>> the contagion channels for russia now are tightened on global uncertainties in commodities. >> this could exacerbate inflation, exacerbates of woes. >> i think we are all trying to figure out what is going on now. >> this looks like this is going to be a rupture that lasts for years. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. tom: good morning, everyone. a most interesting day, to say the least. the war continues, and the

market continues to price in the change of the immediate and out to the future as well. oil leads the way this morning. jonathan: crowd unbelievable amrita sen, it is spring 2020 in reverse. we needed negative prices to stabilize the oil market. how much higher do prices need to go to destroy demand and stabilize the market again? tom:tom: i've got a fancy chart which is an inflation-adjusted saudi oil, and there was a spike just for a cup of coffee years ago. you and m rita were talking $170 has a test. jonathan: it is truly original. russian companies, who wants to do with them in a moment?

ang have decided not to do any business with any russian companies. that is not just based on sanctions. that is a moral start to this. tom: what is so important here is this is a bank that has global frontier economies. jonathan: if the u.s. government tells them not to do something, he won't do something. a law-abiding citizen. ok. we understand all of that. the question is do you have a moral obligation to step back from doing business with russian companies given what is happening in ukraine? i'm not advocating for the answer to that. i am simply asking the question. tom: part of the speech last

night of the president of the united states, lisa abramowicz, you need to go out and get a quart of milk. lisa: we don't understand exactly what price things have to get to for it to actually crimp demand. what does that mean for economic growth? if we are testing that type of strategic analysis, how far do we have to push the idea of u.s. momentum, and how does jay powell today deal with this when how much control does fed policy actually have over gas prices? tom: i'm going to go to the havens right now. euro swissie was a 1.01 handle. ruble i am going to round up to 112. the ratios in america i think have been underreported. the 10 year real yield of

negative 1.00 just touched for a moment in recent hours. jonathan: a big turnaround in yesterday's session, throughout the whole of europe. we've got to turn around that for basis points right now on tens. on crude, the rally of yesterday up by almost 7%. that headline gets my attention, gets yours, gets lisa's. how that actually plays out in the near term will be interesting, but they are certainly taking a stance at ing . tom: right now on your equity markets, sam stovall joins us, chief investment strategist at cfra. wonderful to have you with us today. i want to talk very carefully about how corporations will adapt to war and crisis. what do you believe the american

big corporations will do? sam: i think first off they will toe the line and -- they will toe the line and do whatever they can to sever ties. what i think they're going to do whatever they can in terms of trying to reduce costs of transportation and the direct or indirect effects of higher energy prices. lisa was mentioned earlier what kind of number can we put on that kind of demand disruption. i remember are economist many years ago telling me that every $10 increase in the price of oil takes off about 20 basis points of real gdp. so that is the kind of pressure we are likely to be seeing on gdp growth this year. jonathan: do we have to take down our estimates of corporate earnings? they're basically saying we need

to destroy demand. what are people saying in the equity market? sam: the earnings forecasts have been coming down just as the numbers have been coming up for 2021, now close to about 48% year on year increase. the estimate for 2022 s&p 500 operating earnings is about 6.5% . so we continue to see the full year estimate come ratcheting down. jonathan: are you comfortable with the idea that the fed is not going to do as much as people thought it would? sam: there is a minus 50 basis point correlation between the 10 year yield and the s&p 500. we started this year at about 23 time. now we are in the upper range of p/e ratios from 1.75% to 2.25

percent. the question is do we stop at the top or go towards an average or even lower? i think that is the question the markets are fighting with today. lisa: we were speaking was emily rowland of jh investments and were asking, are you making any trades? she said not yet. there's a lot of uncertainty as they rejigger their allocations. are you in a similar place? sam: in terms of trying to decide whether the level holds on the s&p 500, if we do enact that head and shoulders pattern to the downside, combined with a trades been level, that points to 4800 on the s&p 500, yet if you are an investor, it is hard not to start licking your lips thinking about the dividend yield becoming increasingly

attractive. i am telling clients right now, look for stocks that have favorable cfra investment rankings that pay a yield of about 3.75% or more and that have above average quality ratings according to s&p global. so looking at companies like blackstone, conagra, kraft heinz , as well as several others like pfizer and whirlpool. lisa: the biggest story of the moment is what is going on in the oil and gas market story. we talked about how we looked at the increase in gas and the ramifications for the economy. how are you backing and those assumptions right now? what kind of oil price are you putting as possible scenarios? sam: as you prior guest said, this is covid in reverse, if we

can call it a divoc environment, which is covid spelled backwards. our thought is that it may end up peaking in april this year once we find most of the tension related to ukraine has subsided it is really more of a short-term phenomenon we will have to grin and bear. jonathan: futures up 0.4%. thank you, sir. this follows in a statement. "we have decided not to do any new business with any russian companies." they will also "waive fees for transactions to personal customers in all retail markets to allow people to send money to loved ones." lisa: companies around the world are making moves on thereunto isolate russia financially even

without further sanctions. everyone wants some anticipation of these moves from european alliances. how much is that going to have to come? jonathan: let's talk about the energy names. the last player i can see standing is total. total says no new investments. what about existing ones? lisa: although total has come under a lot of pressure. when do you have the other announcement about what you're going to do? you wonder at what point the g of esg starts to play into things. jonathan: to highlight the problem at the moment, several shipowners have reportedly been

unable to make bookings because of the lack of war insurance. the competitions around handling russian crude. this is the status quo now, the new normal. tom: we are getting a dearth of information from kharkiv, kyiv, and the black sea. we are in an information blackout on what is going on in ukraine, and you've got to believe that extends these announcements. jonathan: coming up, greg valliere of agf on the president addressed to the country. from new york city, this is bloomberg. ♪ ritika: keeping you up to date with news from around the world, with the first word, i'm ritika gupta.

president biden warned vladimir putin that the war would leave his country weaker and more isolated. the state of the union tried to show solidarity with ukraine by inviting congress to standard support for the country. democrats and republicans and ukraine's ambassador stood and cheered in a rare show of unity after a year of bitter divisions. the president spent less than 10 minutes discussing ukraine before turning to the economic hardships of the pandemic. he pledged to the top priority would be to confront rising prices, and the president urged people working from home to return to their offices. meanwhile, russia says its forces have captured a port city on the black sea. they said overnight that russians were moving towards the city. meanwhile, delegates say the opec+ coalition has ratified an increase of 400,000 barrels a day.

that move was, of course, expected. it is a historic real organization of one of the world oldest automakers as ford splits its legacy unit from its ev's. global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'm ritika gupta. this is bloomberg. ♪

>> the message from europe is clear, we will stand up. we will not look away when those fighting in the streets for our values face down putin's massive war machine. jonathan: the european parliament president. from new york, good morning. the nasdaq up 0.2%. yields higher to 1.7753%. that was one hunted $12 and wti

-- $112 on wti. upside surprise on payrolls. the adp report comes in at 47 5. your estimate, 403. just before this number dropped, citigroup published and said, "we strongly disagree with yesterday's pricing out of rate hikes. to the contrary, we expect the most durable implication of economic tensions of what is playing out in russia and ukraine right now to be more pressure, and consequently, more aggressive monetary tightening." tom: i will go with that. james bullard may be alluding to that 10, 20 days ago. what is so important to me is the x-axis. it is not only the inflationary impulse higher this morning, but everybody's length of time is exploding out to the right. jonathan: does demand get destroyed by what is happening on the screen right now?

brent at $113 and wti at $112. tom: do you see much movement in the bond market off of adp? jonathan: we have come up a bit, and equities has faded a little bit as well. nothing major, but it is there. tom: greg valliere with us now with agf investments. greg and i noticed very quietly an important article. this is helen cooper and eric schmidt in "the new york times" today. to me, it was imagery out of our childhood, dead bodies in the snow. it is not a pretty sight. we don't see it much on tv. a good friend of this show said something dramatic is happening to the russians. greg: this is really a staggering development, to see accounts of russian soldiers surrendering, laying down their arms, to see corpses strewn

along the sides of roads. the numbers in this article are astonishing of fatalities and major injuries on the part of russian soldiers. so vladimir putin not only faces a depression, he faces the prospect of thousands of funerals back in russia in the next few weeks. tom: did the president addressed this in a manner that was truly bipartisan last night? greg: i really thought it was. on the extremes, both left and right, there will always be criticism. but i thought the bipartisanship on ukraine was sincere, and i think that is a rare plus for joe biden. lisa: he is talking about the issues both internationally and domestically. do you think he handled inflation well, given the fact that there might be some resolution to this invasion, and we hope it is very soon, but clearly the ramifications for oil are causing pretty widespread ripples? greg: there's not a lot he can

do. he can say we are going to get our hands around the gridlocked ports in l.a. and long beach, but i thought frankly the big development in what he said last night was a clear shift to the center. the left-wing stuff wasn't working. they face a terrible election in november, so he barely mentioned build back better. he rejected totally the idea of defund the police. i think he tried to appeal to a more centrist group of voters. lisa: so he tried to appeal to a centrist group of voters as his approval rating plunges to the lowest in his presidency. is that enough to change the conversation heading into the midterms? greg: i don't think so. if ukraine turns out to be a glorious victory and a huge setback for putin, maybe biden getse cr. ink the big issue still for most voters is the economy in general, and inflation in particular. the inflation story, whether it

is energy or grain, which has sort of been overlooked, i think an awful lot of commodities will continue to rise, and that is not a good story for joe biden. tom: how does that story change in midterms to labor day and into october to the election? this is the first time i have ever said this, that we are really looking at a sustained inflation scenario beyond the distance. all of a sudden we are going to be there, aren't we? greg: you raise a good point. most studies have shown that attitudes, public attitudes tend to harden by summer before an election. so even if inflation starts to look a little better in september or october, i think it is too late to help biden. jonathan: greg valliere, thanks so much. just working to take us out to march 10, when the next cpi print comes. the estimate so far, 7.8%. not many estimates are in right now. we only have three on the screen

. morgan stanley one of them at 8%. tom: help me because you have been better on this, but the baseline is every survey we have come see -- every number we have seen comes in above the survey. jonathan: i'm with you. tom: that is where we are. i will be honest, i see it in my own amateur view of real estate like everyone else, i don't know what real estate is like near you, but the bottom line is i believe real estate is still going up. jonathan: don't you have to use 58th to enter the building? tom: no, i go in through 59th, special entrance. jonathan: lisa, i know you have been following this story at the russian state-controlled energy giant. the russian coupon payments and principal payments coming out of russia and the next few weeks and months that we need to keep an eye on already in the process of settling a $1.3 billion debt due on monday. this is how it reads at the

moment for the team here at bloomberg. the company will add to cash to the settlement bank, which will probably release the funds on march 4. the second piece of that line is the important piece of that line. lisa: the idea probably going to release the funds because we know that russia has banned the release of coupon payments to foreign investors, and you have companies that want to remain part of the system. how do you deal with this if you are a company in russia, and how do we evolve post this crisis to a new regime? jonathan: to be really specific, what they have banned our coupon payments -- banned are coupon payments on dollars. $112 at wti, up more than 8% on

crude now. we need to break down some data with mike mckee. we will get into chairman powell, who we have barely discussed today, and catch up with bill goodling -- with deutsche bank in just a moment. this is bloomberg. ♪

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jonathan: 2011 highs on crude. wti $111.30. with breaking headlines on chariman powell, here is mike mckee. michael: we have the prepared text from the fed chairman and he basically confirms what everybody on wall street is betting on, saying with inflation well above 2% and a strong labor market, we expect it will be appropriate to raise the target range for the federal funds rate at our meeting later this month. he does not say by how much, so you can still guess about that, although investors are priced out the idea of a 50 basis point move at this point. he goes on to repeat rates first. reducing our balance sheet will commence after the process of

raising interest rates has begun and will proceed in a predictable manner through adjustments to reinvestments. assessing the economy, the chairman notes the rapid spread of the omicron variant lead to slowing economic activity earlier this year but now cases are declining in the slow down seems to been brief. the labor market is extremely tight. employers having difficulty filling openings. unprecedented number of workings are quitting and wages are rising at their fastest pace in many years. inflation increased sharply, now running well above the longer run objective of 2% because demand is strong and bottlenecks and supply constraints are limiting how quickly production can respond. he does not say the word transitory but he gives you the impression the fed is still buying that argument. finally, he brings up the invasion of ukraine. he mentioned it in his opening remark and bring stuff later in the context of u.s. economy,

saying the near term affects of the invasion of ukraine, the ongoing war, the sanctions, and defense -- and events to come remain highly uncertain. we will need to be nimble and responding to incoming data and the evolving outlook. basically what i had suggested earlier on the early edition of surveillance, he is going to give us details on what the fed is going to do without giving details because he does not want to get locked into anything with all of this uncertainty. jonathan: thank you as always. they do not want to make a forecast but on march 16 they have to release some forecast. tom: they will have data dependency to that point. we see it in the 10 year yield. lawrence summers scheduled to be with you, the former secretary of treasury. before that david focus landau joins us.

david folkerts-landau and the import research on intervention two years ago. you and others at deutsche bank are talking seriously about a need to intervene. the weak euro intervention of another time and laces $.85, $.90, now you're talking intervention at 1.10, why is that? david: is a question of how to control inflation without doing too much damage. the easiest way and the most effective way to do that would be for the european central bank to raise rates or find some way of talking rates up and indicating that is what they will do. you will recall that when they went negative in 2014 the dollar appreciated in a matter of nine

months. any move now to increase rates and a signal that they will be going positive would precipitate a very quick dollar depreciation , which is great for inflation within europe, which will be one of the main problems they have given what is in the pipeline. tom: do you see this as a singular eu effort or would it be coordinated? david: there's not a chance in the world we will get a coordinated intervention, even in times like this. those days are gone. not even direct intervention for the sake of change is something the ecb would do. it is a question of indicating concern and changing the tonality rather than direct intervention. i think that is not in the cards right now.

lisa: is this basically them coming out and saying no rate hikes are on the horizon, we will continue our emergency purchases for a long time and we have your back. is that the idea? that would weaken the currency. what could they say? david: they would have to go back to their tip of saying we will raise rates this year because inflation is our top priority in our main objective and that will be reflected hopefully in the inflation forecast. we have inflation around 6.5% this year in europe. that number cannot stand without being confronted -- they should admit that and say we will now start thinking about moving this year rather than pushing it further out. lisa: would that be enough? the reason i asked that is because you have an increasing number of analysts saying we are getting to the point where central banks lack the ability

to influence inflation and even growth given some of the shocks. you think that will make a difference from the ecb at a time when the economy is getting hammered by some of the pressures from the invasion? david: there is no doubt. it would feed slowly through the economy. the exchange rate impact would be dramatic and fast. that is why sit at the outset the best tool for them available is to talk up the exchange as best as they can. the way they can do that is by giving the market greater certainty and the conviction they would raise rates they will think in terms of moving towards a positive rate this year or very early next year. that certainty is important and you would see an immediately beneficial effect from the

exchange rate and immediate feedthrough into inflation to make it much easier for them to macro manage the economy. tom: brent crude 1.13 as well -- 113 as well. the answer is these are shocks to the system. as they filter through to the balance sheet, is commercial banking in europe at risk? david: not at all. commercial breaking in europe -- commercial banking has proved tremendously -- clearly like any other industry, the shocks will affect the banking system. in terms of serious impairment, i do not think that is the issue. the two big forces in europe, was the inflationary impact of energy price increases and what that will do to aggregate demand . that is a big shock. on the other hand you have to remember there's also a massive

positive demand shop coming from the rearmament in europe and particularly in germany. we are talking about $100 billion. the amount of money and play, particularly the quick disbursement out of the european fund are such this is a serious stimulus. these are the two forces. on the one hand you have deflationary forces. on the other hand you have the stimulative force from the fiscal expenditure, which is close to as much as the americans but not quite. a very significant impulse. tom: long ago and far away was the pricing of the euro in a much more peaceful time. if we see intervention, if we bounce off again strong dollar, it is not 1978, it is not the financial crisis.

is 116 the fair value of euro? david: no. ultimately once the ecb indicates incredibly it will move positive on the depot rate and that increase, we expect the euro to go through 1.20 and into the one point 30's. will be a dramatic change just the way it happened in 2014. that is something we are quite confident about. there's nothing special about 1.16. it is a lot higher than that. lisa: regardless of what the ecb does, germany's pledge to meet the 2% or more target for military spending is notable. you think because of some of these expenditures talks of stagflation in europe are overblown? david: they are definitely overblown. i listen to what everybody is

saying. the impact of that additional expenditure will be quite dramatic because it will support manufacturing and will be spent very widely. the money is coming out of the recovery and resilience fund. italy is on the way to spending $6 billion just for income maintenance to the gas price increases. that is income immediately. we will see a big impulse, fiscal impulse from there. my sense is i do not expect the ukraine and the subsequent price increases in oil and gas and commodities will have more than half a percent impact on growth within the euro zone. lisa: what would have to happen for you to rethink that, for you to think that perhaps the impact

of higher commodity costs will have a greater effect on the prospects for growth? david: there is a 700 pound gorilla in the room. that is if nord stream one gets disrupted, if either the europeans are no longer able to buy the gas and oil from russia or russia cuts them off, underway, that would be a very significant shock. europe gets 40% of its gas from russia. germany more. if that gets cut off you will have to see prioritization. households come first. you will have a very serious recession. that is something you can see is playing into the market. what might drive this is social media. this is the first major war that we see all around the world on social media. the russians attack kyiv and

other cities from everything that goes on you will find video around the world. that will create enormous pressure to stop buying oil and gas from russia. if that gets cut off and i think we will see a much more significant impact in europe than we have seen so far. jonathan: david, thank you as always. david folkerts-landau on europe and the tail risk around the story of the moment. route 1.11 $60 $113 on brent. tom: can we agree chairman powell did not move the market. i got a little bit of a lift and yields but that is it. jonathan: he does not want to make a forecast. they will put out a dot plot on march 60, they have no choice but to make a forecast. tom: i will say this, i do not have good attribution, but the social be of feet -- the social

media feed is remarkably grim off the sea of asos. we do not have direct attribution but that is something to pay attention to. jonathan: is getting reporting from sky news on the situation with chelsea football club. thinking 3 billion sterling price target on chelsea. the bid target is the middle of march. this is how quickly these efforts have to move. tom: will talk about that. jonathan: coming up, katie kaminski. we will do that in about 20 minutes time. from new york, this is bloomberg. ♪

>> clearly the ukrainians have done very well up to this point.

it is the first inning and a nine inning ballgame. the russians will continue to hammer and hammer away. they do not worry about casualties, they do not worry about collateral damage, they do not worry about infrastructure. tom: did for street and -- retired brigadier general in a stunning interview yesterday on urban warfare. i recommend you take time to listen to the general. as we speak to david folkerts-landau and others about this crisis and how it falls into the american economy, lawrence summers joins us. he is a former secretary of the treasury of the united states. thank you so much for joining. i want to go back to mcchesney martin and truman. what should a chairman of the federal reserve system do it up time of crisis and war?

stay on plan or amend to the politicians? lawrence: let me first say that i was very proud of our president last night. i thought the way in which he spoke to the states of what we are involved in in ukraine, what we are involved in, what the obligation of the united states is to uphold world order at a moment like this was profoundly important and profoundly inspiring. we will talk about economic and financial stuff in just a minute and i am happy to do that, but the real stakes are in freedom, in the maintenance of civilization, in the resistance to naked aggression. history will remember that a lot

longer than it will remember anything with the fed funds rate. lisa: so sorry. to follow on and get to the fed funds rate, what is the cost of the u.s. is willing to bear when you talk about preserving those freedoms, and the federal and trying to tamp down? lawrence: i think the fed has been very late. i think it has been way behind the curve. one of the reasons why it is costly when you're behind the curve is sometimes you can get shops that make it harder for you to act. i do not think the fed has any alternative now but to mount a strong response to inflation at a time when i think we are at or over the brink of a spiral of rising inflation breaking out. you are seeing that in the

numbers for expected inflation over the next year or over the next couple of years. the place you are seeing it most clearly is in the wage data and the data on vacancies, which are pointing to wage inflation at close to 6% and pressures for that to accelerate. that needs to be ringing all the alarm bells at the fed. there is much more risk of the fed doing too little than there is of the fed doing too much at a moment like this. i think the fed obsession with a high pressure economy was way excessive because they do not think about how pressured and economy we would be able to have over the longer term.

i think the next recession probably has mistaken monetary policy written all over. lisa: there is a discussion about this before the invasion of you rain by russia, that perhaps the fed was too late and had to move quickly. now the suggestion coming from markets is that even if the fed moves quickly it will not matter in terms of staving off a near-term recession. it will not matter in terms of leading this economy in a more controlled way. you agree with that sentiment? lawrence: i think the difficulty of getting a soft landing, where we both brought inflation down and we avoided recession was always very difficult and i think with $110 oil, it is that much more difficult. i think, if we want to bring down inflation, and we do not

have a financial accident, we will need to see interest rates higher than the fed or markets are now pricing in. tom: david folkerts-landau at deutsche bank is suggesting the eu will need intervention to see strong dollar become a weaker dollar. he is worried about too week of a euro. he made clear that this time around it is a less than coordinated intervention. can a singular intervention work at any time and place? lawrence: i do not think the track record on currency intervention is very encouraging. i do not envision you are likely to see currency intervention by the united states to begin the dollar, nor is that something i would advocate.

very much the contrary. i suspect the more relevant will is the use of monetary policy rather than currency intervention. tom: thank you so much. former secretary of the treasury of the united states, lawrence summers. lisa, what you see on the screen? lisa: right now i'm just trying to comprehend oil prices and how you gamed that out in terms of growth. thinking about the amrita sen quote. what is the breaking point that is a self-correcting cycle? what is the price you need to see him oil before demand instruction starts to take lace. what does that mean for the global economy? tom: new data adjusted from the american automobile association. i will go back to last friday. $3.60, $3.61 by sunday.

a near three cent jump we saw yesterday for $3.66. you wonder with brent 113 where that statistic will be tomorrow. lisa: especially because it is not just brent. if you look globally and how this factors into demand, it is also wheat, it is aluminum palm it is a commodity complex getting disrupted. how is that feed into growth in consumer discretionary spending and demand. tom: this is not a time for jokes, but with the sanctions and soft sanctions we see in the instability, you wonder how the auction process in the united states will go. we have disbelief we removed stop are we? lisa: how do we make a price the bid such uncertainty? tom: we thank our team for next ordinary dave conversation, particularly the african europe -- an extraordinary day of

conversation, particularly in europe on the border of poland. challenges in oil, brent crude rounded up, $1.13 a barrel. this is -- $113 a barrel. this is bloomberg. good morning. ♪

jonathan: crude at 2011 highs. futures positive.

>> everything you need to get set for the start of u.s. trading. this is "bloomberg: the open" with jonathan ferro. jonathan: live from new york city we begin with the big issue. strong words and unintended consequences. president biden with a message for russia's leader. pres. biden: putin is now isolated more than he has ever been and i'm taking action to make sure the fate of our sanctions is targeted at the russian economy. we are enforcing powerful economic sanctions, cutting off russia's largest banks from the international finance system. jonathan: a growing list of sanctions intended to leave russian energy untouched.