Bloomberg Markets - European Close (03/15/2022)

Bloomberg Markets - European Close (03/15/2022)

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Tuesday March the 15th. European stocks are down but at session highs. Airline stocks are up. Oil stocks are down. The countdown to the next hour of European markets starts right now. From the financial centers of the world. This is Bloomberg Markets with Alix Steel and Guy Johnson. So this is what the price action in Europe looks like right now. The stock 600 is still down by three tenths of one percent but

well off session lows hit earlier. The euro the pound gaining traction against the dollar. Euro dollar is still below 110 1 0 9 83. This in advance of the Fed were up by four tenths of one percent. But this is the story of the day. Brent crude sub one hundred. Caylee down by seven point three. Four percent. Yeah guy it's been a monster monster move for crude. And of course

it's also been a monster move to the downside for tech stocks since the record. The Nasdaq 100 hit on November 19th. That's all the index plunging into a bear market from that record high yesterday. But we're getting just the slightest rebound of course when you're down 21 percent a two percent rally or so today only go so far. But nonetheless we are in positive territory across the benchmarks here in the U.S. with tech stocks leading the way. The one big laggard on a sector basis no surprise energy energy it is down by about four point six percent. That has everything to do with the declines in oil that you mentioned WTI. No exception to that. We're trading sub ninety five dollars a barrel when we got a taste of 130 at one

point last week. And then in the bond market the action really is unremarkable in comparison. We're down on a single basis point on the 10 year Treasury yield trading at 212. Ahead of the Federal Reserve tomorrow the. Katie let's update everybody on the latest geopolitical events particularly those around Russia within the last hour we've seen Russia impose sanctions on President Biden and Secretary of State Anthony Blinken. This as the prime ministers of Poland the Czech Republic and Slovenia head to Kiev. We need to figure out exactly what this all means to do that. We're joined now by Bloomberg's Anne-Marie Horton in Washington and Maggie Cantrell who is on the border between Ukraine and Poland. Aggie I'm going to start with you. We have three European leaders heading for Kiev to meet with President Selenski. Let's talk about the

impact that this trip is going to have on what it signals. I think the significance of this trip what it signals to Ukraine can't be overstated. Essentially three European leaders are going to the capital of Ukraine Kiev at the moment where half of the population of that city has already fled the violence and left the city. I've been speaking to a lot of people on the border here who have come from Kiev in the past several days and the bombing in the outskirts of Kiev. That is a real concern to the government. There is continuing to CAC. It's continuing to occur. And we're seeing that these three leaders when they when they went they said that this was going to be a message of solidarity with the Ukrainians. But it was also going to be an effort to present Zelinsky ISE

government with a package of support measures on behalf of the whole of the European Union. Well now can you talk about the bombing near keep the capital but we understand there also have been attacks growing moving west throughout the country. How is that exacerbating the flow of refugees you are seeing at the border with Poland's. So we've already heard that three million refugees have now left the country and a great deal of them have come through the western border into Poland into Hungary and into other bordering nations. Now we're looking at the fact that Poland and other

Eastern European nations are really expecting a lot of support from the rest of the EU in this time. Poland itself has already accepted one point five million refugees and they're hoping to be able to help integrate these people into their systems into their education systems into their labor force. And for that they're wanting a lot of money that wanting the EU recovery fund to be unlocked and to be given to these countries that desperately need it right now. All right. Bloomberg Technology Cantrell great reporting from that border. Thank you so much. Now let's turn to Bloomberg's Annmarie Horden in Washington. And Marie the headline just crossed moments ago that Russia is now putting on personal sanctions for President Biden and Secretary of State Anthony Blinken. Is not just a symbolic move. Yes it is purely symbolic it's a tit for tat response on the sanctions. The U.S. has placed on President Putin and those close around him. We should note that what these sanctions would

actually do is freeze any sort of assets American officials the president United States has in Russia. I highly doubt they have any assets in rubles in Russian banks or houses or anything like that. It would also bar entry into Russia. But as I said this is largely symbolic but it does talk to what is going on right now which is an absolute escalation of not just the sanctions package but also what's going on on the ground. Emery the president is going to be traveling to Europe next week though unlikely as you say that he's going to be traveling to Russia. But nevertheless it looks like he is going to be visiting Brussels. What do we know about that trip. Well it's likely that the White House wants to make this stance. Having the president go to Europe and especially Brussels which is the NATO headquarters is really just reinforcing that the US is an ally in all of this. And they stand united arm in arm with their partners. And throughout this entire situation whether is

pre invasion the U.S. was constantly in contact with the European partners sharing that intelligence. And then during the sanctions packages there was days when the Europeans went first and just an hour later the U.S. responded. They were in lockstep with how they were going to roll out tranche after tranche of the sanctions we've seen. It'll be interesting to see if the president decides to go to any other areas as well on that trip. Brussels makes a lot of sense in the sense that this is the NATO headquarters but potentially he can go to some other countries Eastern Europe right now as potentially some of those countries that I imagine are vying for that visit. Annmarie Horden at the White House. Thank you very much indeed. Coming up we'll get a look at how investors are assessing the

risks that we've just been talking about about not doubting is the C I O a Blue Bay Asset Management. He is coming up next. This is Bloomberg. For next guest says it's premature to believe that there won't be further escalation in the war in Ukraine. With us now the chief investment officer of Blue Bay Asset Management marked out a mark. We are getting volatility across the peace right now. Oil. Forty dollar round trip. You've got Chinese assets being hammered right now. The NASDAQ closing in a bear market. Talk me

through whether or not you are seeing this dissipation leading to pockets of opportunity. Is there anywhere you are thinking about buying the debt right now. So I think it's important to emphasize that in these markets there will always be bargains when you have volatility. There'll always be some distressed assets that certain investors are needing to sell which you're picking up better prices. But I think the answer to your question depends on investment time wise. And I think if you will taking more of a medium term view you can look at European stocks and say they're back at where they were at the beginning of 2020 and say that they look relatively cheap. European banks I happen to think are

relatively cheap. If you're more concerned about the short term I still think that is going to be more volatility and stall in the coming days and weeks. And so it may well be that prices get cheaper before they start going back up again. OK so more could be in store. Buckle up everybody. I know that's something that we all love to hear. Mark speaking about the volatility in oil specifically the declines that we have seen I mean down 20 percent in just five days. Is that to be believed.

Yes so it's a crazy random trip but I think what you need to understand here is a week ago we were looking at a global economy that looked to be in pretty good health and we were very surveying the picture of a supply shock. We'd take a Russian supply out and there was a concern that's where we're going to get oil from. And so people are speaking to this time a week ago we're talking about oil going from one hundred and twenty dollars up to 180 dollars. But the new news this week obviously is that we now have evidence of perhaps a demand shock. If you end up with Russia with China needing to look down on the

wake of a Covid scare you could see a material drop in oil demand. And if that coincides with any sort of breakthrough in peace talks and that leads to a sort of any easing of sanctions then you can see how sort of a you end up with a move back from a big shortage into surplus. And so a market like this can be very volatile. But I would say on the Ukraine new news we would be pretty skeptical that we're going to see any early end to this conflict. We just don't see a proper off ramp for Putin just yet. We don't think he's going to want to walk away from this war with his reputation as damaged as it currently is. Mark that's going to have meaningful impacts for various European economies.

We're starting to see certainly in the low markets talk of defaults. We're starting to see maybe that creeping in to some of the high yield space as well. Is this the beginning of a credit cycle in Europe. How do you view the credit markets in this part of the world. So I think the answer though is very much. Do you think that there's material sort of recession risk ahead of us and you look at an indicator like the Z W survey which was released this morning. I think we saw the one of the biggest drops in that survey indicated for about 30 years to a level which would be

consistent with a move into recession. And so you can certainly understand how investors are sort of looking at a very uncertain landscape. They're looking at a monetary policy needing to tighten in the wake of inflation at the same time. So the growth forecasts being ratcheted lower and they have that sort of recession fear about them which obviously would get a credit cycle pick up in defaults taking place where you see a recession of that nature. But I still think myself it's probably

a bit premature to be sort of getting too carried away that I think that you have to remember that across Europe we've actually been on a journey out of Covid this year. And so the growth outlook before the Russian use it was actually looking relatively constructive. And actually I do think there's going to be a big big fiscal response in Europe to what's happening in terms of the world events going around us. So a complete collapse in growth. To me looks very unlikely. And therefore when you look at sort of growth this year next year I think it remains in positive territory. And therefore credit markets will be pricing in a bit too much now in terms of default risk. But the one other caveat here is you also have to remember as an

investor that times of uncertainty you're going to see an increase in the sort of risk premia. I don't think that this sort of volatility be MIA related to geopolitics is something that has been sort of baked into the cake in the course of the past week. And it's likely to stay with us now for a very long time because I do think that we've we've seen something pretty sizable in terms of geopolitics in the in the last few days. Ryan of course Mark China has somewhat of a role to play within

that geopolitical consideration and also obviously is a force when it comes to the global economy. How concerned are you about a slowdown in China specifically and the ramifications of that. Yeah. Here. I think it's very much linked to what is happening around Covid. We had actually hoped on the back of some recent Chinese easing that actually we could actually start to see some better numbers coming out the Chinese economy. But the recent spike in Covid cases that looked down in Shenzhen is repeated elsewhere. Obviously that does represent material downside risk and we've seen Covid cases reach a peak. Now for those of us who live in the West we are probably almost living in a bit of a post Covid.

Well we're trying to think what on earth is the problem wise. China still sort of behind the times in trying to adopt a zero Covid policy and then act lockdowns. But the reality is that obviously in the West we've done a very good job of a sort of rolling out vaccines immunizing our populations particularly the older and more vulnerable in society. That hasn't necessarily been the case in places like Hong Kong and China. So if you look at the data in terms of

suddenly the deaths in Hong Kong that we're seeing spiking coincidentally along with a spike in CAC cases. I think there's a lot of anxiety in China now that actually if there is a big wave it is going to massively stress the health care system. So I think he's all up or down to the Covid News. And here it's a bit of a tough one to call. The NASDAQ Golden Dragon China Index China rally right now it's actually up around four and a half percent but China Tech Mark as we spoke about at the beginning of the conversation has been battered not only this week. Last week the week before that for the last year. If you if if you're looking at opportunities and you're looking at dislocations what do you think of China Tech right now. So I think that most certainly names that you want to be trying

to play and buying and trying to take. Obviously the difficulty here is that thematically the crackdown that we've seen from the Communist Party has obviously clobbered a number of the names in that sector. So making sure that you're you're in the right name is especially important in the context of a China tech. In terms of the clamp down that we've seen on some of the Chinese oligarchy. And so that coupled to pressure on the U.S. pressure to delist companies out of the U.S. market on top of worries pertaining to China and things like Covid is a bit of a perfect storm at the moment. But I think when you surveyed the landscape

and you look at historic valuations if you're able to sort of access stocks at levels that they were trading three or four years ago I'm sure there are certainly some bargains to be had. Where else would there be bargains in emerging markets Mark. Well I think it's something that we potentially see all over the place. We've seen a lot of dislocated boy sections. So whether you're looking at some of the credit markets where actually emerging market credit spreads we thought look fully poised towards the end of last year. You've seen something like the emerging market sort of boom and index made from a spit of 330 basis points out to five hundred basis points. You're now looking at sort of levels there where they're all names which are cheap. Sovereign credit is is probably worth owning a lot of investment great names. Sort of a euro denominated skewed is

from countries as far apart as Mexico or Romania which we think would look cheap. There are billions to be had in emerging market corporate bonds as well. So I think it's all about sort of stock picking issue picking picking the right sectors the right countries to be invested in because it's certainly a time when you can sort of pick up good bargains in the midst of these sort of challenging markets. All right. Mike Mark doubting a blueberry asset management. Thank you so much for joining us. Appreciate your thoughts today. And of course Guy. Mark was talking to us about whether or not there's a real chance of recession in Europe what the growth picture looks like there. We are hearing from the ECB president Christine Legarde who is speaking at an event in Berlin. She once again kind of repeating the message we got from her last

week after that ECB decision saying they will take whatever action is needed for price stability. The economy should still grow robustly in 2022 but that uncertainty surrounding the outlook has increased. Guy would imagine we're going to hear some similar kind of tone out of Jerome Powell when he takes the podium tomorrow. Absolutely. But I think way to get more clarity out of power. I think a lot of people were caught by surprise by the hawkishness coming out of Christine Legarde or more broadly the Governing Council last week. It was interesting I think was the FTSE

reporting this. One of the members or one of those close to the members saying we can't be the only central bank that does nothing here. You just wonder that there's the sense of kind of follows the wrong word. But looking isolated at this point when the Fed is going to be on track to deliver rate hikes looks like the Bank of England's going to do the same thing. Yeah. When everyone else is tightening maybe that's just something that you can't set out. So we will continue to monitor those headlines

from Christine Lagarde. But coming up we're also going to talk about another story. It's going to be more expensive to buy a Tesla. Elon Musk says the company is also getting hit by inflation. We'll have more on what exactly that means next. This is Bloomberg.

It's time for the Bloomberg Businessweek to look at some of the biggest business stories in the news right now and risk. Gupta Social communications platform The game is Discord. It's talking to investment bankers about going public this year. Bloomberg has learned at this point is considering a direct listing. The company was last valued by private investors at about 15 billion

dollars. It's the start of Europe's ambitious effort to lower global chip makers back to the continent. Intel will invest eighteen point seven billion to build a cutting edge semiconductor production site over in Germany. The company will try to make chips smaller than two nanometres something that hasn't been done yet. Well that is the latest business flash. Thank you very much indeed. Joining us now for more on Intel's plans for that mega factory in Germany is Bloomberg's Ed Ludlow. Ed let's talk a bit about this. We've seen the huge investments that Intel is going to make in Ohio. Is this of comparable

scale. Is it going to be making the same thing. Should we think about that investment into Germany in the same terms as the higher investment that has been made a little while ago. Yeah. It's really case in point of where the semiconductor industry is right now because it's an eye watering figure right. 19 billion dollars 17 billion euros just for the Germany part of it 33

billion dollars across Europe. Because when you build a fab you need also you know the associated supply chain warehouse design labs that come with it. But the devil is in the detail. And it's a it's a plant that doesn't come online until 2027. And you know it's really for Intel's next generation of technology sub to nanometer chips. They're not they're not at that level. They're not currently manufacturing semiconductors smaller than two nanometres. So you know what we're seeing across the industry is just tens hundreds of billions of dollars of pledges to increase capacity in key markets. But it's very distant because it takes a very long time to build what is essentially the highest tech factory you can build. Roland. Ed obviously consumers of these

chips would like them to be built as fast as possible and that compact capacity to be ramped up as fast as possible including the auto industry. That is one challenge that Tesla has been dealing with is a shortage of semiconductors but also just higher metals prices higher costs that then they are now saying are going to pass through the end consumer. Talk to us about the price hikes for its vehicles that Tesla is planning. Yes. So it's a Tesla's cheapest model. The cheapest military is now forty six thousand nine hundred ninety U.S. dollars. And this is the second price hike this month. That test is made. And we're really focused on the inflation story right now the

raw materials the commodity story. But the other side of this the Tesla don't forget is that they're in the driving seat. Pardon the pun. That demand for their products is so great and they are so supply constrained anyway in the number of vehicles they're able to build that you know they are able to adjust pricing. The street wants them to adjust pricing. You know

there's this great obsession with Tesla's volume the number of vehicles it sells that investors have also been very focused on gross margins. And if you look at the chart adjusted gross margins we're talking say 2 percent which the rest of the industry just doesn't hit. And if you go back through the earnings statements and the transcripts of the earnings calls they zero in on this idea of protecting margins. So raising prices with this inflationary background. Yes very much a margin story as well. Can we expect this to be repeated elsewhere. Are other carmakers going to be raising prices in the future. One hundred percent. GM already raised prices on its premium SUV by thousand dollars

in the last month. They're less nimble than Tesla. They feel the headwind more strongly in terms of those these costs. Tesla has long term supply contracts. Right. Hedge visibility. And the question that we have and we don't know is what visibility did for GM VW when those components cost. All right. Bloomberg's ad Ludlow thank you so much for joining us. And of course feeding

into that Tesla story is higher metals prices. It all feeds into what we're seeing in the commodity complex. What we're seeing in crude though is really something that rally has absolutely deflated down more than 20 percent in just five days in what has been a tumultuous week of trading to say the least. We'll discuss with DAX Banks head of Commodity Strategy Only Slap Hang Seng next. This is Wilbur. So the British Prime Minister Boris Johnson is going to meet with the leaders of Saudi Arabia and the UAE in a push for the region to produce more oil. He says the trip is part of an effort to wean Europe off Russian energy off after what Putin has done in Ukraine. You're seeing European colleagues step up to the plate and say right. This is the time we got to learn our lesson. As the West we've got to end that dependency on Russian hydrocarbons. And that's one of the reasons I'm going out to the

Gulf. Let's talk about what's happening the crude market right now. It has been something of a roller coaster over the last few days. This Hansen had a commodity strategy. It sank so joins us now. Ali let's talk about the price action that we've seen oil prices rallying hard and then selling off aggressively a 40 dollar round trip. Does the oil market have any idea right now how to price a barrel of oil. I think that price action speaks for itself guy. Clearly not. Last week the market rallied in on the expectations that supply

was going to be to be capped but without actually seeing any supply disruption. Since then the focus has moved to the FOMC tomorrow. The Covid outbreak in China. But I think we just need to look at the deep discount with which Russian oil is still trading in the market and just to just see that the market is still at risk of being undersupplied over the coming week. So I

think we are probably near a low in the market. So you would expect us to move back above 100 dollars a barrel. I think in the short term there is a risk of that as long as the war action war continues as long as there is self sanctioning going on in the market and as long as we don't see a significant reduction in demand then I think the risk is for for renewed upside. But obviously one thing is what's happening in China right now which will take some barrels off the market. I think another thing is the the shock to the system from these very very high diesel prices last week because I think we if we are focusing on oil prices and where the weather demand destruction level is that's really irrelevant because what counts is that what we are buying as consumers we're buying gasoline diesel and jet fuel and heating oil and so on. And these last week just hit levels which sent a shiver through the market I think already has started to have an impact on demand. So we're probably

seeing that accumulation over the coming months. But for now the the upside risk is still there. Boris Johnson is going to go to the Gulf. He's going to get a rehab. He's going to get a rabbit derby. He's going to ask for more oil. I think anybody is going to listen. No I don't think so. We just saw the OpEx months ago in my report out today. Again they are trying to skip the elephant in the room not really talking about war an invasion. Still saying

the market is adequately supply but also saying there's a higher degree of uncertainty going ahead. So I think at this point we're not going to expect any additional barrels. And also I think the main risk of the main problem still is the lack of a lack of many countries actually reaching the quota levels that has left the market already before the war action started pretty tight. And that's that's why we need to see improvement. So far we haven't. What about Iran. Only there's been some confusion as

to whether or not a nuclear deal may or may not be on the table in the near future. What impact would you expect that to have within the market. Well if you do get a deal then potential we could see. I would say in the region of a million barrels coming back to the market probably also quite a lot of our stores on and off shore that could be unleashed into the market. So that would obviously help the global global balance and also alleviate some of the pressures from the lack of Russian oil right now. But at this point there's so many. So there's so many political aspects in this. We've got Russia on one side. You've got Saudi Arabia on the other side and we've got us obviously desperate for

additional barrels. So this seems like a process that's still going to drag out. There was a headline across a little bit earlier a Dow Jones headline suggesting that the Saudis are thinking about pricing crude in the Chinese currency. A huge departure from pricing in dollars. What are the implications of that. Do you think it's likely and over what sort of timeframe. I think it's very likely and I think it just goes to show the

the how many countries I increasingly want to move away from the dollar and considering Saudi Arabia. China's accounts for 25 percent of the Saudi oil sales. So obviously they're big customer and if their customers want something then normally they get it. So. So I wouldn't be surprised if we see some some kind of price new pricing mechanism emerge over the coming coming weeks and months. All right. Ali so we've talked a lot about the oil market. What about the metals. Had metals

gotten quite as overheated maybe mispriced unsure how to price it. As we've seen in oil. Well nickel for sure. And it's going to be very very interesting to see how that market will even try to reopen tomorrow. It's going to be a long while before we get some normalization there. But some of the other markets will be. We'll continue to be. B B B bid up for aluminium due to a very high energy cost. It is the most energy intensive metal to produce. I think also even though we are looking for an economic slowdown over the coming months as the Fed starts to hike rates we have to remember that the the the decarbonization process the the the move away from fossil fuels and the now is also the increased defense spending will leave increased demand will leave quite a solid demand for metals over the coming coming quarters and years. So I say I think that we are still going to see the future with elevated metal prices. But again some of the if you look at the charts of

some of these markets Brent crude has returned to trend. Some of the other metals also has come down too. So with that in mind I think we are fairly close to some some support levels there. What are the implications of that. Well we just we just talked to our correspondent San Francisco at Ludlow talking about the fact that Tesla's just raised prices again. Battery prices are going up massively. How do we manage the transition to the to the newer economy with cleaner energy.

If the price of this stuff is going to go higher and stay higher how inflationary do you think the energy transition is going to be with these kinds of inputs. It will be inflationary and it will last for longer. And it also raises the prospect for for the rate hikes from now starting probably tomorrow from there from C. not having the desired impact bringing inflation down because it is an input pressure. But you can also argue that the automobile industry is under

pressure. Metal prices has raised higher probably twice as much for the evenings and for the for the standard cars. Given the research we've seen in some of the battery related metals. But but overall again the the the the political will to to at least in Europe following what's happened in Russia to to wean ourselves off it dependency of Russian oil and gas probably is a price that the many feel at this point is worth paying. And again we're also adding to the to the increased cost towards defense which will also add some some demand. So the conclusion is it will just it will be very expensive and we will be facing a market where demand will remain robust but that supply will remain inelastic and that will keep the prices underpinned. All right. So all of that feeding back into inflation. Let's talk about one medal not an industrial one but a precious one that

maybe could be an inflation hedge. How are you looking at gold right now. Ali. Well unfortunate call it the low volatility safe haven last week. That was a little it like 25 four hours too early because since then we've obviously seen quite a pick correction as well. But. Oh sorry. Gold is responding to a very very strong buildup in speculative interest. Within the last few four weeks. And with that in mind a lot of some of these short term momentum traders have been forced to step back out of the market. I do note that holdings in ETF has continued to rise this past week even though prices had come down. And that tells me that we're still seeing maybe geopolitical risk premium that's coming out

of the market. But the six stagflation risk is still there. And I think that's still one that will provide some underlying support for for precious metals over the coming months. All right. Only Slot Hansen head of commodity strategy at Sasso Sachs Bank thank you so much for joining us for his take on the incredible price action we are seeing in commodities. But also

we have to note the equity action today guy because now the stock's 600 is flat. Little changed on the day after being deeply deeply lower at one point in the session. And after plunging into a bear market yesterday the Nasdaq 100 up two point six percent. Did Baez note that this is a debate we had first thing this morning. And I sort of came in here trying to figure out what the question of the day is going to be. And the first one we came up with was is buying the dip dead. Turns out that may have been maybe the question not to go forward. I am also glad we didn't. But I wonder what exactly equities are

reacting to. Is this just an opportunity to buy the dip. You're not seeing much movement in the bond market. Yields are essentially flat as we see equities here in the U.S. around session highs. So maybe is this part of the oil story with the plunge we are seeing in oil. We asked our actual question of the day earlier. Is the oil crash a good thing or a bad thing. Maybe the market is seeing it as a good thing. Well certainly for now. For now the demand story out of China may be something that we maybe reflect on over a little longer time frame but yet now I think it's oil oil oil down this once you look at what has happened. So the airline bosses are all in New York now at this J.P. Morgan conference. They sounded really positive. Right now

U.S. carriers don't hedge. Lower oil price. Really good news on both sides of the Atlantic. Airline stocks are up really quite nicely today. Yeah you are definitely seeing that reflected. The likes of United for example right now is up 9 percent in the U.S. equity sessions. So we will continue to keep an eye on the moves in oil. But we also have to continue another part of our commodities conversation. Look at metals and the nickel frenzy and the London Metal Exchange's plan to resume trading it tomorrow. This is Bloomberg.

Bloomberg Markets could tell you we're looking at a live shot of the principal rim coming up right Mr. Johnny the founder of Girls Who Code that's up Bloomberg Technology by 30 p.m. in New York to thirty p.m. in San Francisco. This is Bloomberg. Let's check in on the Bloomberg Markets News Hour which could get to the U.K. has imposed new sanctions on Russia and Belarus along with its G-7 allies. Britain is banning the export of luxury goods to the two nations. It's also revoking their most favored nation status. That means hundreds of products from Russia and Belarus will face an additional 35 percent tariff meltdowns aimed at stemming the spread of the coronavirus in China and disrupting the operations of a number of businesses.

Apple Supply a hotline stopping production at all its its sites in Shenzhen. Toyota and Volkswagen also have halted output at several factories lockdowns at more than 45 million people a year after a giant container ship got stuck in the Suez Canal and disrupted trade for months. Another Evergreen Marine ship has run aground this time. The ever forward got stranded in the Chesapeake Bay after leaving the Port of Baltimore. Authorities say the ship's grounding is not blocking other vessels. Global news 24 hours a day on air and on Bloomberg Quicktake powered by more than 20 700 journalists and analysts. One hundred and twenty countries could get DAX. This has been bad guy. Rebecca thank you very much indeed. So big day tomorrow. Trading in nickel will resume on the London Metal Exchange. A week ago of course it was suspended when the price

of nickel soared to more than one hundred thousand dollars a tonne setting off a historic short squeeze. For more let's bring in Bloomberg's Mark Barton to talk. Mark Burton sorry to talk about that loss in the past. Mark let's just talk a bit about the the story tomorrow. So it's been closed for a week. The NIKKEI market since then commodities largely have come down and down very sharply. We've been talking about crude. Let's focus on what we think is going to happen tomorrow. What is your best guess. What on earth is this market going to look like when it reopens. Hi. So I think that speaking to trade is

the main thing that people are looking at is a broad move lower in commodities markets over the past week but also trading has continued in the Shanghai NIKKEI market and prices on the Shanghai Futures Exchange are substantially lower on a like for like basis is in the order of twenty thousand dollars a tonne lower than the closing price of forty eight thousand in the LME market. So the expectation on the balance of probabilities is that from the traders I've been speaking to that prices are likely to fall. But it's not a given that the conditions that led to this rally in the London market to some extent are still there as we have reported. Chanos still has this dominant short position that needs to be covered at some point under some circumstances. It has breathing room and it's the immediate pressure to cover it. It is unlikely to be as as pressing as as it was over over Monday and Tuesday but it's still likely to be a very volatile trading session. And fundamentally the market is still quite tight. So.

So more balance of probabilities as it says a drop. How can the LME be confident in what happened last week won't happen again. What steps has it taken in the interim. I think one key sort of bulwark against a repeat of Tuesdays drama is that it is imposed quite narrow in today trading limits. In the case of NIKKEI 5 percent either way. And so it gives that gives everyone in the London market a bit more confidence that when when trading does resume they won't be exposed to that kind of colossal rise that we saw on day off on Monday and Tuesday of last week.

Mark how damaged is the LME by this whole story. Well we've seen a lot of commentary from the financial industry where there is lots of grievance over the decision not not so much to close the market. Because I think everyone understands that the circumstances that led them to that point that the decision to cancel the trades that had taken place on Tuesday morning of last week has caused a lot of consternation among among investors. And I think that that that could cause them lasting lasting damage really. I mean it's that the right in the middle of the red hot bull market for commodities and to have investors big macro type funds that would presumably ordinarily be piling into markets like the LME expressing reservations about doing so is damaging in and of itself. How long that lasts and how how

severely they follow through with their words with actions cutting their exposure to the LME remains to be seen. But on the face of it so far it looks like a significant problem for the enemy. All right Mark we have to leave it there. But I think we all are looking forward to seeing how this trade goes when it reopens tomorrow at 8:00 a.m. London time I believe. Thank you so much for joining us. Bloomberg's Mark Burton. Now coming up we'll look at other markets as well because of course we have

oil plunging to the downside today down the better part of eight percent on WTI. That is giving a lift to equities. The Nasdaq 100 up two and a half percent after falling into a bear market territory yesterday. And I also want to point out what that is doing to inflation expectations at least priced by the U.S. bond market. The U.S. two year break even down 16 basis points. Today though it is still elevated four and a half percent. Of course that sets the scene for the Federal Reserve's decision tomorrow 25 basis points essentially baked in. But how does the Fed look at what we're seeing today and how may that influence what the

guidance looks like going forward. We'll have more on that in just a moment. This is Bloomberg. Let's talk about what we're going to be looking at here at Bloomberg over the next 24 hours. The main event of course is that we've got the Fed kicking off its two day meeting. It is going to conclude tomorrow. President Biden will also be in action signing the bill to fund the government until September the 30th. Tomorrow though the focus very much on the Fed Caylee

that will be by far and away the main events. Absolutely. That meeting will end. They will make their decision. Likely going to be a 25 basis point rate hike. But we're really be paying attention to Jerome's palace press conference that dot plot everything about the guidance going forward. Also tomorrow President Zelinsky is virtual address before U.S. Congress will

happen. And an extraordinary meeting of NATO defense ministers of course the war in Ukraine front and center on the agenda. That also a factor that the Federal Reserve has to consider. So let's get more insight into the Fed's meeting. Bloomberg's Michael McKee is joining us now. All right Mike give us the rundown of what exactly we should expect. You just did. Yes exactly. It's all kind of tied together. The war and oil prices and everything else. The Fed has to try to figure out where the economy is going. And it's going to be a very difficult job. Now we know going in that the first thing you're going to do is tell us that they raised interest rates by 25 basis points. They told us they were going to do that and they will follow through. Then

the question is what are their new economic projections. Obviously they have to raise their inflation forecasts. But you look at oil prices today the big jump up and now prices are below where they were at the beginning of March. So that would signify inflation going down. How do they account for that. Can they come up with any kind of reasonable number. And then course Chairman Jay Powell gets the hot seat. He gets to try to explain it all. The thing that we are going to be looking at is the dot plot because that's going to give us an idea of what the Fed is going to be doing going forward. The market had price lower than the Fed at their January December 15th meeting but now the market thinks rates are going to go much higher than the Fed. So

what's the dot plot going to tell us. And then as Kelli said after tomorrow risks ahead. You know how do we know what's going to happen next. Yeah. What about the balance sheet. I haven't heard a lot about the balance sheet recently. Are we going to hear about the balance sheet tomorrow. Probably not. They may reference it in the sense that they talked about it and then they're going to make a decision in the coming months. But they definitely want

to separate raising interest rates from sort of shrinking the balance sheet. They want to be seen as two different things and they want to see the balance sheet as a sort of automatic withdrawal of liquidity whereas raising interest rates is an optional decision once they come to each meeting. Mike we look forward to your coverage. We look forward to your question. Blue bugs might be key on the. Tomorrow. Some fantastic coverage coming up. I just want to point out that Vladimir Putin the Russian president is making some comments right now. He's not serious.

He says to find a mutually acceptable solution. We'll talk about that. We'll talk about the latest we have in terms of the reporting from Ukraine and the border there. That will be coming up on Bloomberg's the cable show. It's on Bloomberg Radio. It starts at the top of not in the next half but the hour after that because really got for us between New York and London 5:00 p.m. here in London Kelly on Bloomberg. The ABC Digital Radio. We've also got something else coming up a little bit later on today which I'm equally as excited about. It kicks off today. It's the crypto show. We've been waiting for it

for a long time here at Bloomberg. Matt Miller excited came. Caylee's very excited. What are we going to get. What should we be expecting here. Well it's 30 minutes all dedicated to crypto debuting today at 1:00 p.m. New York time guy. Our first guest Mike Novogratz the billionaire crypto investor who heads up Galaxy Digital. He'll be talking to us the entire half hour. There is so much to unpack. We have to talk about the real crypto plays in the current war in Ukraine how it factors into sanctions. Does this accelerate the dollarization of the world. We'll also dig into some of his specific investment opportunities. He's looking at his targets for where some of these individual crypto currencies may be going over the next

year or even the next five years. Digging up some in the culture around crypto as well. It will be a wide ranging conversation. Of course this is just episode one will take place every Tuesday at 1:00 p.m. Eastern. So really looking forward to that later. But coming up first KKR is head of global macro and asset allocation. Henry McVey will be joining Balance of Power with David Westin on Bloomberg Television and Radio from New York in London. This is Bloomberg.

2022-03-18 05:41

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