>> a very good morning and welcome to daybreak australia. caroline: we are counting down to asia's major market open. this is the picture cross wall street, the s&p 500 falling throughout the day. this after president biden

announced additional sanctions on russian bank. tech led the gains and we saw the nasdaq 100 closed for the -- false for the first time in six sessions. the 10 year yield down toward the 196 level. the bti rising and paring back some of the gains after hitting that $100 a barrel after present biden said he will release more strategic oil as conditions warrant but it of course it is really all to do with what is happening across ukraine. fighting continuing, president biden levying sanctions, but we know for a fact that the penalties as president biden said himself will really take time in order to weaken the russian economy and to actually have an impact. what's really surprising is to see the global markets reacting, and we will be talking about this all afternoon, how the emerging markets index really

plunged to the lowest since the pandemic started, but the reaction in the u.s. market is pretty mild. caroline: i don't think we've ever seen such a significant reversal, in the mastec, -3%, entering technical air levels. these are remarkable moves, these sanctions were not as harsh as many had braced for. counting down the expectation of what central banks will do in response to this. yes to the inflationary push of high commodity levels but we also worry about the stagflation effect on the back of russia's incursion on ukraine and therefore we could see maybe that basis point hike as soon as march. haidi: it's such a confluence of vectors. i would not have expected to see

that late stage rebound of assets in the u.s., it's really extraordinary the way some will find optimism to push the market back to higher levels. also interesting is the china level of all this. chinese assets a kind of -- kind of a safe haven because it's such an idiosyncratic market. all the questions over sovereignty over the individual states in the question of democracy is very sensitive to beijing. again, beijing saying they refused to condemn russia posit attack on ukraine, still urging restraint on both parties and repeating the criticism of the u.s., saying they been hyping up the prospect of war in europe over the past few days. let's listen to what president joe biden said earlier on the latest sanctions on russian banks. pres. biden: he has much larger

ambitions then ukraine. he wants to in fact reestablish the former soviet union. the bank that holds more than one third of russia's banking assets by itself cut off from the u.s. financial system. today we are also launching for additional banks. that means every asset they have in america will be frozen. the sanctions we proposed on all the banks and more consequences, number one. number two is always an option, but right now that's not the position the rest of europe wishes to take. haidi: discussing possible sanctions on putin come on oligarchs including some further sanctions and were now hearing from bank of russia saying all bank operations in rubles are to be carried out but they've developed a plan in advance of

the sanctions to provide necessary support for the banks that are affected by the sanctions. eu leaders -- leaders discussing the sanctions on putin and russian oligarchs as well. let's get the latest from annmarie hordern. it's been a busy few hours. what are we hearing from the white house, what level of support beyond sanctions can ukraine potentially hope to receive? anne-marie: the on sanctions is continuous funding that the u.s. has given to ukraine and part of that for the military and the like. when it comes to sanctions and invoking harsh penalties on russia, russia will have a briefing in about 30 minutes time from the president's deputy national security adviser when it comes to international economics. we should note while maybe they

didn't do everything that was prepared on the table, going directly after russian oil and gas, they wreak havoc on russian financial assets today. 33% lower on the stock, the ruble at the lowest ever, that's the russian currency. so there has been a lot of pressure, and we should note some of those banks that have added to, a few of them are in vegas. one down more than 40%. they're really going after russian financial assets. caroline: bank of russia re-invoking that view that the country has prepared itself and gotten out of u.s. dollars and invested in gold and other currencies. we see the ramifications for russia saying they can protect the five key banks. how does the e.u. respond now,

it looks as though britain and biden are trying to say that the e.u. is not on board with the tactical focus. >> european officials outspoken with would disagree, saying they're not pulling back on any big sanctions. the biggest sanction package ever imposed on the country. when you look at the dependency from europe onto russia for every dollar the u.s. will lose on the sanctions, the europeans will lose 10. a lot of the swift payments, if your european company and you want to bring back a lot of your capital, you still need the system to be operational. european leaders are meeting at this hour and on a video conference, the ukrainian leader called into the conference call. he wanted to make his presence felt here and reiterate that i

am the president of ukraine, the country is going to put up a fight and we know there has been some incredibly tense fighting and also in belarus. it was the plan all along to go into the fastest way into the capital. why is the capital so important -- at this stage? the russians have made it clear they want a government change to see zelensky out and a pro-russian government put in place. shery: as maria was telling us just now about the fighting happening, we've heard from western allies that perhaps we could see kyiv falling in the next few hours. what do we know at this point? >> i believe that reporting to those on the ground. it is incredibly fluid, the situation is traumatic for ukrainians, especially our colleagues that are there. what would be significant is

maria, as she is correctly pointing to what russia wants, which is a change of government, is something seared in president putin's mind. when victory on co. which fled the country, he was ousted by parliament, and they rejoiced for a european ukraine. that is exactly what president putin does not want. he wants a russian backed government. if that were to happen, it would be incredibly significant and make the diplomacy of this very difficult. from where i stand, we cannot see the white house recognizing a russian backed ukraine, given the invasion that took place today. haidi: maria, where does this leave nato right now and the pursuit of membership for ukraine? given that they're not going to

receive fortification from nato because they are still not a member. maria: they are not a member of ukraine, but we know at this point ukraine does not have a timeline, they did not have a date. there is no proposal on the table to show that there was a short-term path into membership. the ukrainian say they are very well aware that they will have to fight on their own. what they do say is that we need weapons, the ukrainian government today said anyone who can operate a weapon will get a weapon from the government. we have to fight in every street and every corner. there has been reporting about the way the russians are moving and very quickly, but the ukrainian say that this is a military operation, we are outnumbered, but we will still continue to fight, and we are putting up a fight. ukrainian official telling me flood a zelensky is in his office and working and he is not going to leave.

they tell me the european union, there's no way it was going to recognize a government put in place by russia. were not going to put a vladimir putin puppet in government and have normal relationships with him. the president of ukraine was voted into office, not a russian puppet. shery: we do have breaking news at the moment. morgan stanley disclosing a doj probe into its business. we've seen news of this happening in the past week but the bank now confirming it has been responding since august to requests or information from the u.s. attorney's office for the southern district of new york related to the inquiry. morgan stanley disclosing that u.s. probe into its business. caroline: fascinating fallout coming from the -- let's have a look at the markets.

>> it's been a historic day in financial markets. wti west texas intermediate oil, you can see what happens throughout thursday, going above $100 a barrel for the first time since 2013. when biden made his remarks, which did not include sanctions for the energy supply, you can see how the crisis just fell away and disappeared, kind of reversing what we saw in equity markets. the story of supply disruption and inflation, a lot of focus on commodities like oil and gas when it comes to russia, but also soft commodities. this is the bloomberg agricultural index, hit a record high and between russia and ukraine, they account for 1/5 of grain trade essentially, we

trade is about 1/5 -- wheat trade is about 1/5. what central banks might now do in terms of equity futures we see in europe, you see across the board futures down 4%. the s&p 500 with direct sales exposure to russia. when you think about europe and the actions it's been taking collectively, look at the euro futures and think about the opening on friday. caroline: let's get over to vonnie quinn with the first word headlines. >> the federal reserve still looks set to raise rates. officials including cleveland and atlanta are stressing the need to confront inflationary pressures.

and saying it's yet to be determined whether ukraine will change the policy outlook. signaling the exit from stimulus may be delayed given the conflict in eastern europe. the central bank governor told bloomberg it is not fundamentally change the outlook though it may slow. this was echoed by officials from at least two other central banks. new infections reported thursday in hong kong and 50 desk. the city has made a rapid decline in the resiliency index and is now second to last among 53 locations reporting. the seven day average felt around 338,000 last week in the u.s., compared to 2.5 million at

the peak of the rollout. is the latest sign that -- about 65% of the u.s. population has received the primary shots. global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. i'm vonnie quinn. this is bloomberg. shery: still ahead, or analysis on the ukraine invasion fallout on the energy markets. we'll see what the ceo of the american petroleum institute to say. up next, a conversation with the president of rbnz on monetary policy. this is bloomberg. ♪

>> markets are somehow doing the job of the central bank. >> they will probably respond to this. >> the fed will have to be really cautious and what they do and figure out how to navigate this. caroline: how the situation ukraine affects the broader monetary policy picture. the reserve bank in new zealand raised interest rates for third straight meeting and the rbnz set to take an even more hawkish

stance in the year had to contain inflation. kathleen hays is standing by with a very special guest. kathleen: adrian or is the governor of the reserve bank of new zealand, joining us now from wellington. very important time in many ways. certainly your decision to speed up rate hikes reverberated not just through the new zealand market but through global markets. in the last 24 hours we have seen russia invade ukraine and really start a war against them. oil prices have surged, commodity prices look like they will keep rising. is this something that could potentially affect your policy outlook? i know we don't know exactly where this is going, but what signal would you have two have a more aggressive tightening policy? >> thank you for being invited

on here, and you're correct, these events are recent and i can only talk on behalf of the reserve bank of new zealand in terms of early considerations. in terms of economic considerations, we still fall in the direction of supply constraint, the large commodity prices feeding through into general consumer price inflation, they are all upward. so we feel certainly the reserve bank is convinced that we need to do more to contain inflation here. and these one-off -- has added to inflation giving way.

kathleen: i think a lot of people were expecting it to die back down until we sell russia actually attack crane. this looks like is not going away in a matter of days. in that case, if new zealand consumers and businesses are facing higher energy costs, is there some risk that you might have to look in the other direction, saying we do want to have an aggressive rate hike but we have to slow it down, cool it off a bit for now. adrian: there's the ups and downs. the most important thing, a relative price shock is exactly that, relative to goods and services. that is reflecting relative scarcity when it comes to the oil side. the actual activities were seeing in europe today are being priced into markets. while the oil sport -- oil price labels may remain high, it's

unlikely they will keep rising forever. eventually they fall out of the consumer price inflation measure. we have no influence around affecting that relative price. real incomes for households are negatively affected. it's costing you more at business, your scarce income is being used on higher oil prices. so it's a balancing effect over the medium term for this. kathleen: you made it clear that it's a close call between 25 basis point and a 50 basis point rate. 50 basis points was on the table. if we get an inflationary full because of higher oil prices, commodity prices, with that maybe bring up this issue sooner rather than later, that maybe

the rbnz will need to do a 15 basis point rate hike? adrian: the world will be very focused on inflation expectations. we can't react to near-term -- medium-term inflation. we know it does over time feed into the expectations of future inflation. our job is to make sure that people see we are focused on domestic inflation costs, which aren't too high, so we will be doing what we need to contain that. meanwhile there are very volatile relative prices. her most important thing is really the end point of where we need to take the interest rates, the official interest rate, because the pace at which we get there, there's a lot of optionality for us. we learn as we go, as all of

these shocks continue to iraq. this is just today's stock. so we are in a good position, but the market is thinking very forward. it's priced into the yield curve, which is what we want and retail lending rates have already responded to expected changes. we know the destination, but we certainly retain optionality to move faster if needed. haidi: have we been shocked by how fast inflation has soared and could we be surprised by the housing market? adrian: are monetary policy actions are being supported by fiscal policy. were very concerned about deflation and employment because

of this pandemic shock. we are through that now and back into policy is normal, growth remains robust, balance sheets are robust. house prices have been well beyond what we would call sustainable here in new zealand. we've been very vocal about that. and the potential of falling house prices really only affects a small sliver of people who have become them -- unemployed or are unable to live with negative equity. that's a very small portion potentially because the vast amount of households have been upward significantly. shery: we have heard some opposition politicians suggest this week that you have perhaps overstimulated the economy which is why you actually have to act

faster. how would you respond to that? adrian: i think we've got the boos and the cheers equally balanced. we've had experts telling us we've done too much too soon, and with the covid pandemic arriving in future prices, and other people arguing look at inflation expectations. what i would say is we need to focus on the medium-term, we need to focus on inflation expectations over the medium-term and we need to focus on the mixed inflation pressures that we can influence. not jumping up and down raced on -- based on relative issues but we are well on the case. we started tightening well ahead of most of the banks in the world. with three shifts -- we are

selling down our bond holdings. so it is more business as usual. kathleen: regarding moving ahead of more central banks which you are in the vanguard of doing, you made this pretty dramatic shift from the november meeting to the february meeting in your peak, where you're going to get the key rate too. does that have something to do with the fact that other central banks like the fed signaled a series of rate hike starting in march? the ecb, which had shut the door to rate hikes this year open it. is it part of your move to say we have to stay in the vanguard, we have to keep ahead of the big banks to get the outcomes we want? adrian: we certainly don't see it as a race, i would say that

the quicker they get on with containing inflation it protects everyone's job including ours here at the reserve bank of new zealand. it's not just the expectations of a central bank. it's more about consolidation of widespread important inflation pressures. talk about oil, essentially a very widespread increase because of the inflation rates that are happening around the rest of the world. kathleen: speaking up important inflation, new zealand is an open economy, in terms of your domestic monitoring policy, do you have to have it be more aggressive to keep your currency supported so that you don't have so much of an imported inflation problem? is that part of the strategy now? adrian: no, it's not.

if -- we backed away to confidently manage a nominal exchange rate. we are inflation targeting nation with the free-floating exchequer. we deal with it by focusing on the medium-term, and it's it's about home chrome -- homegrown inflation and expectations measured for us. i would like to say while we are a small, open economy and the vast bulk of the monetary policy is still home driven. haidi: there is now a phased reopening plan for new zealand close to the end of the year.

do you worry that the demand calls will still be effective in terms of that driver of growth? adrian: that's actually a real concern across the board, new zealand has been very dependent on migrant labor and seasonal labor and so supply shortages, unemployment, levels of participation are at record highs. we need to improve the productive capacity of the it's going to be an interesting time parted how fast the borders are open, it is changing rapidly. we know they're going to be open. we are making simple assumptions that it's back to business as usual with labor migration and that will assist the supply side.

>> we've talked about the elements and find balance with the expectations of tightening. are you forecasting a soft landing? you sound confident that the rbnz can do this without tweaking the other direction. >> two years ahead which is the kind of horizon we look at it a lifetime away as evidenced by overnight actions. we deal with the information we have today, the way in which we believe the economy behaves and we are setting policy. the least regret for us is to make sure inflations are contained and that's why we are moving into signaling tighter monetary conditions. >> i would like to conclude with a big picture question. if this pandemic driven surge

and inflation in new zealand in many countries around the world, is it going to prove temporary? transitory? or are we in the midst of partially pandemic driven structural changes that are going to persist and we're going to come out of this in a world that looks more like the 70's and 80's with higher inflation, rising wages, and something central banks are going to be dealing with for some time now? >> that is a fantastic question. thank you, kathleen. i in -- i am of the camp that it is temporary. generalized inflation is unnecessary and central banks need to keep their eye on the ball to maintain and contain generalized inflation because everything else you talked about our one-off or relative price label shifts. they do not need to move into

generalized aggregate inflation. the only way they will is if we let it happen. central banks have their mandates. they need to get on and achieve their mandates. shery: always a pleasure to have you with us. thank you for your time. this is we are now seeing kiwi stocks rally the most since 2020. the big upside after a lot of fluctuation for the rest of the week. look at asian futures because we might be following the wall street a little bit higher at the moment. sidney futures also gaining ground after we saw the worst basis number -- the worst date since september 2020. here on wall street, we saw the huge rebound. let's get more on the markets with ed ludlow in san francisco. >> it's interesting to see the

risk asset rally continue after late u.s. session. look at the stoxx 600. down 3.3%. it was enough to drag that index into correction territory. also a market that has escaped some of the pressures in recent days is latin america. look at the latin america index down 2.2%. the biggest drop in two months. feeling concerns about global inflation and supply disruption that we may see coming out of russia and ukraine. also, a focus on currency markets. you see broader strength on thursday in particular the dollar making gains against the euro. president biden taking an opportunity to tweet after his remarks saying the ruble is at its weakest against the dollar.

now what do central banks in europe do in the eastern european countries like the czech republic or hungary? the inflation we see added from the situation in ukraine could spur new action from central banks. they expect that the czech republic central bank could -- something we haven't seen of the smaller central banks. i want to get a check in on bitcoin, because bitcoin jumped in in the rally that we saw across the session late on thursday. we are down eight tents of a percent from where we ended use date -- u.s. thursday session. >> let's bring our next guest who has changed convictions in light of recent events.

you see the hopefulness in the rebound we saw in the late stage of the u.s. trading day. do you think that there's a fundamental reason for that or are you fundamentally changing your positioning for the rest of the year? >> certainly not fundamentally changing our position for the outlook 2022. this market has been marked over the last six weeks by a lot of uncertainty around what direction the fed was going to go in mid-march. what we're thinking today as we see the nasdaq rally is that we got a bit of certainty that the likelihood for the fed to raise rates 25 basis points was priced in. that conviction of the market --

growth in technology. the reversion back to growth and technology seems present. shery: we have seen a huge rally when it comes to commodity space and that leads to more inflationary pressures. raw materials gaining ground parted it what will that due to profit measures for these companies and how well have they done so far? >> it's incredibly amazing for lack of a better word. as we look at supply chain impact, inflationary impact going forward, we discounted to some degree how important fed retroactive decision-making, the reflective response perhaps a

bit too late to the game is going to price into the year ahead. the incremental small 25 point basis changes, that's not what's going to move the market this year. it's the trajectory of inflation and the fact that corporations can continue to's public -- to stomach that market. the purchaser, what we start to see happen to the decision-making is likely one of the biggest risks to the market as we look ahead. >> a risk to the u.s. market as we start to countdown on the 50 basis point bet. from a global perspective, is the u.s. the only game in town in terms of equities? we start to shift away from europe given the incursions we have just seen? >> we are still looking at the change and overweighting and outperformance coming as the year ahead. there's going to be more

volatility in the european markets in light of recent acceleration of the situation between russia and ukraine. if you can stomach the volatility, the balance sheet still looks very strong. we believe that the strength of the valuations it's probably safe haven for outperformance relative to u.s. markets. shery: tell us where we can find better valuations. we have been talking about the resilience of emerging markets but today, they took a huge hit. >> we are not quite ready to say that the emerging markets themselves are primed for outperformance in the short-term. it's going to be very hard for them to stomach the inflationary currency impact. what we are seeing instead is twofold. and outperformance opportunity

will me look at the european markets than looking here at the u.s. markets, we still really like the valuations of cyclical and value stocks relative to those in the technology space. we went into 2022 with the outlook. sticking with it, not changing courses in light of the short-term geopolitical challenges. >> always good talking to you. it is time now for morning calls ahead of the asia trading day. a ceo is now saying he will sit it out in asian equities. he adds asia is the strong sense of play given the limited direct exposure to the you came -- ukraine crisis. we have been talking about chinese assets acting perhaps as a safe haven. >> that was a great piece.

meanwhile, market stress, uncertainty they are likely at their maximum right now. that is all according to barclays. caution on the banks and risks to outperformance such as autos and leisure. let's get you up to speed with the rest of the world news. vonnie: we will begin with joe biden who has invoked more sanctions on russia. he laid out penalties including blocking major russian banks and cutting off the country from chips and advanced technology. he is not barring russia from international banking networks for now. white house is also holding off on sanctions hitting aluminum.

>> we will limit russia's ability to do business in for countries -- four currencies. we will stop the ability to finance and grow the russian military. we will impose major and impair their ability to compete in high-tech 21st century economy. we have already seen the impact on the ruble. which early today hit its weakest level ever in history. >> china is refusing to condemn russia's attack on ukraine. it repeated criticism that the u.s. was to blame. a spokesperson sites whether beijing sees moscow's actions as an invasion. russia's invasion is complicating efforts to revise the run nuclear deal.

tensions risk spilling over into talks. that's according to ireland. the vienna talks are currently in a holding pattern with iran's negotiator returning to tehran to consult with negotiators. 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 vonnie quinn. this is bloomberg. shery: look at live pictures of a press conference happening at the white house. the national security advisor was just talking about -- we have seen president biden implementing more sanctions against russian banks limiting the kremlin's ability to do business in foreign currencies and ordering american troops to germany. we have also been hearing from jen psaki explaining the situation right now as we continue to get these latest

headlines about casualties in the ukraine invasion by russia. this as we continue to hear from western intelligence officials that kyiv could be falling within hours. >> the human toll of this current geopolitical tension. it up next, we will shift gears to think about the commodity spectrum. our guest joins us to discuss how the sanctions on russia might affect the energy supply and prices. this is bloomberg. ♪

>> there a lot of uncertainty around ukraine and russia. if a full-scale war breaks out, there would be an shock. it would likely have an impact on inflation. >> we are actively working with countries around the world to coordinate release from the strategic reserves. the u.s. will release additional barrels of oil as conditions warrant. shery: warning about inflation risks from the russia ukraine conflict. president biden saying oil reboot -- will be released if

needed. oil is standing at $92.81. we saw spot gold rallying. a bit of a mixed picture when it comes to the grain space. corn continued higher. ukraine is a huge producer of grains nicknamed the breadbasket of russia. >> around up on the commodities, not to mention what happened in european gas trading. mike summers is with us, let's get his take on how russia's invasion of ukraine is currently affecting access to oil and the price implication. i'm interested from your take about clearly president biden trying to do everything to stop

the pressure being felt on u.s. citizens at the gas pump. for now, are we likely to see prices rise? what more can you do? >> we have to keep in mind that there was a supply demand in -- imbalance prior to the invasion. we are concerned about what this will mean for commodity prices going forward. the important thing to keep in mind is that the by the administration all of their talk has been great in terms of the importance of american energy leadership. at the same time, a number of the policies they have put forward our meeting the rhetoric they have been putting forward the last couple of days. just this weekend, the by the administration put in place a plan to put another moratorium on leasing on federal lands and in federal waters. that's the exact opposite that we should be doing at a time of international crisis. shery: we have seen various

measures from the biden administration in terms of pressure against the oil. what are you seeing from your members and the big oil companies about their willingness to engage with administration now? >> we wanted to work with this administration from the beginning. our door is open to work with them every single day on these important issues. i will say the energy producers in the united states are stepping up to meet the demand increase as a consequence of the end of the pandemic and of course of the global supply crunch. the permian basin, which is the most prolific in the united states, reached record numbers in terms of production last month at 5 million barrels per day. rig accounts -- rig counts tend -- continue to move up. >> russian crude has escaped

sanctions for now. you think that will be the ultimate result? >> russia is basically a petro state. almost all of their economy is based on oil and natural gas export. they have a lot more oil and gas than what they use on a daily basis. certainly, the income they derive as a consequence of that production is fueling this war effort. at the same time, we want to make sure energy prices remain low for american consumers and for world consumers. we are going to leave it up to our international negotiators,

and state department to determine what the right sanctions makes is to make sure that russia's ambition is properly put into place at this time. >> i want to get your take on the opportunities for u.s. energy companies particularly lng. with europe having been so dependent on russia, they will likely look for other sources. where is that opportunity now? >> american producers are trying to meet that demand. for the first time ever, europe is importing more lng from the united states van they are getting gas from russia. that is good news for european consumers. our exports last month were 34 -- 34% of them were going to europe. now, over 50% of u.s. lng exports are going to europe and more is coming. the same time, we hear rumors of six applications at the department of energy for more lng development being held up at the department of energy. now is not the time to be holding up as applications. we should be expediting those

applications, expediting american energy infrastructure during this time of world crisis. >> how do you expect the iranian nuclear negotiations to affect the price of oil? >> there's a lot of iranian oil offshore right now floating in tankers that can be delivered as a consequence of american sanctions. those negotiations so my there making progress and we continue to monitor those negotiations. we understand there is a lot of crew that could be put on the market immediately if those negotiations were successful. >> as we continue to follow this story, we will take a look ahead to the start of trading here in australia as asian markets wake up to what was a volatile session. u.s. markets staging the late

stage come back. we saw earlier the safe haven play in markets tumbling on these developments. this is bloomberg. ♪

>> let's take a look at how the

markets are shaping up today. it was a stunning reversal that we saw in the u.s.. how does this play out across asia today? >> the asian playbook has been so strongly by what is going on with australian new zealand bond yields. their backup above where they finished the previous day. all of yesterday's rally is gone and then some. you could play those -- that mirror game out for a lot of assets. australian shares are likely to rise. they all drop a lot and it's going to be something of a reset even if the ukraine situation remains very fluid. >> setting up the markets across asia.

it daybreak australia is done, but daybreak asia is next and we have the australian open. this is bloomberg. ♪

haidi: good morning. shery: welcome to daybreak asia. the west sees keep falling to russia. asian stocks -- investors assess the