Skip to main content

tv   Bloomberg Daybreak Europe  Bloomberg  March 10, 2023 1:00am-2:00am EST

1:00 am
dani: good morning, this is
1:01 am
"bloomberg daybreak europe". the story says that your agenda. sve alarm bells, to look on valley bank plunges -- silicon valley bank plunges. u.s. bank slumped by the most since 2020. flight to safety, ahead of today's jobs report triggered stocks in treasuries as concerned about the u.s. banking sector sparks fears of broader economic distress. plus, the bank of japan maintains its easing stance as governor kuroda leads his final meeting at the central bank after a decade of stimulus. insolvency fears, that is what dominated markets yesterday. it continues today. silicon valley bank just potentially the latest domino to fall. first was the selloff in crypto, ftx, then silver gate. what you have are folks taking money out of this very vc and crypto exposed banks.
1:02 am
we will get into the details more throughout the show of exactly why this happened. we will be talking about the maturity bonds that don't have the same value they once did since the fed has been raising rates. so, the collateral for these banks has fallen vastly. let me show you what the ramifications were. we saw peter thiel call for his clients to pull money out of silicon valley bank. falls 60.4%. it doesn't just stop there. it spreads into the entirety of the banking sector, specifically regional banks. the s&p -- s&p regional bank falls. folks are really starting to dig in to balance sheets. the collateral for the clients deposits in the bank that are potentially susceptible, schwab has a high amount. again, not necessarily saying it is vulnerable, but these are the types of things that people are digging into. some of it is just plain and simple concerns of contagion and
1:03 am
sell everything, we even stop the bank of america selloff 6.2%. heavy regulation across the u.s. banks makes them less susceptible. it doesn't stop there. the macro picture is also changing. there is this huge flight to quality. part of that means buying bonds. you see the most pressure on the most short part of the bond curve that is the two year yield, given what the fed is doing. huge short covering rally. in the past two days, 20 basis points worth of drop in the front end of the curve the two year yield, just above a 5% at this time yesterday. huge repricing, even a repricing in swaps of what they expect the fed to do. they are now backing off somewhat. let me be clear, the concern is continuing throughout today. asia banks are tumbling to percent. not as bad as the u.s., but they don't have the same exposure. european stocks need to play catch up. jian shi cortesi the worst of
1:04 am
the u.s. losses happened after the european session. the twos and tens can turns -- continues to steepen. even aussie bonds, three year yields, those are down 10 basis points. get to our reporters from around the world. first get over to the banking story itself, silicon valley bank, a lender that is little known outside tech circles has sparked a wave of panic that is dragged down banking shares around the world. let's get to asia investing editor, russell. russell, let's get with that very specific basic thing. why the selloff? what happened at sv be that has us all worried? russell: good morning, dani. just to take a step back, this all started when svp made an announcement that it ends to
1:05 am
sell more than to be an dollars worth of shares. this is to plug a hole in capital that was sparked by having to sell a portfolio of its assets at a significant loss. that was because it suffered a decline in deposits. this is a bank that caters towards silicon valley client. startups in silicon valley. the bank has said that these clients have been burning through cash through the tech slump. now we are seeing funds come back and say to their startup clients, look, this bank is not safe. you have got to withdraw your deposits and maybe look to put them elsewhere. having said that, i must stress that the ceo of svp's parent company is saying, please stay calm. don't panic. there are some startups clients of the bank that have vowed to support it. a panic situation, very chaotic and unclear how this will pan out.
1:06 am
dani: they have very clearly, a fear of a broader bank repercussion. you look at bill ackman saying the failure of sbb could destroy an important long-term driver of the economy and called for a government bailout if there is no private capital options. why are we so worried about the broader banking sector? he of course goes on to say a highly diluted government bailout should be considered. so, why the worry? could we get to the stage where the government needs to intervene? russell: a couple of things going on here. concerns of contagion, it could be another svp or silver gate. how to wind down its operations because of basically a run on deposits from his crypto clients. broadly, i think it is more of what you touched on at the top of the show. we are talking about the fallout
1:07 am
from the rise in interest rates. the conventional wisdom is that the banks benefit from rising interest rates. but we are seeing now is that the value of the assets in the portfolios is declining, the treasuries, other assets have been following as interest rates rise. also, the deposits. clients are now looking at going elsewhere to deposit their cash, into money markets, which offer a bit of returns than banks do. in some ways, banks are having to play catch up to raise the deposit rates to maintain the deposits to keep that source of funding. and to shore up the finances. dani: russell, just one last one from me. what do we know about what svb is doing to try to stop this? a run on the bank is very difficult to stop. what other options at this point? russell: of course, they have
1:08 am
been trying to get through. that will be the main thing, whether they can really equity investors to participate. also, the ceos have been meeting with clients just to urge calm. i think it will have to be a lot more of that going on in the days ahead. dani: russell, thank you very much. russell ward walking us through the details. it has been also, as i said at the top, not just about stocks, it has been about bonds two. let's talk to valerie. before yesterday, it was all about pricing in 50 basis points. that is not what i'm looking at right now. valerie: volatility we have seen, it seems like the market really got caught offside positioning in shorts, expecting a hot payroll pinned -- print. we are seeing a huge positioning squeeze today. this bond really is extending,
1:09 am
extended in the asia session. i want to nail in on this two-year yield movement. and what we have seen since powell spoke, only three days ago. if i can get my chart appear a quick come out to year yields rallied 30 basis points since this equity market. you can see here, we have completely undone and some. this was the powell, and yesterday opening the door to 50 basis points. you can see the treasury market is really getting caught offside. this equity market tumble really isn't helping, and the fact that everyone positioned short bonds into this payroll print is really causing a squeeze. dani: it is so bad at this point that even japan's 10 year yield is falling 11 basis points, despite the fact that we have had no news at the boj. that market is still reacting. today was supposed to be all about jobs. it is a strange backdrop that this is happening in.
1:10 am
is there any impact on macro policy? do jobs matter today? i know you will tell me yes, so why do they matter? valerie: we are set up for a day of volatility. this payroll print could rock markets. any slight beat in these numbers will get the market thinking that 50 is cemented for the march 22 meeting. here are the consensus estimates. we expect to see a drop-down in the headline from that gangbusters january 5 17 print. the market is estimating it to 25 k today. watch out for the average hourly earnings number. a gauge of wage inflation. the fed has really nailed it's inflation fight down to seeing wage inflation continue to soft and. let's look at what the market is pricing in. after those powell comments, pricing near ready three basis points for the march meeting. that has seen a drop, pricing now 38 basis for the march meeting. still above 25 the may.
1:11 am
any surprises in that payroll print today will be jarring for the market, have your eye on what we are pricing in for march. dani: thank you very much, valerie. let's take a look at things that we will be watching out for today, if they fight for the noise. at 9:00 a.m., bobbio panetta will be speaking at a european banking federation meeting in frankfurt. 1:30, the big one, the u.s. nonfarm payrolls number. watching that closely, especially after the hot data. and powell's testimony and all the changing pricing in this market. 1:30, canadian on employment figures, those will be released. at 4:00, the latest russian inflation data is that to be published. coming up, stocks tumble off the back of silicon valley bank. the bank debacle and bonds rally. we will discuss all that next. this is bloomberg. ♪
1:12 am
1:13 am
1:14 am
>> i think the right thing and the prudent thing that we have learned is counterparty risk once these things start. this is a classic bank run. you don't want to be the last guy there, wondering what happened. dani: president john speaking on
1:15 am
this silicon valley bank fallout. the fallout has been clear across markets. we have been seen bonds, a bit into the front end, to year yields falling by some 20 basis once yesterday. the curve steepen's. that's get into it with securities head of international fixed income, andrew. thank you for staying up, very, very late for us. i want to start on the front end of the curve. what do you make of the fact that we have this huge bid into the front end just because of this one regional bank? connect the dots for me. andrew: this has been brewing for a while. and, silicon valley bank, with their announcement yesterday, just got the market very scared. he did it right as the front end was peeking after that powell had spoke. the two-year and the 5:08 a as i
1:16 am
logged in, the two-year was down to inside of 4.75. now it is back up to 478. you have had a fight to quality coupled with some of the largest shorts in the short end between people just being outright short, to's, threes, fives, as well as having buttoning curve trades. they just got walloped in the last 24 hour's from being so short at the short end. the question is, will silicon valley have legs? my answer is yeah, to a point. i don't think it is cause for contagion, but people are going to be scared about it, and i think it will send a message over the fed. dani: can we talk about that message? you sent this to me overnight, the st. louis fed blog have warned about this type of scenario. it is something that the fed
1:17 am
knew was a possibility, so what are the ramifications for them, for monetary policy? andrew: i think they have to really think, you heard brainard before she retired from the fed talk about other consequences and moving too fast and causing things to happen that they can't anticipate at the moment. this is one of those things. i think the fed will slow rate rises down. i can't tell you what the employment number is going to be today, as well as the cpi number on next tuesday. i do see they have pretty much moved the 50 basis point talk from 80% to 5050. i think the fed will start backpedaling on this. they don't really need to move this fast from this point going forward. they move fast enough. i do think it will affect the way that they raise rates in the future. we have already started to build out one rate rise that had been
1:18 am
built into the market. dani: even if we get a really hot jobs print, how do we square this? i think at the bank of england, that had to act against the tightening regime that they wanted to go in. does this derail them? if we are starting to get hot economic data and they can't move as fast as they want to, because of this insolvency fear? andrew: the fed has moved 475 basis points -- or 450 in less than a year. literally, a year ago, interest rates were at zero. i think that is pretty far and pretty fast. i don't think they necessarily have to raise that much more. these things take nine months, 12 months, 15 months, to make its way through the economy. if you look at the other slow-moving data like money supply, i don't see where one
1:19 am
months data or two months data unemployment is enough to really curtail your whole idea of pausing or slowing down or whatever. i really think that numbers are going to start to come in better , but i'm not so sure it will necessarily be tomorrow or next tuesday. i think over the next couple months, you will see economic weakness like we saw in the claims numbers today. i think that will accelerate, and i don't think the fed has to go much further than where they are. dani: enough. it is this argument of what is the rush at this point? you mentioned earlier that there is a possibility that the silicon valley bank has some legs, it is potentially limited. what are you looking at the on the fed and perhaps more towards the banking sector? i know you follow the bonds closely, those got clobbered. what are you looking at in terms of the legs and he continued follow-up might be?
1:20 am
andrew: we will keep our eyes on it. it obviously had a big effect today. make of america was down over 6%, wells fargo was somewhere down around that. the bank index was down 7, 7 and change. we have to keep our eyes on that. the weaker the banking system, the less the fed can do. i am looking at the banking system not because it will go out of business, silicon valley has had a great business model for a long time. they just recently made some mistakes. it basically investing long when they did and having such massive losses when they sold their portfolio. i don't think this is a one-off event. but i don't think it will be contagion for the banking system. i think this will blow over, but i think it will permanently damage what the fed can do as far as raising rates and being as hawkish as we have seen last six weeks.
1:21 am
dani: do you think a call that potentially if they can't find a private buyer, should they should get a government bailout? andrew: you are going a little beyond my expertise. i don't put a lot of credibility to people that are talking to their book. i am going to say no. one thing i will separate, i think one of your analysts did say, the silver gate thing is very different, given its crypto contagion versus the silicon valley bank. even though they sound similar, they are very different banks and situations. dani: make the argument that vc and crypto have morphed into one and the other, that the pain in the crypto sector means that there is pain nbc? -- in vc? andrew: we haven't seen much change. still seems to be a lot of
1:22 am
demand for vc. less volatile than equities. crypto, i was on a program, i think it was a bloomberg program when people ask me to take the negative side of crypto. what is crypto? it is a speculative vehicle. it is not a currency. it is not a value of inflation, it is more of an anti-dollar play and i am just not big on that right now. i think they are very different situations. dani: first of all, a love a plug for our canadian sister station, which i know you go on all the time. let me take it away from the world of equity, private or not, and back into the world of bonds. when i look at the global ramifications, i look at buying in the front end of the australian curve, japan, even though the central bank did nothing today. do you look at this and say potentially, this is an opportunity for me to short?
1:23 am
the move have just gone too far when you look at the spillover effects, especially cross-border. andrew: as much as i don't think there will be further contagion or significant contagion, i wouldn't short the short end right now. it has moved way too far way too fast. yes, both ways. it wasn't too long ago the two years were at 402 and 43. now you want me to short them just because some people think the fed will go to 6%? i don't think so, i think it will be slower. i would not short two years here, especially going into a weekend. dani: was absolutely brilliant. we will let you go and get some sleep, we really appreciate it. andrew brenner, head of international fixed income. coming up, china's xi jinping consolidates power at the npc as he is voted supreme leader for an unprecedented third time. stay with us for the latest.
1:24 am
this is bloomberg. ♪
1:25 am
1:26 am
simone: let's get to the first word news. chinese lawmakers have voted unanimously to give xi jinping a third term as president. he won the vote in the national people's congress by 2952 to zero. five more years of power and demonstrating his unrivaled grip over the ruling communist party. leaker chang is expected to be named premier in tomorrow's session. several people have been killed in a shooting at a jehovah's witness church in hombre. -- hamburg. police say there were no signs of any possible perpetrators and it is unclear if they are among the dead.
1:27 am
local media report that seven people have been killed and at least eight more injured. the u.s. and india are to sign an agreement to boost coordination on chips, and are discussing how to avoid over subsidization. commerce secretary has traveled to the country as she looks to boost incentive plans for chip producers. both countries are pouring government money into subsidies for the industry. global news 24 hours a day, on-air and at bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'm simone foxman, this is bloomberg. dani? dani: evening, afternoon, i don't know the time difference. let's look at the continued fallout from the svb saga. the impact they have had from their how to maturity bonds that are valued a lot less as there is this run -- or a feared run on the bank. two yields continue.
1:28 am
we were just talking to andy brenner who said this means that the fed will need to slow, to shore up financial stability. you are getting some of that priced into the market. not just here, it is throughout the world. japan a 10 year yields are lower by 10, 11 basis points. even more for australia. the equity selloff also moves into the asian session, not as bad as it was in the u.s., but you still are looking at asia banks calling 2%. european stocks play catch up, and russell 2000's, there are some of the regional banks in there, hence why it is underperforming the s&p everything's changing so quickly. before the xfinity 10g network, we didn't have internet that let us play all at once. every device? in every room? why are you up here? when i was your age, we couldn't stream a movie when the power went out. you're only a year older than me. you have no idea how good you've got it.
1:29 am
huh? what a time to be alive. introducing the next generation 10g network. only from xfinity. the future starts now.
1:30 am
dani: good morning, this is
1:31 am
"bloomberg daybreak europe" these are the stories is set your agenda. svb alarm bells, silicon valley bank plunges a 60% as the startup lender struggles to restore confidence in its financial health. the move drives the biggest slump in u.s. bank shares since 2020. flight to safety, traders jump stocks and buy treasuries, broader economic distress fears. the payrolls report later today. the bank of japan keeps policy unchanged as governor kuroda leads his final meeting after a decade of massive stimulus. i should say, we are expecting the press conference from governor kuroda any moment. we will certainly bring you lines as they come out. of course, the bank of japan held steady, no change in their policy. this is the governor's last decision. as any lines come from the press conference, we will bring you to them. in the meantime, the bank of
1:32 am
japan certainly got upstaged by the drama unfolding in the u.s.. there was concern over silicon valley bank, which has vc funds as many of its clients. vc funds have been struggling. if they pull their money out, do they have the collateral to back it up? considering how much bonds have fallen. then we got this run on the bank. we continue to see the ramifications, asia stocks are falling, asia bank stocks are falling. svp -- svb itself. even bank of america, which of course, is a very different bank, looking at what is happening today, the two year yield continues to get a bid. those yields this morning are down by eight basis points. over the past three days, it is more than 20. you get a yield curve that continues to steepen. it did steepen past 1%, we are no longer there. we were talking to andy brenner, i asked him if
1:33 am
he would short any of these, and he said absolutely not. the yields are still at very high levels. so, that is what is happening in the yield curve. elsewhere, we are seeing aussie bonds by about 12 basis points, too. getting more into the story, global bancshares are signing as silicon valley bank, a lender that is literal -- little known outside tech circles. it sparked the panic. >> could be a tame example. there are many other banks out there. it is very rational for investors to be asking, is there contagion in train right now? >> i don't think it is a greater risk to the financial sector. i do think some of the banks that tend to cater to the riskier sectors, a venture capital, cryptocurrency, those types of banks to have risk. >> this is a classic bank run. when the run starts, you don't
1:34 am
want to be the last guy there wondering what happened. >> if they can raise the capital, it is not an accidental issue. dani: joining us now is aneeka gupta from wisdomtree. what a crazy market. how concerned are you that there could be contagion? aneeka: i think it is quite a shocking event that has taken place. and caught markets off guard. we have been prepping ourselves for the all-important jobs report today, and you get this release from spv -- svb, we haven't really caught up with that news in the european equity markets. i think the big thought that investors will be looking at is conventional wisdom tells us that when you see interest rates rising, at a sharp rate, typically financials do tend to benefit. what we are seeing from this release is they are actually putting a lot of pressure on these assets that banks were
1:35 am
supposed to be holding, as the total value has been decreasing. it also tells us that, given the sharp rise of interest rates, exodus of bank deposits because investors are essentially flocking towards shorter duration money market instruments. i think both of these factors are a change in trend that we need to keep track of as interest rates rise to such an aggressive place of tightening. dani: to your point, this irony about an event, rising rates is supposed to help banks leading potentially to one's downfall, the fed did know this. the fed talks to regional banks, the st. louis fed had a blog post where they said, worst case scenario, a bank might sell underwater bonds to raise cash, thus realizing losses and reducing regulatory capital. this is from last month. this was something flagged by the fed. you know it is a thing. do they get even more cautious
1:36 am
now that there is an example? aneeka: having this risk lurking on the horizon just tells us the fed would be even more cautious. and coming in to these two very key releases we have been getting this week and next week, i think it is pretty much priced in that we could get a much higher number with 200 k in terms of payroll reports. and cpi could well be within the range that market investors are predicting. the fact that we have this risk lurking at the horizon would tell fed officials that they need to -- they have raised rates quite aggressively so far. not like we are very far from the target range. it would put a lot of caution for fed members that they don't want to spark a contagion risk looming into the markets with this one thank lurking on the horizon. dani: there are so many known unknowns at this point.
1:37 am
how do you invest in this environment when you look at a day like yesterday, where everything is selling off when you wake up, asia banks are selling off, everything is falling in sympathy. do you stay on the sidelines or do you look for the babies that have been thrown out with the bathwater? aneeka: that is a great question. we have been saying for a while that these have opened 2023 and a speculative frenzy, which was driven by pockets of underperformance in 2022. investors have chase the small caps, they have chased growth, emerging markets, really picked up on trends they did not do well, and were undervalued in 2022. i think we have reached a point where it is due for a correction, unknown events such as these just trigger that sentiment of fear and caution back in the markets. in that environment, what we have been telling investors is looking at more -- assets that would give you a bit more protection within the equity markets on the value side would be a bit more of a favorable
1:38 am
investment, knowing you have a higher margin of safety, still more short duration. you have an outlook over the longer-term, we are seeing inflation more structurally embedded, more value-oriented stocks would be able to shelter you in that sort of environment. dani: how attractive is cash? yields were very high, on those cash like instruments. does this make it even more attractive? aneeka: well, if you look in hindsight, if you were holding on to cash in september, you have lost out in a very big way. in hindsight, we were saying, it was common knowledge that if you were sitting in cash, you would be in the best measure to have gotten ahead. it wasn't. you should have been invested in equity markets. the question is being raised today when you get these unknown event risks lurking. in an event today, it is important to be invested in the markets the long-term.
1:39 am
positioning for the long-term is the best strategy today. if you are allocating for the short term, you will get caught up somewhere in someplace. in terms of positioning geographically, we do see a more favorable tilt, and etf flow trends, there is a shifting and more favorable environment for international versus u.s. we have seen north of 14 billion in etf fund flows in europe and emerging markets, on the other hand, we are seeing 9 billion of outflows coming from the u.s. markets. that just tells you if you are investing in the long term, there is more growth being seen on the eastern side, and that is what investors are allocating. dani: we will have to leave it there, thank you so much for joining us this morning. aneeka gupta director of research at wisdomtree. let's get to the bloomberg business flash. simone: thanks, denny. bloomberg has learned that the
1:40 am
bank of england plans to cut spending on climate change and instead focus on core functions. b.o.e.'s climate team focuses on building esg disclosure guidelines and getting banks to carbon test their balance sheets. you're told rising pressures on the banks cost have prompted the move. the only goldman sachs banker tried and convicted in the global 1mdb scandal has been sentenced to 10 years in prison. roger was convicted last april of conspiring to violate u.s. antibribery laws and launder money with the fugitive malaysian financier jho low. he paid more than $500 globally in fines -- goldman sachs did. shares fell in hong kong after a sharp drop in revenue growth as chinese shoppers rein in spending. china's second largest online retailer said fourth-quarter sales grew 7%, well below the 23% of a year ago. that is your bloomberg business
1:41 am
flash. dani: thank you very much. simone foxman in dubai. coming up, kuroda holds his last ever press conference as bank of japan governor. we will bring you the headlines. this is bloomberg. ♪
1:42 am
i know the markets have gone up and down, but you're right on track to reach your goals. my ameriprise advisor helps me feel confident about my financial future. he knows me and my goals. it's not the first uncertain environment he's helped me navigate. probably won't be the last. but with his advice, i know i'm on track. the plan we created can withstand uncertainty. no wonder clients rate us 4.9 out of 5 in overall satisfaction. because advice worth listening to is advice worth talking about.
1:43 am
dani: the bank of japan left rates unchanged, no difference to by cc. at the moment, you are looking at governor kuroda to bang his last ever essar, saying he believes the labor market will get tighter going ahead. the economy has seen big progress over the past decade. he has also been talking about ueda and his legacy that he knows him well, he will be
1:44 am
effective in leading and believes it will become easier for wages to rise he does say it is regrettable that 2% sustainable inflation was not achieved. doesn't see a situation where that happens. japan's economy is no longer in a state of deflation, they faced that decades ago. he expects rates to stay at current low or lower levels let's dig into this more. joining us now, sreekala kochugovindan. thank you so much for joining us this morning. first of all, no change in boj policy, it is may be getting overshadowed by some of the bigger banking news coming out of the u.s.. what is this and off looking like? do we have a steady period of the same boj policy to come? sreekala: i think it is quite an interesting time that he way to is taking the helm. there is a lot of moving parts now, and the macro picture
1:45 am
doesn't necessarily justify a change in policy. however, the key problem is the market functioning, and that has been a key focus for markets, for the governor, as well. he was targeted at the market dysfunction. that is something that you eta will have to tackle. we were not expecting an immediate move. we think the decision today was very much in line with our expectations. too early for the shinto wage negotiations to become clear, too close to the fiscal year end. april, for an actual move, it is golden week, end of april, a lot of time for turbulence. we need to be careful in case of a surprise. he has mentioned the potential for a surprise in the market. realistically, we are expecting more of a june or july move if there is to be one, and really, that would depend on how the markets are functioning by that time.
1:46 am
dani: yeah, of course, he has spoken before perhaps about the importance and the use of surprise when it comes to monetary policy. what could that actually look like? we had a surprise from the boj not that long ago in terms of the band, but that was extremely expensive for japan to have to depend the new wider band. -- defend the band. but what a surprise look like? sreekala: i think you are actually right. the issue was to surprise the market in december, it seems to have backfired. if anything, market functioning has deteriorated since then surveys from investors have shown that market functioning has deteriorated. but, going forward, i agree that to surprise the market, it could be an inner meeting decision, that could be what is part of the speculation. it wouldn't necessarily achieve an improvement in liquidity in
1:47 am
terms of speculation. going forward, what he needs to do is have a clear policy communication. our expectation is that around june or july, there could be a tweak in the yield curve control, allowing the banks to widen further, but just a plus or minus any five basis points. it could widen to 1% around the zero target. the communication will be key. if it is successfully communicated with a pathway, and an outlook of how policy will be removed or transition away from yield curve control, then that will be a successful re-anchoring of bond yields. if not, you could see the risk of further speculative attack. dani: of course, the big unknown is communication is so key in this. i guess, we are not quite sure exactly yet what his style will be.
1:48 am
when you look at the communication of kuroda, when they did widen the band, i know a lot of people were saying, we don't believe you are just doing this for financial stability. we think this is one step to completely getting rid of why cc. is there some damage control that he needs to do in this case? if he does go ahead with those types of tweaks? sreekala: think the key to this is financial conditions tightening further. we have already seen a tightening of financial conditions in japan. the timing of that is not great. yes, inflation is incredibly high in japan. however, it is starting to roll over. have seen the tokyo cpi has peaked. the base effects from energy prices are likely to unwind, the goods prices are starting to roll over because the supply chain is improving. all of these have been mentioned. what we need to see is a stronger wage growth in japan.
1:49 am
these wage negotiations to signal stronger than previous averages. only 50% of corporate have actually submitted their bids. a good sign so far. it needs to be very punchy, headline wage growth or courier -- core earnings growth. we are not seeing that in the data to see actual sustainable inflation, to reach target. the boj expectations is for low target inflation. and the window to move is quite narrow, given that we are expecting a recession in the year later. today's statements has again reiterated weaknesses across production and exports. some concerns there about the external environment. all of this will come to play pretty soon in h2. it is a very narrow window for them to start moving.
1:50 am
communication so far has been very neutral. i think going forward, it will be very data dependent and clearly signaled. dani: it is interesting, at how the press conference is going right now, a lot of the questions that kuroda is getting are asking him to reflect on his time. he just said that the benefits of easing are far larger than the side effects, to percent price coal is a global standard. he did express regret that he wasn't able to get to that 2%. how do you reflect on his governorship, what are you thinking as we look at him in his last press conference? sreekala: he came in with a big shock, part of a big change, appointed by the prime minister. unfortunately, the inflation,
1:51 am
the big monetary stimulus, the main arrow, that hasn't. i think one of thit is very dife the mindset and that behavior when you have decades of deflation and disinflation. there is a shift in consumer behavior that comes whenever there is an increase in inflation. consumption is pared back quite quickly. it'll be interesting to see how this pans out going forward, because that pass-through has not been so easy in the past. hopefully this global environment will help generate some inflation and some wage pressures. he did mention a tighter labor market, earlier in the press conference. but, the overall signals show that inflation has been externally generated, it is imported rather than domestically generated. those are the key signals for
1:52 am
the next few months. we won't really see any clarity over that until later this month. dani: right. i am afraid we have to leave it there. thanks so much for joining, enjoy the rest of your friday and your weekend. that is sreekala kochugovindan. coming up, sunak travels to paris to meet macron today. the first state visit. we will discuss the agenda next. this is bloomberg. ♪
1:53 am
1:54 am
dani: u.k. prime minister rishi sunak meets with french president in paris today. the first state visit of its kind in five years. after years of post-strains, all eyes will be on whether the two leaders can patch up their relationship. let's get to lizzy burden who is
1:55 am
in paris. let's start with the symbolism of this. what does the summit mean? lizzie: you have sent me to the city of romance. that is exactly what they are trying to rekindle with this visit today. it has been seven years of acrimony over brexit. this is the first such state visit in five years. you had boris johnson and emmanuel macron who were barely on talking terms. liz truss saying he didn't even know -- she didn't know if he was friend or foe. it is a different story with rishi sunak. much more trust, friendship, and pragmatism. already have the windsor framework on the table. today, we are expecting him to confirm that the u.k. will host the fourth meeting of the european political community. which of course, one of emmanuel macron's top foreign policy priorities. later this month, we are also
1:56 am
expecting king charles to come to france on a state visit. really, both sides are hoping this can be a watershed moment in relations. dani: what can the two sides likely win in terms of substance? lizzy: there will be a a lot of they need to present a united front on ukraine. france really felt betrayed over the deal, the u.s., u.k., australia deal on defense, kind of blue out of the water the franco australian deal on submarines. sunak will also bring something home on small boats for the domestic audience, the flow of migrants crossing the english channel. it is a difficult one to solve. they don't wanted to undermine the discussions on ukraine. but micron will want a boots on the ground. that is something that we expect sunak to agree to, because it will cost less than housing
1:57 am
asylum-seekers in british hotels. what emmanuel macron will not agree to is to take back asylum-seekers who have already reached britain. he will tell rishi sunak, no. dani: thank you very much, lizzy burden. the damage continues from the fears over contagion over svd. we have spoken to a lot of guests. the really widespread contagion risks, perhaps they are slight, but it does impact the fed. they will move slower if it means shoring up the financial system. a flight to quality, and bond yields moving lower this morning as stocks selloff. ♪
1:58 am
1:59 am
2:00 am
>> good morning, welcome the bloomberg markets europe,

50 Views

info Stream Only

Uploaded by TV Archive on