Bloomberg Markets Full Show (05/25/2022)
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 Wednesday May 25th. Here are the top markets stories that we're following for you at this hour. Dick's sports some pain. The retailer plunging after cutting its forecast to supply chain issues and high costs. Just the latest company now to warn of the inflation impact. And the Fed tea leaves market waits for the Fed minutes. Inflation growth. Financial conditions in focus. We asked the question have yields finally peaked and worse than 20 20. China's premier
says the country's economic pain is the worst in two years ago. We're going to talk to world leaders at Davos for their take from New York. I'm Alix Steel my co-host in London Guy Johnson. Welcome to Bloomberg Markets. It feels like it's a summer Friday. Volume is super light. Hardly any movement in any asset class right now.
Because we're about to potentially get the answer to the question that everybody is asking right now. And it's the question that we're asking Alex have yields peaked. Is the Fed about to blink. Should we be pricing out maybe that third 50 basis point hike that the market has got in right now. Let's talk to Emily Roland J.J investment management co chief investment strategist to try and get an answer to that. Emily is the Fed going to blink. Have yields peaked.
So the answer is yes we do believe that yields have peaked and we do believe that the Fed will pause after 2 50 basis point rate hikes and the next to upcoming meetings. We see economic growth clearly decelerating. The leading economic indicators are falling there less than 5 percent year over year growth. Right now the Fed is getting the tightening that it wants in terms of financial conditions. Certainly we've seen asset prices come down. We do think that the Fed will be able to pump the brakes here and we're seeing a huge opportunity to lean into bonds. We haven't seen yields at this level in a long time. The aggregate bond index in over three and a half percent. Remember just a year ago we were getting one point seven percent on the aggregate bond index. We think this is a great opportunity to add bonds to portfolios as we move through into late cycle
period. And ultimately recession would only have a hard time thinking a two seventy five is where the Fed is really happy with the 10 year. I mean you're still over thirty nine hundred on the S&P. Yes financial conditions have tightened. But I have to think they want even more now. Yeah I think so. And you know for now the Fed is getting what it wants and we're seeing that come through in data like the housing market data that we've seen. But there's more work that
needs to be done here in terms of figuring out how to dampen inflation. Yes inflationary pressures are coming off the boil but they're certainly still here. And there's a couple elements that have kept them elevated. Russia Ukraine clearly oil prices at one hundred and ten dollars a barrel. That is not helping the inflation situation or the Fed. And we've seen supply chain issues of course be exacerbated here due to the zero Covid policies in China which have effectively brought economic activity to a halt. So inflation is still here it's still elevated. It's not going away. And the Fed has said that it's going to do whatever it takes to attack inflation. And it needs clear and convincing evidence that inflationary pressures are
subsiding in order to be able to pump the brakes on tightening. So we'll need to see. We might get more clues on that in the Fed minutes this afternoon. If the Fed is done though if not done but if if the Fed is going to signal that it is going to pause. Emily and maybe we do get that signal today. Maybe it's too rearview mirror. The minutes
to get to that point though. Are we in a position where now we need to think about rotating out of value and back into growth. Yes certainly I think you know value has been the trade. You think about the overweight sectors like energy and that's really been you know that kind of cyclical element that's helped provide that inflation protection. When we look to the growth side of the house that's really where you're going to find quality. You're going to find companies with great balance
sheets ones that don't need to tap the capital markets in order to be profitable good return on equity good earnings stability. You're going to find some more defensive parts of the market on the growth side of the house. And so we really want to think about emphasizing that defensive element in portfolio as we move closer to a late cycle. One of our favorite places to think
about our areas like utilities and infrastructure type businesses. Consumer behavior is changing away from the things that we want those discretionary items to the things that we need. And we think these companies that are going to have that that consistent demand and that consistent income paid out to investors are going to add a lot of value here. As the cycle progresses very quickly what do you do with tech though. And I mean like high quality tech companies that are definitely going to stick around if yields have peaked. High quality tech is the baby that's been thrown out with the bathwater and we look at some of these companies that have been sold off. Amidst this indiscriminate macro driven selling that
we've seen pervade the market so far this year and there are some high quality tech companies that offer a lot of value right now. On the other hand they make sense that some of these unprofitable more speculative growth names have been sold off. Our being the start of the year was don't get too comfortable in the fast lane. Sell your high beta highly cyclical unprofitable assets that have done so well since the Covid recession ended and start to lean into more defense start to lean into more quality. Don't abandon stocks and be really thoughtful about where you're finding those opportunities under the hood. Emily what do you think the S&P bottoms outs do. I'm curious as to what the next few weeks is going to bring. And I know numbers are difficult to kind of get right. But are we are we in the process of bottoming here on stocks more broadly. Have we got
further to go. We went into the into the into the pandemic significantly lower than where we are now. We're still elevated from that position. Do think we need to get down to kind of clear some of those levels out. Oh do you think we've kind of done around where we are now. Yeah I just saw Michael McKee post that great chart on Twitter suggesting that we're still above the levels that we were pre pandemic. So we could have further to go here. You know
we're looking at a decline of close to 20 percent. If this is a bear market that's associated with the recession which we're putting about a 50 50 odds on I know that's not that helpful right now. And you could see further declines. Average bear markets that come with recession see a decline of thirty seven percent on average versus non recessionary bears which are closer to twenty seven percents are almost there as far as a non recessionary bear but could out for a day to go. Now what I would point out is that it's about making tradeoffs in terms of relative performance. There's a lot of this locations in the market right now. If we're starting to think about recession for example areas like European value stocks have held up incredibly well. We don't really understand that disconnect. We could see further
pain in areas like that. You know you could see oil prices come down. Energy stocks start to roll over a bit here. So there are pockets of opportunity again in companies that have good earnings growth prospects that can do well in a decelerating growth period. Emily you may have to answer my question but I was going to say if you haven't sold yet where can you still be selling. If someone didn't take your recommendation the beginning of the year. Yeah. Again those are the areas it's those more cyclical parts of the market. Again international equities in general you're going to get a lot more cyclical exposure or just because of the relative sector composition you know you've benefited from having a lot of energy a lot of financials. You know European banks are actually moving higher which is a massive disconnect in terms of this move towards a global recession that we're starting to see here. So we would look to chip away and sell those more highly cyclical high beta
assets and move more into defense here which is going to be warranted as late cycle dynamics persists. What does the world look like if the Fed does deliver 350 basis point hikes. What does the world look like. Blackman's writes And we still need multiple 50 basis point hikes from here. Emily. Yeah it's a hard landing. So you know the Fed is going to act aggressively here. I think oil plays a key role of U.S.
commodity and energy prices remain elevated. There is a chance that the Fed is going to need to move forward with more aggressive rate hikes and you see a recession play out. I think the most important thing to consider here is the playbook as far as investing goes. And if you believe that a recession is forthcoming you believe Akerman and the bill the kind of idea
here that the Fed is going to move really aggressively. This is a time where you want to embrace bonds and there is some room here for bonds to rally even in a soft landing scenario. If we get that pause in September which the Fed funds futures are starting to price in you still want to embrace bonds because so much tightening has already been priced into the yield curve. The bond market is pricing in 11 quarter basis point rate hikes right now. So that means that if you think that bond yields are
going to go up based on Fed policy you have to believe that the Fed is going to raise rates more than eleven times. And we're taking the under on that right now which means the bonds are going to offer opportunity either way while the bond markets seem to be supporting you. So far this week Emily before we let you go I just want to get your take on earnings because you talk very clearly about sort of the inflation scare me coming on growth scare. And that's what we saw in the likes of like a Wal-Mart Target DAX for example Ross stores. And I'm wondering in terms of earnings have we rerated enough to account for that. Now in fact we look at next twelve month earnings growth in the US and it's actually still picking off. So we haven't really
seen that rerating and expectations as far as earnings growth. And I think if we do start to see earnings estimates rolling over and reflecting some of these concerns you could see it further down like in stocks here. I do want to point out though that the retailers are a pretty small part of the market. So again back to that conversation around technology that's going to be a really critical piece here is when you own the U.S. equity market you know a lot of technology companies. I think the fate of those companies is going to be critical. And it's one area again that we see the most earnings stability and the
best earnings growth prospects into next year. Emily it was really good to catch up. Really great perspective. Emily Roland J.H. Investment and co chief investment strategist. Coming up we're gonna head back to Davos. Saudi Arabia's plan to overhaul its economy is front and center. We'll get the latest from Khalid Al Fella the Saudi investment minister. He'll be joining
us from Davos. This is Bloomberg. We don't have a lot of spare capacity spare capacity is 2 percent or lower in the market to 100 million barrels. That is very low. Right now it is going down and it said quickly ISE all because of it. Plus releasing 400000 every month. So very soon
you will have a world that 200 million barrels or more with basically no spare capacity. Now Saudi Aramco CEO I mean Nasser speaking earlier with Bloomberg Television at the World Economic Forum. I want to go back to Davos now. I'm Bloomberg's Haslinda Amin is with Saudi Arabia's investment minister. Well Alex joining me is call it all follows Saudi Arabia's investment minister. Minister good to have you with us. We heard about Aramco talking about capacity. We know that you're trying to build your capacity oil capacity that is. What are the plans and are you open perhaps to attracting foreign investors to directly invest in those projects. Well thank you ISE. Linda
pleasure to be with you. First of all let me say we're open to investment in Saudi Arabia across the board. Saudi Arabia is doing better than ever. We are coming out of the pandemic of multiple crises that has hit the world hit the region not just the health crises the economic crisis but two oil shocks on supply and demand. In addition to the regional challenges stronger than ever our delivery against Vision 2030 is ahead of schedule. And I can cite a number of metrics that we have. We have exceeded but our commitment to to to the energy sector is consistent with our policy over many many decades. The kingdom has and will continue to be a key anchor for the global economy in terms of delivering reliable affordable predictable sources of energy oil and gas. Gas will be expanded significantly as I'm sure you've heard from
my colleagues in the energy sector and the oil capacity which is being tested today as well as we experience some supply shortages is also going to be expanded. But let His Royal Highness Prince Abdulaziz. Just to be sure Minister you're saying that you're open to foreign investors investing directly in those projects. Across the board in all sectors I said oil and gas remains the purview Saudi interests are you. Are you seeing right now who's president. We're obviously seeing a lot of interest in renewables. We've seen investments and power generation coming
out of solar coming out of wind. We've seen it in hydrogen. And those those projects are well advanced. And there are leading global companies teaming with with leading Saudi company. And the oil services sector is booming in Saudi Arabia. And there are many global companies that have moved to Saudi Arabia and invested whether I'm coal and oil supply chain. But in terms of investments in gas for example I leave that for my colleagues in.
And the energy sector to speak specifically we know Aramco can can do that entire entire thing by themselves. And that's up to them whether they and they have the concession of course exclusively. But I'll leave it up to them if they if they choose to bring in an investor. Saudi Arabia has been looking to diversify its economy. You want to expand your evey space in particular. How is it coming along.
What are the targets. Well as I mentioned we're we're committed to the energy transition both on the supply and demand side and the supply side. I spoke about opening up our abundant resources of sunshine of wind of ample land and infrastructure that that can allow us to develop those projects at the lowest cost. And today both wind and solar in Saudi Arabia setting a global record than the same thing with hydrogen with the electoral ISE accessing somewhat easy manufacturing apart. So that's what this is. Who are you. Who are you in touch on. Who are you speaking to on on on the demand side. Of course we are activating demand for for for renewable energy whether it's in digital whether it's in
mobility. And you mentioned manufacturing. Yes. We've already broke ground. And our first evey assembly plant it's a significant one. One hundred and fifty thousand at the top of the ladder in terms of the quality and the price range of evey would lose. We're talking to at least two other three other manufacturers. I am not at liberty because we're under NDA. But they come from three different. When do you think you can make the announcement than did you not. Would hope to make the
announcements this year on all three. So this is happening rapidly. And in addition to the assembly plants to the OEMs choosing Saudi Arabia as their supply as their location to be a global supplier we're developing the entire value chain for manufacturing for manufacturing components to research and development to material based material compounding to to talent. You know for four for Saudi Arabia to be the most competitive location for evey two of course batteries and mineral materials feeding evey batteries. So big plans to attract foreign investors into Saudi Arabia. Give us a sense of where you are in terms of your FDI target for the year. We know that from last year for instance. You know you saw I guess DAX high FDI because of the Aramco deal. How is it looking for 2022. Well for 2021 we exceeded our target. We started from a low position less than five billion dollars at the beginning of the vision
last year. We we hit we quadruple that. So. So we're approaching 20 billion dollars in terms of the deal. And yes the Rand Corp. pipeline contributed. But even without Aramco pipeline we did we would have exceeded our target for 21. And we see that trend continuing. You know that oil and gas energy sector will continue to be key to Saudi Arabia to the region. We are endowed like I mentioned with abundant resources. Petrochemicals will grow as more molecules from our natural resources are converted into petrochemical materials increasingly durable materials that are used for sustainability to displace metals into the manufacturing into the construction space. So but but we're seeing new sectors attract a lot of FDI sectors that you would not such hours have associated with Saudi
Arabia. Well tourism is a big sector for the kingdom. And we're we're you know again quadrupling the number of visitors that we're attracting to the kingdom not only religious tourism which we are proud of as the country that that that that that has Mecca and Medina but also cultural tourism tourism and to our archaeological site yet undiscovered as well as discovering our heritage our people our culture our value to you. Minister about the free zone it easy. Give us an update on that. Well we have four zones that have reached an advanced stage of structuring their value proposition. They will include logistics. They will include unique manufacturing value chains in them both in the
East Coast and the west coast of Saudi Arabia. They will be one their own financial services and to host regional headquarters from around the world in the capital city of Syria. There will be some in tech hosting cloud computing and high value technology sectors to be attracted to the kingdom given access to talent access to incentives and an ecosystem that allows them to compete globally in terms of investments. Can you quantify that. I mean what will that translate to.
As I mentioned earlier our targets are ambitious. By 2030 we're going to attract annually over 100 billion dollars of annual flows of FDI. And of course this will be coupled with significant domestic investment investment from the API from from leading Saudi companies as well as from the Saudi private sector. So the size of Saudi investment will be large. We believe we believe that the special economic zones will contribute something like 20 percent of their total investment flows. But it will be more catalyzing this sector and not limiting investments from the base economy. The base economy
will continue to be you know the platform on which most of the investments will go. Minister just one final question before we let you go with some speculation that perhaps you allow alcohol in some of these economic zones. Can you clarify that. Any. And I think you mentioned it's speculation. There is no policy change in Saudi Arabia. Saudia Arabia is firmly committed to its values to the wishes of its population. And we are proud of being as I mentioned the hosts of Mecca and Medina the two holy sites for Muslims. And also we know that our population is also proud of our heritage our religion. We believe our proposition our our quality of life is still very very competitive. Without introducing alcohol into our country missile folly. We thank you
so much for your insights today. There you have it guy heading back to you. Athena thank you very much indeed. Haslinda Amin with Saudi Arabia's investment minister in Davos. We'll be back to Davos very shortly. Much more ahead. 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 which could get better. Pfizer plans to sell its entire portfolio of brand name drugs that cost in as many as forty five lower income countries. It's one of the most ambitious drug access programs ever announced by a large pharmaceutical manufacturer. The initiative will start in five African countries with twenty three drugs for cancer rare illnesses and other conditions. Two internal candidates are emerging at Societe Generale to replace CEO Frederick O'Day who is stepping down after 14 years. Sama Cooper has been running Sanctions Investment Bank from New
York for more than a year. He's been at the bank for more than two decades and has a harsh managerial style. Sebastian Protégé runs some as domestic bank and has elite credentials. The CEO search will go on till the fall and that is the latest business flash guy. Thank you very much indeed. Coming up Ireland's foreign minister says it's up to the UK to move away from quote unrealistic demands on the Northern Ireland protocol. We're here to discuss that. Michael Barr in the tea shop is next. This is
Bloomberg. A lot of turbulence in current markets that shouldn't put us off our mission which is actually to provide stable returns over a longer term than it's really inflation which would probably only watch for the most. We are an hour into the U.S. trading session. You're looking at stocks right around the highs of the session. The S&P up by seven tenths of one percent. Bloomberg's Abigail Doolittle is tracking those moves. Abigail. Hey Alex. Well another day of whipsaw as we now that S&P 500 up seven
tenths of one percent as you were just mentioning earlier down about three to four tenths of one percent. Some intraday volatility that we have seen in recent days weeks months this year really. It is continuing today. But to the upside you can see that the Nasdaq 100 doing even better up 1 percent perhaps confirmed by the idea that it's a risk on day. Yes I was. RASCOFF When you had stocks lower and bonds higher but today bonds down just a little bit. That 10 year yield up 1 basis point. And you can see that the VIX holding steady below 30. So again there's a little bit of a risk on mood here for stocks and risk assets. Now relative to that recent trading I was talking about the Nasdaq 100 maybe higher on the day but in the month of
May it's pretty rough down seven and a half percent. That of course after a very difficult April and you can see the movement down. And then this intraday chop right now from a technical standpoint what you would want to see if you are bullish is to have that last high taken out on the 17th 18th in there and then maybe you could have some sort of a near term bottom that would support at least a near-term move up. Again the downtrend on the year is pretty severe. Plus while we do have big tech higher
today including Apple holding support and Amazon and the like Amazon is on the cusp of perhaps moving missing losing its 1 trillion market cap mark. Here is a chart of this. And you can see that Amazon back in 2020 above that one trillion dollar mark almost at 2 trillion quite frankly for much of last year. Right now right there on the cusp. That would clearly suggest if that happens that maybe the Nasdaq 100 is not going to make out that last high and that this downtrend will continue. Speaking of movement the retail sector who is on the move. We have or earnings actually starting out with Toll Brothers up six point eight percent. The luxury homebuilder they put up a very strong quarter. They did talk about softening demand for the third quarter. That would be in
line with the new home sales issue which disappointed guy as you know. But nonetheless investors like it today. Nordstrom the high end shopper are out and about. SALES beat by 6 percent. They raised the outlooks. So lots of strength there. And then Kohl's a nice bed there up thirteen point four percent. They of course had a disastrous quarter in outlook but that is leading some to think that there could be a buy out there. So you see some possible speculative buy out surge there for Kohl's up 13 percent guy. We got great stuff. Thank you very much indeed. IBEX Abigail Doolittle. What's happening in the markets. Let's return now to Davos. Haslinda Amin is with the Irish prime minister Michael
Martin. Over to you has Linda. Well it is. Me whole margin. The Irish prime minister with me promising good to have you with us. It is still about the dispute over Northern Ireland protocol. We currently have a US delegation in Europe. But some say it's more symbolic than significant. What's your take on it. No it's much more than symbolic because the US involvement in the peace process in Ireland has been one of significant substance over the last number of decades. And when someone of the experience of Richie Neal chairman of the Ways and Means Committee of the House leads that bipartisan delegation both Republicans and Democrats report to Brussels to London and to Dublin. That is significant particularly given the desire of United Kingdom government to have a trade deal with United States and also the genuine desire of the US and these representatives that the Good Friday agreement would be enhanced not undermined and that the carefully calibrated work that has been done in respect of the design of the protocol would be upheld. No we had good
discussions with I had good discussions with them during the week. I mean they do understand the need to work on the operation of the protocol. But the trade representatives and those with experience of trade on that delegation really couldn't see anything that couldn't be resolved in terms of the technicalities around the protocol and the issues around the operation of it between the UK government and European Union which I thought was quite helpful. But realistically what can be achieved. What is the best case scenario. What's the worst case scenario for you. Given that it was signed in 2019 a year we are still in dispute. The best case scenario is for the United Kingdom government to engage in intensive negotiations with the European Union with a view to bringing about a resolution to these issues. Disputes of this kind. Need a will to resolve
them. I have question myself whether that will exists particularly within the United Kingdom government for quite some time because when I met with the European Union vice president last year I asked him to go to Northern Ireland meet all the parties listen and come back with new proposals. He did all of that last October came forward with significant set of proposals but he was not reciprocated by the UK government at the time. That has been changes and so on in terms of the negotiation team. This trust is now in charge. So in my view the UK government hasn't given that process a chance. And we're concerned as to whether there are different agendas at play or whether the UK government really wants to settle this because I don't see the landing zone for the UK government that are not clear what would result this I am clear about politicians in Northern Ireland have a fair idea of where the unionist politicians are their concerns and where they would like to land this particularly goods going from UK to Northern Ireland. I think if the technocrats were allowed to engage people from
industries it should be given a voice at the table because we met them recently there. They're saying to us the protocol is working for manufacturing it's working for the meat industry it's working for the dairy industry. There are smaller sectors where it's not working optimally for them and therefore they have to knowhow and expertise minus the politics to resolve genuine outstanding issues that are there. Dani Burger Minister in your view is the UK acting in good faith. I mean when it signed the protocol back in 2019 do you think the UK knew exactly what were what they were signing up to. Well I think oh
yes they knew exactly what they were signing up to. And in fact all the documentation would attest to that. I mean the implications of Brexit were spelt out but also the implications of the protocol. And it was a British prime minister who recommended the protocol and the trade agreement to the United Kingdom parliament which then subsequently ratified the international treaty with the European Union. And it's the UK government really has decided now to indicate that they're now contemplating reneging and undermining that international treaty unilaterally. Now that's not how democracies and countries of like mind normally behave. And I would appeal to the UK government that to engage with the European Union. They have said to be fair that they are willing to engage but they've now put another sort of demand on the
table that if we don't get to where we're going to go ahead with this legislation anywhere and that's not what we normally engage in before that all options are on the table. What are you referring to. Is a renegotiation even an option. No. When I referenced renegotiation that was in the context of the European Union response to the United Kingdom Union unilaterally enacting legislation to get rid and tear up the agreement that it entered into with the European Union. The European Union are saying all options remain on the table in terms of how the European Union would respond to United Kingdom if that eventuality happened. Of course we don't want to go near there. We're just all experiencing these number
of days talking to representatives from the Ukrainian government for example. There's a terrible war on the people of Ukraine which is affecting all of Europe. United Kingdom has led well under Ukrainian war. I give credit to the Kenyan government for their leadership in that respect. But geopolitically UK Ireland United States should be in alignment on the big issues. These issues should not be the subject matter of dispute of this kind that can be resolved. I'm certain of that. I know the detail of this. The detail of this can be resolved if there is a will on all sides to resolve it. And I would appeal to the British
government to really engage with the European Union and through the vice president Mauricio Covid who has been extremely flexible in respect of this issue. Can it be resolved before you leave office in December. How well optimistic are you to be in government in December. But we have an arrangement to with our coalition party. It can of course be resolved before Christmas. It comes back to that issue of if there is a will there it certainly can be because the issues themselves are not of a kind that should prevent resolution. That's my genuine view. If there's honest engagement on all sides and that is the wish of all at European Union level and also they have no desire for further disruption or for further trouble. We have enough challenges. We've just come out of Covid-19 or the emergency phase of Covid-19 where Europe has responded very well. We now
have this terrible war in relation to Ukraine. We have significant cost of living issues and economic issues. We don't need this dispute. Some say that perhaps if talks fail there could be a trade war between the EU and UK. What are the prospects of that. Well unilateralism by one party can create that response. But nobody wants that. And so that's down the line. But that's something that we do not want to contemplate at the time of COP 26. Last year we again had a similar moment like this where I think Britain pulled back somewhat from some of what it was it threatening to do at that time. And that's becoming frustrating for member states within
the European Union and for the commission that we have to stop start approach to the engagement that we have these kind of threats of unilateral action from time to time. And that's not conducive to a constructive resolution of the issues. Prime Minister we know that Europe is trying to cut its reliance on Russian oil and gas. And of course Ireland is doing the same. But in that transition to renewables you're also I guess coming across high prices. In fact that transition could cost you 30 percent more. Is that impacting your transition to a new place. No. I mean our fundamental challenge in terms of moving to renewables will be structural delivery planning. And we're working in that. We've created a streamlined planning framework for offshore wind development in Ireland. I mean for the next decade the big investment in Ireland will be offshore wind.
We're one of the windiest sea coasts and art in particular the western seaboard and in the world. So wind is Ireland's oil and that's what we're going to play it for the long term and certainly by the year 2030. We want to be exporting energy and that's our ambition and what the war in Ukraine is teaching us and indeed the rest of Europe. And when President von der Leyen puts the grants up on the wall there's only one journey here. It's a journey towards renewables. We're going to double down on that notwithstanding the enormous pressures at the moment on the prices around fossil fuels and so on and energy issues. I think
this is a watershed actually in the transition from fossil fuels to renewables. And I actually see an acceleration and a lessening of the dependency on oil and gas. This war is also causing escalating inflation and it's costing people a lot of grief. There is a cost I guess crisis right now. Is it about to get worse before it gets better. I think it will be very challenging to the end of the year and probably will get worse to the end of the year. But again you know various companies are taking measures to ease the pressure on people. But the war is having an impact and the war has many facets to it. I mean Putin
knows what he's doing in terms of the creating the terror in Ukraine. That's led to a huge humanitarian crisis the worst since World War Two an energy crisis and now significantly a food crisis potentially famine. When you combine the absence of exports from Ukraine in terms of grain and so on with other droughts in the Horn of Africa and so on we're facing very difficult scenarios internationally and globally into the future. But we've got to hold the line because what's at stake here is our fundamental values of democracy of freedom of speech free media. And I genuinely believe in my president. Biden says that there is a very significant challenge ahead of us between those of us of like minded states
democracies who cherish these values versus the authoritarian regimes and those who want to really snuff out free media. Who want to undermine the country or view it and society. Freedom of of of of opinion. These are something these are values that can be taken from us by authoritarian leaders more quickly than perhaps we might think. And therefore you know what I'm saying. Basic to our peoples we didn't want this war but nonetheless the consequences of it would be felt by all of us in all societies in Europe. But once we have the clear vision as to why we're taking the stance we're taking then I think people will will will wear that and take it on board and put the shoulder to the wheel to make sure we can absorb these pressures and come out the other side stronger and better. Irish Prime Minister Michel Martin we thank you so much for your time today of course. We're coming to you live from the World Economic Forum here in Davos. Guy. Back to you. Thank you very much indeed. How slender now
her slender was speaking to the T shock there. The British Prime Minister Boris Johnson has been fielding questions at a press conference at 10 Downing Street in London not related to the Irish protocol but related to the publication today of the Sue Gray reports into the party Gates saga. The prime minister is continuing to answer those questions. Let's take a listen to what he's saying. The kind that we'd never seen before certainly not in my lifetime. Its effects were unknowable. And all the medical and scientific advice was that you had to proceed by known pharmaceutical interventions. You
had to get people to behave according to certain rules. So I don't think the floor was with the with the rules Tom. I've got to you know we should have we should have recognized that the boundary between work events and and socializing for people who are continuously working together in the same place was going to be hard to draw and we should have which we think should have been done differently. And they certainly are being done differently from now on. Your point about incomes which is the crucial thing. And look you know the Covid pandemic cost the government a huge it cost taxpayers for and billion just to
support businesses and support families through the. It's left a very difficult fiscal position. Employment is very strong. Some features of our of our economy are extremely strong. But there's no doubt because of the the global supply chain shocks exacerbated what. By what. But by what Putin has done in Ukraine by the spike in the price of energy. We're going to see pressures for a while to come. I've just got to be realistic with people about that. We can see pressures on household finances. So what I'm saying to people is that we will continue to respond just as we responded throughout
the the pandemic. It won't be easy. We won't be able to to fix everything. But what I would also say is that we will get through it and we will get through it well and that we have the British Prime Minister Boris Johnson speaking at 10 Downing Street. The bulk of the questions on what is happening as a result of the Gray report but nevertheless the prime minister there addressing the issue of the cost of living squeeze. There is an expectation possibly by the end of the week that we could hear from his chancellor in terms of providing further assistance for the British public. Coming up Twitter's annual shareholder meeting kicks off in around two hours. But the question on most shareholders minds is not even on the agenda. What's the latest detail on Elon Musk's offer. We're going to go to California next to try and get an answer. This is Bloomberg.
This is Bloomberg Markets IBEX could get to you're looking at a live shot of the principal room coming up several. Abdul Aziz Malaysia's finance minister joining my television 11:00 a.m. New York time. This is Bloomberg. One corporate event you don't want to watch today is Twitter. It's holding its annual shareholder meeting. It's kicking off at 1 p.m. New York time. And obviously the big question on everyone's mind is the potential sale to Elon Musk. Now one of the Twitter's founders said this morning that this meeting could be one for the books. This sort of feels like the Ragnarok of Twitter annual meetings where there's there's only sort of one option that shareholders are looking for which is to know that the deal is going to go through. Because now the deal price looks like this amazing
deal. And the rest of the world has melted down. And I think the questions are just going to be can I get my money now. Joining us now is Bloomberg's Adler who is outside Twitter's headquarters in Brentwood in San Francisco. I read the Twitter stock 36 42 up by 2 percent today. That is a far cry from the ask price. The original ISE price from Elon Musk. What are we looking for today. Yeah I mean whether you're a shareholder or you're a merger arbitrage specialist there's a number of
scenarios and outcomes that we're trying to discern. Right. And Elon Musk bid to buy the company isn't even on the agenda. But you have CEO Para Geiger while CFO Ned SIEGEL participating in a Q and A. And so you'd imagine of course they'll be asked. You know on one hand I think there is acceptance that fifty four dollars 20 cents per share the current bed just isn't going to happen. But you're also trying to calculate an outcome whether the deal doesn't happen at all. Wheeler Musk of course as you
guys know says that it's on hold until he gets more information about the percentage of users on the platform that are bots. But somewhere in between an outcome where there's no deal when trying to price that. And fifty four dollars 20 cents a share is a price more reflective of what we've seen in markets recently. And of course Twitter was a late seller in the in basically the
tech bear market we saw in recent weeks and months and has seen further pressure because of snaps revision to its guidance for the year. So is there going to be a deal. But also does Elon Musk come back home with a lower price. Yeah. Okay. To that point Ed what does on hold mean. What do people think on hold means right now. Yes you'll remember last week that we reported at Bloomberg there was at a all hands meeting at Twitter feature Get a who's the sort of chief legal officer at Twitter told employees in that meeting. There is no such thing quite as a deal on hold. We've spoken to many lawyers we've spoken to many bankers. Once you've signed that deal a deal isn't on hold. Yes. You could come back in and renegotiate at a lower price point make a renewed offer but you can't just put it on pause. So this is
classic Elon Musk right. Going to Twitter stating his side of the story but not having a mechanism to ask him more about it. And this may be an unfair question but the vibe there. I mean shareholders want this to go through like they into this deal. Well I just think back to that fantastic Jason Goldman quote about Ragnarok right. Norse mythology the end of the world as we know it. Fifty four dollars 20 cents a share seems an unbelievable offer right now. Put yourself in the shoes of the
shareholder. And that outcome versus the worst case scenario you'd probably take it right. But I think there is a concern that whatever happens Twitter has to change. Elon Musk has talked about moving from an ad based model to a subscription model. Well the world has changed overnight right. We're thinking about advertising models. And in the macro environment that we're currently living in with something kind of has to give. And that's what I'm hearing not only from Twitter shareholders but insiders as well who are trying to get to work on a product. These are product engineers who have been working
on something for some time and they're worried that if it almost comes in they'll have to pivot in a dramatically different direction. How did SNAP change that equation adds a snap story was about the macro. The advertising slowdown. Yeah that was a shock for a lot of people. It was a shock for two reasons. One they gave a pretty bullish forecast very recently about their user base but we forget don't worry about users. Advertising is not beholden to the user level and the growth in that metric. It's about the confidence of the consumer and the confidence of advertisers. And quite clearly that is shot based on what's going on in the global economy. Great stuff. Thank you very much indeed. At Ludlow joining us from San Francisco outside the Twitter meeting this is
Bloomberg. Coming up the European close quick check on the price action stocks are paper brought by around a tenth of 1 percent. We're waiting for the Fed. Euro dollar a little softer today at some point critical levels I think judging by the charts. A little bit of a softer language coming out from a number of Fed speakers today. So dovish down. Brent crude up a little bit. We're trading 114 right now. Plenty to talk about when it comes to the crude market. Timothy actually Bay Asset Management
joining us next to talk more about Russia as well. This is Bloomberg.
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