deal with $5 billion to buy israel's semiconductor. it is part of intel's push into the outsourced chip manufacturing business. shares in towers jumped as much as 58% in late u.s. trade. microsoft has told u.s. employees to begin returning to the office from the end of this month along with other tech giants, it has struggled with how soon to bring employees in with previous deadlines pushed back. the company says staff can work from home up to half the week without discussing it with managers.

this is bloomberg. -- global news, 24 hours a day, on air and at quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. dani: juliette saly in singapore. a quick check again on your premarket session, looking at european futures dropping, but the u.s. is faring better. the nasdaq up 0.1%. geopolitical tension being priced in. russia has repeatedly denied any plans to attack ukraine. manus: they have said diplomacy is still open as an option. there has been nervousness when you listen to mike bell yesterday, j.p. morgan talking about as he put it a polar vortex. this is one person's view on the market. markets are trying to grapple with what the worst case scenario is. diplomacy is still very much alive and moving along.

nobody has closed the door as yet. what else how we got? some people call cash trash. personally i don't. dani: some people are worried credit might turn to trash. perhaps we are not there yet. goldman sachs has told clients to switch to cash as the risk off movemore on that next with t from bny mellon investment management. manus: plus we will be speaking to the ceo of a uae based fertilizer exporter. this is bloomberg. ♪

>> in view of the current uncertainty, we need more than ever to maintain flexibility and

optionality in the conduct of monetary policy. our monetary policy is always data dependent. manus: christine lagarde speaking in front of the european parliament yesterday. some would say trying to roll back the narrative from the ecb press conference. the risk off mood is spreading across a myriad of investors. goldman saying to credit lines which. bank of america investors are in sell mode. joining us now is a senior market strategist at bny mellon investment. straight to ground zero in the credit market. everyone is having a panic. last week we warned of the grumblings. now goldman are panicking and bank of america, the survey is pressing. this is the rumble in the jungle in the credit market. how much worse is it going to get? should we dump credit and get cash?

>> thank you for having me. i think we all know typically the progress -- are much more challenging for investors. there is a key factor we need to take a look at, that is real rates. we are seeing 1.5% in three years. that tells us we need to be in short duration assets versus long-duration assets. dani: you say that 90% of the u.s. tech sector will come under pressure from the rise in real rates. if i like tech, how can i find the rest in this environment? >> i would go with high-quality tech. quality is one factor that is going to still deliver in 2022. high-quality, high cash generation, low price and lower

earnings volatility companies within the tech sector are still the places to be. i think this is going to be a good year for value heavy industries. we are favoring international indices because of that. manus: we are waking up each day dealing with the nuances of language on conflict and escalation and de-escalation. so i j.p. morgan, if there is a conflict of some description, it will have a short-lived impact on the equity market. do you expect conflict will cause a cessation, let's say, of aggression from the central banks? >> when we say conflict, we mean geopolitical conflict from what i am understanding? >> yes. we look at the risk of conflict with ukraine and russia, what

that might be. whether it is cyber or real on the ground as people are telling us. >> for geopolitical conflict, they are always interested in how it is going to affect markets. i agree with klonopin -- we are not seeing sustained market contagion. if russia invades ukraine, we are expecting higher usp sanctions on russia, but that is going to hit russia's secondary sovereign debt markets. and of course equities premium is going to increase, structurally higher post crimea as well. i agree we are not seeing a sustained spill over to risk of emerging market for instance. but there will be some slide to safe haven assets such as the u.s. dollar we are seeing at the moment.

that is also driven most importantly by the tightening cycle compared to the ecb and bank of japan. dani: would or could negative developments impact central bank policy? >> to the extent that it affects inflation, yes. the market is kind of pricing that in right now, especially with geopolitical tensions, what that would mean for energy prices and therefore what that would mean for inflation. i think if that is sustained, of course it might affect the central bank monetary policy as well. christine lagarde is getting increasingly hawkish. we are probably going to have one hike coming from the ecb before the end of the year. they still, you know, are behind compared to the fed.

they are getting a little bit hawkish. dani: you are going to stick around with us. that is lale akoner at bny mellon investment management. take us the gmm screen. you know i love a standard deviation move. iron ore tumbling almost 11%. beijing fighting terrain in prices. -- fighting to rein in prices. i have not tracked how many standard deviation moves, but it is at least two. manus: and aussie rates playing the catch-up game with the u.s. overnight in the end of the curve. coming up, we are going to talk about the liquidity injection from the ecb. -- from the pboc. we will discuss market implications with our guest on bloomberg.

dani: it is "bloomberg daybreak: europe." to china, where the pboc is pumping liquidity into the system stepping up support for the nation slowing economy. still with us is lale akoner, senior market strategist at bny mellon investment management. as we enter an environment where you look at tightening central banks in the west, does china's markets become relatively attractive? >> as manus said, compared to other markets. i think for chinese investors, the big question is for chinese equities.

it has driven down emerging markets in 2021. there are places to invest in china. especially sectors that enjoy the party's favor. think about new energy, smart infrastructure, telecoms, and the digital economy. especially 5g. manus: to what extent -- and this is the debate we are going to have. with additional liquidity into the system relative to g3, g10, whatever you want to call it, what will that do in terms of earnings momentum for china and asia relative to the u.s.? >> we are still expecting asia to lead in earnings growth, especially compared to other emerging market countries. china is very much easing its moment. there are places to invest that stay away from political risk

that is going to affect some of the sectors, but go for sectors that are favored by my policy. the rest of asia, there are still good places to invest such as southeast asia, we are in countries such as india, indonesia. the political risk factor is quite low. narendra modi is about 50% in approval level which gives him leeway to enact policies. they try to make the environment favorable for businesses. china is targeting the demand-side. india is targeting the supply-side. it makes it easier to operate businesses there. dani: if you look at valuations in the u.s. versus em, i have a chart. the valuation multiples on two

separate axes, so this is not normalized, but what we are seeing is the valuation of the s&p 500 index coming down dramatically starting to close the gap to ems. how much further does this have to run and what is the catalyst? the u.s. falling or ems playing catch-up? >> the u.s. is very much heavy on tech indices. go for international stocks. you have to be very selective. major developed markets are tightening policies. i think when we compare emerging markets as opposed to the u.s. and other countries, we are saying look, they are still at the early stages of recovery. to your point, valuations are cheap. earnings growth are expected to be led by asian emerging markets.

i think we are still seeing good places to invest in 2022. manus: thank you for being with us today. that is lale akoner at bny mellon. coming up we are going to dig

♪ >> good morning from our middle east head quarters in dubai. dani is in london. >> bad timing. oil warning. citigroup says it could spike 10% if there is russian attack in kiev. and there's an approach for any

e.c.b. action. the fed feds the call for front loading hike. there is this tug of war from the market. is it the thread from the fed or geo political tensions? well, if there is a risk of war, mike wilson says that risk is for the economy, it's for earnings. but a spike in energy prices destroys demand and tips several economy into an outright recession. we hear from plenty of people who disagree. >> the risk of conflict is high. we saw the sarcasm and the equip of the ukrainian president. oil ratcheting by 2.5%. but this is what he says at j.p. morgan. yes, the risk is high. but it should have a limited impact on global equity market and would likely market a dubish reassessment of the central banks so. any escalation could cause a

de-escalation let's say in the monetarily policy, a more activist monetarily policy. dani. dain: our past guests said that the impact won't be that dramatic. the impact will be that rise in real rates worth 90%. so let's get to this morning's market. because tech is up .1 of a percent. maybe that's temporarily we're in this environment where you find safety in tech. that's you won't get as aggressive as banks. meanwhile s&p down .03 of 1%. manus. manus: iron ore, the chinese seek to rein the price of one of the most important commodity. gold is at an eight-month high. it it can be the perfect hedge for any geo police political ax.

we put the swiss frank, i would say in terms of money going into swiss and yen as those haven hedges come into play. let's talk about the oil market. it could go up another 10% if russian military action on ukraine takes place. the global head of commodities over at citigroup. russia has repeatedly said it has no plans to invade ukraine. hear's what morris told bloomberg tv earlier. >> >> if oil goes over is00 for the time being i would not be suprise if there could be a to% increase in prices if there were military action that went to kiev. >> founder appear chief of executive officer of crystal energy which provides research to government investment funds and energy companies. thanks so much for joining us this morning. you hear a 10% jump in oil if there's an escalation of the military kind in russia and

ukraine do you agree, carroll? >> carroll: good morning. yes, some kind of guesswork because we need to find the definition of what a military action what obtain. is it a small incursion or a fully fledged war? how long is it going last? will it be short-lived or going on forever? so different scenarios will have different implication on the economy. so for example we see that the inflation that the european meant to is suffering from is driven by higher energy prices. so if there's action in ukraine and russia, one of the biggest oil exporters in the world -- then that would be to even a higher supply destruction. and in the longer term, so it

depends on the reaction, yes, we're going to see spikes in prices. but if you look further down ahead depending on the extent of the crisis and depend on how long it will take there might be an opposite impact on prices. manus: there's a great deal of unknowns, no knowns, unknowns. i don't know what the right syntax is from donald rumsfeld in a very hot war. here we are, we're grappling with a whole series of unknown quantities, diplomacy and duration if there's an escalation. what is your worst-case scenario? has it been factored in where russian oil comes into play in some form of sanction? carol: the question is sanction. it depends on military action. it might be more than a diplomatic response.

however the big question is how effective those sanctions are going to be. now, it's unlikely that if the sanctions are going to be imposed today in military action by russia against ukraine they would affect the energy supply. the market is very tight as you can tell from prices. supply is struggling to keep up with growth and demand, that might change. but at this stage, i doubt if there are assumptions on russia, they would target short-term supply -- it would have an impact on the longer term supply because of the technology, energy projectses and following followingcrimea. it's very unlikely. but if i'm proven wrong and they target supply, then you're going to see a significant spike in

prices, in oil prices. dani: we are definitely hope that we don't find ourselves in that scenario. i want to bring us a quick line. china warning iron ore against speculation and hoarding as we see iron ore prices tumble. trying to combat inflation there. so many moving parts for commodity companies, energy companies. for those that you are advicing, what does preparedness look like in this environment? >> it depends because people are focusing only on what's going to happen immediately. this is where you see a lot of the fear factor or if you want a translation of the risk premium though nobody knows what it's going to factor in. others take a more longer term perspective and believe that geo politics are likely to ease the pressure especially that you

have additional supplies are expected to hit the market but really from the second half of this year -- it's surprising everyone, right? just after a year almost -- just over a year with people off. it's coming back. we're going to see even more pronounced next week. you have additional supplies. and who knows what the situation will be with iran. that's only on the supply side. i find it hard to distinguish between economic development and oil markets because if we had inflation, central banks whether in europe or the u.s. for example taking more aggressive stance in terms of inflation, that will have repercussions in the economy and as such in oil demand as well. >> interesting. at bank of america it was a little bit earlier, uton said i was wrong. that shell wasn't going to stop the run off. it would be iranian crude. with that in mind -- they reckon

that if iran gets done, it could be a game changer and we flip to surplus of a half a million to a million barrels, do you concur with that math? >> if i look at previous example, which became effective in january 2016, you can easily see how it managed to have about several thousand dollars a day within a few months and today the expectation if i want to call the international agency they are expecting between 1.3 to 1.5 barrels a day. that would hit the market gradually especially when combined with additional supplies coming from outside such as the u.s., canada, brazil. then that is the question. actually if you look at it, we have inventories in the oscd.

yes, they are below five years average. but the expectations are that we're going to see this because of the market. manus: georgia carole, crys to energy founder and c.e.o. a big jump in the earnings. this is bloomberg.

♪ manus: it's daybreak. dani bug ser in london. abu dhabi has reported 138% in the q4 revenue in global

commodity price. the c.e.o. joins us. ahmed, great to have you with us. you are riding the crest of a global wave. simple question. great numbers. net profit. comfortable beat, etc. is this wave rising and continuing? is the momentum going to stay with you? good morning. >> good morning, manus. thanks for having me. with regard on the wave on the crisis side, it's shooting strength with the low cost positioning in the middle east being able to capture strong margins and deliver it to global markets. in terms of whether it is resilient, you know, there's always going to be volatility in our space. but we think the medium term looks solid still the price of hydrocarbons or natural gas which is going

strong with some volatility, strong earnings trajectory. dani: i'm about to show my regional bias considering i'm over this side. manus: she's in london. dani: i am in london. and the rest of europe we are facing an energy crisis. this has led to demand destruction within fertilizer companies. how much opportunity will you fill the void? it's not just energy but geo politics. >> fretiglobe is between o.c.i. which the dutch listed with american presidents as well, fertilizer and a methanol company and adnoc. those are the two key response tokers. they have been turning down production because of the high gas cost in europe and

fertiglobe has stepped in and utilized their low cost base to be able to provide products in here in the case of o.c.i., we have a night crow general fertilizer facility. we shut down one of our ammonia line. we kept the down stream coming and not skip a beat. >> you will be judged on volume, value and margin. and you've already said us, oil -- i know you've got plenty down here for free virtually. but at some juncture, these volatile elements are going to eat into margin. at 100 dollar oil, where does all this begin to bite? or has it already begun? >> for us, we're missouri more -

were more focused on the ammonia space and that's our main product. it's more of an indirect link. when oil goes up, you see greens, wheat, corn for example go up. higher oil is not necessarily for margins in terms of an ammonia player in terms of natural gas that basically pushes the marginal cost floor. european companies start turning down production along with east asian production of fertilizers with the outlook where natural gas today the current price is about $25, $26 which is five, six times what the value was the last five years, it has a high marginal catch and puts fertiglobe in a good position and the forward curb is still at that same level. dani: ahmed? >> yeah.

dani: perhaps you are insulated from the inflationary pressures. but how concerned are you of the hit to the consumer given inflationary pressures and that in turn hurting demand? >> it's something that we're very concerned about in terms of, you know, what happens in terms of the crisis food inavailability and food security, that's why it's important to have this middle eastern production continue to run. we need to focus on volume generation to continue to deliver our fertilizer to the te agricultural community and ultimately to food sources. food is quite inelastic as you can imagine. we're trying to fulfill the requirements and in terms of farm economics, obviously, the input has gone up but so has the ability to deliver product to the -- to the food community. and we're -- we haven't seen significant demand destruction.

we might see some of the periphery. but we continue to see a strong planting season in europe and the in the u.s. in the months to come. >> we are trying to assess what c.e.o.'s with leaders of industry have they planned for the worst-case scenario, maybe conflict with russia and ukraine. when you look across the business, what is the biggest risk to fertiglobe at the moment? is it the energy component or is it the risk of conflict a molecule crisis of everything? your take on the biggest risk to you in the business? >> i mean, it's a good question. in terms of this specific risk with regard to what's going on in ukraine and russia which obviously we're watching closely. i wouldn't say that we would have a direct risk because it would create more uncertainty and push energy prices higher although there's a risk premium

already supporting energy prices. i wouldn't say there's a direct risk with what's going on there. if there's slowdown in the economy then you could see g.d.p. growth come down and some of the demand for industrial product where we sell not just fertilizer but ammonia and euria and in the industrial chain. but to counteract that we're seeing that the economies are opening up in terms of transportation demand and haven't gotten to full -- to the full run rate yet. and, you know, that's a little bit to an upside that we haven't fully seen. >> the building consensus picture. that's the biggest risk. ahmed, as always when you're back in the region, come to see ossifies face. that's the c.e.o. of fertiglobe and oci. not quite sure why we have o.c.i. in there. coming up, what is it about? supply chain pain.

mitch lynn said to letup in cost inflation. we speak to the french maker. this is bloomberg. .

notes dani: i'm dani burger with manus cranny in dubai. manus, the market all about china. we're looking at the market up 300%. this off the back of pboc easing conditions, manus. all right. well, manus, you're looking at iron ore tumbling as well. beyond china our top story, u.s. authorities are scrutinizing how wall street firms handle block

trades. scoreses tell us it's part of a long running probe. joining us is tom metcalfe. tom, what does this mean? tom: yeah, it's a big story. it's one of the sort of pillows of investment banking. it suggests that the s.e.c. and the justice department are taking a close look at how it's run maybe there's perhaps a price manipulation when we're talking at the outsiders involved with that case. manus: tom, good morning. should we be surprised? communication, we've seen this in a number of markets being questioned. so how much of a surprise is it? >> yeah, no. basically this case has been running since 2018. people are pretty surprised because there's so little communication in terms of how progress is being made. so outside there's been a big lull in the case and suddenly today we have goldman, morgan

stanley into it people are scrambling to react. dani: you mentioned that this is something that has been previously brought up. does this have any enforcement between those policymakers? >> yes, we do associate with them. and the interesting thing will be what are we going flare the justice department as they work with the s.e.c. in this in terms of will this draw in morgan stanley. or are other market makers going to be in trouble? manus: we look for reference points. i go back to liable or p.p.e. in the united kingdom which was very painful for many people. and here we are in the hedge fund world and bank. do we have any concept of how big this is?

>> those are the really big hits. is it billions or millions or perhaps it won't proceed for that sort of penalties? perhaps the clase be dropped. four years after the investigation started its no closer to the end. manus: indeed. we'll have to wait to see if it proceeds. tom metcalfe. thank you for being with us. if you go to t-live we spent nine days about anaphia lactic shots about it? agreed? dani: i'm there with you. manus: 2023. we're now down to two hikes and a rate cut in 2024. i just wondered when you look at twos in terms of 2% and expectations rolling over.

there's almost an exhaustion sense in some of these marks. but i could be completely wrong. >> perhaps we've overdone it in a hawkish central bank. we are 40 basis points on that .2 curve. the question that keeps coming up for me is how much of this is math and probability that if you are pricing in more hawkishness, then you kind of have to start flattening out the curve on the long end? manus: there are some serious parts of the curve that have inverted. i won't say which one it is because i don't know. i don't want to be caught short. here we are. we've got equities back in the green. european stocks, we just heard fertiglobe's president talking about the risk. it's a risk of raising conflict between ukraine and russia.

dani: exactly. a lot for markets to digest. up next, bloomberg markets europe. mark and anna will take you through that. this is bloomberg.

♪ ana: good morning. welcome to "bloomberg market europe" i'm anna edwards. mark joins us from singapore to take us through all of the market action this hour. cash trade is less than an hour away. here are your headlines. ukraine's president spooks markets with a equip about the date for russia. lagarde with a gradual approach for any e.c.b. action. but over the