Bloomberg Markets (02/02/2022)
From the financial centers of the world. This is Bloomberg Markets with Alix Steel and Guy Johnson. It's 30 minutes into the US trading day on Wednesday February 2nd tier at the top market stories we're following for you at this hour and a four alphabet. The Google parent crashes estimates thanks to the cloud YouTube and a resilience advertising business. It sets the stage for matters report after the bell today. Pumping it up OPEC plus keeps the status quo and agrees to another 400000 barrels a day output hike for March. Brent crude still dancing around ninety dollars and contingency planning. The U.S. and its allies have approved several gas importers about sending fuel to Europe if a conflict over Ukraine erupts. We'll have more on that Bloomberg scoop. Plus dig into the cyber security issues at play in the crisis with
the CEO of cable networks from New York. I'm Kailey Leinz with Guy Johnson in London. Alix Steel is off today. Welcome to Bloomberg Markets guy. Happy Groundhog Day. It's an update for the market. You can thank Alphabet for a lot of that though. You wonder what Phil is going to have to say about the weather going forward. It's certainly been fairly inclement of late. And
certainly I think in Texas they're looking forward to a cold spell. Yeah. Alphabet. I can't work out whether or not the stock is up on on the numbers which as you say were super strong. I YouTube I thought was fairly mixed. But but certainly the search story as you say absolutely crushed it. Or is it the stock split in the past that has worked and opening the stock up to more retail investors certainly has been a great strategy of late for other tech companies. But I think this is just part of the wider
narrative Caylee which is that tech seems to be coming back super fast. And I think we've already retraced half of the move down that we saw in the NASDAQ. So that is a breathtaking pace in terms of the recovery that we're seeing here. So the question of the day. And it's a fairly straightforward one is big tech back. Let's talk about it at Ludlow. Joining us from San
Francisco pretty good sir in New York alongside Kelly. Ed let me bring you in. All right. Alphabet certainly stealing the spotlight today. But if you take a look at the charts over the last few days things really started to turn around with Apple. Can we thank Apple for all of this. Yeah I think that you know when you're in San Francisco covering this industry you have the privilege of looking at technology broadly. Right. We refer to big tech but all of these guys have different business models. Right. Advertising now is in play with Alphabet and Google. Tonight Apple is hardware and devices. But I think if you look
across the S&P 500 across the NASDAQ 100 we've had strong beats but also bullish outlook specifically from the semiconductor companies. Right. Everyone from Andy to an XP it has done well. Intel is a slight exception to that because they are in growth mode which has impacted profitability. But the thing that kind of keeps jumping back to me is I read the transcript. Some earnings is how concerned are any of these companies with the macro picture. It doesn't really seem to matter. Well and it is the micro picture better for some tech companies versus others created we tend to talk about tech in this very broad basket but it seems that they're starting to be a bit of a differentiation within this market. Yeah there absolutely is. I
mean Ed nailed it. The idea that there are different business models at the end of the day but it does still trade as a bundle at the end of the day. You've heard portfolio manager had a portfolio manager say this is a key part of the equation. If you actually look historically valuations are cheap. Now they're actually way way better than they were say just two years ago. And that's really going to be a game changer for a lot of people who've been looking to buy into tech and have said well they continue to rise. But to Ed's point the idea that some of the steam perhaps from the macro side is being pulled out of tech. Well that's really crucial because the spark that kind of lit the correction we've seen the last few weeks was Apple at three trillion dollars. But pretty multiples are reasonable if you compare that with the market. But if you take a look at pre pandemic these are multiples that have expanded sort of across the board. And the
question that often gets asked of big tech is is it defensive. And if you take a look at the multiples you could argue versus the market then maybe there is something to that. And if you take a look as it says at the earning capacity and the ability of these firms to sidestep the macro headwinds that the rest of the economy is facing. But it comes back to the central question is this area defensive. If we're going into a volatile period driven by the macro is this an area I can hang out. And I think
that we don't know the answer to yet. What are your thoughts. Yeah well I would agree with you but then let me give you the counterpoint of that the idea here. I mean go historically here because there was a time when value was considered the defensive play the idea that investing in the U.S. economy industrials energy even brands like Coca-Cola was the defensive play. Now I think you can say that about Apple simply as a function not just of the fact that they are kind of a proxy for the consumer growth that you're seeing in the United States and around the world the idea that you're spending your disposable income on these luxury products. But also the key point that we've heard about in the last year rice supply chain issues pricing power
and is that pricing power equation that makes big tech in particular even the companies like alphabet and metal platforms that are a little bit more exposed to the cyclical side was the pricing power that really sets them aside and really because it makes them that defensive play. All right. Ed Christy just name checked. Mehta So let's go there. They report after the bell tonight. What's the read through from Alphabet to that. Yeah. So I think we see matter higher today right. I think SNAP is also higher. So you take a look at alphabet strong broad adds business sales growth in ads was up 33 percent. Right. Does that translate to matter. There's a key point of differentiation. For a long time we've been focused on how Meta and the Facebook platform is more vulnerable to the ad tracking or privacy changes that Apple made. That's one thing. Has there been impact
there that has hurt the top line. The other thing is you know send a pitch. I spoke quite candidly about the regulatory risk. Every quarter I come on this show and Guy Johnson asked me what is the regulatory risk the big tech. And I say oh well guy investors are very sanguine about this. It doesn't seem to be priced into the share price where it is priced in and no one's that worried. You do start to wonder is we have a fresh agenda for 2022 if we now start to talk about regulatory risk because a pitch I was compelled to talk about it. And if he was and there's already an antitrust cloud over Facebook or parent
company matter you do wonder if that's a theme for this year in this quarter. BEARDSLEY To see exactly whether or not that story finally comes to fruition because as you say Ed we've been talking about it for quite some time. I want to address the other issue which we're focused on today particularly when it comes to alphabet. This stock split. I don't know whether the stock is up today on the great numbers that they posted particularly its search all because of the stock split. What are
your thoughts on it. It depends who you believe about the rationale. Ruth Porat told the CFO told Bloomberg that this is about making the stock accessible. And I think it's Brian Novak. Morgan Stanley. Yes. That said look at this spot. Stock split is the bigger picture. Alphabet and Google have already done a lot of investor or shareholder friendly stuff. Right. They've been pretty transparent about disclosures. They've been more active on the ESG front on returns. And he actually says this might put a little bit of pressure on Amazon now because there is a battle
for the attention of investors for invested capital. And Amazon may now feel compelled to act in a similar way as as alphabet is done. I mean stock splits have not really been in fashion. Right. If you think back to 2006 2007 fantastic story on the Bloomberg about how there were dozens of stock splits at that time. We've had some big names to it. Tesla Apple Alphabet some of the semiconductor companies. The price is so high I think based on Tuesdays close this stock split will take the stock down to one hundred and thirty eight dollars a share. How interested is the retail investor in this company. They seem to know the reaction seems to be that there is demand for this
stock. I just don't understand the read through from the retail investors perspective. Well Kristie obviously 20 21 and really the pandemic era more broadly was the era of the retail investor coming in full force at this market. They have had a rough go of it so far this year. I mean what is their activity like now. Yeah well let's just talk about the fact that retail has actually been buying this entire time even in the past couple of weeks when you saw the the broader market hedge funds and particularly drive some that's selling retail consistently goes into market and buys what they're not doing it in the same volume that you saw say a year ago and moving the market in that way. What I think is interesting about what Ed is trying to say
that a lot of these big tech companies while they're trying to target the retail investor. Right. So if you are bullish on retail making a bigger and bigger kind of stand in the market then you should be bullish on tech as well because now they do actually have access to a lot of these stocks that they didn't even just a year ago. One thing we learned they do have the power to be a force in this market. Thank you so much to Bloomberg Quicktake Gupta as well as to Ed Ludlow out in San Francisco. Now we also want to bring your attention to some breaking news. We're getting some headlines out of John Kirby the spokesman for the Pentagon who is speaking at the moment. He says a thousand
troops in Germany will be moving to Romania and the U.S. also will be moving about 2000 troops from the U.S. and to Europe within the coming days. Those forces he says are being shifted in Europe. They are not going to Ukraine. They say the movements are not permanent. But these are in addition to the 80 500 troops already on high alert. So we're getting those incremental upgrades updates on the situation on the border with Ukraine and the U.S. military response as a result. Now coming up we will focus more on the markets but geopolitical west as well as well as monetary policy risk. Bridgewater sees market turmoil on the
Fed's hawkish turn. And we'll talk about that with Karen Carnival Tambor Bridgewater co CIO for Sustainability. This is Bloomberg. Ten minutes past the hour live from London I'm Guy Johnson Kailey Leinz of course in New York in for Alix Steel. This is Bloomberg Markets. So let's talk about the markets. The world's largest hedge funds hedge fund says investors may be underestimating the need for aggressive monetary tightening by central banks not only by the Fed but elsewhere as well. Bridgewater says the S&P could drop by up to 20 percent before the Fed blinks. They've had a pretty aggressive move already in
January. So where does that leave us in February. Karen Coronel Tamba Bridgewater Associates Co CIO for Sustainability. Here to give us her take. Karen great to see you. Wow what a January. What did you learn in January and what does it tell us about February and the rest of the year. Hi. Thanks for having me. January has been I think the month where investors started digesting that. Conditions are such that the Fed and other central banks are going to simply have no
choice. They're going to have to act in the face of inflationary pressures. And we're entering a phase where very likely the economy is going to do fine. There's just such a strong self-sustaining expansion that is with us now because that easing into Covid was so powerful across monitoring fiscal but inflationary pressures they're strong they're entrenched. They're not just supply it's also massive demand. It's massive amount outstripping supply. And the Fed and those central banks are simply going to have no choice but to withdraw liquidity out of the system and withdrawing liquidity. The system drags down
assets especially assets that are the ones that received all of the inflows. What we saw in January is the market really digesting that that real liquidity withdrawal is upon us and trying to figure out how fast how intense how behind the curve is the Fed going to be versus how far is it gonna let it run. So Karen do you think what we've seen is more just some froth coming off the top of those assets that have benefited from an ample liquidity environment or is what we've seen a market that is now preparing for some kind of growth shock down the line because of a Fed that tightens too quickly. I think the markets are currently pricing in not that much tightening. I mean it's a lot of tightening relative to what we've experienced in recent years. Well we haven't experienced anything like the inflationary pressures that we're seeing
today. So the market is basically telling us the Fed is gonna tighten what is a moderate amount relative to history and that will be enough. They will stop at that point or they will cause a recession. And so they won't overdo it. They won't do more. And that our view is yes the Fed is probably going to want to stay somewhat behind the curve. It doesn't really want to shut off the recovery. It wants to sort of you know go slow. But they'll have to do a lot more than is currently expected a lot
more than is currently priced in because it's not going to be enough to stop the inflationary pressures that we're seeing. So the Fed will kind of take a number of years to tighten into such a strong recovery and such strong inflationary pressures. And the markets are going be proven wrong by just how much the Fed will have to do. They're starting to digest that this tightening will be difficult for risky assets. But then again they're not pricing in all that much tightening at. Let's put some numbers on this Karen how high do you think the Fed is going to have to raise rates. Where do you think the
terminal rate ultimately ends up being. You know I think it is not wise to predicted because the Fed doesn't want to get there. If you listen to the Fed they told us before it was this clear just how strong inflation was. We want our inflation mandate to go both ways. They're becoming more sensitive to the fact that when you have such a powerful expansion as you have today and you know we have labor markets as strong as you've seen them that helps everyone throughout the whole economy that actually gets to the bottom. Income groups really really nicely. You have faster rising wages there. The Fed likes this and they would really wants to believe that inflation will subside. And so is a question between you know what they should do and what they will do. They will probably stay behind the curve. The economy will probably stay strong
self-sustaining but they'll probably go a little faster than what you currently showing on the screen. And what's priced in is I'd say a lot for 20 two and basically almost nothing beyond that. The curve is extremely flat once you get beyond the next 12 18 months. And I really doubt that will be enough. What the Fed still be behind the curve if it does indeed hike five times in twenty twenty two. Is that not enough for this year specifically.
I don't think when they do these hikes that are priced in and they might not do more in this the next few months they are going to look around and say we don't have any more inflation. We don't have any more inflation. I think you have an economy we have not seen. This mix of cyclical and secular pressures on inflation at the same time in decades and the turn towards you know having supply be so low relative to massive demand. I doubt that one year of moderately normalizing policy will be enough to
make that go away and that the Fed can you know basically do nothing. Once we get to 2023 OK we've got a strong economy and a fed that is going to continue to tighten. What do I do with that as an investor. So as an investor the places they're are most dangerous are where ever you saw a lot of excess liquidity go over Covid. And so you know you have the Covid response. It's a very unique response relative to what we've seen in history because you have both
massive fed money printing and fiscal policy at the same time. That's why we're getting the inflation that we're getting because it was so powerful to print money and put it directly into the hands of consumers through all the fiscal policies those consumers have both create of massive demand and they bought a lot of things. So we know what they bought. They bought you know certain tech stocks. They bought crypto currencies. These are areas where valuations are high. You had a lot of new entrants even though some pressures come off now. That's where you see the most pressure as liquidity is being removed. What's most attractive for investors are places that no one are exposed to nominal growth where you can say whether it's growth or inflation that are strong. I believe there's a lot of fuel still in the system. And I want to gain from that. For example commodities commodity exposure you get exposure both strong growth and inflation. ISE the nominal economy strong. You can
get exposure to that. And most investors think they lack the most in their portfolio. Is all that much inflation protection. Very little inflation protection for most investors that we see in other places are places where you're looking and saying look a lot of money didn't go here during the boom and valuations still look pretty good. And if you look across the emerging market complex you have different emerging economies where you say you know money didn't really go here during the boom. That
looks very different than what happened in prior periods where money chasing higher yields ended up in a lot of emerging markets. Valuations are really good. It's very attractive to start investing in these countries in places like you know when you get geopolitical tensions like Russia that can scare investors from any emerging market of any type. Those are great places to be. So you don't want to be parking your money in the US in this kind of environment Erin. I would say that U.S. stocks are some of the least attractive relative to other stock markets in the world. So I like having a stock allocation. U.S. stocks in particular are some of the most susceptible to liquidity removal. Where you've had bubbles build up in pieces valuations just look a lot better and a lot of other countries and there's not a lot of reason to be there and not elsewhere. That's where all the flows have gone. Any reversals better for other countries. And I think U.S. bonds are
terrible place to be because any increasing inflationary pressure any pressure on the Fed to hike faster than is priced in is going to hit the bond market. So there's a lot of attractive place to be. Most investors are mostly sitting over allocated to US stocks and without almost any inflation protection. How much cast do you think investors should be holding right now.
I think Josh is not going to be that attractive of an asset for a while. When you're talking about you're still with pretty high negative real rates while people want some safety you know you're you're losing real spending power. Every dollar that you have in cash. But when you get to how much cash to hold you really do get to water investors particular circumstances. How much do they need the cash. How much liquidity are they relying on. What are the types
of liabilities that they have and why. Karen you said a couple of times now that what investors are lacking is inflation protection. How do you protect against inflation. What ax is that hedge. It's really important to remember that there are different types of inflation and so being has well to inflation is usually a combination of assets that will protect you. Whatever type of inflation hits commodities is probably the most under utilized. If you look at a broad basket of commodities and don't just end up holding oil you're looking at assets that are going to do well as the economy grows and inflation pressures are strong. They have good and growth exposure and very strong inflation exposure and their real inputs that we need in order to make any of the things that we want. I really like metals. I also like
carbon credits because these are areas that not only are exposed to all the cyclical strengths but also we have this big secular issue which is we need to deal with climate change. There is a lot of political consensus all around the world that we need to do that. I don't know. Pace will do that. There are a lot of issues around that. But any acceleration in our desire to deal with climate change we need to build electric vehicles build solar panels. We've got to go build a lot of physical infrastructure that's going to be made of metals and a supply takes a really long time to come online. And so now you're talking about exposure to growth exposure to these secular climate issues and exposure to all the inflationary pressures.
In addition to that for a lot of investors just switching some of their nominal bonds to inflation like bonds is an easy way to have an exposure very similar to what they have today. That just instead of paying you a nominal coupon is going to pay you whatever CPI is. If you don't want to have a big bet on exactly what inflation will do. Just hold an instrument that will literally pay you CPI. And then you know gold is still a nice hedge against true debasement of the currency. It's less of a
good hedge against you know just a broad strong economy. All right. Really great insight into how you are thinking about where to put your money in this market. Karen CARNEY I'll talk Tambor Bridgewater Associates co CIO for Sustainability. Thank you so much. 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 Black and its allies didn't need much time to decide what to do at their meeting today. They've agreed to increase output by 400000 barrels a day in March. Still if the past is any guide they'll have to struggle to
deliver. In November the group only implemented about 60 percent of its increase. Members from Nigeria to Russia have been running out of spare capacity. Melinda French Gates reportedly will not give the bulk of her wealth to the Bill and Melinda Gates Foundation. That's according to Dow Jones. The billionaire is said to have made the change official late last year after a divorce from Bill Gates. She reportedly now plans to spread her fortune amongst various philanthropic endeavors. Happy days are here again. The Wall Street rainmakers bought bonuses at U.S. investment banks. Haven't been this good in more than 10 years. Eight figure pay packages are becoming almost
standard for top performers. Goldman Sachs just spent an average 23 percent more per employee for the past year. That is the biggest jump in a decade and that is the latest business that guy predicted. Thanks very much indeed. Less able to tell whether bonus story because actually Katie I think it's interesting on the call last night with Alphabet they talked a lot about pay as well and talked about the need to pay up for talent pay up for brainpower. Basically they're looking for IQ and that's the battle here. And that's what's changed here in so many ways. You don't really go to war for talent or Wall Street but it's a war with talent with Silicon Valley as well. And Silicon Valley in certain areas is
winning. Yeah I think I was speaking with Sree about his story Shery Ahn Rajan who wrote that Bloomberg Quicktake this morning. And his whole thing was this is no longer I mean Wall Street is kind of at the lower rung of the financial world pay spectrum at this point because you have crypto billionaires you have all the wealth in Silicon Valley a lot to compete with guy and they're paying up to do so. We've got to talk about Ferrari a little bit later on. Makes you wonder what kind of a year Ferrari is going to have going forward. Quickly we're gonna talk about oil next. OPEC at the meeting. What do we learn from it. This is
Bloomberg. Pricing ten thirty in New York life from London on Guy Johnson CAC lines over in New York. This is Bloomberg Markets. So we're an hour into trading. Let's figure out where we are. Big tech city making his presence felt today. Kaley Abigail Doolittle here with the details. A good point guy because it is all about big tech today. The Nasdaq 100 higher but not surprisingly we're seeing a little bit of intra day volatility. So we are off the highs. Now one reason we're off the highs alphabet which put up that monster quarter. It's off its highs not so long ago up closer to 10 percent now up six point three percent. It's still
pretty solid but given its big weighting to the Nasdaq 100 that big tech index up about four tenths of one percent at this point. Nonetheless that is I believe the fourth up day in a row and the longest winning streak of the year. So impressive. We also have Amazon and metal platforms and of course metal platforms. The old Facebook up 1 percent. They report today after the bell. As for some other asset classes let's take a look at bonds
because we do of course have yields in that helps big tech as valuation becomes a little bit less of a concern. The not surprisingly CBO NASDAQ index actually said not surprisingly last time I looked at it it was down but right now up slightly. So that speaks that intraday volatility the whipsaw is the uncertainty.
And speaking to the idea Kelly that there could be a little bit of a risk off tone to come take a look at bitcoin. It is down about 3 percent not a huge decline but technically this chart looks really pretty bad. It looks as though we could see a pretty decent decline in last week or the week before we looked at a bearish head and shoulders pattern that pointed to below 20000. This is a six month chart and you can see a very strong downtrend. You can also see critical support taken out here.
This area of congestion it looks more bearish than not. If that breaks to the downside it looks like we could probably see Bitcoin go to about 25 20. This whole chart Kaylie actually confirms Bitcoin for closer to 10. If that happens that would be a massive breakdown and probably a breakdown in risk sentiment. Ten that is brutal. Abigail Doolittle thank you very much. Bitcoin already down about 33 percent over the last two months. Now in addition to bitcoin maybe you can call it a commodity. But we are watching another commodity and that is oil. We are just getting the EIA crude inventory data out. And we did get a
drop in crude stockpiles. After two weeks of those moving higher crude oil inventories fell one point oh five million barrels distilled and inventories also down by about two point four one million. We did get a build though in gasoline inventories which rose by about two point one million barrels. And of course this follows the OPEC plus meeting we got earlier today at Moore City. Global head of commodities research is joining us now to discuss all of it. And after that OPEC plus meeting we just got the headline that UBS has now raised its Brent forecast to a 90 to 100 dollar range. You're still at seventy nine for this quarter moving lower throughout the year. If OPEC plus maintains this kind of discipline on the supply side how much upside risk
is there to that view. I actually think that if you look at what these countries are doing up there plus countries are doing they're not adding 400000 barrels a day per month that they have in there in their plan but they are increasing it by more than two hundred and fifty thousand barrels a day per month. You stretch that across the twelve months of this year and that's an increase of three million barrels a day of production. So I think it's it's misleading to say hey they can't do it. Some of them are out of capacity. They're doing a lot. Three million
barrels a day is a lot. We think there's going to be a good three million coming from nano pack countries as well. So are our outlook is slanted toward the bearish side. Because we just think this is an oversupplied market and we'll be seeing that starting in the second quarter. Is Russia doing what it needs to do. There are there are other
names I could mention as well. And when we talk about what what is being said that's being done and what is actually being done. Russia hasn't made its targets for the last few months. Russia has made its overall target more or less. They haven't made it to the last two months. And it's a complicated story when you look me behind the headlines on it. They're their
compliance record in terms of what they're supposed to do is about one hundred and six percent. So they are not far from doing what they have to do. It's not much much different from the Saudi compliance record. It is a very different story from say Kazakhstan on the one hand which is overproducing tremendously. When Nigeria on the other hand which is barely
able to do anything other than see production decline. OPEC countries vary in what they can do. Russia in particular had shut down a lot of brownfield production focusing on Greenfield for tax reasons and other factors. But they're now spending an incredible amount of capital to get that production back. And we have little doubt that between now and the end of
the year you add condensates to crude oil production and they'll be up a good million barrels a day. So I think we ought to look at the bigger picture rather than just what's happened in the last month and this month. They claim that they are actually on target for what they supposed to be producing. Well let's talk about non OPEC plus production then. We heard from Exxon and Chevron over the last several days. Exxon plans to pass Permian out those Permian output by 25 percent this year for Chevron something like 10 percent. How do you factor shale into this equation. Shale is massive in this equation. We won't get back to where shale was producing at the beginning of 2020 until the end of this year. So that means that shale was really the as
almost important part of the rebalancing of the market from the oversupply of 2020 as a pet. Plus once we we lost three years worth of production in effect but now production is rising at a really rapid rate. And when we see these corporate reports coming in for the last quarter of the year and projections for this year we're seeing an estimated increase in capital spending in the U.S. of about 30 percent. Some people thinks that maybe that's countered by inflation. We don't think inflation in the oil industry is anywhere near the 30 percent increase in capital
spending. So we have calculated about a million three in a minimum of liquid production coming out of the U.S. this year versus last year about 800000 a day of that coming from crude oil and the remainder from natural gas liquids. And with these new reports on increased capital spending and a movement away from that so-called discipline that had that Wall Street had applauded and that Wall Street is applauding taking advantage of higher prices we think our estimates for U.S. production are
going to be on the low side. When we come to the end of the year. Wise wise domestic production been falling so much over the last few weeks. It's down 300000 barrels over the last three weeks I understand. Does that number ring true to you. What is going on in the near term right now. In the near term we call it winter and freeze offs. So it's not unusual to see winter weather intruding and
production capacity has certainly increased. We know that from what happened before these results took place and we know that the Permian Basin had gotten to its old record of much 2020 at four point eight million barrels a day was at four point nine last month and expected to be 5 million today this month. So I think it's noise and wicked weather is part of the demand story and it's also part of what's happening in shale at the moment. So once we get past this and we have to remind ourselves we had an enormous freeze off last February which shut in production. Plus natural gas prices has skyrocketed in the United States. Oil was buffered by the oversupply and high inventories. This year it stopped. So the inventory situation kind of exaggerates
that for the high frequency data in the US but it's really quite temporary compared to where the rig count is which points to a much more robust production future. Ed's final question. My good friend and colleague Annmarie Horden breaking a story out of DC that the Washington and European capitals are talking to China to India to a range of countries about potentially providing gas to Europe. Were there to be an invasion of Ukraine. What is your assessment of the situation. How realistic would such a plan be. And how exposed is Europe right now to such a crunch. Well Europe is exposed to such a crunch. And yes the
capitals are doing what they can to secure additional supplies of LNG to get into the European market. And they are succeeding by and large in this succeeding in part because China which had gobbled up all of the remaining available LNG once they ran into power generation problems last September is now releasing those cargoes. We're seeing a tremendous movement of LNG into Europe. They can probably get by if there is a crunch. We estimate that there probably won't be a crunch when we look at Russian exports. It's it's it's an intriguing situation because yes Ukraine is one thing. And they've limited supplies through Ukraine. They've not limited supplies through the other four pipelines. And it's not in their interest that it's it's in their interest to behave as they have been historically to be reliable suppliers.
The last thing in the world that they want to do is see an ability to see new supplies getting into Europe to cut their market share. So I think it's the lowest probability but there is a buffer that it's being worked out through the LNG market through Qatar and through the US incremental suppliers of LNG. And it's always great catch up. Perfect timing as ever. Ed Morse City Global head of Commodities Research. Sir thank you very much indeed. We're gonna carry on the conversation relating to what is happening around and in Ukraine. The top White House cybersecurity official has been travelling to Europe around
Europe in Brussels talking to the EU talking to NATO about how to respond to potential Russian cyber threats. We're going to talk to a man who founded the first cyber security firm ever. Shlomo Kramer is going to be joining us. Kato Networks that conversation coming up next. This is Bloomberg.
This is Bloomberg Markets CAC and you're looking at a live shot of the principal room. Tune in to Bloomberg's monthly series The Cheap Future Office. In the latest episode featuring Macy's CFO Adrian Mitchell is now on Bloomberg dot com out on YouTube. This is Bloomberg. Let's check in on the Bloomberg Markets news armors could get to new figures indicate that private sector payrolls in the U.S. fell by 300 and 1000 in January. That comes from the ADP National Employment Report. Earlier the White House said that brief absences of workers due to a macron could overstate the
number of unemployed people for the last month. The January jobs report comes out on Friday. And in the euro area inflation surprisingly speeded up to a record in January. Consumer prices jumped five point one percent from a year ago. None of the economists surveyed by Bloomberg saw inflation accelerated. It's the latest challenge to the ECB plan to pare back stimulus more slowly than its counterparts in both the US and the U.K. government used 24 hours a day on our on Bloomberg Quicktake powered by more than twenty seven hundred journalists and analysts and more than one hundred and twenty countries I'm sure you could get to. This is Linda Kelly. Where to go. Thank you. Well let's get to a Bloomberg scoop. The U.S. wants to ensure that Europe doesn't run out of energy if Russia invades Ukraine.
Bloomberg has learned that the U.S. and its European allies have approached China and other major natural gas importers in Asia about sending their fuel to Europe. Bloomberg Washington correspondent Annmarie Horden help break this story and she's joining us now. Anne-Marie is this just backup contingency planning or is there a feeling that this may actually have to be implemented. No it's certainly right now backup contingency planning.
And even if Russia was to invade Ukraine or in the height of the Cold War those flows never actually stopped. But there is a worry about Europe's dependence on Russia. More than 40 percent of their natural gas supplies comes from Russian if the U.S. wants a harsh sanctions package alongside their European allies. They're doing what they can to try to help alleviate some of these pains. So while we also reported a few weeks ago they were talking to Cutter. We now know they're
talking to other gas suppliers like Libya and Egypt and Nigeria. But the issue in the natural gas market is a little bit different than say the oil market. They have long term contracts and not a lot of spare capacity. And these long term contracts go to a lot of Asian countries. So it would need to happen is similar to what we saw in 2011 with Fukushima. So if you are going to a shipment is going to say Japan or South Korea or India and even China. We know that Biden administration officials and EU officials are approaching Beijing on this. They could potentially use their own stores
that they built up and send that shipment instead to Europe. What I find so interesting is that there does seem to be some outreach between Beijing officials and Washington officials and some at times agreement when it comes to the energy space. We saw that with the SPRO. Now we're seeing this again potentially this Russia invasion if they're supposed to be supply disruptions potentially in Europe potentially also be a little bit tricky for Vladimir Putin who heads to Beijing on Friday. Winter Olympics coming up. Yeah. You wonder how that she piece in chat will go if that's the backdrop to all of this. Great reporting Amari. Fantastic work. Bloomberg's Amari Holder breaking that story for us. The U.S. and NATO trying to figure out exactly how prepared they are right now. Gas just one
element of the story. The other is what is happening in cyberspace. Cyber attacks certainly a feature of the landscape in modern warfare. The top White House official for cyber security and Neuberger is on a tour of Europe right now. She's been meeting with NATO allies at meetings in Brussels with both NATO and the EU. With us today to talk about what she is likely to find on the ground in Europe is one of the founders of the world's first cyber security company Checkpoint Software. Shlomo Claim Kramer is now the founder and CEO of CAC Networks. He joins us now from Tel Aviv. What do you think and Newberger is going to find. Welcome to the show Shlomo. By the way and thanks for joining us. What do you think is going to find when she when she when she she goes around Europe she's going to find
the ad that the geopolitical talks are going to be part of modern warfare and that debt to equity. Right. So the main issue here is how do we how do you prepare afterwards. That's right. And actually there's no way Filipinos who that really matters in coping with this inevitable effect. One is better protection. And you know I'm speaking as one of the founding members and 30 year veteran of this cyber market. And I have to say that this whole market has woken and it has been provided with kind of the backbone of the economy the small and midsize organization with the appropriate capabilities to protect themselves against the geopolitical attacks. And that's because all of the investment all of the new widget went to the
Bank of America of the world and their businesses need an iPhone. But hopefully not as stable. So I may just interject here you're talking about defense. Are we weakest on defense or offense in terms of our response to cyber attacks. I would say that you know the offense this is asymmetrical so so the offense is going to happen. It's like 100 years ago asking if you know artillery is going to influence it's going to influence it's going to be effective. The main question is how
are we raising awareness to the fact that it's going to come and and be prepared and the areas where awareness is amazingly behavior. Look at the colonial pipeline. Example it's basically critical infrastructure is under a protected and even the consumer with any out there. Still what percentage of the viewers have a mobile security solution on the day on their mobile device. So absolutely the difference is the issue here. But there's also another issue that has to be addressed. And as soon as possible you know this geopolitical attack and the offense is not only effective but the most disruptive weapon since the atomic bomb. And some would say even more so. It definitely influences mostly civilians. And there's no treaty
two way to address it. There's no agreement. What is wartime and what is legitimate. So this is really an urgent need as well. Schlemmer what is Russia's capability here. How effective is Russia. How much damage could Russia do if it decided to go down this right road in a big way. I shall ISE is famously very capable and their offensive capabilities. And the question is you know how strong all the defenses. And
unfortunately we haven't prepared ourselves as well as we should. Where does that responsibility lie Shlomo. Does it need to be on private companies who have these vulnerable vulnerabilities or is this on governments to do more. I would say both both the market needs to recognize that in order to provide protection and this is not only the Bank of America but also Canada. The vast majority of the market. And there needs to be a raising awareness and this has to be a full regulation. It forces awareness and through other means and
obviously a treaty. Is this something that has to be a government. I would answer both that the public market as well as the government. This critical infrastructure. In Europe given the risks that we face need to be a hardened and I'm assuming the answer to that is yes but be taken off line. What are easy solutions here and I appreciate there probably not a yes but let's go about our separate.
There are solution and there is a segment of the cyber security market for operational technology and a security industrial cybersecurity and it must be adopted much more broadly. And it's not and it's it's there. And you know it's a question of awareness and investment and regulation that forces that to happen. And you know that's that's the security. There's a gap here. That is the dangers. Shlomo we only have about a minute left but what is the next biggest threat in your view. You know there are threats out of every word said the cyber security is always about the next legal defense. But I would say that the biggest threat is the fact that
the backbone of the economy is unable to protect itself. And the proof of that is if a mid-sized business tries to get this cyber insurance policy it would cost them ten times now than it costs a few years ago. So this is the number one I've seen at Dusk and for protection the blog a fat waste of the economy. All right. Really really valuable insight. Thank you so much to Shlomo Kramer founder and CEO of Cato Networks for joining us as the situation with Ukraine and Russia unfolds. This is. For Amanda Lang Guy Johnson Kailey Leinz over in New York. This is Bloomberg Markets. Let's talk about the price action over here in Europe. Equities bed 477 on the stock 600 were up by another six tenths of one percent. The rally off the lows
continues. The real action though I think is elsewhere. Foreign exchange and what's happening in the bond market really the story right now. Euro. Sterling I think kind of encapsulates the story here in Europe. We've got inflation data out of Europe. We'll talk about that out of the eurozone in just a moment. Stronger than anticipated. Is the ECB going to hikers. Is price
right now. How much further will the Bank of England go. Does that power continue to sell off. But then I think you get to the real story and that is digging deeper into what is happening with the ECB. The German 2 year now negative. Forty five were inside the negative 50 that the ECB key rate has. And that tells and tells a story and a signal is sent by the ECB is going to deliver some hikes this year certainly priced. Simon French chief economist of Gordon's going to be talking us next debate
this very issue. This is Bloomberg.
2022-02-04 21:51
