he would probably rather have a rival put a bullet in his head, than to be sitting where he is now and that part makes me feel good. ♪♪ -- captions by vitac -- welcome back to "squawk box. european markets getting going first day of trade of the week we are dealing with a negative handover from china. a significant pull back with the shenzhen dropping. european investors are shrugging off the weakness stoxx 600 opening in positive territory. up 0.4%.

we saw european breaking a three-week losing streak volatility remained high as investors continued to fixate on ukraine and think about the implications of monetary policy. european markets in positive territory. let's break it down by sector and see what the split looks like this morning. we have at the bottom of the board in europe at what is coming through we have basic resources d dodow dodow down .70%. china impactful. we have shutdowns with covid in china. investors piecing what that means for the european economic outlook. household goods round out the market the sectors are trading higher in the middle of the board, financials and real estate

moving to the top of the stoxx 600. the best is industrial and construction and travel and banks. banks in front at 1.6% every stock in that basket and travel and construction are in positive territory turning to the regional persp perspective, we have a look. we have green across the board the ftse 100 up 12 points. the cac 40 in france is up .50%. ftse mib up. the swiss market up. green across the board we are waiting for the opening on the dax we have green across the board wide spread rally in europe. russia's invasion of ukraine moved to the frontiers on sunday when a barrage of russian missiles hit a ukrainian base 25

kilometers from the polish are border authorities say 35 people were killed and 134 wounded the white house has approved additional $200 million in arms and equipment for ukraine while germany has reportedly agreed in principle to buy 35 f-35 fighter jets here is a look at the key defense names in europe. majority trading higher this morning. daeutsche bank announced it is winding down the russian operations the decision was in line with the legal and regulatory operations although just a day earlier, it insisted it would maintain ties in the country last week, deutsche bank revealed it has a gross loan exposure of $1.5 billion it has been cutting russian exposure since 2014 and annexation of crimea it is trading in line with the rally in the european banks.

volodymyr zelenskyy has called on u.s. software firms microsoft and oracle and s.a.p. to halt operations on sunday zelenskyy urged them to stop supporting the russian products and roll back business in russia as half decisions. volkswagon doubled the profit last year to 19.3 billion euro the german carmaker warned the russian invasion of ukraine could weigh on supply changes. the group added it was sourcing supplies on venders in europe. the pandemic continues to impact production in other key areas. production suspended in china due to covid outbreaks volkswagen reacting well 6.6% up from the german

automaker. edf slashes the profit outlook after the potential impact on energy supply. the french utility group has about 10.2 billion euro compared to the previous estimate of 8 billion. the company added the french government's ability to cap electricity prices will weigh on the performance in the oil and gas space, activist investor capital has urged totalenergies to halt in russia total refused to leave russia which has 24% of its reserves. clear way capital's founder said there will would be a ground swell of support among the company's shareholder base to

the call we have muted reaction shares are .20% lower. let's widen it out and look at the broader oil and gas space. the basket of energy names in europe contained moves overall. a pull back in line with the price of oil shell down 1.5%. we have bp down 12 basis points. contained moves to the down side senior portfolio manager is joining us now great to speak with you this morning. let's kickoff with the question. how are you feeling about equities volatility is the name of the n game, but we have momentum brewing. >> it is all dependent on the situation in the war in ukraine. what has been positive is two things last week, the european equities

when there was positive note on oil supply from the opec countries and beneficial for the energy supply to europe and i think we heard at least slightly constructive news from the negotiations between ukraine and russia ukraine negotiators telling the news wires that russia has been becoming constructive in the talks. if that moves in a better direction and there is some view on an end to the war, i don't know what it would look like or the situation would look like, that would be very positive for global equities and european equity >> my question then, joost, if that were to be the case, do you go back to buying the growth and technology stocks that have been the leaders over the last couple

of years or do you think that the market leadership has now permanently shifted to value cyclicals and commodities? >> that's a long time. if things return to the situation before the ukrainian war, i think what will come back is inflation central banks. it hasn't been that way in the u.s. the position of the fed is clear that the situation is more easy for the fed growth and inflation pointing in the same direction of at least rate hikes and series of rate hikes starting this week. europe had been more difficult for ecb. i think they were more hawkish last week. if things return to normal, you get that inflation back.

i think we would be more in favor of value stocks and how we saw it in the relief in europe with the banks turning higher because of the yields. more value and more europe of the i think that would be our equity decision. >> so, let me get this right we will pray, really, that the horrific events in ukraine end soon will central bankers try to cope with run away inflation? i am looking at the history in germany and the spells of the early '80s and '90s. interest rates why ere higher t now. if the war were to end and would they take seriously the run away inflation or will it abate in the second half as they have been telling us for a long time?

>> i think a bit of both there is a window of opportunity, if you will, to cut back on the extremely loose monetary policy. i think the decision by the european central bank last week accelerates the tapering and gives the message they will end in the third quarter if everything goes according to plan there was, with the uncertainty of ukraine and the smie i supple and so on for the negative implications for growth. we all hope with all we can, but if that improves, yes, central banks have to address the inflation issue. the big lesson in europe than the u.s. inflation in europe is less broad. inflation is lower in the u.s. wage growth is slower in europe.

it is a bit different. the tapering from the european central bank is there and it paves the way for rate hikes if you get into a difficult situation, the question of rate hikes will be on the agenda again. >> i want to get your take on the correlation of rate hikes and the dollar and oil if we see the fed hike rates this week, can we expect that to put down ward pressure on the oil price given it's typical inverse relationship with the dollar >> i think that is difficult to say at the moment because the price of oil is so much de dependent on the geopolitical situation. those correlations could be different this time. i think at least the rate hike

this week is fully discounted. a range of rate hikes. when you look at the markets, it is discounting 6 to 7 rate hikes. it will be interesting to see what they will say in the forecast how the dots in the fed will move not as high as markets it is interesting to see what they see as the terminal rate for the fed fund rate. is it 2.5% or higher where we have to tighten monetary policy? if they are hawkish, there could be some potential on the dollar ofdollar oil, sure, the fed will have an impact if the prospect -- what is overhanging in the oil markets is the sanctions on energy supply from russia, particularly oil. we have seen the oil price coming down in the past couple of days because of the prospect

of sanctions has been reduced to some extent. i think there are so many other moving parts at this moment having an impact on the oil prices, not just the fed >> yeah, the other thing i think was really important for the oil price ahead of this war was how quickly the world was planning to transition to renewable energy sources so let me ask the question since we are seeing hand brake turns across europe with oil and coal phased out, where does that leave you with the turbine manufacturing or solar panel companies or so on those businesses that should be very much at the vanguard of the renewable and transition story >> i think the drive is still

obviously there. even if there is a solution to the war in ukraine, i think europe still wants to reduce its dependency from russia the drive for energy is still there. it will be a bit stronger. it is also the case if the costs are high and russia behaves more normal we will be happy to get energy from there for the time being. i think in general, what the situation has shown us that energy, at least a bit more energy dependency is important and necessary to achieve of that is probably a sustainable drive. >> we have to leave the conversation there thank you for joining us joost, senior portfolio manager

at kempen capital management i want to take you to the asian market close because we have seen massive selling take place in hong kong in particular with the hang seng closing down 5% within that basket, heavy selling. tech stocks closing down 11% we have seen selling in mainland with the shanghai with the biggest drop since july of 2020. major selloff in chinese stocks overnight. tencent faces a record fine for anti-money laundering allegations. that is according to the wall street journal which reports it could be a fine in the hundreds of millions of yuan. trading down more than 6%. the wider china story. jitters are given with more lockdowns as china maintains zero tolerance covid policy.

and italia will begin talks over the $10.8 billion offer the board voted to allow the ceo and chairman to evaluate the attractiveness and concreteness of the offer italia will analyze the merger with the state back opened fiber. shares trading 5.5% higher this morning. coming up, we will have an inn itterview ahead of the two-y fed meeting. that interview with paschal donohoe coming up next

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welcome back to the program. french president emmanuel macron and german chancellor olaf

scholz are calling for an end of the war in ukraine the sides agreed to limit releasing details of the phone call the u.s. and g7 allies removed the russia trade status. paving the way for economic powers to raise tariffs on russia products. the removal of the russia's favored nation designation is the plan to isolate the country from economies and the financial system. eu leaders stopped short of fast tracking the eu membership for ukraine. heads of state said they would strengthen bonds and deepen partnership to support ukraine in pursuing the european path. they pledge to increase defense expenses fr let's get into the next

guest. paschal donohoe is the minister of ireland thank you for joining us we he are looking at sanctions we are hoping they work over the medium turn. they rarely work in the short-term can europe afford the level of sanctions we're talking about here can europe afford to wean off energy yes, we will be able to rise to the challenge. we will do so because the costs of not being able to stand by the sanctions and not increasing energy independence are greater in the medium and long term than the costs for short-term there will be economic impacts as a result of the decisions we are making ultimately these impacts are frankly small in the context of

the suffering of ukraine at the moment those costs are small in comparison to the cost of the russian economy is experiencing now as the result of the war that vladimir putin is now waging >> minister, you talk about the longer term effects. why did german energy policy, berated by various administrations, allow this to happen in the last eight years why didn't we look longer term >> well, the cause of this is clearly the actions taken by vladimir putin, not actions taken by any european union leader i think it will be the case that in years to come, of course, we will look back at decisions at recent points and question if they were different. the key thing for now is the policy in place in the eu and the actions we are taking all

over europe. to accelerate our independence and bolster sanctions that are behind the calculus of the russian decision to wage the war. for me, the key thing is the resilience and unity of the eu and implementing the measures and speed with which those decisions were taken >> paschal, how do you capitalize on the renewed urgency to get some issues over the line that are dragged for support a long time like ce cementing banking union and coming up with some firm agreement on what going forward the eu growth and stability pact is going to look like? these are all outstanding issues that need resolution

are you more confident this renewed impetus may get these issues over the line >> yes, i am i think you have to put those projects now into the context that has changed so much if you look at the issues we just touched on. so much are about the resilience of the european union. we acknowledged the importance of energy resilience we need to step back and look at the project fresh and deepen the resilience in the world that is changing so much if you look at the banking union, when i meet other finance m ministers near brussels, this is one of the ways in which europe can respond back to the pace of change that we are now seeing.

i would make the case and i think you could argue in the era of covid and now in the era of dealing with the terrible war in ukraine, the eu has demonstrated to make decision as the the speed and demonstrated the ability to stand by the project and protect us with the kind of pressures that we're now seeing developing i hope that will continue into other decisions we now have to make >> the germans have expressed opposition to the golden rule allowing increased spending on both green and digital investments. that being excluded from deficit calculations do you think that in the light of the events and what you just said that there will be some agreement now including the germans that allows that extra

spending to be taken away from the deficit calculations >> ultimately, we will reach agreement on the future of the economic roles for the european union. that will happen at the moment, many governments are articulating their public positions which recognizes issues which are more important. as an example, how will the defense spending be recognized and what place will it play in the economic roles that is the negotiation and debate that will play out. ultimately agreement will be reached on this issue. for now, it is alittle early t say what the final compromise could be in relation to this and the landing zone will be for the eu overall i'm confident we will reach agreement on the roles at the

right point. for my first hand experience of hearing finance ministers and prime ministers articulate views on the roles and process we are now involved in, i'm clear that ultimately we will reach agreement and will ensure that the agreement contributes to the stability and prosperity of the european union in the coming years. >> minister, thank you for taking the time to speak with us critics have weighed in saying that european leaders haven't done enough to deter president putin from furthering his mission in ukraine these economic sanction, while severe, are not going to have an impact short-term or stem the violence can you respond to these critics in terms of what the european union and european leaders have done >> sure. i understand the critique that is there with sanctions whenever

they are developed sanctions in the short term are less impactful than some expect. in the medium turn, they are tape able of being impactful whatever measure, the sanctions in place have exceeded those expectations because you can't see what has happened for example. you can see with the participation. you can see what is happening with russian equity markets. these are decisions and sanctions which had an impact. i expect that energy to grow this is so important that in the coaling period, the eu will enforce the sanctions because this is part of the overall response back to the war of

aggression and terror taking place. i have every confidence that the unity you see and sanctions will b grow as we ensure this >> in the meantime, europeans are facing higher prices at the pumps and higher electricity bills with oil and gas markets do you think more needs to be done to support european consumers and businesses as they deal with the inflationary impact >> a lot is already done the finance ministers of the european union, we appreciate the impact that the rising cost of fuel is having on living standards and businesses we appreciate that impact of the pandemic over the last number of years and emerging from this and facing the economic impacts is a

challenge for many now this is a challenge experienced by those in ukraine at the moment. country by country, you see governments put in place measures to help citizens and businesses cope with some of the cost you are seeing measures put in place to try to reduce the energy in many countries the european commission has now committed to bringing forward some proposals to look at how we can help with this on an eu wide basis. so, because of the decisions taken by governments, and because of also the work the eu may yet do, i do believe we will find some ways of helping with the costs. ultimately, it is important to be honest. we are not going to be in a position to intimate everybody from the entire cost we will be able to contribute to

some of it >> paschal, thank you for joining us coming to us from the euro group where he is president and finance minister of ireland. still to come on the program, we will speak to the ecb mario centeno. ahead of the crucial week for the central banks. stay tuned we'll be right back.

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it's dr. scholl's time. our insoles are designed with unique massaging gel waves, for all-day comfort and energy. find your relief in store or online. good morning welcome back the latest round of russia and ukraine talks begin with the deputy prime minister of ukraine saying 10 humanitarian corridors have been agreed >> the costs of not standing by sanctions or increasing energy independence are greater in the medium and long term than the costs in the short term. china brands reports that russia has asked for military help as disinformation

this is beijing's top foreign official prepares to meet u.s. national security adviser jake sullivan in rome for talks >> we will ensure neither china nor anyone else can compensate russia for these losses. we will communicate that with china. european markets start the week in positive territory the dax leading gains of 2%. driven higher by strong earnings from volkswagen. the hang seng closes 5% lower as chinese tech stock plummet. selling hits the mainland with the shanghai composite with the biggest daily decline since july 2020.

the u.s. and uk central banks convene with both expected to raise interest rates. the fed kicks off the central bank action tomorrow and will announce its decision on wednesday. analysts are widely expecting a quarter point hike from the current target level of near zero this would be the fed's first interest rate hike since december of 2018 the bank of england embarking on the tightening earlier and is expected to hike the main rate for the third time in a row. guys, i still have a little bit of a problem understanding at this point why rising interest rates is the right response to a supply side spike in inflation the argument is, of course,

there is post-covid lockdown demand response which is also exacerbating inflationary pressure how can we have a cost of living crisis where the consumer is struggling with higher prices of raw materials and commodities and food and so on and at the same time be concerned that excess demand is driving inflation higher and therefore central banks have to hike interest rates either this is a supply side issue or demand issue. i'm not sure i have clarity or the central banks provided sufficient clarity to justify moving interest rates much higher at this stage steve, i don't know if you want to weigh in. >> again, i bow to the eco economists who told us inflation

is transitory. the issue is the longer term effects which will prove problematic for people i take on board, geoff, about the slowdown in wage increases we are still talking about levels that are way, way higher than recent history. for instance, 5% gain. that is double what we are seeing from 2019 and 2018 before covid as well. you also got systemic problem in the labor market where you have unfilled jobs. over 11 million. very close to the record high. we have 6.5 million people unem unemployed a lot of issues there. that means prices could be going higher what are we saying here? i have taken it back to you. are you saying the current wave of inflation that the central banks are not able to do anything about it? if so, that is a hell of an

admission, julianna. >> i read an article this morning from robert armstrong saying for the first time in a long time people are talking about a u.s. recession as a possible scenario. not a base case scenario, but a scenario nonetheless to geoff's point, is this the right move to raise rates in the situation where inflation is driven by supply constraints in the piece, it raises an interesting question or point that many investors are not used to pricing risk appropriately or accurately given we have seen unprecedented monetary support thinking about the scenario where the fed and other central banks are withdrawing support and normalizing policy investors and traders will be asked to forecast in a different way. it is a difficult scenario to forecast and then thequestion

of whether it is the right policy decision to raise rates, geoff. >> i think i hear you. partly in response to steve, i think one of the challenges is that at the moment, i think it is very clear that prices are running well ahead of wage settlements. i think companies are also passing through factory gate prices into finished goods prices at a faster rate than salaries are going up here you've got this potential twin risk that even as the household income is eaten away more rapidly because of perhaps changes in collective bargaining and ability to enforce higher salary settlements here not as strong as it was in the '70s,

households are not able to keep up by lifting wages at this stage. households are getting poorer and less money to spend going forward. that has a knock on impact on demand at the same time, you have the twin track where central banks are tightening or threatening to tighten monetary conditions. maybe they don't have to impose an interest rate hike, but convince the market that is coming as well as reduction in asset purchasing which will have an impact on the banking system. there is, to the point that julianna, was making a concern that as households are getting poorer slowly, monetary conditions could fight even which would have another negative impact on household we wealt wealth, but tighten up conditions for businesses.

>> geoff, despite the concerns you outlined, european investors are shrugging off. building on the gains that came through with the stoxx 600 breaking a three-week losing streak investors think the pull back was strong enough and the base case scenario priced in was too much we are seeing a bid now for european heequity this is the split from the sector perspective we have the insurance and auto out performing this morning. auto up 3% volkswagen, the key out performer there after the numbers that cleared were cheered by investors on the down side, basic resources down 1.9%. we saw the steep selloff in asian equities overnight the chinese market and hong kong markets lower. basic recosoresources.

from the individual stock perspective, this is the picture. we have the basic resources names performing well. we have poly metal up 12%. process on the down side key under performer down 9%. i mentioned volkswagen shares. up 5.6%. geoff. terrific julianna, thank you. russia's invasion of ukraine had moved to the frontline russian missiles hit a ukrainian base which is 25 kilometers from the polish border. at least 35 people were killed and 134 were wounded the attack targeted western military aid coming into ukraine

via the base nbc's molly hunter has the report >> reporter: in the last 24 hours, the war is marching west. russia attacking the ukraine military base with 30 cruise missi missiles the middle of the night attack killing 35 people and injuring 134. the pentagon confirmed no americans were killed. an attempt to cut off the supply of weapons from the west this training facility used for nato military drills close to the polish border. >> we will defend. >> reporter: 20 miles away, air raid sirens shattering the western city sense of safety lviv is the safe haven the destination for people fleeing the east and departure point for anyone leaving the country for poland or elsewhere in europe. after the last couple days, for

refugees or residents, the risk of staying is changing >> i feel it is always in the air. there is no safe place in ukraine right now because you are at war with a country with missiles which can fly to any capital. >> reporter: amid heavy shelling to the north, the president volodymyr zelenskyy is walking to a military hospital and awarding those injured with presidential medals. in the southeast, the city is growing dire in mariupol cut off from heat and water and electricity. the convoy carrying aid is on its way. still 50 miles outside the city. humanitarian corridors elsewhere appear to be working zelenskyy said 125,000 people have been evacuated in the last few days as russian forces gain ground in the east, ukrainians protest the occupation in lviv, a city coming together.

♪ >> reporter: as the war grows closer this 63-year-old said he never thought he would have to pick up another gun. he will protect the city i remember how to shoot and kill he says. >> that was molly hunter out of lviv the white house approved $200 million in arms and equipment for ukraine. the latest package which includes anti-tank missiles and anti-aircraft missiles the weapons come from the existing u.s. military stockpiles in europe it will be transported over land into western ukraine talks will continue with ukraine and russia today with both sides offering cautious optimism this is after the negotiations in turkey last week yielded no

progress for a cease-fire or humanitarian corridors the ukrainian adviser has confirmed the talks will take place via video link ukrainian president volodymyr zelenskyy said the talks will be to arrange a meeting with himself and vladimir putin >> representatives are holding daily talks via video con conference our delegation has the task of arraigning the meeting the meeting, i'm sure, people are waiting for. it is a difficult story and path, but we need the path the u.s. and g7 allies removed the preferred trade status for russia. the g7 said the removal of the designation is the plan to

isolate the country. latvia prime minister told cnbc that russia is putting europe on course for history to repeat itself. the revival of the cold war political scenario >> the closest way i can describe it is a new iron curtain will decscend in europe. it looks like putin is leading his country in the same way. he is forcing the world to isolate him. it is correct what we are doing in the economic sanctions. we have to isolate in order to force change of behavior putin's reaction seems to be, publicly, go ahead i don't care at best, and this is the best-case scenario, there could be a long-term standoff with western democracy and rule of law and putin's russia with the rule of might and rule of force.

>> the prime minister of greece said the eu needs to take action to stem the economic impact of the war in ukraine speaking to sylvia, he said the bloc'sreaction is common >> the eu demonstrated over the last years, but in particular, the next generation eu that one faced with the crisis can step up to the plate and maybe it may need to do something similar to address this challenge in terms of common borrowing because when you look at what we need to do on the fence and on transition and resources, there is a clear gap. >> finally, to understand your message there, you want to see the new generation to do something now to address the impact >> you put it well there are a lot of countries that think along the lines

this will be a topic for the next council. coming up on the show, u.s. and chinese officials prepare to meet in rome amid reports that russia is looking to beijing for military support we will bring you the full story after the break. do you have a life insurance policy you no longer need? now you can sell your policy - even a term policy - for an immediate cash payment. we thought we had planned carefully for our retirement. but we quickly realized we needed a way to supplement our income. if you have $100,000 or more of life insurance, you may qualify to sell your policy. don't cancel or let your policy lapse without finding out what it's worth. visit coventrydirect.com to find out if your policy qualifies. or call the number on your screen.

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welcome back ukraine's deputy prime minister said ten humanitarian corridors have been agreed on for today. the official said they will make fresh attempts to transport food and medicine to the port of mariupol the latest set of talks with russia and ukraine are under way this morning the meeting comes after both sides gave an assessment of discussions. saying progress has been made. china's foreign ministry refuted reporting that moscow asked for help replenishing weapons with the invasion of ukraine. that comes as u.s. and chinese officials prepare to meet for talks in rome today. let's bring in claudio from

rome claudio, what is on the agenda with the talks with the u.s. and china today? >> reporter: good morning, julianna this is a definitely important meeting because it is the highest level of meeting with the u.s. and china since the war in ukraine begun we got a hint from jake sullivan, the national security adviser, who will take part in the meeting yesterday when he gave a series of interviews to several news channels. u.s. networks, including nbc news and talking to chuck todd he repeated that if china and other countries think of bailing out for throwing a life-line to russia by working around the sanctions or compensate for those sanctions, then there will be consequences.

when asked about the consequences, he said it wasn't going to be talk about it. he will tell china privately this is that moment where the u.s. will tell china what the consequences will be the meeting will take place today. another topic of discussion as you mentioned may be the news reports and unconfirmed that russia may have asked china for military support and equipment this could be something else that they will talk about. julianna >> claudio, thank you. we have a positive start in store for the u.s. trading session. all three indexes in positive territory. dow jones industrial average with a 230 point gain. nasdaq and s&p with a positive start. >> a disparity u.s. indexes ended solidly in the red for the week the dax up 4% after the rally

last week. that is it for "squawk box." stay tuned to "worldwide exchange" with dominic chu coming up next

it is 5:00 a.m. at cnbc global headquarters. here is your top five at 5:00. wall street trying to reverse course after the worst week since january. stock futures pointing higher. not so for the chinese tech stocks the sector taking a tumble on de-listing fears sticking with that china story. the government putting a key port city in lockdown amid a new covid outbreak one that could send shock wave