'Bloomberg The Open' Full Show (03/29/2022)
JONATHON: DO WE HAVE A BREAKTHROUGH IN PEACE TALKS ECHO THE COUNTDOWN TO THE OPEN STARTS RIGHT NOW. ANNOUNCER: EVERYTHING YOU NEED TO GET SET FOR THE START OF U.S. TRADING. THIS IS BLOOMBERG "THE OPEN" WITH JONATHAN FERRERO. ♪ JONATHON: LIVE FROM NEW YORK CITY, WE BEGIN WITH A BIG ISSUE, A CHANGE OF TONE. PEACE TALKS IN TURKEY DEVELOPING INTO SOMETHING WE HAVEN'T SEEN BEFORE THROUGHOUT THIS DEVASTATING WAR. PRESIDENT ZELENSKYY MEETING IS ON THE TABLE.
TEAM COVERAGE STARTS RIGHT NOW IN BERLIN. MARIA, PUT IT ALL TOGETHER FOR US. THE FEE FROM BOTH SIDES IN THE LAST HOUR. MARIA: WHAT I WOULD SAY IS THIS IS THE FIRST TIME WHERE WE HAVE HAD THE RUSSIAN DELEGATION AND THE UKRAINIAN DELEGATION AT A MEETING OR WE GET THE IMPRESSION WHERE THEY ACTUALLY SAT AT THE SAME MEETING. A MEMBER, PREVIOUSLY, IT WAS A COMPLETELY DIFFERENT CONCLUSION FROM EACH SITE. NOW WE BEGIN TO SEE THERE MAY BE SHADES OF A COMPROMISE HERE.
ON THE ONE HAND, PRECIOUS AS THEY ARE WILLING TO PULL BACK SOME MILITARY DEPLOYMENTS ESPECIALLY AROUND THE CAPITAL, BUT I WOULD SAY -- AND WE NEED TO STRESS THIS -- AT THIS POINT, THE UKRAINIAN CAPITAL IS COMPLETELY LOCKED, SEALED. IT HAS BECOME A FORTRESS CITY. IT WILL BE VERY HARD FOR RUSSIA TO TAKE THE CAPITAL OF KYIV. THERE MAY POTENTIALLY BE A MEETING BETWEEN APPLY MAYOR PUTIN AND VOLODYMYR ZELENSKYY. THE ONLY WAY WE CAN PUT IT INTO THE WAR IS FOR THEM TO ACTUALLY SIT FACE-TO-FACE AND HAVE THIS CONVERSATION. UNTIL NOW, AS I'M SURE YOU WILL REMEMBER, THE RUSSIA'S -- THE RUSSIANS ALWAYS SAID THEY WOULD NOT DEBATE.
WE ALWAYS SPEAK TO THE GREAT POWERS THE WORLD, BUT WE ARE NOW SEEING THAT POTENTIAL IS CHANGING. THIRDLY, AND THIS IS ALSO PORTON, -- IMPORTANT, WE ARE WONDERING ABOUT CRIMEA IN THE DONBASS REGION. A LOT OF THIS CAN TELL YOU A LOT WITH THE TURKISH FOREIGN WHO WAS THERE. HE WAS HOSTING THE TALKS HE SAID THAT FOR THE FIRST TIME, HE SEES PROGRESS. IT IS NOT THE FIRST TIME THE RUSSIAN FEDERATION HAS LIED ABOUT THE INVASION, ABOUT ITS PLANS TO TARGET CIVILIANS, AND USING NEIGHBORING BELARUS. JONATHON: THERE IS HOPE RIGHT NOW AND HOPE IS ALL WE HAVE AT THE MOMENT. ANN MARIE, BEFORE WE VERIFY ALL
OF THAT, UNDERSTAND PRESIDENT BIDEN WILL HAVE A CALL WITH ALLIES. WHERE IS THE FOCUS OF THE CALL? ANNMARIE: A LOT OF THAT WILL BE WHAT BIDEN HAS BEEN TRY TO FOCUS ON SINCE THE BEGINNING, TRYING TO FIGURE OUT WHAT, IF ANYTHING, THEY NEED TO DO TO HELP UKRAINE. YOU HEARD UKRAINIAN PRESIDENT VOLODYMYR ZELENSKYY CRITICIZE THEM FOR NOT DOING ENOUGH, SAYING THEY NEEDED MORE WEAPON, -- MORE WEAPONS, MORE SUPPORT. YOU HAVE SEEN SOME OF THOSE ACTIONS STALLED IN CONGRESS.
SOME PERMANENT ENDINGS OF TRADING'S WITH RUSSIA HAVE PASSED THE HOUSE, BUT THEY HAVE NOT GOTTEN TO BIDEN'S DESK. AT THE SAME POINT, BIDEN IS ALSO GOING HAVE TO DEAL WITH THE FALLOUT FROM HIS OR MARKS OVER THE WEEKEND, SAYING THAT PUTIN SHOULD NO LONGER BE IN POWER. WE HEARD HIM ADDRESS THOSE MARKS -- THOSE WERE MARK'S LATE YESTERDAY WITH REPORTERS, SAYING THAT WAS A PERSONAL, EMOTIONAL STATEMENT AND IT WAS NOT A SIGN THAT THE U.S. IS CHANGING ITS POLICY TO RUSSIA OR CALLING FOR PUTIN TO BE REMOVED. STILL, THAT SENT SHOCKWAVES AROUND THE WORLD. WE SAW FRENCH PRESIDENT EMMANUEL MACRON SAY THAT THEY WANTED TO SEE THEM DE-ESCALATE TENSIONS.
THE KREMLIN ALSO SAID THAT COULD IMPAIR RELATIONSHIPS GOING FORWARD. PRESIDENT BIDEN WILL HAVE TO DO SOME DAMAGE CONTROL WITH HIS ALLIES. JONATHON: MARIA, AS YOU INDICATED, WE HAVE SEEN THIS DONE A FEW TIMES NOW, THIS MISPLACED HOPE. I'M WONDERING IN THESE TALKS,
WHAT CHANGED? WHAT CHANGED FOR BOTH SIDES AS THEY SAT AROUND ECHO MARIA: I WOULD SAY IT TWO THINGS. IT IS BECOMING CLEAR THAT THIS IS NOT GOING TO BE A WAR THAT THEY CAN WIN ON THE GROUND, THAT THEY CAN BOMB UKRAINE, DESTROY UKRAINE FROM THE AIR, BUT ON THE GROUND, THEY FACE INCREDIBLE ASSISTANCE. THE IDEA THAT THEY COULD JUST SWITCH A GOVERNMENT AND PUT IN A PUP GET -- PUPPET INSTEAD OF SULLEN SKI, THAT DID NOT HAPPEN. -- INSTEAD OF ZELINSKI -- SO
ONCE KEEP UP -- VOLODYMYR ZELENSKYY, IT ESSENTIALLY BECOME THE SATELLITE FOR THE RUSSIAN FEDERATION. THERE WERE PEOPLE IN THE GROUND FOR THE PEOPLE BECAME. IT IS SO BIG THAT THIS IS NOW IN OPERATION BECOMING VERY, VERY DIFFICULT. THE CRANE ANTS SEE THE STATE OF THEIR COUNTRY AND HAVE NOW HAD A REALITY CHECK ABOUT NATO. THEY KNOW THEY ARE NOT GOING TO BE ABLE TO ENTER THIS ALLIANCE AND NOW THEY'RE LOOKING FOR A PLAN B, A WAY OUT. THE TWO SIDES HAVE VERY STRONG INCENTIVE NOW TO GET TO CEASE FIRE, TRYING TO FIND A DIPLOMATIC SOLUTION.
LET'S NOT GET CARRIED AWAY. WE HAVE SEEN RUSSIA PROMISE A LOT, BUT UNDER DELIVER. A LOT OF THE SITUATION IN KYIV RESPONSE TO A MILITARY FAILURE OF THE RUSSIAN FEDERATION. WE ALSO HAVE IMAGES OF THE CONVOY APPROACHING THE CAPITAL OF UKRAINE, BUT UNABLE TO TAKE IT. IT HAS BECOME A FORTRESS FOR THE UKRAINIAN GOVERNMENT. A LOT OF THIS COULD BE SAVING FACE FOR RUSSIA. JONATHON: MARIA, THANK YOU.
EMILY, THIS LOOKS LIKE PROGRESS. NOW, WE NEED TO VERIFY SOME OF THE THINGS BEING PROMISED. THE PULLBACK FROM UKRAINIAN CAPITAL, A SHARP DROP IN MINISTRY OPERATIONS FROM THE RUSSIAN SIDE. THERE IS THE HOPE THAT WE WILL GET THE MEETING BETWEEN TWO LEADERS. WE HOPE WE WILL GET A MINIMUM, MAYBE EVEN A PEACE ACCORD.
FOR THE FIRST WEEK OF MARCH, WHERE PITCHING -- WE'RE PUSHING 180, NOW DOWN TO 186. WE HAD A BREAK AT 100. THE CRUDE IS NOW AT A 1999 HANDLE. TREASURY YIELDS ARE HIGHER NOW. IN EUROPE, A SELLOFF OF THE GERMAN MARKET THROUGH ZERO BRIEFLY, FOR THE FIRST TIME SINCE 2014. WHAT DID THIS CHANGE FOR CENTRAL BANKS WORLDWIDE, NOT JUST THE FED? ELLA, I WANT TO BEGIN WITH YOU. WHAT DO THESE HEADLINES CHANGE FOR YOU IN THE PAST 24 HOURS IN THE LAST 60 MINUTES? >> IT CERTAINLY FOCUSES UPON MARKETS MORE WITH THE FEDS ON GUIDING THE MARKETS AND WE HAVE SEEN INCREASED HAWKISH AND US FROM CENTRAL BANKS.
OUR VIEW IS THE BOND MARKETS HAVE ALREADY APPEASED THEMSELVES TO SOME EXTENT FROM THE INITIAL SHOCK OF THE WAR IN THE MARKET REACTIONS FROM THAT MORE BROADLY WERE EXPECTING SOME BACKTRACKING OR SOMETHING WE'VE BEEN HEARING FOR WEEKS. I DON'T THINK IT IS A MAJOR SURPRISE WITH THE BOND MARKETS YOU CAN PROBABLY SEE FROM THE REACTION IN THE 10-YEAR YIELDS. WE ARE EXPECTING A SELLOFF. IT IS ALSO REACTING MORE TO THE IDEA OF THIS COMMODITY SHOCK THAT THEY ARE TRYING TO PRICE WEEKS AGO. JONATHON: YOUR THOUGHTS THIS MORNING ECHO -- THIS MORNING? >> THE POINT MADE BY THE EARLIER SPEAKING -- THE EARLIER SPEAKER, THE FOCUS WILL DEFINITELY SHIFT BACK TO THE CENTRAL BANK HAWKISH IN US, WHETHER IT STAYS IN PLACE.
WE DO THINK THERE WILL STILL BE A HAWKISH SURPRISE IN THE TOWN, WHICH WILL CONTINUE FROM THE RISK MARKET PERSPECTIVE. I THINK THAT IS WHERE THERE IS A BIT MORE TO BE RESOLVED. WE ARE SURPRISED BY THE MAGNITUDE OF RALEIGH WE HAVE SEEN ON THE BACK OF THE HAWKISH PIPIT FROM THE FED. I DO THINK THAT THAT IS PROBABLY SOMETHING THAT IS LIKELY TO FADE OVER THE NEAR TERM, AS THE NEAR TERM AND THE MARKET STARTS TO PRICING. -- PRICE IN. JONATHON: THE ONE BULL MARKET THAT WE HAVE RIGHT NOW, I WAS TOLD THIS MORNING, IS IN HAWKISH IN US.
ONE OF FROM YOUR PERSPECTIVE WHETHER YOU THINK WE ARE PICKING UP ON THAT BULL MARKET EFFECTIVELY, EFFICIENTLY, AND EQUITY MARKET. >> IT'S A GREAT QUESTION. I KNOW SO MANY PEOPLE ARE OF THE VIEW THAT THE FED CAN SORT OF FREE EMBRACE WHAT THEY SAID LAST WEEK, WHICH IS THAT THEY WILL START MOVING 50 BASIS POINTS NOW THAT WE ARE MAKING PROGRESS IN THESE NEGOTIATIONS. I DO THINK THAT THERE IS THE OTHER SIDE OF THE STORY, WHICH IS THAT WE HAVE HUGE SUPPLY CHANGE CHALLENGES GOING INTO THE FEBRUARY 23 WARD. IN UKRAINE. -- FEBRUARY 23 WAR IN UKRAINE. WE ARE GOING TO SEE SOME OF THE SUPPLY CHAIN BOTTLENECKS SUBSIDE IF THIS PROGRESS IN UKRAINE IS REAL. THEY ALLOW CENTRAL BANKS,
PARTICULARLY THE FED, TO TAKE A SLIGHTLY MORE CONSTRUCTIVE TIGHTENING APPROACH, BUT SLIGHTLY LESS HAWKISH APPROACH THROUGHOUT THE COURSE OF 2022. I THINK THE TIMING OF THIS NEGOTIATION AS IT PERTAINS TO ENERGY AND SOFT COMMODITIES, PARTICULARLY WHEAT, AND THIS IMPACTS ON THE OVERALL ECONOMY COULD IMPACT OUR CENTRAL BANKS. THINK ABOUT THEIR POLICY GOING FORWARD. JONATHON:
DO YOU THINK THAT WHAT HAS DEVELOPED THIS MORNING REDUCES THE RISK OF AN EVEN BIGGER MOVE FROM THE FEDERAL RESERVE? >> WE HAD SIGNIFICANT SUPPLY CHANGE CHALLENGES. IF YOU LOOK IN THE U.S. PRIOR TO THE WAR, WE ARE NOT HEARING AND TALKING ABOUT LONG BEACH, BUT IF YOU LOOK AT THE DATA THERE, AS MORE PEOPLE COME BACK TO THE WORKFORCE AT THOSE PORTS, AND THE RAIL LINES ARE RUNNING WELL, AND THE TRUCKING BUSINESS -- WE SEE LABOR PARTICIPATION PICKING UP IN THAT SEGMENT OF THE MARKET. WE ARE SEEING STRONG COMPONENTS OF A FINE ON THE SUPPLY CHAIN FRONT.
THE WAR KIND OF BROUGHT A HALT TO THE COMMENTARY BECAUSE WE SAW A SPIKE IN ENERGY PRICES, CONCERNS AROUND SOFT CULTURAL PRICES. THE SPOT THAT I HAD THIS MORNING -- AND YOU SEEK THE TREASURY MARKET RALLYING. IT IS NOT TELLING OFF. PERHAPS THAT IS A VIEW THAT WE WILL START ACTUALLY SEE INFLATION, IF THIS CONVERSATION IN UKRAINE REALLY IS AN INDICATION OF PROGRESS, WE CAN START TO SEE INFLATION BOTH AT HOME AND ABROAD. JONATHON: WE WILL KEEP THIS CONVERSATION GOING.
WE ARE EXPECTING A NEWS CONFERENCE WITH SECRETARY BLINKEN WITH HIS MOROCCAN COUNTERPART A LITTLE BIT LATER. THE FIRST SCHEDULED OPPORTUNITY FOR THE U.S. ADMINISTRATION TO GIVE THEIR VIEWS ON WHAT DEVELOPED A LITTLE BIT EARLIER THIS MORNING. HEAD OF THE OPENING BOUT, LET'S MOVE AHEAD. >> YOU MENTIONED THAT STOCKS ARE HIGHER ON THIS UKRAINE-RUSSIA OPTIMISM. SHARES ARE UP MORE THAN 1%. NOT TO PRESENTLY, BIG TECH NAMES ARE SHARPLY HIGHER.
THEY ARE REALLY LEADING THE WAY UP TO 2.7%. TRAVEL IS BACK ON, TOO. THEY'RE FLYING HIGH BY ABOUT 3%. NO PUN INTENDED. CONTRACTORS ARE LOWER. WITH OIL CONSOLIDATING RIGHT AROUND 100 DOLLARS PER BARREL RIGHT NOW, SLIGHTLY BELOW SOME OF THE BIG NAMES, THEY ARE LOWER. JONATHON: THANK YOU.
COMING UP ON THE PROGRAM, WHAT IS EMERGING FROM THE PEACE TALKS GOING ON IN TURKEY. THAT CONVERSATION UP NEXT. >> THERE ARE FEW BETTER PLACES TO PUT YOUR MONEY THAN THE S&P AND THE NASDAQ. >> THIS IS BEEN ALL ABOUT INFLATION, THE FED, BOND YIELDS.
>> I AM VERY IMPRESSED AND QUITE HONESTLY SURPRISED. >> IF THERE IS NO ALTERNATIVE TO GUESS EQUITIES. JONATHON: IT HAS BEEN QUITE A MONTH, THE EQUITY MARKET DOING PRETTY WELL, ALL THINGS CONSIDERED. THE THREE-YEAR YIELD GOING THE END OF THIS MONTH AT 1:43 240 THIS MORNING. WHAT A RUN WE HAVE SEEN. TINA HAS MADE A COMEBACK. HOW MAY TIMES HAVE WE HEARD THAT OVER THE LAST FEW WEEKS? >> I DON'T EVEN THINK I COULD BEGIN TO COUNT.
USUALLY COUNTING IS WHAT I DO BEST. IT IS BEEN ABSOLUTELY BRUTAL FOR THE BOND MARKETS TO THE POINT THAT MARKETS ARE MOVING HIGHER, NOT YET TO THE DEGREE WHICH COULD IN THEORY BEAR A LITTLE BIT BETTER. WE HAVE GLOBAL AGGREGATE BONDS DOWN, HEADING FOR A RECORD DRAWDOWN. HE HAD THE 10-YEAR YIELD UP 91 BASIS POINTS HERE IN JUST A COUPLE MONTHS. THAT IS STILL NOT AT THE LEVEL OF THEIR ATTRACTIVE TO STOCKS. YOU GET A PREMIUM FOR BOTH
EUROPE AND THE U.S., YOU CAN SEE THAT IT IS STILL SIX PERCENTAGE POINTS ABOVE THAT OF THE 10-YEAR BOOM. STILL UP ABOUT TWO PERCENTAGE POINTS.
THAT IS, IF YOU'RE PUTTING MONEY TO WORK. WE ALSO HAVE A LOT MORE ON THE SIDELINES IN THIS MOMENT. BLESSED BANK OF AMERICA FUND MANAGERS SHOWING BECAUSE POSITIONS AMONG RESPONDENTS. UP 5%. WHEN YOU LOOK AT THE SAME LEVEL OF CASH HELD IN 2020. IN AN INFLATIONARY ENVIRONMENT, WHERE THEY SAY CASH DOESN'T MAKE A LOT OF SENSE, THAT POWERED NEEDS TO FIND A HOME SOON AND THAT COULD BE IN EQUITIES. JONATHON: THANK YOU. WE HAVE AN ALMOST 100 BASIS POINT MOVE ON THE END OF THE TREASURY CURVE. I WOULD'VE BEEN THINKING WE
WOULD TALK LESS ABOUT TINA. WHY ARE WE DOING THAT? >> I GUESS IT HAS BEEN VERY MUCH LED BY THE FED, IN TERMS OF THAT MOVE. INITIALLY, WE STARTED WITH THE IDEA THAT INFLATION RATES WOULD COME DOWN HALFWAY THROUGH THE YEAR AND ESCROWS WERE GOING TO BE ABOVE TREND.
BUT MUCH LOWER THAN WHAT WE SELL LESS THAN WHAT WE SAW LAST YEAR. WHEN YOU LOOK AT THE YIELD FORECAST BY STRATEGISTS, WE ARE NOT AT ALL HAWKISH. THIS IS BEEN A SURPRISE TO MOST BOND MARKETS.
WHERE DO YOU GO FROM HERE? IT IS TRICKY BECAUSE I SET UP FROM THE MICRO PERSPECTIVE IN THE U.S. SUPPORTS THE FED ACTUALLY PULLING RATES HIGHER. VERY DIFFICULT TO ARGUE AGAINST THAT.
THAT IS WHY YOU ARE SEEING MOST OF THE BACKUP PLAYERS, SUCH OF MYSELF, ACTUALLY PLAYING THE CURVE. THAT IS SOMETHING WE WOULD'VE BEEN CALLING FOR SINCE LAST YEAR. CAN THE STOCKS SELLOFF? RIGHT NOW, WE JUST DON'T HAVE ENOUGH TO TELL US OTHERWISE. WE WILL SEE IS THIS INVERSION CONTINUES. HAVING SAID THAT, POSITIONS IN THE MARKET ARE FAIRLY STRESSED -- STRETCHED TO THAT VIEW. WE ARE VERY VULNERABLE HERE. ANY POTENTIAL SURPRISES
ARE FAILING. OUR BEST CASE HERE IS STILL NOT A PRETTY ONE FOR DURATION AND RATES. JONATHON: THING I HEAR IS THAT 250 DOESN'T GET IT DONE. THAT DOESN'T GET IT DONE AND A WORLD WITH CLOSE TO 8% CPI. REAL YIELDS ARE STILL PROVIDING SOME BUFFER AGAINST REAL RATE INCREASES BECAUSE THEY ARE NEGATIVE.
DOES NOT RESONATE WITH YOU AS WELL? -- DOES THAT RESONATE WITH YOU AS WELL? >> IF YOU LOOK BACK AT SORT OF THE PRE-COVID CHARTS, WE HAD A DIFFERENT INFLATIONARY CENSURE. IN 2018, NOT ALL YIELDS WERE AROUND 3%. THE CURVE WAS FLAT IN THE FALL OF 18.
WE HAD THEM FALL CLOSE TO THAT SORT OF LEVEL. IT WOULD NOT SURPRISE ME IF WE RETURNED BACK THERE. IT DOESN'T TAKE AWAY FROM THE FACT THAT THE INFLATIONARY PICTURE IN 2023, IF THINGS BREAK AS WE SUSPECT THEY MAY, COULD IMPROVE DRAMATICALLY. YOU LOOK AT PITCH BREAKEVENS, YOU LOOK AT THE FIVE YEAR-FIVE YEAR. LONG-TERM EXPECTATIONS ARE STILL REASONABLY WELL ANCHORED. LASTLY, I WOULD JUST ANCHOR -- I WOULD JUST ARGUE THAT OUR GDP HAS TRENDED FROM THAT 2018 HUNDRED PERCENT GDP TO A HUNDRED 35%. THE FED KNOWS THAT, THE TREASURY KNOWS THAT. HIGHER INTEREST RATES, IN TERMS
OF THE INTEREST WE PAY ON OUR DEFICIT, BECOMES UNSUSTAINABLE FOR THE U.S. GOVERNMENT. I BELIEVE THAT THERE IS A NATURAL REALIZATION THAT IS PROBABLY GOING TO FORCE THE FED TO REMAIN INCREMENTALLY HAWKISH, BUT PERHAPS NOT AS EXTREMELY HAWKISH AS MANY ARE PREDICTING, WHICH IS 350 POINT -- THREE 50 POINT BASIS MOVES. I THINK THE FED MAY INFECT FACT OVERSHOOT AND THEN WE WILL END UP SEEING THEM CUT RATES NEXT YEAR. JONATHON: NEXT YEAR.
I WANT TO TALK ABOUT THIS SELF-LIMITING AMOUNT OF DEBT. THE FIRST PROTECTIVE PART OF THE RATE HIKES WILL BE NOT ENOUGH TO TAME INFLATION. NOT ONLY IS THE RATE TOO LOW TODAY, BUT IT WILL LIKELY BE TOO LOW EVEN AFTER THE FED PRINT -- COMPLETES IS PROJECTED RATE HIKES. HOW MAY TIMES HAVE WE HEARD THAT? THE SAME IS -- IS THE SAME TRUE OF THE CREDIT MARKET? >> CREDIT IS LIKELY DIFFERENT, AND THE SENSE THAT THERE IS THE TECHNICAL EVALUATION ARGUMENT THAT COMES IN FROM WHAT THE FED IS DOING, ETC. WE'RE ALSO TRYING TO SEE HOW IT
PEAKS THROUGH THE FUNDAMENTALS. I THINK THE TENSION HERE, BY AND LARGE, IS BUYING INTO A RELATIVELY HEALTHY ECONOMY AND RECENTLY POSITIVE TERRITORY. THERE STILL BALANCE SHEETS THAT COULD ABSOLVE THE MAGNITUDE OF RATE HIKES THAT OUR ECONOMISTS ARE FORECASTING. BUT THE WORKING ASSUMPTION HAS TO BE THAT EARNINGS STILL HOLD UP. I THINK IT IS THE SECOND LEG OF THE ARGUMENT THAT STANCE TO FOLLOW PART. THAT IS WHEN WE START GETTING MORE CONCERNED ABOUT THE PROFITS TO SERVICE DEBT AND A HIGHER INTEREST RATE ENVIRONMENT. JONATHON: LET'S REGROUP AND TALK ABOUT
THAT LAST LEG. IF YOU WILL TUNE IN AGAIN ON BLOOMBERG TV AND BLOOMBERG RADIO, WE ARE GOING INTO THE OPENING BELL, CONSTRUCTIVE TALK FROM UKRAINE AND RUSSIA IN TURKEY TODAY. JONATHON: FINE MENTAL WAY FROM THE OPENING BELL. A CONSTRUCTIVE CONVERSATION BETWEEN RUSSIA AND UKRAINE. FIRST UP, POINTING TO THE STOCKS.
NEGATIVE RISK WILL WORK PROFILE AND RISING RISKS. MORGAN STANLEY, A 30 DOLLAR PRICE TARGET, SEEING MULTIPLE HEADWINDS CREATING TOO MUCH UNCERTAINTY. MULTIPLE NEAR-TERM GROWTH DRIVERS. UP NEXT, APPLE, ON TRACK FOR ITS LONGEST WINNING STREAK IN ALMOST TWO DECADES.
JONATHON: 24 SECONDS AWAY FROM THE OPENING BELL THIS MORNING. GOOD MORNING. THIS IS WHAT WE WANTED TO HEAR. A CONSTRUCTIVE TONE FROM BOTH RUSSIA AND UKRAINE COMING OUT OF TALKS IN TURKEY. THOSE TALKS WILL CONTINUE INTO THIS EVENING AND TONIGHT, POTENTIALLY, AS WELL. OFF THE BACK OF THAT, FEATURES ELEVATED BY 9/10 OF 1% AFTER A THREE-DAY WINNING STREAK. CAN WE MAKE IT FOUR? CRUDE IS $99.65. THAT IS ALL THIS WEEK IS EUROPE
IS STRONGER. A CONVERSATION ABOUT ACTION LATER THIS YEAR. MAYBE YOU CAN EXPLAIN THIS ONE FOR ME. GO AHEAD. THERE WILL BE AHEAD SCRATCHER IN THE MIX. 2.42 FOR U.S. GENERIC. WE ARE AT 8/10 OF 1% AT THE OPENING, ABOUT 30 SECONDS AND. LIKING 1.3%, A DISCRETIONARY OF 1.2%.
>> ON THIS VERY STRONG START IS A BROAD-BASED OPTIMISM FOR TALKS. MICROSOFT IS ONE OF THE TOP LEADERS, REALLY HELPING OUT THAT TECH SECTOR. INTERESTINGLY, EVEN THOUGH BANKS ARE HIGHER, CITIBANK UP 4.1%. AMERICAN AIRLINES UP 4.1%. FINALLY, GENERAL MOTORS ALSO IN ON THE GAME, UP 3.5%.
AGAIN, VERY BROAD-BASED RALLY. ENERGY IS THE LAGGING SECTOR. JONATHON: THANK YOU. THE ONE NAME TO WATCH IS APPLE. A 10 DAY WINNING STREAK. THAT IS THE LONGEST WINNING STREAKS -- STREET SINCE 2010. 11 STRAIGHT DAYS OF GAIN,
ADDING ALMOST 18 PERCENTAGE POINTS. THE TEAM HERE AT BLOOMBERG CRUNCHING THE NUMBERS OVER THE PREVIOUS 10 DAYS. THAT SAME MARKET MOVE OF MORE THAN $400 BILLION. IF YOU WANT A COMPARISON, THAT IS ROUGHLY THE SAME MARKET CAP AS WALMART.
WHAT A STUNNING RALLY. >> GOOD MORNING. IT IS AN ASTONISHING STORY, ESPECIALLY WHEN YOU CONSIDER THE BACKDROP OF YIELDS HAPPENING IN UKRAINE, QUESTIONS AROUND THAT. AMAZON IS THE LEADER ON THE YEAR-TO-DATE BASIS.
LET'S GO TO THE TERMINAL AND TALK ABOUT THIS RUN. THIS IS THE BEST RUN SINCE 2003. IF WE CLOSE HIGHER ON WEDNESDAY, WE MATCH THAT RUN. IF WE CLOSE HIGHER ON THURSDAY, WHICH WOULD BE 13 CONSECUTIVE DAYS, THAT WOULD BE THE LONGEST WINNING STREAK IN HISTORY. YOU SEE ANALYSTS BOOSTING EARNING ESTIMATES BY AROUND 7% TO THE YEAR.
THEY KIND OF SHRUGGED OFF THE STOCK THAT THEY CUT PRODUCTION BY 20% ON THE IPHONE BECAUSE OF THE WANING DEMAND AND THE CONTINUING CONFLICT IN UKRAINE. WHAT STOPPED THE STOCK? THERE IS A WARNING IN THIS BECAUSE APPLE HIT $3 TRILLION AT THE BEGINNING OF THE YEAR. THE S&P HAD A SIGNIFICANT DROP TO FOLLOW. WE ALSO HAVE YIELDS OF 2.5% ON THE 10-YEAR TREASURY. APPLE WAS NOT IMMUNE FROM THE
CONVERSATION AROUND DISCOUNTING THE PRESENT VALUE OF FUTURE EARNINGS. WHY IS IT NOT IMMUNE? IT IS REALLY AN INTERESTING NARRATIVE. THEN, WE TALK ABOUT WHAT INVESTORS ARE DOING RIGHT NOW. THE NASDAQ 100 IS STILL DOWN 7% YEAR-TO-DATE. AMAZON IS BEING THE YEAR-TO-DATE LEADER, UP 2.5 PERCENT SO FAR IN 2022.
THAT SEEMS TO BE ON THE BACK OF THEIR OWN STOCK SPLIT, WHICH HAS GIVEN RETAIL INVESTORS A REASON TO LOOK AT AMAZON WITH ENTHUSIASM. APPLE IS ALMOST POSITIVE YOU'RE TODAY. WE ARE SO CLOSE. IT IS REALLY INTERESTING GIVEN THE BACKDROP. JONATHON: IT IS A MOVE IN AMAZON. NEVER MIND THE YEAR-TO-DATE, IT IS A 25% MOVE.
YOU'RE TELLING ME THAT IS JUST ABOUT A STOCK SPLIT? ED: NO, AGAIN, JUST AS APPLE HAS DONE WITH CONSUMER PRODUCTS AND SHOWED RESILIENCY WITH THE SUPPLY CHAIN, AMAZON HAS SHOWN THAT IT IS THE SUM OF ITS PARTS. THE ETA BS CLOUD BUSINESS -- THAT EW A CLOUD BUSINESS SHOWN CONFIDENCE FROM WALL STREET. EVEN THE INFLATION STORY THAT IS GOING ON IN HIGHER INPUT COSTS FOR A COMPANY, AMAZON STILL SEEMS TO BE ABLE TO GROW THAT TOP AND BOTTOM LINE. JONATHON: ED LUDLOW, THANK YOU.
ELLA, WANT TO COME TO YOU ON THAT. THE MOVES WE HAVE SEEN IN APPLE, AMAZON, TESLA AS WELL. WHAT DO YOU THINK IS BEHIND ALL OF THAT? >> THE RELEASE, I SUPPOSE ON THE MARKET DEVELOPMENTS BASED ON THE UKRAINE FRONT. BUT MORE BROADLY SPEAKING, THE SCENARIO THAT EQUITY MARKETS ARE PRICING IS JUST A LITTLE DIFFERENT TO THE BOND MARKETS. IT IS ONE WHERE GROWTH IS OK. AS YOU SEE AT THE BEGINNING OF PRICING POLICY FROM CENTRAL BANKS, AS IS THE CASE, EQUITIES TEND TO DO OK.
THIS IS AROUND 2/10 OF THE TREASURY CURVE FLATTENING. EQUITIES HAVE PERFORMED WELL ON THAT. IT IS MUCH MORE ALIGNED WITH THE IDEA THAT WE ARE NOT IN A LATE STAGE. IT DEPENDS ON WHICH SCHOOL YOU STICK WITH. IF YOU ARE IN A LATE STAGE CALLED, THERE IS VOLATILITY WE SEE IN RATE MARKETS, WHICH IS VERY ELEVATED STILL.
IT IS GIVING YOU LITTLE SIGNALS, AS WELL AS THE RECESSION STORY FROM THE CURVE FLATTENING. EQUITIES ARE PLAYING WITH A HOPE AND BETTER GROWTH SCENARIO. THOSE ARE GETTING MORE WORRIED A YEAR OR SO DOWN THE LINE. JONATHON: HE TALKED ABOUT TURNING SPEED LIMIT SURE THIS QUOTE FROM CITY WITH YOU. THEY GO ON TO SAY SEEING NEGATIVE CORRELATIONS IS NOTABLE, BUT THE MORE INTERESTING ATTRIBUTE IS THE NOTED CORRELATION TO THE S&P 500 EARNINGS.
THEY CONCLUDE BY SAYING THIS REINFORCES OUR EMPHASIS THAT THE KEY TO EQUITY MARKET PERFORMANCE IN THE INTERMEDIATE TERM. LET'S CHECK UP ON THAT DYNAMIC OF EARNINGS. FOR YOU, DID EARNINGS GET BETTER OR WORSE SINCE THIS YEAR STARTED? >> JUST TO BORROW TALKS FROM MY EQUITY CALI, WE DO THINK THE OUTFLOW IS WEAKER. MORE SPECIFICALLY, WHEN WE LOOK AT THE NATURE OF THE EARNING SERVICES THAT HAVE COME THROUGH, THE POINT WE HAVE BEEN MAKING IN RECENT WEEKS IS THAT WE SEE THE DOWNWARD COMBAT, IS TYPICALLY NOT A HEALTHY FIND. WHETHER IT IS TRANSIT INFLATION, IF IT IS GOING TO BE BACK IN THE NEAR TERM, IS MEANINGFUL.
WE DON'T THINK THAT THIS IS THE BOND MARKET SIGNALING RECESSION RISKS, BUT FROM THE PERSPECTIVE OF EARNINGS, IT DOES FEEL LIKE WE ARE GOING TO BE PRICING IN A WEEK EARNING THEN A STRONGER ONE. >> WAS A BIT MORE DECOMPRESSION IS WHAT WE WANT TO SEE WITH IT. WHAT HAS BEEN MOSTLY PRICING -- I FEEL LIKE THE MORE RECENT MATTER AROUND THE NEXT LEG OF THE RACE MIGHT BE MORE SIGNIFICANT AND FRONTLOADED. THAT WILL TRIGGER A BIT MORE
CONCERN AROUND THE LOWER QUALITY PORTIONS OF THE MARKET. EARNINGS WILL BE HIGHER. AT THE SAME TIME, THE IMPACT OF HIGHER RATES IS GOING TO BE MORE MEANINGFUL. THAT IS WHY I THINK THE MORE FLOATING-RATE DEPENDENT CAPITAL STRUCTURES, PLUS LOW-QUALITY COMPANIES, THOSE WILL HAVE MORE CRACKS LIKELY TO SHOW UP RATHER THAN BROAD-BASED. JONATHON: THEY ARE REALLY INSULATED GIVEN WHAT IS HAPPENING AROUND THE WORLD THE LAST MONTH OR SO. THEY ARE INSULATED BECAUSE OF THE SECTOR MIX.
IF WE DO INDEED GET A DE-ESCALATION, AND I DON'T EXPECT YOU TO PROVIDE A FORECAST, I JUST WANT TO UNDERSTAND THE DYNAMIC OF THE REACTION AND MORE BROADLY HIGH-YIELD. IF WE GET DE-ESCALATION AND ENERGY BACKS OFF A LITTLE BIT, DOES THAT LEAVE HIGH-YIELD A BIT MORE EXPOSED? JONATHON: -- >> TO SOME EXTENT, YES. BUT THEY'RE ALSO LONGER DURATION POCKETS, WHICH IS LIKELY GOING TO BE A BENEFICIARY OF THAT MOVE. TO SOME EXTENT, THE SECTOR
MIGHT SURGE IF WE DO COME OFF WITH THE GEOPOLITICAL TENSION, BUT AT THE SAME TIME, SOME OF THE LONGER DURATION HIGHER QUALITY POCKETS WITHIN HIGH-YIELD ARE GOING TO HOLD UP BETTER. JONATHON: I JUST PULLED UP SOME QUICK RESEARCH FROM OVER THE WEEKEND. MARKETS PRICE THE TIME FOR FED, BUT NOT GROWTH RISK. GIVEN A FULL FORECAST OF THE INVERSION OF THE YIELD CURVE THIS WEEKEND AND NEXT WEEK, FINANCIALS WERE HAVE HAD A HARD TIME OUTPERFORMING. LET'S GO WITH THE FIRST LINE. MARKETS PRICE FOR A TYPE TO FED, BUT NOT FOR THE GROWTH RISK. DOES THAT MAKE SENSE TO YOU?
>> YEAH, I THINK IT DOES. THAT IS SORT OF OUR BASE CASE, WHICH IS THE FLATTENING OF THE YIELD CURVE HISTORICALLY ALTERS TEND TO BE A SIGN OF RECESSIONARY RISK. BUT THIS TIME AROUND, BECAUSE OF THE UNCONVENTIONAL NATURE OF MONETARY POLICY, WE THINK THAT THAT SIGNALING IS A BIT MUDDY. WE MAY, IN FACT, EXPERIENCE NOT A SOFT LANDING, BUT SOMETHING BETWEEN HARD AND SOFT.
IT MAY JUST AVOID THAT RECESSIONARY CONCERN. IF I HAVE TO GO BACK TO THE REALITY THAT WE HAVE -- OUR SAVINGS RATE IS LOWER. WE STILL HAVE THE INFLATIONARY PRESSURES ON KEY SEGMENTS OF THE MARKET. OUR EXPECTATIONS ARE THAT EARNINGS ARE GOING TO DISAPPOINT, THAT WE ARE GOING TO CERTAINLY SEE A SIGNIFICANT DECELERATION OF THE GROWTH PICTURE THIS YEAR. AND THE FED IS GOING TO CLEARLY HIKE RATES SOMEWHAT AGGRESSIVELY. WE THINK AS WE MOVE INTO THE
BACK HALF OF THIS YEAR, AS A RESULT OF THAT, THE FED IS GOING TO MAKE INTO PLAY IN THAT BE POSITIVE FOR EQUITIES AS WE MOVE INTO THE BACK HALF OF THE YEAR, INTO 2023. JONATHON: HOW MUCH INFLATION DO THINK THERE COULD BE AT THE BACK END OF THIS YEAR? >> TAKE A QUESTION. WE WILL HAVE TO SEE HOW THIS ALL PLAYS OUT. I SUSPECT IT WILL BE A SORT OF EVENT. THERE IS A LOT GOING ON ON THE GEOPOLITICAL PART THAT WE ARE MONITORING. THE PICTURE IN THE U.S. IS BECOMING MORE OF A STICKIER
POINT. WE DO THINK THE TREND IS FOR INFLATION TO P CARE ARE THE NEXT MONTH OR 2 -- PEAK HERE OVER THE NEXT MONTH OR TWO, AND WE WILL SEE OVER TIME. JONATHON: I AM HUMBLED WATCHING THIS. THANK ALL OF YOU. ENERGY PULLING BACK DOWN BY TWO POINT 9%, NOW DOWN BY 3%, AS CRUDE FALLS BACK WE HAD A BREAKTHROUGH, WE THOUGHT, BETWEEN CRANE AND RUSSIA. THEY HAVE TOXIN TURKEY AND THOSE WILL CONTINUE TO THIS EVENING.
THE PRESIDENT OF THE UNITED STATES, THE FOCUS WILL BE ON THOSE TALKS, BUT ALSO THINGS HERE AT HOME AS WELL. HIS $5.8 TRILLION BUDGET PROPOSAL. PRES. BIDEN: THIS YEAR ON TRACK TO CUT THE DEFICIT BY MORE THAN $1.3 TRILLION. THAT WOULD BE THE LARGEST ONE YEAR REDUCTION JONATHON: IN THE DEFICIT IN HISTORY. THAT CONVERSATION UP NEXT. THIS'LL BE TO: 30 P.M. IN NEW YORK. THIS IS BLOOMBERG.
♪ >> ONE OF THE HALLMARKS OF THIS BUDGET, AS THE PRESIDENT OUTLINED YESTERDAY, WAS THAT IT WOULD REDUCE DEFICIT. IT WOULD REDUCE THE SPENDING BY $1 TRILLION. BUT WITHOUT THAT TAX ON UNREALIZED GAINS, YOU CANNOT GET THAT $1 TRILLION. THERE ARE THINGS THAT NEED TO BE WORKED OUT HERE. BY THE WAY, WE WILL BEGIN OFFICIALLY THE PROCESS HERE IN THE NEXT HOUR, WHEN THE DIRECTOR OF OMB TESTIFIES BEFORE THE HOUSE BUDGET COMMITTEE. THERE IS NOTHING ORIGINAL, AS WE ALL KNOW ABOUT THINGS COMING OUT OF THE WHITE HOUSE THAT NEVER SEE THE LIGHT OF DAY. WHEN I DON'T UNDERSTAND IS THAT
IF YOU WANT TO GET SOMETHING DONE, WHY ARE WE HAVING A CONVERSATION WITH SENATOR MANCHIN ASKING WHAT WE CAN DO. IF YOU ARE NOT AGREEING WITH THE PRESIDENT OF THE UNITED STATES, GET PEOPLE TO PAY THEIR FAIR SHARE. IF YOU HAVE SOMETHING YOUR OWN SENATOR WON'T AGREE ON, IT WON'T GET ANYTHING DONE. JOE: MAYBE YOU ARE GETTING CLOSER TO YOU FIRST QUESTION, WHICH IS THAT WILL GET DONE. THIS IS SUPPOSED TO BE A PROJECTION OR A STATEMENT OF VALUE. IT IS THE MOST OVERUSED PHRASE IN WASHINGTON. IT IS A LAUNDRY LIST. IT IS
WHAT WE BELIEVE IN. IT IS ALMOST A CAMPAIGN SPEECH. THE WHITE HOUSE KNOWS ALL TOO WELL THAT THIS WILL BE TWISTED INTO A LOT OF DIFFERENT PRETZEL PIECES BEFORE THIS EVER BECOMES A LAW. WE JUST PAST LAWMAKERS TWO WEEKS AGO. THE OMNIBUS BUDGET THAT WE ARE NOW OPERATING UNDER, THIS IS HALFWAY THROUGH THE FISCAL YEAR. IF WE THINK THIS IS GOING TO GET DONE BEFORE THE NEXT FISCAL YEAR, THAT IN ITSELF WOULD BE AN ACHIEVEMENT.
AFTER THAT, ABOUT A MONTH LATER, MIDTERM ELECTIONS. IT IS NOT LIKELY THAT THIS WILL SEE THE LIGHT OF DAY IN ITS CURRENT FORM. JONATHON: THANK YOU. JOE MATHIEU, LOOK AT -- LOOK OUT FOR HIM MONDAY THROUGH FRIDAY AT 5 P.M.
AND 11 DAY WINNING STREAK ON APPLE ERASES LOSSES FOR THE YEAR. APPLE STOCK RIGHT NOW UP BY MORE THAN 1%. IT IS THE LONGEST WINNING STREAK SINCE 2003, TO BE SPUR SITES. -- TO BE PRECISE. MATT: -- TAYLOR: I JUST WANTED TO TALK ABOUT UNREALIZED GAINS, BUT WE WILL TALK ABOUT THAT ON ANOTHER DAY. I WANT TO FIRST START WITH SOME OF THE BIGGEST INCREASES ON THE YEAR-OVER-YEAR BASIS AND WE TALKED A LOT ABOUT DEFENSE SPENDING ON THE BACK OF RUSSIA AND UKRAINE. THERE'S A BIG INCREASE FOR VETERANS AFFAIRS. $82 BILLION IS A JUMP IN
HELPING HUMAN SERVICES. ALSO ASKING FOR A 71% INCREASE ON A YEAR-OVER-YEAR BASIS. LET'S GET BACK TO THAT DEFENSE SPENDING. WHAT IS INTERESTING AS THEY ARE
LOOKING FOR A 4% NOMINAL INCREASE, 1.5% REAL GROWTH. REPUBLICANS HAVE COME OUT WITH 5% REAL GROWTH. THINK ABOUT THE INFLATIONARY IMPACT ON THE SECTOR, IT WILL BE A BIG ONE HERE. WHEN WE THINK ABOUT SOME OF THE
NUCLEAR MODERNIZATION BUDGET GOING TO THAT AND A BIG $130 BILLION FOR R&D, THAT IS IN THE PENTAGON'S BUDGET AS WELL. LET'S JUST TAKE A LOOK AT SOME OF THE TRANSPORTATION AS WELL, BECAUSE THE FEDERAL TRANSIT ADMINISTRATION IS NOW GOING TO GET AN ADDITIONAL $21 BILLION. BIG MONEY FOR PASSENGER AND FREIGHT RAIL. WHEN WE THINK ABOUT HOW TO MODERNIZE THE PORTS, THE BIG FOCUS HAS BEEN ON SUPPLY CHAINS. JONATHON: ARE WE SEEING A CAP NOW? TAYLOR: DO I GET AN UNREALIZED REBATE? JONATHON: I HAVE NO IDEA HOW THAT IS MEANT TO WORK. ISN'T THAT THE POINT?
IT DOESN'T GET DONE, YOU TALK ABOUT DOING SOMETHING, YOU DON'T MAKE POLICY, POLITICS. IT FRUSTRATES US BOTH. TAYLOR RIGGS, THANK YOU. BEFORE WE GET THERE, LET'S GET SOME SECTOR PRICE ACTION. ABIGAIL: UP ABOUT SOME INTENSIVE 1% RIGHT NOW. MOST AREAS ARE HIGHER, LEAVING A DISCRETIONARY OF 1.27%. APPLE AND MICROSOFT MEDICATION SERVICES ARE ALSO HIGHER.
THINK OF FACEBOOK, GOOGLE, AND TWITTER. ON THE BOTTOM, NOT SURPRISINGLY, IS ENERGY. THERE IS A MOVE HERE ON THE OPTIMISM ON THE POSSIBILITY OF UKRAINE-RUSSIA TALKS. AT THIS POINT, THE S&P 500 IS UP MORE THAN 12% FROM ITS FEBRUARY LOW.
NOW, IT IS DOWN 4% LOW ITS ALL-TIME PEAK. ARE WE GOING TO HAVE ANOTHER ALL-TIME HIGH? JONATHON: THANK YOU VERY MUCH. 10-YEAR YIELD IN GERMANY UP FOR BASIS POINT. -- FOUR BASIS POINTS.
WE ARE NOW NEGATIVE AGAIN BY SEVEN BASIS POINTS OR SOMETHING LIKE THAT. YIELDS WERE HIGHER ACROSS THE CURVE ON TWOS AND TENS. MUCH MORE SO ON TWOS.
NOW, GUILT ARE NARROWER. YOU CAN DO THE MATH QUICKLY. THE CURVE IS FLATTER AND THE SPREAD IS STILL NARROWER. SINGLE-DIGIT ON TENS. LET'S GET YOU TO YOUR TRADING DIARY ON EFFECT TODAY FOR UKRAINE-RUSSIA TALKS.
AGAIN, FROM NEW YORK, THIS IS BLOOMBERG. JONATHAN: 25 MINUTES IN, WE'VE GOT SOME WEIGHT TO THIS EQUITY MARKET. IMPROVEMENT IN UKRAINE AND RUSSIA TALKS. WILL IT STICK? THE TALKS WILL CONTINUE BUT A CONSTRUCTIVE TONE IN THE EQUITY MARKET. PERFORMANCE ON THE SMALL CAPS. THE PRESIDENT OF THE UNITED STATES HOLDING A NEWS CONFERENCE WITH THE PRIME MINISTER OF SINGAPORE. MORE DATA COMING UP ON
WEDNESDAY AND THURSDAY WITH INITIAL JOBLESS CLAIMS AROUND THE CORNER. IT IS PAYROLLS FRIDAY. THE ESTIMATES SO FAR, 419 FOR THE MONTH OF MARCH. THIS WAS THE COUNTDOWN TO THE OPEN.
2022-04-03 05:22
