kriti: the stock market is roaring. bloomberg markets starts right now. ♪ kriti: let's get a quick check of the markets with green on the screen with the s&p 500 higher by 1.6% as the banks are getting a lifeline on both sides of the atlantic. the volatility in the bond market goes in both directions.

we will dive into what this means for the ecb and the federal reserve in just a moment. as we see the moving yields, we are seeing strength going back into the euro, $1.06. it looks like the banking turmoil is not really getting in their way. we got to check on the commodity story, nymex crude paying -- higher by about 2%. the banks is where you see more direction and developments. a lot of green on the screen. first republic is higher by 10%. the expectation is they will get about early billion dollars of deposits from other banks. j.p. morgan, morgan stanley will help them out and we will get the latest up date. western alliances higher by 25%. ken griffin recently made his investment there and even with that lifeline, they are rallying

2% for the big banks. in the european story, that was rocking markets this morning. there are still questions about financial stability in that part of the world. the ecb president expressed her concern. >> we are monitoring current market potential closely and stand ready to respond as necessary to preserve price stability and financial stability in the euro area. the euro area banking sector is resilient with strong capital and liquidity positions. kriti: strong capital and liquidity positions, you heard it right there. is credit in the clear? -- it -- is credit suisse in the clear. let's bring in francine lacqua.

always a pleasure to have you on the show. walk us through the developments here. it is a takeover likely? francine: it's an absolute mess at the moment because there was injection of capital. they looked at the facility so this morning, when the stock price open, it was up 40% and we thought it would stabilize. the credit default swaps are not as stable. if you look at the cost of insuring the bank against a default, those costs are rising. this means that there is a lot of stress out there. we had reassurance from the european after we saw some worry would banks rising more than they are now after the vice president of the european central bank said as soon as tuesday, he was looking at european banks but if you look at the fundamentals, nothing seems bad. they are liquid and they have access to facilities but at some

point, if there is too much fear and deposits go out as the share price goes down, that could impact the balance sheet. i'm not sure what they are looking at now but the government is also holding talks. there have been rumors about possibly raking up the bank and spinning off something and giving it to ubs but that's all speculation right now. kriti: what role does the swiss national bank play there? how can they talk about it takeover beyond the liquidity infusion we were just talking about? what else can the swiss national bank do here? francine: we have spoken to a lot of people on the ground and we have a great team of reporters finama cannot do anything at the moment. the move was swift yesterday and

they said you can access credit lines and access liquidity and they decided to draw that to put the panic we saw yesterday under the floor. they cannot force the bank into breaking up or things like that. from what we hear on the ground, a lot will depend on how the share price moves. if the share price stabilizes and credits what -- swaps tighten, maybe they can take a couple of weeks and see if they can go ahead with a strategy. this is really firefighting. there is no real fundamental reason to worry about the liquidity unless this is a vicious cycle, a spiral death move which we are not seeing but we could see. it's all preventive measures at the moment. unless it stabilizes, we don't know what happens next. kriti: that's something we will

keep an eye on. we thank you as always. first republic is higher by 10% on the day and is now turning positive. this is about whether this is sustainably reversing the losses we have seen in the last couple of weeks. $30 billion worth of deposits is what we are told. it's the idea that perhaps liquidity infusion will rescue this bank. some positivity in the air for first republic. u.s. treasury secretary janet yellen's oak to the senate finance committee early today about the stability of banks. >> i can reassure the members of the committee that are banking system is sound and that americans can feel confident that their deposits will be there when they need them. this week's actions demonstrate a resolute commitment to ensure that our financial system remains strong and depositors

savings remain safe. kriti: for more in the possible readthrough to central banks, michael mckee joins us on set. this idea of price stability versus financial stability has been the name of the game for the federal reserve. to what extent has the pricing change now that we are kind of making our way through the chaos. michael: tell me when we make our way through. the central banks are groping their way through a dark room. the ecb today moved 50 basis points and their deposit rate up which is the main focus right now. they moved it up to 3% because they have an inflation mandate and patient is still too high. they had promised to do 50 at this meeting and they did but the statement now says they don't know what they will do next because they will be

data-dependent which leave them in opening if we have more financial concerns that would affect the economy. they have the luxury of waiting until next week before they make a decision about monetary policy and use the rates to deal with inflation. they could use regulatory powers to do with financial stability and looks at this point what we are seeing is the supervisory and regulatory efforts have started to work. the one thing that remains is the individual names and the banking system like first republic who were still having trouble and we hear they may get these deposits from other banks. this reminds me of long-term capital management when the fed organized a bank rescue of that hedge fund. this may be all of the offices

working together. if this shores of two or three banks, there is less of a problem for the fed when they get to their meeting next week. kriti: an interesting historical parallel, we thank you as always. first republic bank rallied by about 22% and now it has halted again so we see continued upward pressure in that stock. our next yes will continue the discussion on what mike was just talking about, the ecb. the head of fx strategy joins us. always a pleasure to have you. i want to know what kind of pressure the ecb has set. is the ecb now setting the tone that perhaps price stability matters more? >> i think they have a most

straightforward mandate area in the u.s., price stability is the mandate but for all of them, you have to juggle that with financial stability. it has always been the third part of it for everybody. i think the ecb was probably put on the spot and wanted to make sure they got out the message they have and they don't think the problem is immediately in europe or the euro zone. it was in california first. as things get more difficult, they will change their tune. i think they will all turn around to some degree. this will make banks more cautious about lending and tighten financial conditions but lower terminal rates for pre-much everybody. what they are trying to do is send a clear message on inflation that they are buying themselves some time to see if there is a big problem in europe as well. kriti: today is the one-year anniversary of when the federal reserve began hiking in this

cycle. when we talk about the likes the federal reserve and the ecb have, are they shorter or now longer given the banking turmoil? >> they are variable, that's all we know. i think they are shorter than they were two weeks ago. they accumulate. you get an accumulation of forces and then you get an earthquake. what we are finding now is the speed of the rate hikes we have seen from the bed relative to the starting point, not the absolute rates. we've had higher rates than this in my career but the speed definitely has started to break some things. you want to be careful now that you started breaking things. from here on in, you will see the legs before it takes effect become faster because it will affect people's decision about whether to take out money and affecting banks decisions about

how much to lend. kriti: i'm looking at euro-dollar at $1.06, coming off of the 50 basis points. when there is panic around the world by -- by americans always the strategy. will this stay? >> i think it is because the central bank decisions are taking place. the euro-dollar has not moved much during this event. i have clients on both sides saying everything will be ok and others are pretty worried. while we've got aftershocks and further tremors, if where we are heading -- if what we are heading toward is the back end of the fed rate hiking cycle with slower growth down the road, i feel fine. and every rate cutting cycle i can remember, the dollar goes down. this dollar is already very

strong. i think we will hold this level just because the cavalry arrived in time unless the next aftershock is bigger than the first shock. kriti: i have to ask you about liquidity which we are talking about in all markets. is dollar liquidity an issue here? >> no, i don't think liquidity is a big issue. we are getting early volatile moves. i think the bond market is the place where you see the volatility express itself but i'm not sure liquidity in and of itself is going to be an issue but volatility at these levels is absurd. kriti: head of fx strategy, always a pleasure to have you on the show. coming up on the show, how the turmoil is affecting community

banks, we go from the big banks to the tiny ones. we go with the president of independent community bankers of america joining us next. stick with us, this is bloomberg. ♪

kriti: this is bloomberg markets. the banking fallout continues as the american government tries to orchestrate a rescue of first republic bank with the aid of our nation's biggest banks. a public partnership that could result in $30 billion in deposits. is this going to be enough? >> i think so. with the government in conjunction with private sector banks are drawing a line in the sand and saying that svb

happened and signature happened and we will not let first republic become a failed bank. kriti: the wording here is interesting because we are talking about capital infusions and liquidity but not talking about acquisition yet. do we get there? >> idle -- i don't think so. it structured as deposits to shore up the confidence for the remaining first republic depositors, trying to tell the story that if the largest u.s. banks like j.p. morgan and city bank and wells fargo and pnc and bank of america are looking to put their own money at stake in first republic, than everyone else should be able to sleep soundly with their money at first republic as well. kriti: how does that have a ripple effect across the other banks? is this safety or assurance for the likes of pac west or western alliance that if first republic can navigate this, then we can as well. >> this assuring up the

confidence for the entire region. hopefully, the markets can breathe a sigh of relief and go on and understand that the government and the largest u.s. banks will shore up the stability of the regionals. kriti: first republic bank is now pairing the initial gains. that halt as come often we are higher by about 14%. we are trading just shy of $35 per share. when we talk about the regional banks, western alliance got a 5.3% stake from ken griffin of all places. if you've got j.p. morgan and morgan stanley helping out first republic, is pac west? >> the inference is it j.p. morgan and the largest banks are going to help out first republic, it's just a sign of confidence over all. i don't think they need to do anything else to dip into

western alliance or any other bank that is viewed as potentially vulnerable. it's more of the fact that this is a decisive action by the government in conjunction with the largest banks. kriti: we have to talk about management because this is a rising rate environment. folks were managing trillions of dollars of money have never witnessed this kind of aggressive hiking cycle. the folks in the c-suite of these regional banks, are they prepared for this? >> i think it's a rude awakening of what the market reaction is if there is too much duration risk. the issue going forward is that interest rate risks have to be managed more conservatively that's going to be the name of the game. it means markets will be contracting and not be as

aggressive with your interest rate policy in terms of investing in securities and doing fixed rate rending -- lending. kriti: we kind of knew this was coming on one hand and it was easy to short the front and. interesting time in the markets, we thank you as always. i want to zoom in further from the regional banks to community banks which have been hit by the turmoil in the financial sector. the nasdaq community bank index is taking a significant hit over the last 10 trading days. we are joined by the president and ceo of independent community bankers of america and the former ceo of a community bank herself. she was also on the advisory council for the kansas city fed. given the size of the bank you represent, i want to ask you the same question, do they have the

talent to manage a rising rate environment that is aggressive as the one we are in? >> it's extraordinary times but i would say this is what the community balance sheet is built to do, to look at the long-term and not try to predict and know exactly where rates are going and prepare for any number of cycles. that's what we are seeing in terms of the response with strong capital liquidity in the nation's community banks. kriti: in terms of liquidity, it feels a lot of these bigger banks and regional banks have the ability to hedge some of the duration risk we see. do community banks had that same ability? >> they do. community banks have any number of tools at their disposal to be able to manage the balance sheet. what's interesting here is even in the historic times we face, this is another cycle. that is the benefit of a community bank balance sheet in that it's nimble and has access

to many different tools to help them manage over time. kriti: what is the next shoe to drop for the part of the financial sector you work in? >> what we are focused on is ensuring the confidence and the long-term vision that community banks come with. it's important as we look at what's happening and these couple of institutions, it's an opportunity for folks to realize the underlying resiliency and stability of the community banking sector. kriti: in the underlying resilience of the banking sector, isn't there now incentive to pull your funds from smaller banks, regionals or community banks and take it to a jp morgan or bank of america? >> we are seeing quite the contrary. we talked to hundreds of community banks over the last few days.

we are seeing this as an opportunity for folks saying i want to know my banker, i want to know and understand what they are doing on their balance sheet. we've heard from a few banks that are growing in deposits as folks are looking for a trusted source to go to for their financial services. kriti: are the big banks not trusted sources now? >> what community banks provide is a local trusted source, a relationship in which they know and can really help them sort through all the noise in terms of everything happening. kriti: i'm sure something that is driving a lot of the fund flows. we thank you as always for the crucial context. more markets coverage of ahead, this is bloomberg.

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markets. i want to get to something that caught my eye. the highlight of today came out from across the atlantic, the ecb hiking by 50 basis points. now we are worried that perhaps that hike make caused some panic. it's because they are taking a very hawkish approach is something the federal reserve might not be viewing the same way. we expect to hear from the fomc march 22 when we are seeing the implied rate by the end of the year. it's a vastly different for the ecb and the federal reserve. the fed implied rate is 4.2% and the ecb is 3.2%. will it materialize going into next week? we will wait and see so let's check on the banks. we are watching the market reaction and first republic shares. frc pairing the initial gains with some of the volatility shaking out and we will have far more on the show because is not just the banks, it's the

economic data. the north america chief economist at mastercard joins me right here on set and we will jewel -- dive into the turmoil and what it means for the events next week. this is bloomberg. ♪

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jon: welcome to bloomberg markets. kriti: let's dive into the price action because green on the screen for the s&p 500 higher coming off of session highs but nothing to scoff at. the yield move is more notable as we see the fed get repriced for next week. is the banking chaos in the rearview mirror and does it change the economic outlook? the two year yield is higher by a move of 24 basis points.

it's not the dollar that's getting the bid, it's the euro, $1.06 on euro-dollar after the latest headlines out of the ecb that other than a 50 basis point hike might have spooked investors. that's an important piece of the equation and how they view the 50 basis point move. all these questions we will ask michelle meyer coming up. jon: that was an excellent piece of bloomberg reporting on the ecb decision. one of the storylines in a whipsaw day that started with all the attention on credit suisse which is up by about 4%. these latest developments as we tracked the story with first republic and those deposits that, based on the reporting, could be coming to assist the troubled financial player with first republic shares going up

but we are tracking that. there are other moving parts and an outlook from adobe in financial report that was soothing to those who might've been concerned and though shares are up and we will watch fedex after the bell. lots more to be watching today. we will have a preview a little later in the program. let's get more perspective on the developing bank story. we have been tracking the latest with first republic and we will walk through what we know at this point. sonali: this could be more than 25 billion dollars worth of deposits being sent to first republic, orchestrated by the u.s. government and aided with a lot of the big banks that might come in here and help tied this company through the storm they have been experiencing. first republic is a different story than what we saw the last week from other banks that have fallen under the weight a lot --

of a lot of depositor runs. first republic faced some strains but you saw a comeback and a lot of the issues came back in in at to the s&p ratings cuts. the depositor story is interesting. this is not necessarily equity injection. this is not necessarily new debt the bank would take on. it helps keep the funding base stable for first republic and we will see with the full terms are to a deal like this but it looks like it is pretty imminent area we could expect something as soon as today and the idea that this doesn't impact the shareholders and bondholders who have seen significant strains. kriti: we are talking about first republic and jp morgan and morgan stanley but we are forgetting about western alliance, another stock that is trading like first republic and recently got its own capital infusion with ken griffin putting in a 5.3% stake.

if there's another regional bank that falls of this pressure, is there enough interest in the big banks sonali: sonali: to pop in? when you think about capital in flute -- in -- infusions that are being discussed, these are pretty historic. to see the banking system tied together like this with the bigger banks saying it's us leaving money with you so that's a different type of story. it is seriously a vote of confidence when you see other banks step in in this way. there is the idea that banking mergers are very difficult. they were difficult before things got rough in the market and difficult actor. -- after. the banking regimes are difficult. they have created some giant banks and they are systemically important and deposits are moving but i would say when you look at what jamie dimon has said before, it also comes with

a lot of regrets and pain after the fact and a lot of costs they didn't know they would take on. you're not seeing people jump to the rescue when it comes to buying a bank in full. you are not seeing the fdic federal reserve saying we don't necessarily want you to be buying these banks in all cases. there are deposit caps. you are seeing a very elegant infusion but is there firepower for more of this thing it is continue to go bad, is that undertone in the market? kriti: that something we will keep an eye on. we thank you as always. the banking turmoil has taken all the oxygen in the room but has not increase the odds of a hard landing. the former fed vice chair weighed in. >> we more likely than not will see a recession with a rise in unemployment. when you have a rate hike cycle

of this magnitude and how quickly that will be the outcome but have the odds of a hard landing on up? they certainly have. kriti: on top of that, you have to factor in the economic data with jobless claims following last week by the most since july, another sign of strength of the u.s. labor market. michelle meyer joins us now. there is a lot for the federal reserve to digest. you cannot pay me to have chairman howell's job right now. kind of president does the ecb and the banking turmoil create in the face of some of this eco-data? >> the good thing is the federal reserve has time. it doesn't seem like a lot of time but it is in terms of how quickly things are evolving and changing day by day in the markets and the financial system. they will monitor not only what they see in the data and the real economy but they will try

to understand what the changes in the financial system main for what is to come in the real economy. they are basing policy off of expectations for the future and trying to gather signals about what it means for the flow of credit, over financial conditions, the availability of capital. it's still a close call and is different in the ecb. they sent a very strong signal about rate hikes. the fed has more flexibility. jon: no doubt more time in the sense that the bloomberg reporting the last hour, the sources say there was a fear within the ecb that if they didn't make this move, that might spark more panic. from the fed's perspective since we are waiting until next week, that they can watch to see how things play out within the banking landscape in these coming days? >> if you sat down with chair powell and asked him what he

will do, the answer will be they don't know. i don't think they've made a decision yet. they will assess conditions until the last minute and the conditions they are assessing a an is not just about what the real economy is doing but expectations of what that data will look like as they think about the next month or two, knowing that monetary policy works on lags. the fed has been very clear in their communication. they are in risk management mode and data-dependent mode and they've been saying that this year where's last year, they were talking about being behind the curve. they have change their rhetoric around data dependence and risk management, i think it gives them that much more flexibility to sort through what the market is saying, how financial conditions are playing out and what they've learned about the health of the banking sector minutes before the fed meeting. kriti: factoring in the data, the consensus is from a 50 basis

hike point to a 25 basis point cut, where do you stand and what data is driving that? >> it goes back to the court data which is was happening for inflation and jobs and there's been a lot of other things happening but we got a lot of interesting data on those fronts. the labor market has been strong. they are aware that the unemployment rate is more of a lagging indicator see want to look at measures of labor market turn. look at more survey data and look at layoff numbers. they are looking at the full-spectrum and they are seeing a labor market that hasn't really changed course. the labor market is strong given their price stability. on the inflation front, some progress made is encouraged by the ppi numbers in terms of cost pressures of baiting particular food prices have come down which is a welcome relief for

consumers and the economy if that continues. looking at the data by itself, it would dictate the need to continue to hike but they are not just looking at that. they are looking at everything to gather and where we will go in the future. jon: thanks for your perspective as always and good to have you back with us. let's take a look at the headlines with mark crumpton. mark: thank you, welcome to the bloomberg audiences. this is first word news. the united states has released video footage it says shows russian jets dumping fuel on a u.s. surveillance drone in international airspace. the challenge -- that challenges moscow's contention that it had no role in tuesday downing. russia and nato member countries were intercepting each other's warplanes but this marks the first time since the cold war that a u.s. aircraft went down

during such a confrontation. french unions held strikes and marches against president emmanuel macron's plan to raise the retirement age. he will use executive fee to push through his unpopular pension reform which will raise the french retirement age to 54, effectively trust -- bypassing parliament. the pension bill was debated for six weeks before became clear that emmanuel macron could not muster enough votes. the microsoft effort to overhaul its entire line of with ai technology has spread to one of the companies oldest and best-known products, it's office apps. microsoft says the software will begin using its new ai platform.

they talked about how this would transform the future of work. >> today's generation of ai is on autopilot. it's a black box that is dictating however attention is focused. the thing that's most exciting about this generation of ai is perhaps we move from auto pilot to copilot. mark: microsoft is investing more than $10 billion in open ai and has been using the system as a search preview for several weeks. global news, powered by more than 2700 journalists and analysts in more than 120 countries. i this is bloomberg. am mark crumpton. this is bloomberg. ♪

♪ kriti: this is bloomberg markets. time for stock of the hour. fedex reporting earnings after the bell and analyst are looking at their cost-cutting measures amid headcount stories. let's bring in lee kaslko. you have a buy rating on the stock with a $233 price target, 15% upside, what is your biggest risk and what the game changer? >> the thing that changed for aziz you are stern to see them execute on their cost-cutting program. when they announced a $7 billion plan almost a year ago in june and then they came up the first quarter out of the gate and missed their targets, these are big pie in the sky numbers. seven dollars could be $21 to earnings. if you're talking about a

company that currently only has $15 of earnings this year, to get to $21 additional earnings means you have to be really aggressive in that cost-cutting. they missed the targets in the first quarter so what could go wrong is that they are not really cutting those costs. the reason we are bullish is you starting to see tangible evidence of what they are doing. they had a hiring freeze and cancel 10,000 positions in that creates a most half $1 billion in savings. they did a headcount reduction on managers and other 60 million dollars of savings. if you get to half $1 billion of therefore billion-dollar targets for its own tangible ideas and they will have a detailed event on april 5 to walk you through those things, that's why we are confident in their ability to achieve some of these costs that hadn't been done before. they were meandering earnings and margins were going down but this is an opportunity to

improve that. jon: ken just outlined what's happening with bottom-line performance and cost-cutting and some of that has to transpire because we are looking at a different demand backdrop then a year ago. walk us through that part of the story. >> volumes across all the major businesses are expected to be down this quarter, colored by single digits for their freight business. that will be mitigated very pricing which is still expected to be positive across its businesses. it's freight business which is less than truckload business. l fedex is the largesttl carrier in the u.s. and that businesses sing mixed digit pricing increases excluding fuel surcharges and that would jump to load double should -- digits when you include fuel. that will pilot the result in revenue being down by probably

four or 5% based on consensus estimates. kriti: you were one of the bowls on fedex and it feels there is this understanding that year-over-year revenue is going to decline. the margins have already been in decline. what kind of timeline are we looking for to stem the bleeding? >> i think we are looking at something about a trough period right now. volumes are down about 5% and revenues down 5% and getting your earnings down 40%. when you had that negative leverage because you have a high fixed cost, the first step is to cut your cyclical costs and start parking aircraft and cut the over expenditures you got but the big opportunity is the secular shift. they look at blending ground opportunities. that's where you can really see

some of the earnings leverage. we don't expect too much of that and maybe they can show a little in the order they will report but they will talk about the concrete steps we will see over the next few quarters. we are looking for just over 1% margins which is half the revenues. if you are down that low level, you don't have far to go. jon: in terms of this uncertain environment, we've heard about hard landing as a reality. between fedex and ups, what does the landscape look like? how does feta -- fedex can beat against ups. >> if they are going to's prize in the upside, one is on the volume side and ups is a union contract that's coming up later this year. that's an opportunity for fedex

to win share it some of that share may not be sticky because it makes sense to stay in the ups network but it's an opportunity for u.s. to provide good if not better service than ups and when some additional share. share shift could be a positive and this quarter in the next quarter and another positive could be how quickly they can generate a billion dollars in cost savings that they outlined in most expectations or maybe they will do in this quarter. fedex is more exposed to its earnings. asia has been slow to fully reopen in a reopening of china would bode well for fedex relative to ups. jon: you outlined the cost story

but we are watching for details today so any last things you will watching for an vs later? >> one is to bring the cost into line. you got amazon that is accelerating her volumes from ups and it will be interesting to see both parties stick to the pricing side. we've seen both of them say this value to the network we want to make sure they continue to focus on that despite being down single digits. fuel prices will roll over and you will have to do it that, but you want to make sure that underlying prices as positive as it can be. kriti: thank you both, we appreciate it. breaking news back on the credit suisse story, ubs and credit

suisse are opposing the idea of a fourth combination. this was suggested by analyst at jp morgan. the idea that the swiss national bank would have to read some sort of takeover, that looks like something that is not jiving with the two banks but we will bring of the latest in the hours ahead. stick with us, this is bloomberg. ♪

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jon: this is bloomberg markets. let's get back to the breaking news that ubs and credit suisse are set to be opposed to the idea of a forced combination as we track the developments. the rumor is sending ubs tied to the credit suisse risk profile and a preference to focus on its wealth, clients. sonali: ubs/credit suisse was a

merger of dreams but at this moment, if ubs were to buy credit suisse, they would take on the risks. they probably also need support from the swiss national bank. things played out as people expected, that the swiss national bank would take care of the problems by themselves for the moment. there is a question as to whether more drastic measures would be needed. we know from the ubs perspective white would be difficult to do. international banks have some qualms about the unknowns underneath the hood of credit suisse. the situation is stable but this takes one big idea off the table for now. kriti: a lot to digest and we thank you as always and we will get that coverage in the hours ahead. credit suisse is starting to fade the initial game but anything can happen.

checking the broader markets, green on the screen with the s&p 500 higher by 1.5% and the nasdaq outperforming by about 2%. the 10 year yield is 356. more markets and banking coverage ahead. this is bloomberg. ♪ go spotlights. go stadium lights. emerson software helps clean energy become reliable electricity. go “good night." go boldly. emerson.

romaine: volume high, volatility high but the sentiment has changed. regulators and some private banks stepping in to bolster the banking sector. romaine bostick alongside katie greifeld kicking off to the close. katie: you have the banks outperforming. maybe those systemic fears easing. look at the