Bloomberg Markets Full Show (05/10/2022)

Bloomberg Markets Full Show (05/10/2022)

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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 Tuesday May 10. Here are the top market stories that we're following for you at this hour. A turnaround Tuesday. Stocks bounced back after Monday's wipeout by markets. Catch a bear. Do you buy the dip or sell the rip. And Palatine is not for everyone. Stock tumbled as it posts a deeper than expected loss and cuts its revenue guidance. The latest pandemic stock to just come crashing down to earth. And the Fed's bright side strong economy weaker inflation. New York Fed President John Williams floats the best outcome for the economy and a higher rate environment. We're gonna speak to

Cleveland Fed President Loretta Master in the next hour from New York. I'm Alix Steel my co-host in London. Guy Johnson welcome to Bloomberg Markets. So guys this was the volatility that I missed in the last four months. Absolutely. Back with the bank turnaround Tuesday whipsawed. As I said yesterday Alex we've all got sore necks. Left right left right. Which way is it going. It's like watching a tennis game in this market. And we continue to monitor what is happening with the central bank story which is front and center. We'll try to figure out which central bank is communicating the best or the worst right

now. Well we've got some input from Doctor Professor Margo over at the Bundesbank saying that he backs the first interest rate hike from the ECB in July. Nobody really expects it in June before he signaling that we could see the end of QE coming in June. So the balance sheet is still being expanded remember over at the ECB. That could come to an end fairly soon. Mustn't let elevated inflation become entrenched. German inflation is gathering momentum.

Obviously a huge day tomorrow for inflation on both sides of the Atlantic. Delaying a policy turnaround is a risky strategy. Expects net asset purchases to end in June. Alex. No sign yet of second round effects on German wages. I don't know. Maybe disagree with that one. I look at what he gave Mittal is looking for. I think it's 8 plus percent right now. That feels like a second round effect. But yep the central bank story front and center inflation up front and center. But I feel today as you say it's kind of a reaction to yesterday that massive market move. Yeah. Interesting. Euro dollar is actually a bit lower despite those headlines though not enough to really support the currency there as we're almost there at parity. So let's dig

deeper into this whipsaw action. Here is our Question of the day. Do you buy the dip. You sell the rally. We're going to ask David Sneddon head of technical analyst analysis over at Credit Suisse. David what do you do on a day like today. What are the technicals telling you. Good afternoon. Yes. Turnaround Tuesday and counter trend

Tuesday as we would also sometimes sort of call it. I think our view is to sell that bounce still. It's the decline that we've had has been pretty impressive. We've seen a lot of momentum. The downside. We've taken out quite a lot of support levels and we've held a tactically a bearish view on the US equity market and we're still not at the bigger support levels we're looking for. So our view is at the moment you're clearly below falling short medium long term

averages. You're making lower lows and lower highs. The momentum is fairly strongly negative and trending lower. So our view is this this is more of a temporary bounce. We don't see a huge amount in terms of just the sheer distance from the downside to where we see our next major support level at the moment. That's around 38 50 and where we see the whole bigger cluster of support levels come in. So our view is to sell into sort of a bounce or look for a bounce to fade and move down to there. But our base case is then really to be looking for some type of throw at that 38 50 area because at the moment what we've seen I think the equity market is it's not been a full across the board rollover. It's been this very much a cyclical growth tech led

move rather than sort of all in move. Well let's talk about that. There's a lot of people questioning David whether or not yesterday was a major bottom whether it was capitulation whether it's something you can work with. I think you've already answered that question. But you're alluding to the second part of what we want to talk about which is what is happening internally within this market. As you say a lot of stocks didn't take part in yesterday's move lower and it was a big move lower. But it was very selective. So where are we in the growth value debate.

I think that sums up the market we're in and insists on. On a broader basis you know we think the market's been more in terms of the base case we've been looking for. Technically it's more of a bigger mean reverting range. And what we've had is is very much the sector in style driven themes that have taken place. And so far I think those things probably continue. If we look at

things like the US growth to value ratio which has seen a sharp fall already we think that that forward has extended below some further significant levels which suggests that we do continue to see growth growth underperform further and this leads that the market lowest. And we still think real yields especially which is a key part of that story will continue to rise. But when we look at some of the classic defensive sectors when we look at things like energy that's been talked about when we look at the value space. Yes they've come under pressure. But I think the key story there is purely from a technical perspective they are still holding some really really big support. That wasn't. And unless those levels were to break then then I think you know we are still looking at this fragmented theme of sector driven moves rather than a broader index. Thanks David. We'll get to

the other real yields and inflation in just a second. But I wanted to just talk a little bit more about growth. Is clearly going to be a difference between like Google and Apple and the politicians of the world or the revisions of the world. And I guess the question is when do you know it's time to buy these large cap growth stocks and tech that do make money that are huge that we're definitely not going to live without. So I mean we tend to focus we don't actually look at sort of the individual stocks so we focus more on the sector side and the things we would be looking for is now clearly signs of capitulation exhaustive moves lower moves lower into major support levels that are not confirmed by momentum but also some more evidence of a peak in the real yield picture as well. I think that that's a key part of this with that with the growth and tech story. And our view is we're not there yet. We think there is more to go on that. But those are the type of things that we will be looking at and where they then align with where we think the major long term technical support levels come in.

David let's just talk a little bit about about what is happening with the inflation story the president's going to speak on a little bit later on. We also get the big number coming out tomorrow. A lot of people are watching what is happening in the bond markets and trying to judge where we go next there because the bond market is being whipped around just as much here. Real yields obviously a focus. But tell us what is happening from your perspective in break evens right now. Are we getting to peak inflation. Why it is peak. Where does inflation go next. What a break evens telling us about the trajectory we're looking at here. I think there is growing evidence from a technical perspective

that we are getting to peak inflation suddenly in sort of the interim term. We've seen tenure use inflationary Cubans essentially until we saw that this used issues go on and as you were pretty much capped at the highs of the last 24 years and now they started to come back. But these levels and argue technically within 10 years inflation rankings have now actually put in the top on their break below 278 basis points. So we think the risk is

lower for break evens. And then essentially that's been a bit of a base case for us for this year. Last year was all about the raising break even inflation story. And that gets rising nominal yields high. This low yields not dramatically we think we're seeing. No I don't think we go dramatically low. I think what we do is the main I think from all sides were calling for a peak

but not as a big collapse. I think we're looking for a peak in then looking to be an elevated range. So around about 258 256. And the downside is probably the most we're looking at. And that then defines the lower end of a range that then allows essentially if we are seeing a peak in inflation break evens it makes it mechanically more difficult for nominal yields to rise dramatically further. But clearly then you just still have the risk that real yields continued to rise. And that's kind of the

roadmap that we're looking at technically. Right. So less and unreal yields there. So then what's the projection of you. You have those inflation break evens rolling over. Yeah. So we think real yields I mean we're clearly getting a bit of a pause in the bond selloff in here. And nominal yields are coming back as well as real. It's coming back. We still think this is a temporary pause before yields rise again. But it's going to be more given the inflation break even story more of a real your life. So we think 10 year U.S. variables can still raise the 65 basis points. And that's essentially our ultimate sort of big resistance that we see on the upside. And that's what we look for the move to stall in terms of bond yields. We had a 321 326

target that was the 2018 high. We kind of view maybe we can overshoot to 343 45. That type of area. But that for us certainly for this time that would kind of be it on the on the top side and the inflation break even story would kind of limit how much more bond yields nominal bond yields can rise from here. David great stuff. Always a pleasure to get that perspective on what is happening in these markets particularly at moments like this. David Slavin Credit Suisse head of Technical Analysis joining us really kindly. Great to get his take on what we need

to pose that question that we're imposing today to our next guest. You buy the dip or sell the rally. So here's a here's a quote from Anna Hahn Wells Fargo Securities equity strategist too. We get to talk to you next. When does the pain stop. We think 10 year break even rates currently two point nine needs to fall below 275 before growth can find a longer term footing. That happened yesterday. David was talking about it coming down the break even but not that far. We're gonna get an update from Adam next. Really looking forward to this conversation. This is Bloomberg. See quite a bit correction now there has been quite a flash sales which have been really traumatic position squaring just d risking across the complexes the sentiment in markets is obviously incredibly bearish right now. We have seen a huge

absorption of a lot of worrying things for investors are all signs that is getting there with the pricing in. We're starting to see some forms of capitulation not blow off the top really heavily. We haven't seen that capitulation moves. The question is where do we go from here today. Just be one of those dead market. The cost base is in a market. There's still a great deal of uncertainty about the near-term trajectory but we're sort of waiting to see here a tradable rally. Is it likely the next few months. Sure it is. I think we're starting to get closer perhaps to the bottom may be what we should be doing is looking at our shopping list and buying some things. Equities are starting to look attractive for medium to longer term and

there might be some opportunities coming in on the horizon. As some of our guests on Bloomberg Television on the recent market swing all things to Kelly lines by the way is a welcome back gift to me. Thank you very much. And that brings us to the Question of the Day. Do you buy the dip or do you sell the rally. When I ask a hon equity strategist at Wells Fargo Securities and that's a question by herself. Well you know we've been telling investors that on a year to day basis below 10 percent we would start looking for buying opportunities. But to really buy the rally we were more buying

into weakness. The question always becomes what's a buy right. We're not looking for passive investing here. We're looking for parts of the market that are undervalued and has a little bit more of a longer term play. Originates with interest because it fitted really well with what Dave Sneddon was just talking about from from Credit Suisse talking about what is happening with break evens and a big day yesterday big move LA in break evens. Obviously we get inflation data coming up. The president's going to be talking about it a little bit later. You had a key line in the sand. You get below 275 on us 10 year break evens. You want to buy growth. Do I want to buy growth.

Well we're starting to think about it now. So you're right. Break evens or inflation expectations on the 10 year U.S. Treasury yields have broken below two seventy five. And the reason why we drew that line in the sand we think about a two fifty two to seventy five range is indicating to us the market believes that the Fed is starting to have an impact on inflation. If they starting to balance the demand side of the equation so that it brings it more in line or balance with the supply side which has been wracked with supply chain issues. And in that kind of environment to us we think that's a little more

friendly for the growth style. You've seen how much the growth side has underperformed and how much of that has been a repricing of valuations on that kind of style. So for us we always like to take that sort of contrarian view and look when do we get back in before everyone else does. So to be fair it's not the most low risk play but that's something that we always look for in the best opportunity where in growth I mean we're talking like big tech and we talk in the mean stocks. Are we

talking consumer discretionary. Well to us that means stocks are probably a little too high. Price volatility for us something we've seen as a trend and we're not quite ready to go the other way on is a high price. Volatility has just really been a basket that's been unloved and we think that could really continue. But some part about risk

appetite that suggests that there still may be some despite this aversion for high volatility is that when you look at that there's still a bid from value factors for that cyclicality and that exposure to economic sensitivity. So when you put the two and two together that's something that tell us that there is some willingness to take risks but we wouldn't necessarily go as far as the mean stocks the tech side of the equation. Now you've seen a lot of tech has been beaten up and a lot of that big tech still remains high quality. I think high quality is a good feature to have as we get this late in the cycle. But I think really what we look at is we want growth at the right price. Let's talk about where inflation goes and how low it goes. Mr. Snedden was saying that break evens are going to come down but not that far. Let's call it two and a half and then they're going to kind of remain fairly anchored around that kind of a level if that is the case. Does that change your thinking around

where you want to go. If we do see Elevate as sort of inflation remaining reasonably elevated for quite quite a while do I really want to get into growth stocks and how can I make that call if I really actually don't know how far the Fed is gonna have to go in order to quell inflation back to Target. That's the big question guy is is the Fed falling behind. Are they on target. Are they going to have to accelerate later. These are the worries that really have shaken the markets in the last few days. I think for us the reason why we watch break evens is it's sort of the investors putting money where their mouth is to really express where they believe or how much impact they believe the Fed starting to have on those inflation and bringing down inflation. So to us to see that break even on the 10 year stay within that two fifty two to seventy five range I think that's reasonable for going forward and in the medium term and perhaps for the next several months. And in that range we

still would probably look to add to growth. That's what we're thinking about right now actually. And we're going to actually stay above the two seventy five. I think then that would indicate to us a little early to rotate into that growth style. So this kind of planning that we're doing kind of case scenarios we've been playing out in a different way of looking at it is the wide band that we've seen in the terminal rate from the Fed from many different guests. I mean you could look at any any research paper and you get 2 percent you get 8 percent. It's hard to know how to value equities when you have that kind of a spread of a terminal rate. That just means more volatility down the road. How do you hedge then. That's a great point. You mentioned the volatility down the road Alex because when you look at that VIX futures curve you're

seeing that it's not just the spot levels on the VIX that's elevated the front. Few months are also up near current levels. So it looks like the market is prepared for volatility to remain a little bit higher. And something that we've projected coming into the year is more vol spikes more S&P pullbacks. One way to hedge that you can look at broad downside protection in the options market. A lot of investors and the market's been suggesting that actually downside skew is not too expensive on a historical basis. Another manner that you can approach this is to look at low volatility defensive sectors. Some of the

traditional defenses we've seen that have done a bit better this year are the utility sectors reads Staples as well. But keep in mind that these kind of sectors can also struggle. And when you see these kind of inflation expectations come down. So to us that's why we're looking more of a opportunity in something where more valuation a little more time to break even story. So that's the kind of reason we're looking at the growth style right now. OK. And a final question it kind of wraps it all up. A lot of people have got into cash. Is now the moment to be getting out of cash. When do you think that moment comes. You're kind of you sound like you're kind of

getting close to pulling the trigger maybe. How close really are you. And if I'm sitting in cash right now. Do I want to be getting out of it. I think you want to be you know preparing and as we say sharpening your pencils here. Everyone knows what the inflation figures are seeing. Just sitting on cash could be you know it's

a loss just because of inflation. So again that's why we've been telling investors start putting money to work below these levels on buying into weakness a little bit. But again where to buy. And I think growth might be our next pivot. We just want to see these break evens being able to show this trend below to seventy five. Just to be a little bit more than a day or so that we've seen so far. And I think that might be our push to incrementally start looking into the style. And it's a bumpy market. I hear your caution need to see a little bit more action to make sure that the move is confirmed and a great staff and a hand. Wells Fargo Securities equity strategist thank you very much indeed.

I want to take you to the Senate Banking Committee. The Treasury Secretary Janet Yellen is speaking there. She's speaking on the Financial Stability Oversight Council Council annual report. Some of the headlines coming out talking about the fact that banning abortion would hurt the US economy. Straight to the politics of that. Important to pass legislation on stable coins. Climate change is an existential threat to our future. Transition risks in climate change are very real. Cybersecurity certainly an imminent threat. So she's covering quite a lot of ground already during that hearing. We'll continue to keep you

updated on what is happening here. I'm assuming you can follow it if you want to. On live go on your Bloomberg. 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 as a politician plunging the business company reported a bigger than expected lost its revenue guidance and signed a deal with JP Morgan Chase and Goldman Sachs to borrow seven hundred and fifty million dollars in five year term debt. The results suggest Palestine's comeback and that is still a long way from taking hold and a big transaction in the drug industry. Pfizer's agreed to buy Bio Haven Pharmaceuticals for eleven point six billion dollars in cash to get an approved treatment for migraines headaches. Meanwhile Bio Haven shareholders will get one half of a share of new Bio Haven a new company that will retain some compounds in development and in pro football. Tom Brady isn't retiring yet but when he does a

star quarterback will join Fox Sports as an analyst. Fox CEO Lachlan Murdoch says the timing of that retirement is up to him. Brady said in March he would return to Tampa Bay ISE 2010 season after previously saying he would retire. Brody has won seven Super Bowl championships and that is the latest business flash guy. Excellent news. Kelly Lyons is delighted. Coming up gasoline prices in the United States hitting an all time high in an hour or so. We're going to hear what President Biden might do about that. Gasoline prices front and center in this story. And as we head to break talking of an inflation story Janet Yellen is speaking before the Senate Banking Committee.

A number of different headlines coming out of the treasury secretary. She's now being asked about Russia where she was just a moment ago. Senator Warner is asking her questions. And Janet Yellen saying that Russia is clearly in recession and that inflation is probably running at around 20 percent. U.S. inflation is running at circa 8 percent. The question is exactly how quickly is it coming down. You got a hot print tomorrow that changes the narrative for U.S. markets. You get a slightly cold print tomorrow then that's a completely different story. So there's a lot going on here around the inflation story and we're going to continue to focus on that.

That's the treasury secretary answering answering questions. As I say she is speaking in front of the Senate Banking Committee. If you want to follow along what the treasury secretary is saying you can do just that. Of course this is Bloomberg. We offer you all the options you can do. So as it says on the screen on live go definitely prices next. The feed through to inflation. That's what we're doing here on Bloomberg. This is Bloomberg. I think we should make it work my colleagues on that.

Thank you. Thank you. Senator Scott from South Carolina. Thank you Chairman. Thank you. Breaking. Corner brings abuse of a breaking story that's just silly. The Bloomberg terminal. The Ukrainian grid which manages the transit of Russian gas across Ukraine is saying that one of the key entry points for Russian gas into that network is being is being shut down. The Ukrainian grid is declaring force majeure on this entry points. And what they are saying in Shery Ahn enough Alex is that Russian actions are disrupting the transit to Europe gas transit to Europe. Now few days back we spoke to NASDAQ Gas the CEO of NASDAQ Gas in Ukraine. He was saying that at the moment the Russians are being very very careful to make sure that they

they don't hit the transit facilities i.e. that gas can continue transit. They're heading domestic grids but they're not hitting transit equipment. Now it looks like we're starting to see an impact maybe of the war on that transit of Russian gas across Ukraine as well. That's a fairly major development I would argue. Young European as future is raised by as much as eight percent and a lot of the gas that is flowing has already been contracted. But if you start to sort of disrupt the actual ability to transport it and there's force majeure within the contracts don't necessarily matter which also frees up different countries in Europe to kind of look for other contract options maybe like the US. Absolutely. Which is what I suspect the Mario

Draghi is going to be talking to President Biden a little bit later on when they meet in D.C.. Now that although all of the routes there are other ways of getting gas into Europe but also Ukraine has been a fairly major one. That was effectively the reason why Alex they were building no street to try and bypass some of those those issues. Yeah. So we're going to monitor this in just a moment and we'll continue to update you on those headlines. We also get to take from the White House as well.

What this means for certain product prices as well. But in the meantime we are about an hour into the open here in the U.S. trading session. Limericks Abigail Doolittle is tracking all of these moves as the S&P still up holding solid 1 percent. It certainly is. What a difference a day makes. Alex let's take a look at the 500 to your point up 1 percent. That tech heavy Nasdaq doing even better up one point nine percent. And I say what a difference a

day makes because of course yesterday you have this big sell off. The S&P 500 down three days. Speaking of sell up over the last three days the NASDAQ 100 had been down 10 percent and the dip buyers are out. One help of course the pressure of yields rising. That's not the case today of bonds rallying the 10 year yield coming in about eight basis points. You also have oil about even. So there's not a lot of pressure from other asset classes on stocks. So the S&P 500 right now is going higher. I say right now though because if we go into the Bloomberg terminal it's a brutal downtrend. It's very clear that volatility is the name of the game this year. And you can see the S&P 500 for much of this

year in this downtrend. However it is said that bear markets have the best rally. Now the Nasdaq 100 firmly in a bear market down 25 percent. The S&P 500 right now down about 17 percent. But you can see at the bottom of this trend channel we could see some sort of bounce back up to forty five hundred. It's supported by the RSI which

suggests that you could see momentum increase in the near term to the bulls. But on the longer term picture this chart is pretty brutal. But again today's bounce back could last for what a week two weeks three weeks. We don't know. Helping out though is all about big tech. We take a look at the individual movers really helping for the S&P 500. It's all about your Microsoft down 24 percent on the year but the dip buyers out Apple down 17 percent to buyers are up in video. And Tesla lots of strength here in the world of tech. But again the question is will it last and how long will it last. All right Bill thanks a lot. Really appreciate it. Let's get back to that commodity story those headlines that perhaps some natural gas has been disrupted

over in Ukraine. Now when I was sort of prepping to come back to work Guy and I was talking to a lot of people about what's what are the big themes of the market. Without a doubt it was actually products. You can talk about oil and natural gas all you want but the real shortage globally is the product shortage particularly in things like diesel. And I have this chart that kind of shows the pricing that we're talking about. You have that yellow line which is WTI and then the blue line is ultra low sulfur diesel which is super super clean diesel in oil equivalent. And the white line is gasoline

futures in oil equivalent. And the reason why this has implications is if you're a farmer maybe you can't afford diesel in order to farm your fields. And that's going to have sort of another knock on effect. And the question becomes sort of what do you do about that. What is what I find fascinating about the energy market right now is I think it's trying to price two things and and you have to look at the products for one. And the headline oil prices at the other. I think the headline oil prices are trying to price in the China slowdown. Hmm. And you look at the kind of connection that is being made there. But if you look at what is happening with

distillates that's the inflation story that the president is going to be talking about in the United States a little bit later on. That's what U.S. consumers are having to deal with. It's not the China slowdown. This is a direct relationship to the lack of refining capacity. What's happening in Ukraine is definitely having an impact here. So I think the the two stories are very different. And I think you need to see them that way. One is about China. One is about the inflation story and the rest of the world. And it's much more related to the conflicts in Ukraine. Yeah. And we saw sort

of the pressure then either oil producers to make up for any loss that you might get from Russia which it's not as easy as just like shoving new oil into China to make sort of products. For example the UAE minister was speaking earlier today and talked about her. Where are the other countries in relation to pumping the supply. We were only producing 40 percent of the of the production. What about the others. What are they doing. What about the other producers. What are they doing. How are they incentivized to put more investment to bring more oil. That's the question. Plus why aren't we talking about the guys and the others. There are other countries who have reserves and who can bring more production. Why aren't we seeing projects so someone is pushing them to produce more.

And from what I was hearing from a lot of individuals guy is that what you need. Companies need record high stock prices. Once the stock market gives them the go ahead then they'll invest more money. Until then no dice. Yes. And again it's either going to invest in more production or we're going to get more investment in more refinery capacity because. Again just two different stories and and they are feeling like very different stories at the moment and getting more refining capacity is is something that takes an awfully long time. If you

want to switch refining capacity that can take took to retool a refinery can take a very long time. If you want to take different types of crude and this is the problem the president faces right now. There is crude available. It is reasonably highly priced but it's come down. But the issue is that the distillates the products are not coming down. So President Biden is expected to outline what he's going to try and do about this. In fact do more about this a little bit later on. One topic he is certain to address is this issue of rising gasoline prices. It's not just gasoline it's also diesel as well. So today they hit an all time high. So the average price now in the United States four

dollars 37 a gallon. He understands that he needs that we need to address gas prices. We don't want the inflation to become spiraling out of control and for individuals euro households to become underwater. Joining us now Bloomberg's Washington commerce correspondent Amery Holden. High gasoline prices high diesel prices Amari are a problem not only for the Fed. They're also a massive problem for the president. He's tried to address this already. What can he do now to try and help the American consumer. Yeah on a day like today when you're seeing record prices for retail gasoline and retail diesel it's going to be the elephant in the room and the president tries to address inflation head on. What he's going to say is likely tout what they've done so far to try to quell these pump prices. But Guy you make a very

good point. There's the oil price. And this of course is the retail price. And the margin between the two has absolutely exploded because we are suffering from refinery capacity around the world. Also the president will likely blame a lot of this on quote Putin's price hike. That's what the administration's been calling it. So let's talk about what they've done so far which is the SPDR releases the E 15 increase in the level of ethanol in gasoline and then also calling on Congress to do more. And then the president is gonna do something else and he's really going to take aim at Republicans and their policies. And this is what you're going to see a lot of shift in tone from the administration as we gear up towards the midterm elections. And

I also wonder are we going to hear anything about environmental regulations from the other side. So some have been pointing to the fact that if you say use shipping rules so the vessels can just burn dirtier fuel. That will help offset the prices because you'll have more diesel say for consumers things like that. Doubtful he's going to say that out loud. Is anyone talking

about that in D.C.. Well the president's likely also going to call on Congress according to his fact sheet. The administration gave us this morning really previewing this speech for actually more cleaner technologies. So that can be you know expanding this capacity in the energy space but towards cleaner technology. The issue that

the president has with a lot of these policies is that this will not impact inflation today. It will not impact inflation and get the CPI print tomorrow. And what Goldman Sachs economists say is that the day we have election day inflation will be at 7 percent right now. March was eight point five percent percent. Seven percent is still very high. And it's the summer driving months that are really going to embed in voters this issue of higher gasoline prices and also higher grocery bills because we are a farm to table economy. To get your food on the table you have to go through trucks. To get trucks you have to have diesel. And the prices of this are just expected to go up. Emory is just going to be a speech about solving the energy crisis or is this going to be a speech about bashing the Republicans.

I think it's going to be a mix of two right. We heard from economists in the White House talking about the fact that the president is going to want to address gasoline prices head on. But we have seen them take a little bit of a turn. And when you look at the preview of this speech on the president's agenda for the day it talks about the ultra maga policies. The president is taking direct aim at Senator Rick Scott of Florida and one of his policies that says that every individual in America even those in the lowest income brackets should pay taxes. Now what the president is going to talk about in this speech is was part of his build back better agenda which is that those on the higher level incomes the wealthiest Americans and the biggest corporations should be paying more taxes basically going back to the pre trump our tax cuts. All right Emery thanks a lot. We

really appreciate. Looking forward to that in the next hour and read her journal. Joining us outside the White House. Coming up we'll see with this inflation theme and take a look at it from a business angle. Is inflation taking a bite in a chocolate sales. We're going to break it down with the CEO of Godiva. It does look good. Coming up next. This is no. This is Bloomberg Markets ISE could get to. You're looking at a live shot of the principal room coming up Doug Hersh the good IBEX co-founder and co CEO joining Bloomberg Television to 30 p.m. New York time. This is Glenn Beck.

Keeping up to date with news from around the world. His first word answers could get to the U.K. Prime Minister Boris Johnson is vowing to ramp up pressure on what he called Vladimir Putin's cronies by driving dirty money out of the country. Johnson set out an agenda that is also heavy on electoral priorities including cutting waiting lists at pandemic hit hospitals and boosting disadvantaged regions. Prince Charles outlined the agenda in parliament standing in for the 96 year old queen. She was said to have mobility issues in Finland. The parliament's defense committee has concluded that the country should join NATO. Finland started on the path to join the alliance after its neighbor Russia invaded Ukraine. Three out of four friends now

support joining me. So that is up from just one in five before the war in Ukraine. And China is tightening pandemic restrictions in Shanghai and expanding a mass testing sweep. In Beijing more people are being shipped off to government run isolation centers under a new definition of what it means to be a close contact. The country reported a little more than 30 400 new infections Monday. That is the lowest daily total since March 16. But when is 24 hours a day on air and on Bloomberg Quicktake powered by more than twenty seven hundred journalists and analysts and more than one hundred and twenty countries members can get to. This is Glenn Beck. Thank you very much indeed. Where the going gets tough. A lot of

people buy chocolate. Godiva is launching a new strategy including a global campaign. It's calling Godiva is chocolate which I hope is the case. The goal is to make Godiva a more vibrant and easier to find brand. Joining us now is no touch. Afridi Godiva is global CEO. Natasha thank you very much indeed for joining us today. Look we are spending our whole time talking about inflation and how the consumer is being hit hard by inflation. Good diver is at the premium end of the chocolate

market. How do you continue to persuade people to pay premium prices for chocolate when they are being squeezed everywhere else. Thank you guy hitting me today. Actually what we are trying to deal with chocolates with the premium chocolate is to bring a little bit of happiness while there is some challenges going on in the works. We are continuing our global expansion which are new strategy making Godiva more accessible more available by expanding our portfolio which ranges that are more approachable more accessible smaller sizes smaller packaging taking the best selling chocolates from our iconic gold boxes and wrapping them individually for sharing so that everyone can make it part of their everyday life. We are having it each in a really important step in our strategy with our global brands. Champion Godiva Chocolates powered by the internationally

renowned actor Chris Evans New Touch. Talk a little bit then about what pricing power you feel you do have and then also what your strongest input costs are right now. But that is very much known by each very high end luxury gift boxes and the iconic artisanal chocolates that have been prepared by our chocolate chips.

Based on the initial founder from Belgium PR drugs very professionally built chocolates recipes have been handed over to generations. Today what we are doing is democratizing luxury and bringing these chocolates at more affordable prices in different formats and sizes. Now we have a single bite for sharing. We have chocolate bars for everyday indulgence but we also have informal gifting chocolates in the grocery stores club stores. But also we also have the high and chocolates. We have a range from two dollars to two hundred dollars for every moment for every occasion for everyone. Okay. Okay. Let's talk about what

kind of inflation are you feeling right now. No attach. What costs are you having to deal with yourself. What are your margins look like right now. Like everyone else in different industries chocolate is also sheets by the inflation. By the first increases the ingredient prices are increasing and DAX are not only related to the material cost. Packaging for us but also freight costs is increasing today. What we are trying to do continue focusing on our consumers and providing high quality ingredients high quality chocolate. That's our priority. Of course in order to avoid the impact on the shelves we are trying to find efficiencies in the way we operate.

But obviously there are some cuts in the ingredients costs in material cost and freight costs like everyone else. So just last question on that. You talked about premium ingredients. What's your visibility in your ability to get those ingredients say over the next one to two years as we're in essence dealing with a global food crisis. The biggest ingredient the most important ingredient for us is program which we are buying from the West Africa. For that we are trying to hedge our costs being on the other hand. There are other ingredients like packaging. We import some of them from

outside to us. Some of them are sourced from North America and we are trying to manage the cost increase by trying to build more efficiencies in the way we operate and also trying to find opportunities in the saving of the labor policies and packaging material. Nerd types thank you very much we appreciate it. Appreciate your insight into that the pricing and then the input costs as well nerd types. Afridi Godiva CEO thank you very much. So if you eat

a lot chocolate maybe you want to go workout. So Palatine though is losing more money than expected and the immediate future doesn't look a lot better. That stock down by 13 percent. More premarket though could be worse. More next on. This is Bloomberg. Well shares of Peloton getting hammered today down by about 13 percent the company that was the high flyer during the pandemic reported a bigger than expected loss but it's cut its revenue guidance as well. With us is Bloomberg's Ed Ludlow. EDIT Technically I mean it could be worse. It was down 20 percent in pre darkest.

Are we looking at a stock that can realistically go to zero here. Yeah I mean like the management were pretty forthright on the call it was a very short earnings call. They didn't even bother to kind of rehash the numbers with the standard boilerplate and got kind of straight to the questions and they were brutally honest. I mean the reality is that the demand isn't there. That sort of tepid fiscal fourth quarter sales outlook reflects that.

And at the same time the the wider than expected loss shows a company that's still struggling operationally. Right. Supply chain was a massive challenge for them. Logistics a massive challenge. And the final factor to put into that you know is we see those losses kind of pare some of their debt in this session is that they're planning to raise prices in June. And when you think about demand in the context of inflation and what households are going through right now there's concern. It's quite sunny outside as we can see behind you Ed so going outside is definitely now an option. Where does this company go. Where where where can it go next. Is it. Is somebody going to buy it because it's getting cheaper by the day here. And people talked about buying it at the top. I'm assuming that there must

be some interest down at these levels. Well I don't want to put producers on the spot but let's bring back that cash chart and talk about the situation that they're in. Right. Which is they're running on fumes a little bit. I mean the other big piece of news is that they have set up a credit facility or they you know borrowed debt from JP Morgan Goldman Sachs. Seven hundred and fifty million. You know their cash and cash equivalents around 800 million for a company of their scale. As

executives on the call put it they are running on fumes. This is the bit I didn't understand. They have this goal of getting to 100 million paid subscribers. They have seven million paid subscribers. And they admitted that's a long way to go. This is a company wants to focus on content on classes not on hardware but the jump from 7 million to 100 million. Do you do that

organically. How do you grow a user base. And they kind of said well if you look at the landscape there are loads of sports or health platforms that have a hundred million users. We feel we can get there eventually. But it's a big question. Bloomberg reported according to sources that looking to sell a 20 percent stake in the company. Not Covid off but yeah. Big question guys.

And finally and quickly who is selling like who is in it. These the retail guys selling. Are these big time investors selling. Who's in there right now. Yeah. I mean I saw a few people tweet the HD function on the Bloomberg which showed some of the biggest shareholders including Tiger including by Gifford. And I believe one tweet referenced those guys holding the bag on this one. There are still a lot of institutional names in there and you know it's not been a popular stock on fidelity trading platform retail investors for example it doesn't have the same use a love for the shares that say a Tesla does. We have Tesla car and is buying the stock. You know I use peloton. I still use it from time to time. But guys. Right. Look outside. Look behind me. You know we're leaving the house and there's not a lot of love for

the store is that. No. Brings a whole new meaning to getting on your bike doesn't it. Ed thank you. Indeed. Mr. Ludlow in San Francisco greatly appreciate it. Coming up on the European clothes we've got a fantastic interview coming up with Lorraine a mess of the Cleveland Fed president. We'll talk about the price action here in Europe versus yesterday. Obviously things look pretty good. Is that a tradable bottom. We'll talk about it next. How sustainable is this move anyway. Loretta Masters coming up this Bloomberg.

2022-05-14 19:12

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