Bloomberg Markets Full Show (05/23/2022)

Bloomberg Markets Full Show (05/23/2022)

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From the financial centers of the world. This is Bloomberg Markets with Alix Steel and Guy Johnson. It is 30 minutes into the US trading day on this Monday May twenty third. Here are the top markets stories we're following for you at the hour. By their help rally the stock shake off seven straight weeks of losses as China unveils a plan to support the economy. And President Biden hints at possible tariff relief. And broadening Broadcom. The semi giant sets its sights on BMW after its failed deal for Qualcomm years ago. The stock is down by about 5 percent in the market. And Davos and the power to deal globalization. World leaders take Davos by storm and tackle the effects of a globalized world. We're going

to speak to C suite executives all throughout the next two hours. From New York. I'm Alix Steel my co-host in London Guy Johnson. Welcome to Bloomberg Markets. Guy it feels like we all forgot that we hit a bear market at some point on Friday. Yeah it didn't last long. And we rally through it and I think there was some options action in there as well. But nevertheless

you're right. We seem to have forgotten. We seem to have moved on from it relatively quickly. I still think the scars are going to take a while to heal and I'm not sure we're done yet. So I think there's a there's a kind of pause maybe as everybody focuses on maybe some good news if we get another a week down eight weeks in a row. That's a record that's never happened before. So we're kind of at the outer edges of what markets do right now. I think the question around this is going to be at

Davos themed week is definitely going to be a Davos themed show. And and I think the issue of globalization is really front center here. And I think it goes to why markets are up a little bit as well today. The president's comments on tariffs I thought Alex were really important. If he is going to ease up those that Joseph Stiglitz was talking about this in Davos that's going to help on the supply side as well. And it was interesting to hear what he said

about the fact you can't solve this problem with with interest rate rises. You can only solve this problem with supply side reform. And that's what basically he was talking about. So I think we're kind of maybe looking at things from a different different point of view today. Yeah. And I think that that's also important because even if things say are fixed on the terror front overnight for example we'll all of a sudden supply come you know shipped into the US. I have a lot of doubts about how quickly that can get fixed how quickly that winds up helping the Fed. I agree. But it does. It does. It's interesting that people are focusing on on the tariffs rather than Taiwan comments which I

think are much more positive for the markets. I think the Taiwan comments if you take them at face value are a little bit of a risk to global security anyway. Let's talk about a little bit more. We need to bring in a few smarter voices. RTS Alison Smart me less so. The fight is still in Asia. While he was there as I just alluded to he did signal that he's

going to reconsider those Chinese tariffs imposed by the Trump administration. I'm talking with the secretary when we get home. I am considering it. We do not impose any of those tariffs that are imposed by the last administration and they're under consideration. It would seem one way of maybe resolving some of the issues that we're facing right now. Global business leaders in Davos Switzerland. World Economic Forum underway. Yes there are cows rather than snow in the background this year. It's all rather greed but

globalization or globalization definitely the main central theme. So our question of the day how far can decline globalization go Michael McKee. Bloomberg's international economics and policy correspondent joining us to discuss as is AMH Emery hold Dud Bloomberg's Washington correspondent joining us from D.C. Emory. Let's talk a little bit about those those Biden comments on tariffs. Is this a recognition that we have a major supply side problem for the U.S. economy. And one of the ways of resolving that would be to reduce those tariffs. This is a fact effectively signaling

that globalization is still important. Well Guy I think the first thing is that when you look at the supply side we're talking about inflation. Right. And this is their biggest domestic hurdle right now. This is what American families are dealing with. And American families will be heading to the polls soon for the midterm elections. But this also isn't news. The

president said this a few weeks ago saying that this was under discussion. Now he's saying he's going to be sitting down with Treasury Secretary Janet Yellen to discuss it. He also wanted to make clear to that audience that we did not impose these tariffs. These are Trump era tariffs and they've become under pressure because inflation is so high. And you have the likes of the Peterson Institute saying if you remove those towers one point four percentage points could be shaved off inflation. But potentially a big question the administration is going to be asking is how much is going to actually hit the end consumer as they are under pressure from the likes of Chamber of Commerce and some economists and lawyers to move those tariffs. But another part of the administration guy will also be asking. We do have mid-term elections in November.

If they remove these tariffs are they seen as soft on China. And that is something this administration does not want to be seen as. So Mike on the economic front though let's pretend that it does happen and we do get some kind of tariff easing like how quickly does that fit in to inflation. What it has helped the Fed doesn't feed in very quickly at all. The Peterson Institute study was over the course of a year and they think that once the tariffs are removed then you could see about a three tenths percent decrease in inflation on a monthly basis. The problem is is that many contracts for imports are already signed. We're almost getting to the season however when everybody starts ordering for the holidays. And so it could have an effect by the end of the year. That doesn't help you with your November 1st Tuesday problem for the

Democratic Party. And the other issue is that I'm sure they're having a grand old time arguing about this at the bars. And Davos is does it really affect inflation. There are all kinds of studies that suggest either a big impact or not very much impact at all. And as far as the president sitting down with Janet Yellen he really needs to sit down with Catherine Tie because the U.S. trade representative has been very much opposed to removing the tariffs. And she argues the Peterson Institute

study is somewhere between an interesting academic exercise and a fantasy. Mike why why why wouldn't it. Sorry. That's amazing. Why. Why is it a fantasy. Why would it be having such little effect in reality. I Americans are dealing with inflation right now. If you raise the cost of imported goods why why wouldn't reducing

the effects of that reduce inflation. It would a little bit over a period of time but a lot of it is absorbed by middlemen between the producer the exporter and the importer. So not everything makes it through. And plus Joe Biden has been talking about three hundred and thirty five billion dollars worth of tariff reductions. That's about 25 percent of the tariffs that they put on. So it isn't a huge amount of money and it has more symbolic value perhaps than it does actual economic value. Yeah

not to mention the fact that we're already seeing sort of reassuring on shoring move from companies to they're not vulnerable to the likes of China. I have to wonder how much that's really going to change. Also in regards to a guy alluded to this before President Biden's comments on Taiwan it feels like that's being pushed aside in favor of the tariff conversation but that had strong repercussions from the official White House and sort of what they put out against it. Can you talk me through a little bit about that. So this is the fourth time the White House Biden himself or his

aides have had to come out after Biden made a comment about Taiwan to then walk it back. So one White House official said the president did say they are approaching this as the taking in consideration. And they still maintain this one China policy. But the president was asked about whether or not they would come to the defense of Taiwan. And his remarks were yes it's a

commitment we made. So when he said the idea that it could be taken by force just taking by force is just not appropriate. Ill just disclose the entire region to be another action similar to what happened to Ukraine. I'm reading off his statement because you know these words are very tricky. And the White House has come out and

saying he's talking about not sending U.S. military troops but sending military aid. But this does obviously put the backs up of Chinese officials because this is something they do not want to hear. And they made the point that. I appreciate that we've been here before with the president. But isn't that if you think about the comments on tariffs and you

made the correct comment a little bit earlier on suggesting that there is a danger that the president will be seen in the midterms as being weak on China. He can balance that out by saying look at my comments on Taiwan. I doesn't one go hand in hand. Isn't this actually in some ways. And I appreciate that the White House officials are walking it back. But in some ways isn't this smart politics from his point of view. He's he's able to walk back the terrorists. He's able and I appreciate what

Mike had to say about what Janet talked about what's what Ty said about this whole Janet Yellen tie and Kathy. Yep. And but but if he can put himself in a position where he says look at my comments on Taiwan. Isn't he in a better position right now than the Republicans certainly want to see. Right. A very tough defender of Taiwan and that Taiwanese relationship

with the United States. I mean a few people have messaged me asking do you think the president was being very ambiguous meaning. OK. The White House walks it back but a number of times he has come and said the U.S. will defend Taiwan. And that is being incredibly tough on Beijing potentially at the same time as they as they weigh these tariffs. We just don't know. Guy if they go hand in hand. But it's an excellent point. Well uncertainty whatever. We're having stocks up here. That's me up

by three tenths of one percent. Nasdaq 100 though still a little bit lower. Go figure. Guys thanks a lot. Bloomberg Michael McKee. Annmarie Horden. Great to catch up with you guys on this Monday. So coming up going to pose that question. Julie Beal portfolio manager at Ken Anderson Rudnick be joining us next about where we fit where she thinks we are in the deep globalization cycle. This is Bloomberg. We are looking team to the 2022 as a difficult year for especially developing countries under a high level of debt. When

your costs of servicing that jump up and you are in a very tight fiscal position of course this is the time when the IMF has to step up and we will do that as IMF managing director Brazilian inter diva earlier in Davos Switzerland at the World Economic Forum where globalization is definitely a central theme. Which leads us to our question of the day. How far can that globalization trend go. Want to bring in Julie Beal a portfolio manager at Kayne Anderson Rudnick. Hey Julie you have to invest longer term right. So how do you impact has globalization impact. Where are we in that. Well I think right now globalization or d globalization really is a great talking point for a lot of politicians. And we've seen the challenges of our hyper globalization in the sense that

our supply chains are very rigid and they're built for being low cost but they're not necessarily built for flexibility. And you know we've seen the downsides of that. But being able to wholesale move and re onshore is a really challenging slow process. And the thing is is there are reasons why globalization happens. Right. Some countries are better at producing certain things. Right. I am not buying my romance novels from Germany. Right. But I love their cars. So it's just a function of being able to. AMASS the right quantities of inventory in places where it makes the most sense. So I think longer term we'll see some

movement to unsure where it makes sense. High value goods you see semiconductors coming back to the US but generally speaking I don't think there's gonna be a wholesale change. I'm genuinely just Googling German romantic novels now. There are probably a little depressing but you know no I don't. I haven't read them. Certainly not. Not in German. So I'll park that one. But they do exist as my point is what I'm trying to say. Julie. The point about globalization is though that it is likely to be inflationary. If you talk about kind of

comparative advantage that comparative advantage leads to lower cost and therefore lower inflation rates going forward. If we reverse that it's going to mean higher inflation. That's what Stiglitz is talking about in Davos. He's talking about the fact that we're trying to fight the war the wrong way. Right now we have a supply side problem. But the Fed's raising rates the two don't compute. The two don't go together. So if we're if we're using the wrong tools right now what is going to be the implication of that. Well I think right now inflation is a near-term problem. Right.

And being able to completely wholesale re onshore your supply. That's a multi-year process. Right. Intel's fab in the U.S. is going to take years to build. Right. So I think the talk of globalization is really more so a political point. We need to move to be more flexible and have more good jobs onshore. Right. But the real fight with inflation is happening kind of at the monetary level. And it's not so much about where we are in globalization. I don't actually think they're that super related

because their time horizons are so different. Well it's a fair point. Also we got immediate relief when companies just used that to help their margins and unnecessarily pass that on to their consumers like to Target and Wal-Mart. So exactly. So with that in mind and we look at a market that had a really terrible seven weeks particularly last week on that Thursday was really brutal. And then today we're up by seven tenths of one percent. And I just wonder is the worst over or are we going to be in a no man's land. Well I think the level of volatility indicates that we're still probably not settled in into a bottom right. I mean this is probably one of the most emotional markets we've seen in a long time. I mean it's worse than my four year old toddler. I mean it's just all over the place. And you know if you think about

what we're doing right every day we're trying to price companies. Right. These companies fundamentals are not moving 20 to 30 percent in the span of months. Right. So that really indicates that this is about investor emotion investor spirits. And when we have this level of volatility we're not going to get to a place where we really are genuinely completely oversold. We

have to exhaust. Everyone has to say I am done with this market and we're not there yet because we're seeing so much money kind of flow back in when we get these like nice short little rallies. And I just don't think we're quite there yet. Julie you do a lot of granular work on companies. What are you getting from those companies in the research you're doing in

terms of where we are with the consumer. I've listened to a number of people in Davos today particularly in the banking world talking about the fact that the consumer is still in great shape which kind of goes contrary to some of the data we've seen lately. What is your sense of where we are. Because if the consumer still in great shape then we still got a way to go with this. I think that's absolutely right. I think if you have a strong

consumer the economy can really chug along for a good long time. The sentiment is really bad. But generally speaking sentiment isn't always the best indicator of the consumer's health. But I do think at a certain point these gas prices start to be really meaningful. We're starting to have to go back into work whether we like it or not. And I think generally speaking with all the bad news about inflation that really causes people to re-evaluate how they're spending their money. So I think we'll have a nice boost of people just traveling because they have so much cabin fever over the summer. And then we will really have a

retrenchment. And I think you could see very soft back to school numbers. I think you could see a tough holiday season. And that would be really difficult for a lot of the U.S. economy to shoulder. Apparently Gertler was a romantic as well Julie. So we've offended a few Germans today. We're getting a few comments getting a few comments. I don't know. I think I will. The

collective collective responsibility here. Julie thank you very much indeed. Greatly greatly appreciated. Julie Bill of Kayne Anderson Rudnick. Thank you very much indeed. Swiss romantic novelists. Maybe we should talk about those as well. Coming up the song of our CEO is going to be joining us from Davos Spain while Boston is going to be speaking to the team that will get his take on supply chains as well. Obviously the construction sector is an injury place right now. Material prices going up labor prices going up. We'll get Ben was take on all of that. This is

Bloomberg. Raising interest rates is not going to solve the problem. Inflation is not going to create more food. He's got to make it more difficult. You weren't going to be able to make any investment. What you do is you have supply side interventions. That was the course. Professor Stiglitz Nobel Prize winning economist and Columbia University professor speaking to the team

in Davos a little bit earlier. Let's get back to the Swiss Alps. Joining us now IBEX Hang Seng in the amen for the CEO of SAG Harbor Hacienda. Well Guy you said it is not just about surging inflation prices. It's also about those higher rates. And of course expectations of a slowdown in the global economy although we've seen a pushback from a Christian ISE Jaber herself that she's not factoring that in at this point in time. Let's get perspective from a company which is one of the largest

industrial companies in France of course. Of bizarre sunglasses open Ben. Good to have you with us. What what assumptions are you making about inflation. And at this point in time that seems to be the new normal. Are you having to pass on all the cost to consumers. Yes. Clearly we live in a world with higher inflation. Actually the vast majority of that comes from energy. How do we cope with that. Which is first priority for our customers is the availability of materials on the job sites making sure that with all the disruption on the supply chain they get the BBC or so good service. And the second point is

that you know we are the leader worldwide on light and sustainable consumption. So we provide solutions for energy efficiency. When you provide a lot of solutions value added products to your customers it does help the pricing power. And yes last year we did pass the highly efficient on modules to our customers. This year again we are on double digit price increases in the first quarter. We pass it to our customers. But popularity. Availability. Good service. Good solutions. Evacuated for all customers. All

against the backdrop of expectations of a slowdown in the economy. Are you looking at demand destruction. Are you looking at perhaps companies canceling on projects. We don't see that. That has been the number one question from investors over for the last two months. Demand destruction. I keep saying that we have a huge backlog of renovation in Europe. Why. Because energy

efficiency is of course important for a couple of new 22. We are here in Davos to tobacco. That is very important for the purchasing power of households. I know it's even more important for the geo politics in terms of getting our independence and sovereignty. Right. So there is a perfect alignment on jobs for renovation. What. Energy efficiency. So large backlog of orders in Europe on renovation a lot of accumulated savings from the household over the last two 3 years or so. New habits new work

from home. You need to renovate you RTX. Change your garden for what type of office. In fact the other countries in the US we have a good level of housing starts. Still a good demand. We are up 40 percent in India for instance in the first quarter. So it varies country by country. But overall no I don't see a recession coming. We might have a bit of a question mark on new beat in Europe in 2023 but renovation focus is 50 percent of all sales and is strong. And we need to triple the renovation rate in Europe for the next year. So I'm very confident about that. We follow. No I'm not. All your shareholders are happy with how you're doing it. In fact our your activist shareholder Blue Bell reportedly is pushing for you to reorganize your business and also to perhaps replace your chairman. I mean how are you responding to all of that. Well first we value all the insight and perspective from

all investors big or small. And we are open to any constructive dialogue. You know what we are doing is a country by country very pragmatic approach. So I'm not too dogmatic. I think country by country approach to create value to maximize the value we create for folks. Think about being pooled by very promising markets such as energy efficiency renovation light a new system for shareholder returns. What can be expected. We have done a lot. You know last year was a record breaking year for about thanks to the deep successful transformation we have done over the last three years. Very pigmented back country. So the largest organic growth in the sector the largest margin expansion in the sector. And also it will see a return on capital employed above average above 15 percent. So we keep rolling out a successful strategy.

And I can tell you our long large investors are very happy about the job with the team and the energy that we have developed over the last four years. And still a lot more to come in the next years. I'm very confident. All right. We're going to look forward to that before. Thank you so much for that. Our bizarre saga by sea. Oh guy we're handing it back to you. We're back very shortly with you there in Davos Switzerland. Thank you very much indeed the CEO of Sago Bar. A few comments coming to you from Andrew Bailey. He's just releasing the text of a speech that he's about to deliver. Tightening must take into account the income shock. The U.K. has a tight labor market not rapid demand gains. Is the bank is

prepared to raise rates again if needed. Well we're going to do next. As I say back to Davos. Pat Gallagher Intel's CEO of. Joining the team from the World Economic Forum up there in the Swiss Alps. We're gonna be talking about chip shortages what is happening with the supply chain story. That conversation coming up next. This is Bloomberg. A lot has changed since the beginning of the year. I think the biggest change has been discounted tightening by central banks particularly the Fed and we have seen that flow through clearly to the bond markets and we have seen the equity decline so far largely a function of the change in discount rates. You haven't seen a major change in expected earnings growth. And so that to

us is the thing we're watching. If this is a head fake or continuing that would be the shoe to drop. As Rebecca Patterson chief investment strategist at Bridgewater speaking earlier in Davos and we are an hour into trading on the U.S. trading session I don't know its confusion. NASDAQ 100 can make up its mind where it's going. Bloomberg's Abigail Doolittle is tracking some of those moves. Hey Abigail. Hey Alix Steel. Yet another unpredictable day. We are just moments ago had the

Nasdaq 100 down slightly after being up big time in the premarket. Now back up and the S&P 500 moving closer to its premarket highs right now up more than 1 percent. The Nasdaq 100 up about three tenths of 1 percent really outperforming the banks up three point four percent. The best day in about five days helping out. Of course we have yields rising up about 4

basis points. The 10 year yield as bonds sell off a little bit on this risk on tone. But we also have commentary out of JP Morgan. They've raised the net interest income outlook that has all the big banks up 4 or 5 percent on the year though it's a different story despite the fact that we have this historic backup for yields. You have banks down pretty sharply on the year down about 25 percent here for some. But today you can see this little bit of a rise. So maybe this net interest income guidance rise for JP Morgan will help out the banks especially again. We do have yields moving higher. As for some of the

individual movers. Elsewhere it is of course some MBNA Monday. Take a look at the shares of VMware. Absolutely soaring up 19 percent on the news that Broadcom may. Bloomberg learned earlier that Broadcom is considering a bid for VM where Broadcom of course a chip maker. And they've been moving more to software VM where a cloud maker or a cloud maker a cloud software company. So another bid for diversification it would be a greater than 50 billion dollar deal. So a real blockbuster. And of course VMware is one of Michael Dell's companies. And you can see Dell Technologies up two point four percent. As for the market action on the day we of course had that rebound Friday. It almost felt like after the S&P 500 hit that technical bear market briefly it

down 20 percent. It cleared the way maybe for some near-term. We'll see because it's felt like that for a little while and it hasn't really come together. But one thing that could be attractive for some of the deep buyers who have some real courage is valuation. The S&P 500 and Forward P E at sixteen point four times. That is slightly below the 10 year average. You can see though it's still above that low that we saw back in 20 20. And then in that 2018 brief correction mini bear market relative to 2008 which is not shown here guy in 2008 and 2009 the S&P 500 forward P E went below 10 times. It was actually a

single digit deep value. We're nowhere close to that right now. But nonetheless this is attractive here. Abigail great stuff. Thank you very much indeed. Intel is down 19 percent year to date. Pat Gettelfinger is the CEO. He's up a mountain right now in Davos. Let's listen to a conversation with him.

Well we welcome now Bloomberg Television audience and Bloomberg radio listeners. Joining me now at the World Economic Forum in Davos is Intel CEO Pat glancing up head. Good to have you with us. Great to be with you Haslinda Amin. The world has been preoccupied with supply chain disruptions as well as chip shortages. I mean how is out there saying perhaps there is light at the end of the tunnel. They say you know what. Maybe they've been easing by the second half of this year but you're not so obviously not known until perhaps 2024. Yeah. No we definitely think that the supply demand balances 2024. And you know a year ago I said 20 23. Since then we've seen a number of equipment supply chains move out. So our equipment coming into the fabs

that we're building that has moved out. So overall 20 24 until we start to see a reasonable balancing of semiconductor supply chain. So will it get worse from here before it gets better. Because when you take a look at the ports in China for instance we're talking about 50 to 60 ships just waiting to unload. And of course that's causing a lot of headaches. So yeah the supply

chain issues that we've seen in China but it comes on the back of many other supply chain issues. So we're already sort of beaten down and so we have to work through it. And maybe the softening of the economy a little bit of consumer softness gives us just a little bit of breath. But you know we're still out to 2024. And obviously the Shanghai ports have created a bit more turbulence that we're managing through near-term. We talk about a slowdown. In fact a global slowdown although we've seen a push back from Kristalina Georgieva by saying we're not looking at a global recession but definitely a slowdown. What that means

demand destruction. What assumptions are you making. Well we definitely see a bit of softening on the consumer side. Softening. I mean can you give a number to that. You know as you saw in our earnings you know we saw it. You know there was a meaningful you know several you know a number of percentage points soft there. We originally were expecting the P.C. industry to be up a couple of points this year. Now it's sort of flattish maybe down 1 point. So you know a meaningful swing. But on the business side the enterprise and commercial side no change. Right. Continuing to have real strength in those areas

of the market. I think with you know inflation concerns tightening of monetary policy this continuing supply chain challenges. Yeah. Things are probably gonna be a little bit choppy for a couple of quarters. Yeah. Also we looking reviewing where you produce your chips. In fact you're making Europe as well as the U.S. a priority. And perhaps that message is resonating even more. Given what we're seeing in China how is that coming along. Well we are all in on the rebuilding and what we've called the geographically balanced resilient supply chain where you know this industry was 80 percent in U.S. and Europe 30 years ago. Now it's 80 percent manufactured in Asia. What happened. And it was never as I was in Washington

last week. You know I joke to some of the congressional leaders we never voted to get rid of this industry but those countries voted to get this industry you know and they put strong packages in place to attract this industry there. And now we see that oh you know we are way too dependent on too few places in the world and has led to what aspect of your life is not becoming more digital. Everything's becoming digital right. You know my consumer my health care my trade you know transportation you know how I work how I live and everything. Digital runs on semiconductors. As I say you know we're the oil reserves are

defined geopolitics for the last five decades. Where the fabs are is more important for the next several decades. Let's kill them where we want them and do it in a way that we have more resilience to the supply chain. It is all great that you want to make the US and Europe a priority. It's also about scaling and scaling quickly. How soon can you get there. Well you know we've announced the Ohio site expansions in Arizona in Europe. We announced our expansion in Germany new research in France expansions continuing in Ireland. And what we're really now anxious to see is that the U.S. and the EU CHIPS Act get completed. That allows us to make those good economic investments because part of the challenge is is that you know

we're competing now with countries that are very actively incented those investments in Asia in these investments they have to be competitive worldwide or I can't compete for the worldwide market. So that's what we're looking for. The EU leaders as well as the US congressional leaders get these things done so we can go faster. Just for our radio listeners. We're speaking to that headcount thing. Intel's CEO here in Davos Pat Mean we talk about how we want to ramp up production in the US and what kind of government support are you seeing. Are you getting. Is it enough. Well you know the U.S. chips at 52

billion dollars. The European. Chips at forty five billion euros. And as we've looked at those programs that we've helped to shape them they make us competitive in the world. We feel very good that these are very good steps forward. And it's against what I call the moonshot. And by the end of the decade our objective is that we go from 80

20 80 percent Asia 20 percent U.S. of Europe to 50 50. Right 30 percent US 20 percent in Europe 50 percent in Asia. That is the goal that we are driving these for. We think these these are great steps forward. And if they are being successful we can drive toward that 2030 goal of 50 50. You know we've heard from General Mundo seeking urging for manufacturing data. It's not a game changer. I mean how will it help solve the supply chain disruptions. You know

she's argued for and has put some steps in place to help with supply chain transparency. You know we're supportive of the general idea of more visibility there. But I say you know you know I don't think that's the solution. I think that helps a bit you know. But we think fundamentally we have to build more resilient supply chains. We have to do that with the fabs and then we have to attract more of the other aspects of the system supply chain materials. You know the gases and others that go into it. You we need balance across U.S. Europe and Asia.

That is the fundamental answer to accomplishing what we see as this resilient supply chain to the future. Pat I'd like your reaction to what we reported on Bloomberg TV today that perhaps not com is looking at acquiring VM where your thoughts on that. Won't this be the start of more consolidation within the industry. Well you know I woke up to the news a little bit like everybody else. I put eight years of my life my soul into a VM where so a bit startled when reading that you know and I would say hey if it helps VM where be a more compelling innovative growth story that it's good. If not then it's not good. And to

me it really is. You know they play a certain place in the ecosystem of the industry hybrid cloud strategy. You know that's super important for the future. And I want to make sure that they continue to do that for a long time to come. On the surface right now. Is it good. Yeah. Broadcom acquiring VM. Why would it be good. I mean what's your own take. I mean we have inside sort of mixed. Sort of mixed. You know the current thinking and obviously it was surprising news today. And I'm like I say we have to make sure VM wears a great innovation engine for the future. Do you see for the kind of consolidation within the

industry. I mean we've seen an uptick intensive tech consolidation I think in excess of 40 percent for the year already. Yeah. Well obviously with the correction and multiples that we've seen you know I think somewhat we were overheated. Right. You know with some of these high multiple stocks. And as that comes back down to earth a little bit. Yeah I think there will be a consolidation. You know we've done several acquisitions this year. And you know I don't think any of that's bad in that sense because there's an extraordinary flow of new IP shows and new offerings into the market. I hope to get my mobile I done this year as well. So I think it always is this normal cycle of acquisitions consolidation and New Birth. This

is an exciting industry. Just one final question before we let you go. Lots of headwinds for companies fought for governance. Inflation. Supply chain disruptions for you. As you look ahead in the next 12 months what's the biggest one. What's the biggest risk. Well you know I think overall this economic uncertainty right now creates some of these headwinds with our customers and what they're forecasting. But you know I'd say two responses that we're saying I'm investing for a decade. Right. You know and hey some near-term up and down. That isn't what we're focused on. We have to go manage the biggest business prudently in the near-term but we are making a 10 year cycle of investment. Also the core of why we're here at Davos is public

private partnership governments and companies coming together to drive industry policy that allows us to compete for the long term geographically balance resilient supply chains. All right Pat great insights. Thank you for joining us. CAC Singh Intel CEO right here in Davos. Back to you. All right. Thanks so much. That was Haslinda Amin from Bloomberg Quicktake Alcindor Intel's

CEO. Remember he was the CEO of GM where from 2012 to twenty twenty one. So really great to get his insight on that potential deal with Broadcom. Are coming up running at the latest on the health of the consumer Ling High. MasterCard National Marcus Ko president joining us next from Davos. This is Bloomberg. This is Bloomberg Markets numbers could go up to you're looking at a live shot of the principal room coming up. Mazza 10 grand they Anglia Investment CEO joining my television 330 p.m. Yorktown. This is Glenn Beck.

Let's go right back to Davos where government leaders executives and central bankers are meeting at the World Economic Forum Bloomberg's Haslinda Amin ISE there and joins us now at. High MasterCard National Co Present. Is Linda. Well Alex it is about inflation inflation inflation and there are expectations out there that given that cost are being passed down to consumers they'll be putting a lot more debt on that credit card. Let's get perspective insights from Ling High of MasterCard International. Good to have you with us. What are you seeing it. MasterCard out people putting more debt on credit

cards. Well first of all thank you for having me again. So far we haven't really seen any drop in terms of consumer spending. In fact the resilience is there. What we are seeing both in Europe and in the US is it's a nice recovery story. Basically people are spending more money now. I think a lot of that is driven by the fact that there's there was government stimulus there's savings. In fact the labor market is pretty strong and tight. So you're seeing wage increases as well. So that gives people a lot of room and confidence. The question on inflation is a good one. I think it does create uncertainty down the road.

My own hope is that it's going to be transitory because if you think about the impact of inflation it's just going to create another disproportionate negative impact on the low income people. You talk about resilience. The question is for how long. Because data out there suggests that debt will reach a record by summer. And what's the risk then of all people being deep in debt. Yeah no that's so that's exactly what I'm saying. I think the whole thing around inflation is something every government needs to address and take it very seriously because of the disproportionate impact on low income middle class people. Rich people don't care about inflation right. You can afford it. People who can least afford it will be hit really hard on

inflation. So it is a concern. It is a worry. But look I still believe largely inflationary pressure so far has been caused largely by the supply chain disruptions. And that will get adjusted that the timeline is a bit uncertain. I don't want to get into prediction but it's something we should watch out for. The US is a huge market. So is China seeing a slowdown. And when you take a look at the latest data out of China I mean we had retail sales slumping contracting 11 percent. What are you seeing intensive you know the e-commerce industry and what does that reflecting. Yeah overall retail sales is negative for China

this year. Year to date I think it's largely due to the restrictions and the zero Covid policy. Now overall from an e-commerce Pacific perspective it's really interesting. Last year e-commerce outperformed general retail sales 14 percent versus general retailers about twelve and a half or so this year. E-commerce. Year to date for China is still positive. It's around 3 percent versus the negative growth in retail sales overall. So as a as a proportion of the overall sales e-commerce

continues to outpace and the percentage is increasing from somewhere around 25 percent now to 28 percent. So what is the outlook. Because for the first time as President Biden said that U.S. growth will exceed that of China in a very very long time in decades in fact. I mean what's the outlook for China for you for your business. That could very well be true. But look sometimes our spend growth is not necessarily directly correlated with the overall GDP growth because there is a lot of pent up demand in China. As you know it's more a function of borders opening. I think we you know people just really haven't been able to travel outside China and overseas students in the US those who have been able to go overseas we're actually seeing a recovery to spend on their credit cards. So we remain actually cautiously optimistic by staying with China. You've been while MasterCard has been. It's been it's no secret that MasterCard wants to partake in the digital yuan and you're waiting for

approval from regulator is where are you on that. OK. I just want to make one quick quick correction. We are waiting for approval for a license to conduct domestic switching business. So we're working really closely with the regulator in order to get there. We'll continue to advance our cause there. From a digital perspective I'm not aware of any approval being given to anybody from a cross-border processing perspective. I think it's still early days. They are conducting a domestic pilot. Actually several pilots in major cities from across border perspective I think the major issue is going to be merchant acceptance. Will overseas merchants accept a digital. How would that work. How do you create that interoperability. And that's true for both

outbound and inbound. So very early days. Crypto you're all in Moscow is all in. And now the CEO has made no qualms about saying that data wants to be a part of the crypto space. But Kevin what we saw recently the fallout in the crypto space surely that is I guess an indication that it is not ready for mass adoption. Yeah well I think last time we met we actually talked about this. I continue to think about crypto in two categories as an investment class and as a digital. Currency so as an investment class. Like any investment there is risk. There's volatility. You have to deal with right. So that's what you're seeing right now in the crypto space. Now we want to support the consumer preference for credit for crypto

investment. So the buying and selling of crypto. Of course we're going to support this. We want to be in those flows from a digital currency whether this is private stable coins or central bank digital currency. I think it's still early days. Many governments are still looking at this. China is probably further ahead. But when a digital currency is approved properly sanctioned and approved by a central bank to be used as a legal tender in any country we are getting our network ready to support that. We have to we need to be in the flows. We need to be at the table. And it's also where they can stomach the volatility link. Hi. Thank you so much for that link. Hi. Joining us here in Davos. Back to you. Linda thank you very much indeed. Really fascinating conversation. Bloomberg Markets Haslinda Amin in Davos with leg

high. MasterCard International's co president Christine Lagarde saying within the last couple of seconds that a rate hike plan irked some of the ECB who want a faster option. This coming from the fantastic ECB team here at Bloomberg. This is Bloomberg. Strong economy. Big storm clouds. I'm calling them storm clouds because they're storm clouds. They may dissipate if it was a hurricane. I would tell you that as soon NAMI like we had in 0 7 or 8. They may not dissipate. We're not wishful thinkers. Obviously we wanted to turn out well but we can handle

all that. I always love James glasses when he wasn't like that. Jamie Diamond the JP Morgan CEO speaking at the firm's Investor Day say that the US economy remains strong and potential obstacles to growth are not set in stone. They are clouds storm clouds admittedly but nevertheless they are clouds. The firm also announcing today it is raising its estimates for net interest income Alex which is interesting and it's probably why us banks are trading as strongly as they are today because essentially so he's had a lot of pushback pushback pushback over the last few days as a result of the plans to spend more money basically. So he's keeping that cost estimates stable but he's saying we're

going to make more money over here. Hopefully the two may balance each other out when it comes to investors. What I also found interesting too is just what he talked about. Credit. He's a credit. Looks really good. We've never seen it this good. And they haven't set aside that much for credit. Haven't seen that many credit losses. That's different than what we see in terms of spreads and the concern that spreads are gonna blow out too much et cetera. There's been a lot of concern about the consumer over the last few days. Yet when you listen to what the bankers are saying today they're saying really positive things about what's happening with the consumer as well. European Close is coming up next. Cuckoo will blow from SOP. Jan is going to be

joining us. We'll get his take on these markets. This is Bloomberg.

2022-05-26 00:16

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