Bloomberg Markets (07/05/2022)

Bloomberg Markets (07/05/2022)

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From the financial centers of the world. This is Bloomberg Markets with Alix Steel and Guy Johnson. If 30 minutes in the U.S. trading day is Tuesday July 5th the top Marcus stories we're following for you at this hour a 20 year low. The euro weakened to a 20 year low against the U.S. dollar. Traders betting the ECB will slow down on raising interest rates as the economy risks being tipped into a recession. And eco data on deck. Factory orders. Durable goods data. A slew of economic metrics to watch ahead of payrolls. On Friday we're going to break down what it all means for the economy and fuel pressures. Natural gas soars while oil extend its range bound run as Citigroup says crude could fall to sixty

five dollars a barrel this year. J.P. Morgan on the other hand saying crude as high as 380 for a dive into that issue. From New York. I'm Priti Gupta with Guy Johnson in London. Alix Steel is off today. Welcome to Bloomberg Markets Guy. I think it's that range that you're seeing even in the oil markets and the stock market even in the recession calls that's really moving a lot of the price action. Absolutely is everything today really isn't it. Take a look at what's happening with crude. You're seeing a big downside move there. Take a look at what's happening with yields. They're coming down sharply. Equities under pressure. I tell you what's going up though and that is the economic data. Now factory orders are a fairly bumpy series. Nevertheless we have a upside bump to contend with right now. Factory orders coming through the number. And this is a May number up one point

six percent. The prior number point three. So a significant upside move but it's still well within the normal kind of range that we've been operating in here. Ex transportation one point seven. So even better we've got the turbo goods numbers as well. These are final numbers. These are again May data. You need to be aware of coming to

slightly better than anticipated at point eight versus point seven last time round the transport number back in line. The capital goods numbers as well. Also a little better but not substantially. But the data at the moment it appears holding in there which is in stark contrast to what we saw with the manufacturing I assume Friday. Now remember we get the services data tomorrow so pay attention to that. We also get jobs data. They're going to be paying attention too as well. Very much as

Kitty laid out though we are seeing the story very much focused on the foreign exchange narrative today. But it's basically just an indication I think of what else is going on elsewhere. He was talking about this being across the board. She's not wrong. It goes to our question of the day. What is the weak euro. Tell you about where you should be putting your money. Where

does it say you should be investing your money. So let's try and answer that question and try and understand the signals that are being sent here Christine Aquino. Joining us are a jersey of Bloomberg intelligence joining us. Christine let me start with you. First of all 1 0 2 euro dollar. What signal does that send. What does it tell us about where we should be money to work. Well Guy I think it's a very negative things about Europe for sure. And so I would expect investors really having to rethink

any sort of Europe bullish place particularly in the equities space that they started this year with. Remember we started this year with the notion that this is finally going to be the year of European value. That clearly hasn't played out just because of the way that the general economic trajectory and sentiment has really gone in Europe. And now we're again seeing the ECB worrying increasingly about potential growth slowdown possibly even a recession. And that really cannot be great for any

European assets. I think you know part of the European story you really have to ask you know what is driving that currency weakness. Is it something that is fundamentally driven. Is it something that is central bank driven. I think in this case it's a confluence of both. And it really does being quite a negative picture for Europe in the second half for sure. IRA hop on in

here. Exactly where Christine left off the idea that is it fundamentally driven or is it core central bank driven. And it kind of feels like the dollar's story for a very long time was central bank driving. It was the Fed getting ahead of really a lot of these other G10 banks. To what extent is that still the story and when do we start seeing it go back to the fundamentals

of the actual U.S. or European economy. Well I think firstly the European economy is going to be very challenged over the near term. So certainly some of the move is fundamentally driven. But you know as you noted central banks have had a big part to play. And the current move in the euro and the fact that the Federal Reserve now it looks like they're going to hike to 3 three and a half percent somewhere in that range. The question is will the ECB start to catch up and how quickly will it do that. And Christine Legarde last week did suggest that hey maybe 25 basis points and then 50 basis point hike. So kind of starting to catch up. So that might be an interesting turn in the dollar euro relationship in the not too distant future thanks in large

part to the shift in monetary policy expectations. How do we know whether that's going to turn out to be the case. Because at the moment it feels like. Part of the story is the central bank divide. The ECB is late but part of it is down to this unknown factor which is Vladimir Putin and whether or not he's going to turn the gas on or leave it leave it to the gas. Awful. Leave it on. We don't know the answer to that question but I tell you it is a huge one. I don't understand the ECB reaction function in the second half of the year in that scenario. Say they say the gas does get turned off.

Say so. Energy prices go through the roof. So unions say we need huge pay rises to compensate for us. How does the ECB react in that kind of scenario when growth is being slammed. But inflation is absolutely surging. Yeah you know it's interesting guy. We'd actually just had a call this morning with the Bloomberg Intelligence Strategy teams globally. And that was a big topic of discussion. You know if the gas is turned off and we head toward the winter and you don't see a any significant relief on the fuel side then you'd have to think that real growth in Europe is going to slow substantially. Now you know

there is one thing for the euro. But but to your point will the ECB be willing to continue to increase interest rates you know amid the inflation scare. Now I think that they will and they will have to in part because of their mandate. Right. So the ECB does have a single mandate saying you have to get inflation under control. But one of the interesting aspects of this that we note at Bloomberg Intelligence is look demand side inflation in the US is much stronger than it is in Europe. So so because of that you can wind up with a significant growth differential and maybe an increasing growth differential between the US and even the U.K. and the rest of the rest of Europe because of what's going on in the Ukraine. Christine hop back in here and talk about that euro dollar dynamic that IRA was just outlining here because we're looking at. I'm trying to pull up this 1 0 2

on euro dollars right now. But I'm curious if we hit parity how much further could a euro weakness go. Well Kristie I think we've moved on from the discussions of parity now in Europe just looking through some of the morning notes this morning. We're already seeing calls for a year at all to hit and below parity at ninety five year sense versus the dollar. And so you can really get this sense now of just that decline continuous decline in the euro that people are

expecting. And of course the flipside of that is this continued strength the U.S. dollar. But I would also point out that that's not necessarily a good thing particularly for U.S. corporates. A couple of months ago we already heard from a bunch of blue chip companies really lamenting the strength of the U.S. dollar in a way that we've never really seen before. And so is this your

weakness. The flip side of that is continued dollar strength. You have to wonder when that's going to start becoming a problem for some of these U.S. companies as well. And when they're going to start eating into their profits and whether people in any of those people in the market investors will start kind of gleaning more fundamental implications from that beyond the corporate space is going to be fascinating to see what the earnings season looks like and how they do talk about that translation effect. I read the other factor here as well. It's just the growth narrative. If Europe if Europe crises as a result of the energy crisis economically I'm assuming that that will have ripple effects across the Atlantic. Christine's point there's a lot of

U.S. companies with a lot of business in Europe. It's a major major part of the global economy. And if it goes into reverse in a big way presumably that is going to have a significant effect not only on the U.S. economy but the way that the Fed thinks about it as well. Well certainly certainly the Fed the Federal Reserve and every central bank globally is going to think about hey if Europe's in a recession are we going to follow. But I do think there are significant differences between obviously the

eurozone and the U.K. and the US just in terms of what are our trade flows where do we. You know how does the overall economy react. And I do think in the U.S. you know we have to disconnect. And Gina Martin Adams my colleague on the equity side always brings us up. The stock market is not the economy right. So if you do have large multinationals that are seeing

their profits crimped a bit because of the exchange rate issue that doesn't necessarily mean that the U.S. economy has to fall out of bed. And in fact you know just the numbers this morning for may suggest that the business sector is still doing reasonably well. Factory orders up pretty healthy. Also durable goods orders up reasonably well and good as well. So you wind up with it with a maybe a dichotomy between what's going on in Europe because of the significant increase in fuel prices versus the U.S. where yes prices are higher. But they're also we're also not as reliant on one source of and a foreign source of energy here directly. So I do think that you can have you know growth OK in the U.S. and still be shrinking pretty

significantly in Europe. IRA Jersey a Bloomberg Intelligence and Bloomberg's very own Christine Aquino. We thank you both as always for your insight. Coming up more on the euro's weakest position your portfolio in the wake of some pretty drastic effects moves. Sima Shah chief global strategist at principal global investors joins us next. This is Bloomberg.

This week all eyes are on some valley where the titans of tech and media meet to talk business. And Bloomberg will make sure your part of the action with live coverage and impactful interviews. It all starts Wednesday July 6th right here on Bloomberg. We're looking at an economy losing momentum faster than what we anticipated. Economists have begun to cut their top down

economic forecasts for GDP. This is a global story. Input costs have risen substantially and we're seeing demand destruction in some areas. The consumer is on somewhat more fragile and we do expect the Fed to hike rates more aggressively. The Fed has been driving the car looking through the rearview mirror. The economy is slowing and the Fed is saying that's collateral damage.

Companies and consumers need to get ready. Frankly we think they can keep going. I don't think they blinked. We did see some pretty notable down downward revisions. We expect more downgrades. Those are Bloomberg TV guests weighing in on the U.S. recession outlook. Back get back to our question of the day because in addition to factoring in recession you also have to factor with some of these weak euro signals are telling you where do you invest. Our question of the day asked just that. What does a weak euro signal about where to put your money. We're going to ask that question to see Machar chief global strategist at Principal Global Investors. Sima thank you as always for joining

us. We're looking at one or two on your own dollars. We just talked to Christine Aquino and IRA Jersey saying that perhaps that euro can weaker even further. Where do you put your money in that kind of environment. I like it. It's undoubtably look it's a really tough global environment not just for Europe but I think particularly for Europe. And that's what the euro weakness is telling us is that the European economy is in a considerably worse state than anywhere else in the globe when it comes to investing. You know we are still U.S. of the year. We think that your pool will fundamentally underperform Europe as you go through the remainder of this year. But also

when you're thinking about the U.S. and other countries you have to stop being cognizant of which countries or which companies I should say have significant revenue exposure to Europe. And typically they you a large cap. So that starts to build up a bit of a question. You know a lot people talk about quality and stability which you typically get in large cap but you also have

to be very very aware of the exposure that they have to countries like the euro. And as a result it's actually one of the reasons why we've moved out of this last cup and more into the mid-cap space. Any areas in particular in the midcaps that you're going to be watching how do how do I what's the best place within midcaps to insulate myself away from this risk. Because some of those midcaps will also be providing services up to large caps. They'll be part of a supply chain. Are there areas that you are seeing quite clearly as being insulated. So it's a really good question. I think everything that you've just pointed out that is exactly why it's no longer just about taking more of a top down view. This is an environment where you

have to be a little bit more nuanced to understand what the oil company exposures. And you said some of those mid caps will be supplying the large caps. Now from a more fundamental basis we look at Mount Mid-cap and we say hey look that has got exposure to things like more like energy and utilities which will typically at least in this environment feel a bit more defensive. So we continue to like energy but it is study. A lot more of it can take significantly more challenging investment story. And I think we've been associated with over the last two decades. Simplistic with an energy story because that's been an inflation hedge to some extent it's been the latest defensive play in the markets for almost a year now and it's the trade that's worked. But I'm curious that if we are talking about recession you kind of have perhaps some of these prices slightly suppressed because of that recession talk. I'm curious when that trade on wines

because you're looking at it as an inflation hedge and suddenly you find out we're in the middle of a recession. Isn't that the first trade that collapses. Well typically yes. And I think that that recession story is inevitably going to be very challenging to the energy commodity space in the near-term. But then you know when we look at commodities there is a structural shortage which should actually support prices beyond that near weakness. So should we continue to like commodities continue like energy. The one concern for us on the

energy side specifically is on the regulations which countries are to be bringing regulation. But you can pare back some of those potential profits that energy companies. So to us that is the part that we need to watch closest. There is the potential for energy prices to go sharply higher though Sema here. We could we could see European gas prices going through the roof if Russia cuts the supply off. We could see energy prices more broadly go much much higher. J.P. Morgan talking about two three hundred dollars potentially on the price of Brent in that kind of environment. All economies are going to suffer. Europe in particular as we've already highlighted is going to suffer probably more than most. What are the what are

the ripple effects just economically just from a macroeconomic point of view that we need to be thinking about. If Europe was to get cut off see super high energy prices and see basically an economic collapse a kind of economic collapse that German unions are beginning to warn about. You know I think I think he just said it. I mean just devastation for the European economy. I think you know this is a tail risk. We're not we're not forecasting this at the moment.

But in FTSE this is what you know when we look at valuations for example for Europe European valuations are very attractive. Why are we not overweight on that side and why. A lot of investors not overweight. It's because of that fundamental tail risk. That is it seems looming larger and larger. So we have to be pretty familiar with this now from a global perspective. You know we

have a baseline view that the US is going to go into recession early next year. We think that the recession is going to be somewhat shallow. I know if we're getting this word but it's a shallow recession which is maybe a little bit more prolonged. Now on the other hand if you do have the point where oil prices rise 250 200 dollars a barrel well this is your stagflation scenario where you not only do you have a very prolonged recession but you have a very very deep recession. So I think this changes the narrative very significantly. And given that it is I think the tail risk is a little bit higher percentage chance than what you typically associate with tail risk. It does mean that within portfolio you have to be very defensive. Seems we have about a minute here. I'm curious when you say a very deep recession what kind of historical precedent are we

talking about. I mean we talk about we've seen plenty of recessions from the 70s from the arguably the late 80s as well and even 2008. I'm curious what actually applies here. We're talking about a deep recession perhaps spurred on by this kind of inflation. So this is your stagflation scenario. It's not there to fight. It's not the global financial crisis. That was a very very different kind of beast in terms of the bursting balances that had built up over the time that Huckabee joined down. This is more like you had 1970 stagflation area effects.

In some ways more concerning. But again it's a slightly different picture. So there are some comparisons and study from an investment perspective. It's something that we all need to be cognizant of as we're positioning. And as I said that's one of the reasons that even if you do have hopes that the US can come out of this late in 2023 even potentially for Europe this still has to be some defensive positioning within that. And again that's actually what's the reason that we still like real assets. This is still an inflation led story even though you're based on your downside scenario. This is where inflation is leading the way. And it's why real assets really outperform. Sima always great to catch up. Really enjoyed the analysis. Thank you very much indeed. Sami Shah chief global strategist at Principal Global Investors. Still ahead the US Treasury

secretary and China's vice premier talking terrorists. The Biden administration may may be about to rollback. Some of them may increase others. Details to follow. This is Bloomberg. We are getting some breaking news here this time out of Germany Germany make it up to 20 25 percent stake in uniform. That according to handles bought. This of course is the German gas giant. We know that Germany has been looking for ways to kind of help that industry as well. Really a potential bailout package of as much as nine billion euros nine point four billion dollars. If you want to look at it from that stand and it's really not

just the only one they're looking at there also perhaps looking at other ways they can really help that industry. A lot of analysts saying right now that if Germany really falls because of this gas issue that could mean the fall of the entirety of Europe. We're of course going to stick with that story and bring you any headlines related as we get there. But for now let's go from Europe to China. China the United States discussing Trump era tariffs that President Biden is looking to ease. Chinese Vice Premier Li. He told U.S. Treasury Secretary Janet Yellen in a video call that these tariffs are a source of concern. Bloomberg's Washington correspondent Annmarie Horden has the details. Anne-Marie we're looking at about 20 percent tariffs on

both sides. What are the odds that these are actually decreased or even completely eliminated. What we just don't know yet. For months the administration has been debating this and ultimately the decision will come from the president who's been given a number of options on whether to lift those Trump era tariffs or not. But the divide within the administration is very clear. You have last month Secretary Yellen who also was on the phone with China's vice premier. She said last month that they want to reconfigure those towers. At the same time you have Ambassador Tigh saying that these

terrorists offer her leverage. That is the word she used. And she said that any sort of impact on inflation will be marginal. And when you look at Barclays is saying they're saying about three tenths of a percentage point. Potentially could be shaved off inflation. So the president needs to do is decide whether or not. On one hand remember we are going into the midterm elections. On one hand the Republicans may use lifting those tariffs as a means to call the administration soft on China. On

the other hand the president has said he will do anything in his power to bring down inflation because inflation is what the electorate is worried about. And that keeps showing up. Poll after poll after poll. Emery how targeted could this be. Could the president reduce tariffs on say back to school goods but increase them elsewhere. Is this a zero sum game just playing with the levels of different areas that are currently experiencing these terrorists. Secretary Raimondo had said recently to CNN its consumer goods things like bicycle. So if it's going to help the president he would probably want it more help with more things like gasoline with groceries. And these tariffs would not hit

that. But potentially if the administration were to lift some of these tariffs it would be billion dollars of consumer goods then potentially there would be a probe into other subsidies in the Chinese economy. So it could be a more targeted approach to other issues they have with China while at the same time lifting tariffs on consumer goods to try to help the everyday consumer.

We should also note this won't be a light switch. This would take months to potentially drip down to the price consumers are paying it paying when they checkout for these goods. And really about 30 seconds here I'm curious how this balances out with some of the geopolitical tensions specifically any sort of alliances that China and Russia have at the moment. While Secretary of Treasury Janet Yellen had mentioned Russia in her call as well as China's unfair market practices and they said that it was candid but we should also look forward to a meeting that we found about found out about this morning when Secretary Blinken goes to Indonesia to meet with his G. 20 counterparts. He will also be sitting down with him with the

China Foreign Ministry. So this story is not ending here. We will certainly keep a careful eye on it. Thank you very much indeed. Bloomberg's Embry Hold done. Joining us from the White House back at the White House. Coming up we got a better than expected number for U.S. factory orders in May. Gandhi. What does it mean for his business. He's the CEO of GM and Nonstick Coatings. That's the last time he spoke fairly downbeat. Have things improved. This is Bloomberg. We're about an hour into the U.S. trading day Bloomberg Quicktake Greifeld is tracking the moves. Katie what you think. Well we're already off by about 2 percent in the S&P 500 after Friday's big rally and that shouldn't be any surprise because of the last 15 times that we saw the S&P 500 gain by 1 percent or more. 13 of those times were followed by a fall. Definitely

seeing that today. No love for stocks but a big bid into the dollar. We look at the euro dollar pair that is the most actively traded currency pair. We are officially on parity. Watch. You can see the euro is at its weakest level to the dollar since 2002.

That was a long time ago. And of the other big headlines that we had crossing the wire this morning also taking a look at Ford. So we know that chip makers have been a huge problem for the automakers. Ford was actually a bit of a bright spot. You saw two Q auto sales actually increased by one point eight percent. You compare that to double digit losses for some of its peers. But Ford shares getting no love today because this is a market that is obsessed with economic growth. There was a great note from Neil Dutta of Renaissance Macro this morning saying that this is a recession trade and you can absolutely see that in the intraday price action. And you can see that banks are down. You have energy down. You have chip makers down as well. Energy

actually off by 4 percent. So not really a hint of risk appetite when you look at this. Ford CRE Bloomberg Hany Greifeld thank you as always. From the markets to the economy when the big economic releases we're watching this week is fed minutes out tomorrow lowers international economics and policy correspondent Michael McKee joins us right now. Mike why should we we be watching. Tell us everything. Well we're gonna look for any hint about what the Fed was thinking. Remember this is going to be three week old data what they were thinking about the possibility of

recession at the time they met and what they thought the possibility of inflation coming down would be maybe what the mechanics of that are. There's not really much confusion about what the Fed wants to do and thinks it has to do. Jay Power's been out about speaking quite a bit. Other members of the Fed have been as well. But given the gloom hanging over Wall Street there will be a lot of interest in anything making glean out of what's in the minutes. Is the expectation is the risk here Mike that actually this set of minutes signals that the Fed is going to be even more hawkish than maybe we'd been signal to thus far. As you say kind of post the last meeting all of the narrative we've heard it from power we've heard it from everybody else has been fairly hawkish.

Well is there a danger within these within these minutes that actually it's even more hawkish where does the risk lie that that much more hawkish or more dovish. I mean you hate to say that Wall Street could misinterpret things but they can. Yeah I suppose that the risk would be more hawkish even though these are three weeks old and we've had more data since then and we're going to get the jobs data on Friday. The two S. Lewis guys Chris Waller and Jim Bullard who've been out front in saying the Fed needed to do more are both speaking on the economy and monetary policy on Thursday. So a lot of different information could be coming into the markets that supersede the minutes. But if the minutes are seen as particularly hawkish you're right. We may get an adverse reaction. Mike to what extent is the market ahead of the Fed so to speak. It does seemed like for a while it's kind of game of who could be even more hawkish the market or some of these members of the Federal Reserve. But I have to ask does that dynamic still exist given that we now have 75 basis points in the rearview mirror.

It seems to be easing up a little bit now that the Fed has sort of caught up for a long time. The market was ahead of the Fed. Fed didn't mind that. It sort of let people know what it was going to do over the longer term and let the markets find an equilibrium price. And the markets moved up to where the Fed basically is now. I mean across the curve we're above the Fed's version of neutral. The question is what comes next. And the markets are already ahead of the Fed in that regard and deciding that maybe a recession comes next and the Fed's going to have to cut interest rates. That's farther down the road. But we do see

the Fed. The market already if you look at the W IRP function on the Bloomberg already paring back from 75 basis points in September to 50 now and we'll see how the data treat it going forward. What is a labor market report Friday that could knock the Fed off course. Well a really strong one would really bother the markets and the Fed because they would have to take good maybe stronger action to bring down inflation if we're getting so many jobs created. If we get a really weak one that'll raise questions about whether the Fed has put us into recession

already. So it could go either way. But if we come into consensus then that's kind of where the Fed wants to be. A slowing economy but not a falling economy. Two hundred and seventy five thousand or so jobs is a very strong report but it's nothing like we have had. So everybody could digest that. And we want to watch the unemployment rate because of the so-called Sam rule. If you rise above half a percentage point and unemployment it signals recession. And so far we haven't risen at all. We've actually come down a tenth since the quarter began. So that's another thing. Keep an eye on.

Mike looking forward to the coverage out of D.C.. Got minutes tomorrow. We got payrolls on Friday. Bloomberg's Mike McKee. He's gonna be all over it. Let's get back to that question of what is happening with the global economy the weak euro. Obviously a huge signal at the moment about what is happening in Europe. We're going to watch the data out of the states very

carefully as well. What's happening in China. What's happening in India. Let's take the temperature now with Rabin Gandhi CEO of GM nonstick coatings one of the world's biggest suppliers of nonstick coatings to household names such as Kitchen 8 and pirates. He's always a great guy to talk to because he gives us the temperature of what's actually happening in the industrial retail sector. Robyn thank you very much indeed for your time. Last time we caught up with you you were feeling pretty downbeat. You were wondering whether or not we were heading towards already in a recession. Has anything improved. No I think we are in a recession. We're sitting here in July and normally we would be in the busiest phase of the year for us by

far for Christmas production and we aren't that busy. We are down 15 percent year over year which is the worst delta I've experienced since I started this business in 2000 7. We expected to be up about 10 percent. So I think we're gonna have a pretty brutal second half. I think there's gonna be a lot of negative surprises in Q3 maybe in Q4 in the long run. I think 20 20 things can be a lot better but I think 20 22 is going to be a rocky ride. Robin let's talk a little bit about the tariff situation here. You have reports saying that the White House is actually considering easing some of those tariffs for looking at about 20 percent on both sides. How much of a difference in your opinion

could that actually make to the situation. You know I spoke out quite a bit against the tariffs. I just think tariffs are always a bad idea. So in an area and what a tariffs do they make prices go up. What are consumers hurting with right now. Prices going up particularly on durable goods. So I definitely think the tariffs should be

taken away. I know there's a lot of political game theory involved with what Biden would whether he looks weak against China. But I just think that existentially tariffs are always a bad idea. Gives the geographical breakdown talking of terrorists as to where the different pieces of the global economy are right now. Clearly Europe is finding life very very difficult. Maybe some signs of a slowdown in the United States. What about Asia. What

are you seeing more broadly. OK so I would say the worst local economy that we sell him to right now is China. There are. And I think the reasons are there are certain areas in China like we have a partner facility in Shanghai where there was actually they were actually locked down for a while. So China is the worst then I would say America second worst. From my perspective Europe I know this flies in the face. A little bit of the data you guys been talking about. Europe is a little bit ahead of America. And the strongest economy that we are experiencing right now is India. India is still growing at a pretty good

clip. So that's how we see it with our global production. Well speaking of India let's talk about the emerging market complex broadly because a lot of these commodity inflation was coming also from the likes of Brazil likes of Argentina Colombia even a lot of these kind of export oriented economies. I have to ask too how much attention are you paying to that part of the world. Well I would say probably from a commodity perspective. I mean look most of my raw materials are our plastics that are derived from petroleum. And if there is one piece of good news I can give you. It's that we have not seen as dramatic of price increases from our kirana raw. Many of our vendors this year. So that I think is actually potentially Pete. So from my

perspective the big question is really about the consumer. But on the commodity front I'm actually somewhat dovish. What about labor. Late labor is off. I mean labor is up across the board. I absolutely don't see a end to that. I am hoping that things are peaking right now. But part of what I said earlier about the rocky road and the negative surprises we're going to see in the next two quarters I think you're gonna see a lot of very tough prints from a labor or labor inflation perspective through the end of year.

Romaine Bostick with the labor question how much of that is factoring into your own decisions and how you're operating your company. I mean are you paying your employees more. Are you starting to feel the pinch on that end. Yeah. I mean we've been feeling that pitch for well over a year. We we are still hiring very very slowly. You know when I was down here. I think a couple of months ago I talked about the fact that we were we were trying to slow down hiring a lot because we saw this negativity happening. I'm unfortunately seem to be right so far with my business. But it's you know we always want to grow. And as much as ISE I'm talking gloom and doom here in the long run. I think 2023 is going to be better. We're still building facilities in Asia. We're still hiring people. So I'm just hoping things are going. We get the pain over with. We take our

medicine and then we can keep growing. Let's talk about the strong dollar. What if fact is that having a on your bottom line. Because presumably as we've just discussed you have a great deal of earnings coming in from abroad. And B what is what impact does it have in terms of your ability to deal with the inflation narrative you're seeing in the states and be able to pass that on more broadly elsewhere. Well yeah. The dollar. I mean look I'm fundamentally a strong dollar guy. I think it's very good for America to have a strong currency but it does make running a global business very challenging. You know we have facilities in Asia. We have facilities in Europe. So if we don't really play the currencies

per say we don't hedge anything like that whether it's from our sales perspective or from our are our raw materials perspective. But but it makes things very very complicated that's for sure. Robert hero's perspective I have to ask how are you looking at that currency dynamic when it comes to perhaps bringing your profits back to the states and converting it to the dollar. I

mean how much of a squeeze are you seeing on the bottom line. Yes it is. You know GM was acquired by a multi-billion dollar Japanese company a few years ago. So we are we have a lot of very complicated things going on in terms of you know earning and renminbi. Earning in rupees are earning in dollars. It's definitely having an impact. But it's not one of my biggest concerns at this point if it keeps going. I think it's going to be harder. I think that the rupee it's almost at 80. It's about

seventy nine. So if it keeps going it is going to start impacting how we might have to price things. But but for right now it's something we're watching really really carefully. Ravine Gandhi G M M Non-Stick Coating CEO we thank you as always virtually global perspective the macro and the micro. We appreciate it as always. Coming up the euro hasn't been this low against the dollar in two decades. We're going take a look at what might happen next. This is Bloomberg. This is Bloomberg Markets CAC up to you're looking at a live shot of the principal rubber room coming up Anita McCusker Jeffries chief financial economist joining Bloomberg Television 130 p.m. New York Time. This is Bloomberg.

Keeping you up to date with these from around the world here's the first word answers you can get to. The mayor of Highland Park Illinois says the gun used in the deadly attack on a Fourth of July parade was legally obtained. Nancy Watch rings suggested to NBC News and the country needs to quote reexamine the laws. A 22 year old man has been arrested in connection with the shooting. Six people were killed. Dozens more were wounded. The new leader of Hong Kong is signaling a cautious approach towards the coronavirus. John Lee says the city must balance travel inconvenience with limiting the spread of Covid. He also warned that people in Hong Kong should only be allowed to go about

their normal activities once they have identified as not being infected. London has a two tier market at the moment. Apartment values are down 11 percent from that people most two years ago to a median of less than four hundred eighty five thousand dollars. Meanwhile the median price for a house has reached a new high of seven hundred sixty eight thousand. The mixed picture suggests this team is starting to come out of London's property market companies 24 hours a day on and on Bloomberg Quicktake powered by more than twenty seven hundred journalists and analysts and more than 120 countries which could get to. This has been DAX to pray. God. Thank you. As always let's take a look at the currency picture. The euro

sliding to a 20 year low against the US dollar. Traders betting the ECB will go slower on raising interest rates. Vinson's Cinderella macro strategist at Bloomberg who joins us now in the voice I should say of the Bloomberg audio Squawk Eskew you a folks on your terminal vent. You have traded across several trading floors across New York and ISE arguably say around the country as well. You specifically traded Eurodollar. This is why our clients should listen to you. Our viewers should listen to you. What are the ripple effects here of Eurodollar not just hitting parity but going even weaker. Well I mean it's good news for the U.S. from an inflation

standpoint. The higher the dollar does ease these prices at least it's supposed to. If those prices are pricings are passed long for the euro it's just a it's a long story. It's a it's the big picture. It's dollar strength and dollar strength coming from what a weakness is. There's been a sell off in equities globally and here in the United States. When you see that selloff isn't very very good inverse correlation that's been going on since about March between the dollar and the S&P cash. And if you just look at one day's trading this morning for instance the S&P futures turned lower and about 15 minutes later the broad dollar featuring gets its turn lower. So that correlation is still with us. Doesn't look like we're seeing an end in sight yet for the bottom in the equity market. We're likely to continue to see a stronger dollar. But even with that

correlation turns and feeds and we don't see equities giving the U.S. dollar a lift. There are many many other things out there that put the dollar in the driver's seat. The real yields in the U.S. higher than they are in Europe. The Fed anticipated to go another 75 basis points this month with the ECB as you just mentioned is is expected at a slower pace. So that puts the dollar at assuming significant advantage. And let's face it do you really want to own euros whether it's worth it. So a lot of things working against the. Question from a from a view events. If the ECB when the ECB gets the depot rate back into neutral

territory i.e. above zero and zero. Does that create enough momentum to keep the euro from falling through through through one to the dollar. Not so sure. I think like I said there are so many other things somebody other factors weighing on the euro on the euro. I don't see the ECB in and of itself as becoming the savior. I do think very interestingly though and this is I'm sure against the majority I think the ECB is actually making a more credible move than the Federal Reserve. I think the Fed is acting irrationally. I think they're they're trying to preserve

credibility as seeing as they are catching up for when they missed a broadly missed that inflation obviously wasn't transitory. And I think they're rushing to try to catch up with the market in of itself as we can see is basically telling them to slow down. I mean traders are pricing an interest rate cut not very far into the future. And the Fed is not acknowledging the slowdown in the first quarter. That's been negative growth. Your previous guest I agree with. I think we are in a recession.

It won't be proven when we get numbers for the second quarter. And raising rates in a recession regardless of where inflation is is. Makes no sense to me. Spends about 30 seconds here I have to ask what's the next level to watch on your ad dollars. I think we're gonna see. I think we're going to see parity in the very near future so that one day a low level should provide substantial support even if nothing else. With the gamma delta hedging and the option space there are knockouts for sure. Double what I would have bought. And so I'm sure some other

people have as well. It's always great to catch up. Thanks a lot Vincent Signorile on what is happening in the Fox market. 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 we can get to the price of copper has fallen to its lowest level in 17 months. The metal is widely considered an economic bellwether. It's now trading below eight thousand dollars a tonne as a group. Metals just posted their worst quarterly slump since the 2008 financial

crisis. Troubled crypto lender Moen says it has signed a tentative agreement to be acquired by rival next. No word on the price. On Monday Volvo announced it was freezing withdrawals. The Singapore based company is in the latest among several crypto lenders to resort to emergency measures after the digital asset market mount and says it points to a more than 31 percent in June thanks to big gains from its top selling pickup line. Deliveries on the series tracks were up some 26 percent from a

year ago. They include the electric at 150 lightning. Ford is now the second best seller of plug in models behind Tesla and British Airways is scrapping more flights from its summer schedule. Like a lot of carriers B.A. wants to end last minute cancellations caused in part by staff shortages. British Airways has now reduced its time table by 11 percent through October. The UK government has waived rules that requires airlines to use takeoff and landing slots or lose them the next season. And that

is the latest business. Sky thank thanks very much indeed. It's gonna be answering some of some of for European travel talking of European travel. It's going to be a big feature of the European clothes. SARS also filing for bankruptcy. That's another story that we're going to be focusing on. The European economy looks like it is in a tough place right now that is being very much reflected in the European markets more broadly and in particular in euro dollar euro dollar now trading one two to forty five. Look at that. You've got the stocks extended down by one point

seventy five percent. You've got the German 10 year yield as you could see catching a little bit of a bid coming down sharply. Once again we're going to talk about all of this with Dominic Bunning. He is HSBC is heads of European ethics research. He is going to be joining us next to give us his take on this. Clearly the story Kristie is are we going to see parity. Are we going to

see below parity and within Europe. What happens there as well. What happens. Euro Swiss. See what happens with the euro versus the pound. That's also an interesting trade to watch too. And it's not just what's going on in Europe. Let's broaden this out. I mean you're looking at some pretty record Japanese weakness. You're looking at ripple effects in the yuan your Korean one as well those export economies. And then you look at the rest of those emerging market a lot of which are supposed to be kind of a no brainer trade. If you're betting on commodities you're betting on those

commodity based currencies as well. And is that a trade guy that's going to start to unravel. I simply don't know how all this is going to play out. The reason for that is that I don't understand yet what the energy dynamic is going to look like in Europe this winter. We have got a big date coming up.

Gazprom is about to turn off Nord Stream 1. This is the huge pipeline that brings Russian gas into Europe directly into Germany. It is down for maintenance. How long is it down for. Could it be an extended period of time. Because that's going to be a meaningful impact on the supplies that Europe can put to one side as it prepares for winter. Really hard core really tough call. I think euro dollar for the rest of this year and what is happening with the European economy. And that as you say will ripple around the world the Bank of Japan in a really difficult place. That research coming up from HSBC. This is


2022-07-07 02:27

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