Bloomberg Markets (05/05/2022)

Bloomberg Markets (05/05/2022)

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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. Thursday May 5th here are the top markets stories we're following for you at this hour. Recession risk. The Bank of England raises interest rates by 25 basis points to 1 percent as it warns it sees a risk of

recession in the U.K. as inflation remains above 10 percent. That comes just one day after the Fed's first half percent rate hike in 22 years. And risk off that has markets trading with the risk off tone. Stocks pare gains seen over the last three days and the pound weakens against the dollar. Cable trading with a 123 handle sticking to the plan. OPEC and its allies ratify the standard four hundred thirty two thousand barrel a day increase in its third 13 minute meeting since the war in Ukraine began. Even as the EU aims to ban Russian oil while a US ISE more oil purchases crude rallying on

the back of those announcements from New York I'm pretty creating group that with Guy Johnson in London Alix Steel is off. Welcome to Bloomberg Markets Guy. A historic couple of days. I got to say the BLT. It takes the cake this morning. I don't know what to say about market reactions. I don't know what to say about central banks. I am absolutely flummoxed by all of this. The market reaction to what we're hearing from central banks the central banks. What did they expect to happen. Maybe not what we're seeing in the markets. We've got a lot to work our way through. A couple of pieces of breaking news that I think are worth focusing on. Alix Steel. If she is watching has a huge smile on her face right now. U.S. mortgage rates jumping

to five point to seven. That's the highest since August 2009. Alix Steel managed I think to pick the bottom in 30 year rates for mortgages in the United States. Actually we're back on Monday and I expect that she will be talking about that a little bit. The other thing that's worth mentioning as well is the U.S. Treasury the U.S. 10 year U.S. 30 years up really quite sharply. Now the U.S. 10 year now trading well north of 3 percent. We are up by 9 basis points. And there has been a significant spike higher in yields in the United States over the last hour or so. This is we've seen a significant move lower in U.K. yields over the last few hours. I don't know what the answer to our question of the day is because

I don't know whether or not we should be focusing on growth or whether we should be focusing on inflation. The market I think can't make up its mind either. All we passed peak called CAC hawkishness. Are we at peak hawkishness as Cameron Price says on the end life today. It could be a plateau. Table mountain rather than a rather than a traditional kind of v shape up and then down of another mountain that we could potentially use Kilimanjaro. Stick with the Africa theme. So where are we. Which

one of those should we be focusing on. Are we at peak hawkishness or should we be continuing to focus on inflation rather than the growth narrative might be key. Bloomberg's international economics policy correspondent joining us as is the one or only Vincent Su Keenan Bloomberg macro strategist. Mike what do you think to the answer to this question. You were in the room with the Fed yesterday. You talk to the Fed. I've just been talking to the governor of the Bank of England. What is your sense of where we are. Is this peak hawkishness. Is it downhill from here or should actually we be refocusing on

this inflation narrative. Well I think you need to refocus on the inflation narrative when you look at what is happening to oil prices the last couple of days. The headlines are going to go up especially as Europe moves towards that embargo of Russian oil. We're going to see more expensive energy and that is going to hurt in terms of inflation. But when you're thinking of it from a central bankers point of view you want to look at the core rate because there's nothing they can do about oil or about food prices that are going up.

And so as we watch the indicators going forward let's see if there are broader price pressures that continue or if those start to slow a little bit. It's hard to know about peak at this point. I'm envisioning clouds around the top of the mountain and you don't know exactly where the peak is. Those quite the visual. Let's bring in Ben Signorile here. Vince hop into this conversation. Are we past peak hawkishness. Because there are two issues here. There's inflation there is growth. And if the BLT is perhaps a crystal ball for any other central banks around the world you're seeing some very aggressive hikes and commentary coming in the face of lower growth forecasts. How is the world's central banking leaders supposed to square the two. First I would caution not to look at the Bank of England as an example. We can recall what they did during the pandemic by

panicking in terms of cutting rates and then having to panic back and raise rates. I think Mike makes a good point about the cloudiness of the issue and what the Fed can control and what the Fed can't control. I think realistically what we're seeing is a almost a panic reaction in markets regarding inflation. Yes prices are going up. Yes mortgage rates are higher. Yes. Wages are not exactly keeping pace. But you're looking at a 5 and 4 percent 30 year mortgage rate. You're looking at a 3 percent 10 year yield. That's far away from where we talk about panic inflation. Yet 40 years ago 40 years ago we had 10 year yields

up towards 13 percent and we have mortgage rates above 17 percent. Just to put things in perspective. So yes things are going up. We're not past the hawkish sense of it just yet. In terms of peak only because the markets are continuing to panic I don't get it. Do you think this is the new environment we're in. Do you. I. We have been since 2008. We've been in an environment where effectively central banks particularly the Fed but others as well have effectively guided the markets put the markets to sleep. Everybody's been anesthetized by what has been happening. We are now in a world where I'm not sure central

banks really have a handle on what is happening and that is being amplified into the markets. And as a result of which we may be entering a period that is that is not going to be short. It could be quite elongated period in which nobody really understands what is happening. And as a result of which we're going to get days like today when we see huge amounts of volatility around key assets. Yeah I mean I'm looking at the Dow now down 550. Yesterday the futures closed up over 900. I mean volatility is definitely here to stay. Don't don't get me wrong. But what the central banks

are doing is potentially making another huge blunder by rushing too quickly to raise rates. If the market wants to raise rates let the market raise rates. The Fed is just following suit. There is nothing they can do with that. They're not. As Mike said they can't control energy prices. They can't control food food prices. Raising rates too aggressively only potentially stifles economic growth which that puts them in a situation of stagflation. They can only make a huge mistake at this point. They cannot leave markets. Markets lead the Fed. This idea that the Fed leaves market is a result of Greenspan which in my opinion was absolutely just never mind in thinking that he could tell the markets to do is a complete joke. Central banks don't tell markets what to do. Markets tell central banks. And in this the current thinking is

that central banks are telling us what to do is actually incorrect. The rates are going up and the Fed is chasing. Rates went down. The Fed chased. This is the same situation. Rates are going to go wherever the market thinks they're going to go. And if the Fed overreacts what they're going to do is make the situation worse. Mike hop into the what Vince was just talking about because a key part of that press conference we heard from Chairman Powell something stood out to me was he said monetary policy to a large extent is working through expectations. Would you agree with Ben says take. Not quite. And here's the reason why you have an awful lot of Fed speakers who have raised possibilities and I'm thinking and looking at you here Jim Bullard of ever more hawkish Fed actions that then the market adjust to. And I'm thinking that average

Jersey are a Bloomberg intelligence fixed income guy said yesterday. He thinks that the Fed is front running itself. And to a certain extent I think that's true. They're putting out there the possibility of doing all these extra hawkish things that they may not follow through on. But the markets are repricing to them especially the 75 basis points idea that nobody really endorsed not even Bullard. He just brought it up as a possibility. And yet we saw the reaction yesterday in the markets where by said the biggest increase in the Fed funds rate since 2000 was dove ish because it wasn't worse. That strikes me as kind of odd. Yeah but Mike does it. Does the Fed does the Bank of England does the ECB have to adjust now to a new world

in which their words carry extra weight. As I said before that we've been through a period where basically markets have been anesthetized. Therefore the the amplitude of the reaction the size of the reaction you get from any given phrase or or or word was was smaller. We now seem to be because it was so confused that the words seemed to carry even more weight on central banks talking too much. I don't know if they're talking too much you can't really tell. These independent members of these monetary policy committees that they're not allowed to speak. They're designed to have a

variety of voices. But I do think that there is sense of uncertainty that is greater than we have seen in years. I mean when we had the the tech bubble pop and then the Fed started raising rates and they did 25 basis points for 17 consecutive meetings that's gone. And the markets don't know anymore than the Fed or the Bank of England or the ECB. What they're going to do and when they're going to do it. And so the markets are going to be much more volatile much more jittery. And the Fed and the other central bankers are only going to feed into that. I do have one suggestion for you guys for your viewers. Maybe you hold a contest because stagflation doesn't work for England for the United Kingdom because if you're going to have a contraction and rising inflation it's not stagnant. No. To be fair. Actually if you look at the specifics they don't necessarily calling for a recession. But but yeah I take your points.

Basically we've got negative growth and and very much not negative inflation. I just wonder whether the market is focusing on one to the detriment of the other. We're going to hear from the governor of the Bank of England. I just sat down with him. I have to say we started the conversation talking about the market reaction. He seemed a little surprised. Anyway we'll bring you that a little bit later. Mike NIKKEI Vince and Cinderella. Gentlemen thank you very much indeed. As I say in the next hour we're going to bring you my conversation with the governor Andrew Bailey. My first

question. Are you surprised I gave him the market reaction. Are you surprised. We'll talk about it. We'll talk more about this in the second hour. BlackRock Scarlet Fu Chowdhury is going to join us next. We'll continue the conversation around the central banks. That's next. This is Bloomberg. Back to our Question of the day. Are we past peak hawkishness. Joining us now Gabi Chaudhuri head of ISE shares America's investment strategy at BlackRock. Thank you as always for joining us. A historic moment when you look at whether the Federal Reserve or the BBC this morning. Two main issues inflation versus growth. Are we past peak hawkishness. Your

take. Good morning and thank you for having me. So I'd say for this week yes we are fast hawkishness. I think the market breathed a great sigh of relief when we learned from the Fed that sees the 75 basis points was off the table for now. They're not actively considering it. And that given a clear forward guidance around the next couple of meetings being 50 basis points. So I would say for now we are but that doesn't mean that the data that's going to come over the course of the month. Well most importantly the data on inflation will not lead us to price and further rate hikes. Again more 50 basis point rate hikes. I don't think we're going to get to a 75 basis point rate hike

again anytime soon. The market reaction to both the Bank of England to the Fed I think is fascinating. The market reaction to the Fed was as you say relatively restrained inasmuch much as well that the Fed is going to be relatively restrained. That seems to be the green light for stocks initially. Now stocks are rolling over now and yields are starting to spike a little bit higher. The Bank of England despite putting out a double digit inflation forecast was taken as dovish because while growth is going to be a problem is it does the market have a good sense of House of Reed central banks right now. You know I was listening to the conversation that you were having with the speakers that came on before me. And I think that the market is trying to determine what is the most

important factor going forward. So for the Fed it's very clear they are a single mandate fed right now. They are only focused on inflation. And they are telling us that they told us that in a numerous ways yesterday that till they see the signs of inflation turning over they are likely to continue to raise rates into a sort of neutral territory. And we can discuss later a little bit around their definition of neutral which I thought was interesting. I think that right now the market isn't any more or less sensitive than any time in the past. But I think that is this unique nature to inflation which is so supply driven. And to Chapel's point yesterday they don't really have the tools to navigate supply driven inflation. So therefore I

think the market's having a harder time. You know just just the moves that we've seen over the last couple of days deciphering which to focus on. And I think inflation is top of mind broadly across the ECB across Bank of Japan across LBO and obviously the Fed going to have to ask you about the currency market. We've seen volatility across markets but the currency market has really been something extremely unique. The dollar strength factor you see continuous weakness in the yen and in the euro as you know you're also seeing weakness in the pound today looking at 123 on the cable rate over absorption. Duke says the likelihood of the cable rate dropping below 120 is larger than euro dollar parity. Would you agree with that.

So to your point obviously there's been a huge move in the dollar. This the. You know we have seen with an ISE shares which is where I am I work obviously a huge amount of interest in sort of hedged products especially in Japan yen hedge products. So I would say that investors are pushing back or at least recognizing that maybe a little bit of value is being created at these levels off the yen right now. And look our view is that at least in the front end of the globe. So when we look at the two we are the three up front. I think we're beginning to get at levels that offer a lot of value. Does that mean that the dollar

is going to immediately move significantly lower. No. But I do think that at some point we have to come to terms with the fact that more of the move has happened especially in the front end of the curve and at some point above 3 percent on the 10 year Treasury. I think we are probably going to see a little bit of buying come in in the fixed income markets as well. How can we know where we're going. If we don't yet fully understand the implications of what is going on in the labour

market the labour market in the states and the labour market here in the UK is unbelievably strong. Until we start to see data suggesting that maybe we're going to back towards balance can we really get a handle on how far these central banks are going to have to go. I think we had a little bit about that yesterday right. So I think that's exactly the point that Chuck Powell was trying to make and I think he did an excellent job of it. Well you said

that they don't have a specific U ratio in mind. So vacancies to unemployed ratio in mind. We've talked about that one point nine number a few times but it's not as if he's targeting a 1 or a 1 point to what we should be focused on going forward is you know looking to see if more and more people are enticed back into the labor market as a result of higher wages and obviously didn't get a reading of that tomorrow when we get the payroll up in the morning. But I think that as of right now what we should be focused on is higher wages allowing more people to enter the labor market at hopefully levels that you know increasing the participation rate. Hopefully we'll see some of that and wages still remain steady. So I don't think you know I don't think we'll have a real sense of how quickly that's going to happen. I don't think we're going to have a clear sense very soon around what that V to you ratio is going to look like. But I think if we focus on a

few things that we focus on the participation rate and not just on the headline number I think tomorrow we may get a slightly bigger than expected number. But let's not get panicked about that. I think we should look at the underlying strength of the labor market which hopefully participation will show us that. And obviously keeping the JOLTS backdrop in mind how many people or how many jobs are still available for workers how many people are quitting their jobs and to what extent that portends a really robust labor market. Yeah I certainly the jobs number look pretty strong. I know it's a rearview mirror number but it is in some ways forward looking one would appear maybe to cancel the other one out. Gangi. Thank

you very much indeed. It's gonna be a fascinating payroll report. Chowdhury of BlackRock. Greatly appreciated. Coming up what are we gonna talk about next. Twitter. I think probably is where we should go. Elon Musk lining up some big names to invest in his 44 billion dollar Twitter deal. Details to follow. This is Bloomberg.

Brookfield Assets V.C. ARM cuts its largest check to date to help finance Elon Musk's Twitter purchase. Other backers include billionaire Larry Ellison and Saudi Prince Alwaleed bin Talal agreeing to roll over his current investment. For more let's bring in man deep thing of Bloomberg intelligence. He joins us now right here in New York set. Mindy let's start off with some breaking news with Twitter in particular. Reports suggest that Elon Musk is going to be at least temporarily the CEO of the social media company. What does that do if anything to its bottom line. Well so clearly he has a plan and he wants himself to execute it. And I think his focus is really at towards cutting costs because he does think you know the e-book margins

for Twitter are much lower than their competitors. So clearly there will be a focus on costs and with the new investors joining him. Look I don't think there is a panacea when it comes to turning around the top line growth for this company. So it will take time and looks like all these investors are ready to wait for a while as opposed to private equity players like Apollo or Donahoe Bravo who may have looked for a three to five year exit. Mandy is this a zero sum game if you CEO of Twitter. What does that leave for. For Tesla in terms of time and attention. Well

that was the biggest criticism with Jack Dorsey running two companies right. Square and Twitter. And so in this case clearly you could make the same argument. The difference is Twitter will be a private company going forward. And I'm sure you know the likes of Andreessen Horowitz or Sequoia will play a part in terms of running the day to day operations of the company mandate. Twitter shares up three point seven percent trading still below that 50 to 40 or 50 for 20. Excuse me offer price of

your must work in about fifty fifty one dollars. Let's say I have to ask why is RTS suddenly getting all this financing. Because when he first introduced the deal he was having trouble finding the backers. What's changed. So we still don't know the remainder of that 15 to 20 billion. So look he agreed to seven billion but we

and he lowered the loan component. But there is still 15 to 20 billion. Is he selling stock. What does it do to his overall portfolio. You know and stake in Tesla stock. So there are still some unknowns. Looks like there won't be any new partners from the private equity side. So he may have to sell stock to really get that remainder of the 15 to 20 billion. Where do you think we're gonna start getting clues as to what Twitter 2.0 is going to look like. Well we are getting clues in the sense that he thinks subscription is a better way to monetize Twitter's engagement. And he has tweeted about you know the commercial

users paying as a subscription fee. April still be freemium for the common user but I think he's leaning towards subscriptions. And that's a dangerous thing because all the social media players currently pivot to an advertising model. So it remains to be seen whether subscription can turn out to be a big bet in the social media space. Great stuff. My. Thank you very much indeed as ever for the analysis and seeing it. Bloomberg Intelligence. Right. Coming up still plenty of snags in the global supply chain story. Companies continue to struggle to manage inventory. Essentially

things happening in fast fashion. Chief Investment Officer Jack So Matt Miller next. This is Bloomberg. We're an hour into the U.S. trading session Bloomberg Quicktake a group that is tracking the moves right. Yes Chris you know how

quickly things change. That's what I just want to start on here. Because yesterday you got that big relief rally the S&P 500 the Nasdaq having their best day going in about two years and actually the best Fed day since all the way back to 1978. You can see we move lower pretty aggressively here. Perhaps that rally was a little overdone. Yes 75 basis points may be off the table. But you know what. The fundamentals haven't really changed here. You still got 50 basis point hike.

That was a large going back to 2000 and more 50 basis point hikes to come. And you kind of see that and move reflected in the two year yield today of course. That's kind of the market expectations for where monetary policy is going. That's moving back higher again. Yesterday you saw that to a yield down some 14 basis points but today continuing that trajectory higher. And

what is also continuing that that trajectory harbors is indeed oil. So yesterday that moved 5 percent higher. The EU planning to phase in that ban on Russian oil. And today that OPEC plus meeting that yes they went ahead with that moderate hike in output as expected. But there are questions whether that supply will even reach. Now let's shift tone a little bit here because one of the other many themes today is those e-commerce stocks had some disappointing earnings out and that disappointed investors in a big way. That was off to Amazon a historic rout we saw last week with those

revenue forecasts missing. Analysts estimates really highlights the shift in tone as consumers get back out there and shop assistant trends changing for the pandemic. And those macro headwinds of inflation as well weighing on some consumers seem spending. Let's take a look at some of the movies under the hood. In that space you have way fed down in the double digit

sound some 18 percent. Those actually reporting adjusted quarterly loss. The CEO also announcing a retirement. Then I take a look at see here also down in a big way. They actually did beat in their latest quarter but it was that outlook that forward guidance on missing those revenue expectations again. Those macro headwinds and the changes as consumers get back out.

That was a similar story over for eBay. But I will leave you guys with one move to the upside. Take a look at Albemarle. This is the miner for lithium getting a big rise of 9 percent beat in those earnings. They have a lot of pricing power. Analysts very bullish about this stock as of course we see that demand for these just go higher and higher. Guy. Thank you very much indeed. Bloomberg's looking up to what's

happening in these markets. Let's talk about one individual stock within these markets. GSO is currently tracking around 4 percent lower. The company though has raised its full year guidance reported the first quarter revenue rose 14 percent from a year earlier. It's raised its revenue guidance to eleven to 15 percent organic growth in 2022. That sounds like a pretty positive picture. Yet the stock as you can see is over two days only down by two tenths of one percent. But on the day down a little bit more. Let's talk to Juliette Saly chief investment officer Mark Duca. Mark these are numbers that at first blush look pretty strong and certainly your

guidance feels pretty strong as well. What is the market not guessing about the GSO story. I think your point about high growth is well-made. I think even on a second blush these numbers are very strong indeed. The reality is is that we've entered a period or exited a period rather over the last six months where everyone's been indiscriminately selling everything. And what I think's going to happen over the next six months. Testament to what we were saying on our conference call this morning is that we're going to get some discrimination between the good and the bad that we just heard about. I think we're going to get a period here where people start to focus on brands with pricing power people who

can pass on inflation. And there is going to be an element of differentiation now that takes place. So the market will do whatever the market will do on a day to day basis. But we're very focused on the fact that we've just done 19 percent organic revenue growth. We've got a two and a half billion dollar pipeline and we're growing EPS this year by twenty nine to thirty nine percent. I've got customers falling over themselves wanting to do business with us. And I wake up every morning feeling like I'm holding onto the tail of a tiger quite frankly. So times are good.

Mark it's creepy in New York. Let's talk about some of the challenges of the future. One more time on X boards a lot of concerns coming around China right now. The Covid lockdowns there. But also can the exports leave China. Can the exports leave Germany. A lot of those pre-war supply chain issues and inflation issues they're going to stick around. What does that mean for logistics broadly. I think there are lots of problems out there. Chrissy I know you and Guy and I have spoken about this a lot. And the reality is if you look at the world right now about a fifth of the world's

container ships are under some form of birth sitting outside a port. So there's a lot of bottlenecks out there. If you look specifically on your point of Asia I mean if you look at Shanghai specifically go around three hundred and forty four container ships stuck outside the port of Shanghai. These bottlenecks are not going away anytime soon particularly with the zero Covid policies and what's happening of course in the airfreight market over Russia. There are going to be constraints in this market for a while. And really the theme that's going to be prevalent here I think over the next 12 to 24 months is what you're going to see is is that people are going to continually marshal they're going to make decisions where they put their warehouses. It's going to be less Asia more in the West. That requires a decision making process. And those are kind of the

calls that I'm getting at the moment. Customers are coming to us saying I want to be closer to our consumer. But be very clear. Supply chains are going to be a theme for the next 12 to 24 months. The problems aren't going away anytime soon. Mark we just took a little bit about what the consumer is doing right now you are in the e-commerce business. And I'm wondering what you're getting back from customers and not asking for specifics here but I'm asking for generalities. Today we are seeing the e-commerce giants getting hit and hit hard on the S&P. Etsy is one of the biggest decliners out there. Wayfair also down pretty big here in the UK. Boo hoo Downs Orlando in Germany. Also over the last 24 hours taking a very

big hit. What are you seeing in that kind of fast fashion e-commerce market right now. The stocks have held up reasonably well thus far. What do you see in these businesses. If I look across the entire consumer and industrial space that touches AECOM for us I'm seeing strength but I am also seeing in parts a bit of softness in some of the areas such as automotive which is less e-commerce focused but particularly if you look at consumer fashion. Very strong indeed. Your point guy. I think overall what surprised me is the consistency of despite the fact that we've had this shift from as you said earlier with retailers comments from econ into brick and mortar retail. The reality is is that both e-commerce and brick and mortar retail have remained resilient through the first quarter. That's really underpinned that 19 percent organic growth that I talked about.

I think that is a bit of a differentiation here in terms of the haves and the have nots. And I think that's going to be a bit of a barbell into the second half of the year. But consumers consumer elements like fashion remain strong. Places like the industrials a little bit softer. But overall across my portfolio I'm seeing strength when it comes to consumption. Well those consumer sectors that you just mentioned fashion for example those supply chains extended to Asia. You mentioned earlier the concept of near shoring those supply chains. I'm curious about your forecast for perhaps countries like in Latin America for example moving production from China to Mexico when it comes to American consumption. What are your thoughts.

There's a lot of denial as you noted for warehousing in Mexico. Right now it's the right place at the right time with the right currency. We're seeing also huge demand for shifting back towards the US market for warehousing. We're also seeing strong demand on the continent as well. And this is really one of the reasons we're seeing wage inflation. If you look at look at the

pace across the European and U.S. market wage inflation is tracking at the moment across our business anywhere between mid to high single digits in the US and low to mid single digits across the continent in Europe. But there is huge demand for warehousing. Just mentioned it obviously on a call a couple of weeks ago. That's not a theme that's going to change anytime soon. Mexico US Continental Europe is seeing strong demand for warehousing.

Mark let me talk about our question of the day and slightly rephrase it. Which aspects of the economy should the market be focusing on right now inflation or growth. I love how you always asked me to play market strategist it's very very kind of you guys. I think it goes back to this idea of the fact that Wall Street has benefited from inflation asset

inflation specifically for the last 10 years. And we've all become accustomed particularly market strategists who are wet between their ears. They're basically seeing a lot of things that point them towards buying utilities and buying dividends. And therefore there's this obsession with the fact that there's a shift from Wall Street inflation now to Main Street's inflation. The fact that I said to you that wages have been going up for the last 12 months and Wall Street's a bit flummoxed about what to do with this. They didn't quite understand what to do. What it means for me is that you're going to see winners in the brand space that can pass on pricing to their end consumers in the second half of the year. Those are

the stocks that do well. Businesses such as mine where there's an inflation pass through and businesses that have underlying growth stories that go beyond Covid. My total addressable market is four hundred and thirty billion dollars. I've got tons of growth ahead. That's the differentiation that we're going to see here. And inflation is going to play a narrative behind that. Guessing about a recession in the second half. I still think is the great unknown. But inflation is here and now and that's

something that you can invest behind. Mark I want to talk about the currency story with you in a past life I believe you are a market strategist. So we're gonna put that hat on for a moment. When we're talking about the Federal Reserve here you're also seeing some pretty extreme dollar strength weakness in the rest of the world. You hit on the currency picture for Mexico. I'm curious about the implications of that dollar strength on the supply chain business. I think it's fascinating what you say about the way that the supply chains are changing in regards to currency. There seems

to be this tug of war going on from everything from the Federal Reserve all the way through to the Bank of Japan about how they want to pay the interest rate cycle and how much he wants to forgive on your currency. I don't see that changing anytime soon. I think it definitely drives warehouse decision making. I think it drives employee decision making as well for this business. But it seems like that dollar strength is going to continue from here on out.

Where are you seeing supply chain issues. Mark I've been to some of your facilities use robots use a lot of robots and increasingly you're going to use more of them. Talk to me about how that side of the business is evolving as we see this tight labor market. I think you hit on it with that last point which is labor

availability has been the big issue for businesses such as ISE and the way that we've combated that and dealt so well with it over the last twelve months. We've got 300 H.R. executives poring over every single one of the business parks that we operate in across the US market. So it's really being about granular detail here and making sure that you know exactly what the fair competitive wages within the various business parks parks across the US. So we've really focused on that detail. But I also feel that there's an element here of making sure that there is softer pay and pay in play making sure you're looking after employees in the downtime sessions lunches dinners making sure that you're giving them proper career prospects. That's what we really focus on in this business. And I think that that's going to be a big theme. We're going to see a differentiation here between companies that have really got their H.R. fingers on the pulse and companies that don't. And I

think that's gonna be a theme over the next twelve months. Mark Gurman Duka Ji Excel Logistics C I Oh thank you so much as always for joining us. Coming up oil jumping to its highest since late March after reports that the U.S. plans to port put out bids to replenish reserves. More on that and the OPEC plus output deal. That's coming up next. This is Bloomberg. This is Bloomberg Markets Summers could tell you're looking at a live shot of the principal room coming up top. Tom Galvin the

City National watched out chief investment officer joining Bloomberg Television 330 p.m. in New York. This is Bloomberg. Keeping you up to date with news from around the world is the first what I'm sure you could get to. The Bank of England has raised interest rates to their highest level since the financial crisis. Plus it warned the economy is on course to shrink under

pressure from double digit inflation the quarter point rate increase to 1 percent backed by six of the bank's nine policymakers. The other three wanted a half point rate hike. The current Avaaz death toll probably climbed to almost 15 million people in its first two years. In other words about one out of every 500 people worldwide. That's according to the World Health Organization. The new estimate is actually twice the figures from individual governments reports and opaque. And its allies once again agreed on a small monthly increase in production. It comes at a time when global markets are likely to get even tighter because of his proposed ban on Russian oil. Plus ratified a four hundred thirty two thousand barrel a day increase. Analysts doubt the

alliance will even be able to deliver that much. Global news 24 hours a day on air and on Bloomberg Quicktake powered by more than twenty seven hundred journalists and analysts and more than 120 countries others could get to. This is Glenn. Guys thanks very much. Wanna go back to that epic story in just a moment but let's talk about what is happening in other assets right now. The NASDAQ is falling like a brick down like 4 percent now. And continuing to fall and be flying like a brick would be a better way of putting it. The two day chart obviously doesn't look quite so brutal but it is down and down hard. It's now down by 3 percent. Sorry it was down over 4 percent. We've recovered a little bit in the last few seconds but nevertheless this is a

market that is under significant pressure after rising rapidly. I think the two day chart is the one that maybe we'll get the producers to put up because basically we completely round trips around that Fed meeting perceived as dovish. NASDAQ goes up falls rapidly today as we refocus on inflation the US 10 year is up by 10 basis points. Oil is trading higher a little bit but it's trading higher. Let's talk about that OPEC decision and get a sense of whether or not OPEC really kind of is in control of anything anymore. Will Kennedy Bloomberg's executive editor for Energy Commodities. Joining me now on set. So as expected a little increase pretty much in line with what we've seen before. But to

be honest OPEC's ability to actually deliver on that increase being questioned. Does OPEC have any control over the oil price anymore. It's decided to sit this one out. I think it's fair to say what's important here is that since the war in Ukraine started we've had all sorts of convulsions in the global oil market and OPEC has stuck exactly as the planet had from before the war started. So far for several reasons. It's not engaging. It is raising production of a slowly and as you say guy it's not even delivering on those promises. Now the UAE and Saudi Arabia still have some spare capacity. They could bring more oil to bear on the market. The White House would dearly love them to do that. But they've decided that the unity of the alliance which includes Russia of course is more important. And for them it's prudent just to continue doing what they were doing.

Well this has been the third 13 minute meeting since the war in Ukraine began a couple months ago I spoke to Nigerian oil minister after that first 30 minute meeting. He said we're still kind of monitoring developments. Well it's been a couple of months now. I'm curious how much of this decision is less is a reaction to the supply demand situation as opposed to some of these OPEC members actually being able to meet their quotas Russia included. There is a bit of that and of course Russia is going to be in a difficult situation and very packed plus because clearly Russian production is falling fast now likely to fall more if the EU enacts the embargo it proposed yesterday and it's sanctions on shipping and it won't be able to get anywhere close to its quota. But there are two things that mean that the market is actually relatively subdued compared to what it might

be. And that's probably giving OPEC some room to carry on doing what it was doing. Oil demand is very subdued in China because of the lockdowns that we've seen in Shanghai and morning out over other parts of the country. We estimated a couple of weeks ago that demand for fully taking at least a million barrel hit from that. And also we have the Biden administration's decision last month or in late March rather to release a million barrels a day from the strategic stockpile stockpiles. So both of those things are keeping a lid on prices. Yes we're high. We're well above 110. There were but we're a long way from hundred thirty nine we saw in the weeks after the war. And I think that's allowed OPEC some space to carry on doing what it planned to do without getting too much criticism from elsewhere. At what point do we see that SPRO release effectively being counteracted by the administration's plans to refill the SPL. Well which which

they're starting to announce now. Yes there's a story today that they're going to put out a tender in the autumn in the fall to start buying back some of that oil 60 million barrels compared to the 180 million barrels that they plan to release. So it's not all of it. I think we need to see some more details as actually when it's likely to be that tender will be for oil that

doesn't get bought until 2023 perhaps even 2024 25. So it's a slow long term process. I think the market may have got a bit overexcited about that headline. Well in the macro sphere we're talking about persistent inflation a lot of which is driven by these higher energy prices gasoline diesel for example extremely high right now. How high is the expectation or how long is the expectation of oil that oil will remain over 100 dollars a barrel. Are we talking months years a decade. There's no reason to think that it would fall markedly from here. Absent a really dramatic slowdown in the economy perhaps a recession and a knock on effect on demand. But I think it's

important to secretly that we're not seeing that we had shall announce record profits today on the back of these high oil and fuel prices. And the CEO in a call of analysts said that they are seeing no sign these high prices are causing any sort of demand contraction. We can see that people are driving people are flying. The economy is still working fairly fast keeping diesel. So the economy at the moment is absorbing these very high prices. The real question is how long

that lasts and whether we do get demand destruction later in the year. But it's important I think that the Shell CEO Europe's largest oil company said there's no sign of that yet. Bloomberg's Will Kennedy we thank you so much as always for your insight. Let's get a quick check on these markets though because the sell off really is getting worse and worse. The S&P 500 down three point one percent. Look at the Nasdaq where a lot of that pain is concentrated in those e commerce names. The index as a whole down one point two percent. This comes in tandem with this yield move 10 year yield will again 11 basis point move crossing that 3 percent threshold. We're looking at three or four basis points on the 10 year yield

and dollar's strength continues to be the story. You're looking at a one to three handle on the D X Y. I'm looking at it bouncing up against these key technical levels in 2014 2016 2020. How much of this is really an a read through from the Federal Reserve. We're going to have all those updates for you throughout the hour. Stick with us. This is Bloomberg. There's quite a lot going on right now so let's talk you through the price action because the last 24 hours have been absolutely amazing. I'm going to start with the US then we'll talk about Europe. Europe in some ways has missed out on all of this. So

yes they would get the Fed pound puts to bear the idea of 75 basis points. The market reacts really strongly. The NASDAQ shoots higher yields shoot lower. Today were completely reversing that. The NASDAQ is now flying like a break. It is basically gone up and it's gone down almost ballistically. Kind of looks like that ballistic curve. And what we're seeing the Nasdaq is now down by 4 percent. I think we're actually below where we were pretty power yesterday. So we're down pretty

sharply four point two percent. The US 10 year is up sharply. So we're refocusing basically on inflation and pricing back in the idea that actually rates are going to go up and go up aggressively. That didn't take long did it. The dollar is definitely catching a bet. You got a 1 0 3 handle on the dollar index. We're trading up by around 1 percent. So that's the picture stateside in some ways. And we're approaching the end of the day here in Europe. Europe is just basically sasol this out. We were closed by the time we got the news from power yesterday in the press conference as a result of which we didn't really have to deal with it. We got the way up and now we're getting the way down. So actually kind of from where we started. Europe really hasn't changed very much. You kind of see that being reflected in the market. We are trading though some 440 on the

stock 600. The Bank of England has been the main story over here today. Just mass confusion I think about what the message is from the Bank of England. Was that a hawkish hike. Was that a dovish hike. We got 25 basis points from the Bank of England today. But the economic outlook doesn't look particularly clever. And as a result of which we question whether or not

we've got 180 basis points that we've currently got price till the end of the year in terms of hikes are they actually get to really materialise. The pound went down pretty sharply. As you can see we're trading sub 120 for the U.K. 10 year and the U.K.. You look at the U.K. two year. Absolutely shooting to the upside. That's always on the downside. Bonds catching a massive bid. I talked to the governor after the decision. We're going to play some of that interview in just a moment. That's next. This

is Bloomberg.

2022-05-07 20:19

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