tv Bloomberg Markets European Open Bloomberg February 18, 2022 3:00am-4:00am EST
risks with ukraine remain high. foster -- faster and further, they may need to raise rates above 2% to curb prices. natwest beat estimates. more from our interview with the ceo. francine: is there a date we do not hear from james bullard? i felt like he is all over this and every two days we hear from his thoughts on when inflation will cool off or not. well done to him. were looking at the fed and thinking about what we should do. tom: he sees 2%. you have to be above the neutral target to get inflation down. how many aligned with that view, something we are watching. the markets are reducing the bets you will get that hike in march. the geopolitics are front and
center. you had a risk off move yesterday. european sucks were low as well. the mood has shifted as we got confirmation that the performance or a rush or will be meeting his counterpart. you have a bit of unwinding with some of those moves, particularly with gold. here is how things are flowing in terms of the open. 2/10 of a percent has been gained on the ftse. the ibex is similar. when it comes to the ftse, retail sales numbers came out for the month of january comfortably above the forecast. we are at 1.9%. how that factors in to the decision process will be interesting. this is a picture across these markets. two things -- how things are shaping up.
stateside we are looking a gains after significant losses if day. your u.s. tenure, yields are up. brent is at $92 a barrel. this is the first week in a we get losses for brent coming down. there is a report suggesting that progress is being made on negotiations. gold is at 93 after breaking above 90 yesterday. it is probably down three tents of a percent as we look to the continuation of diplomatic talks between russia and the u.s. francine: that is filtering through what is happening with oil and basic resources. there are a number of things that they are looking at. the price of oil is dependent on this. this is why we are also seeing
some of the moves trying to stabilize. auto parts are also on the way up. for industry groups, a bit of pressure. health care, travel and technology down percent. a bit of a foster to a we saw in asia. very small gains across the board. tom: reanault also gaining. they increase their margins. they see the cut around 300,000 in terms of production of vehicles. it is the margin story of gains that we are seeing currently. edf has a different story. it is all about the fact that a
number of reactors have been closed. more importantly, the government of france has come in. it is currently down 2%. they're doing a new issuance of shares. french company says they will buy up some of that. also, assets and sales. currently, that stock is under pressure. natwest, it was a beat for that. currently the stock is down. they are not seeing a lot of distress in terms of lows. for the fourth quarter, it was a beat for that bank. there is the broad picture. the geopolitical risks. it was illustrated by this chart was showing the volatility in the move indexes are spiking back above the 50 day moving average. we're talking about treasuries.
start to see that. that is indicated by the yellow line. the move index, the has started to edge up towards the end of last year. can see this marked pickup for both indexes the last couple of days as we adjust for these risks. francine: i love the chart. i would also point to our bluebird economics team coming up with a winter piece of research. the resta -- russia situation. the lack of visibility that means that people and markets are on tenterhooks. there will be in a meeting in europe next week with blinken. moscow denies in that has always denied it has plans to attack its neighbor. we are now joined by maria tadeo.
we have the security complex, we understand that the defense ministers on both sides are meeting today. very conflicting signs. when to be expect those to settle? maria: incredibly conflicting. that is the message i have heard from every official i speak with. it is difficult to read the situation but they agreed that it is a very delicate face. piercing exclamation -- ethical -- you are seeing escalation and also de-escalation. we are waiting for this meeting next week. the is a i am going to be reminded of is the situation in eastern ukraine. there have been reports about both sides attacking each other. this is normal, it has been happening for years but the
issue is that is happening in a timer -- a time where they are trying to de-escalate. the situation is delicate and we view this as a callous. we are urging everyone to de-escalate, particularly in the area. francine: thank you. a little bit later she has a wonderful conversation with the lithuanian president. joining us now is peter oppenheimer from goldman sachs. thank you for coming on. one anything change, depending on what happened in ukraine? peter: there is a huge focus on the ukraine situation. it is the result of any further escalation would be unpredictable. clearly it will have a big effect on energy prices which we
are feeding into this inflation story. markets are so focused on it. we're seeing the volatility as described earlier. fundamentally. the markets have to put up with uncertainty in this trade-off between urgency to raise interest rates and what the effect will that be for growth we will still see economic activity this year. the pullback and markets is about the cost of capital. it is not going to turn into a market reflective of the recession. tom: do you think the fed will start to readjust their view light of these geopolitics? peter: i do not think so. i think they have to keep it in focus very much. inflation expectations. what the long in -- long-term
inflation has been impacted in terms of energy and other costs. they really have to keep focus on that to maintain credibility and a belief that they are in control the situation. unless those tensions have a big impact on consumer confidence and growth, i think they will contribute to focus on maintaining this gradual approach to tightening the policy to slow down inflation without damaging economic prospects. francine: i note goldman sachs has one of the boldest calls when it comes to fed hiking. where do you want to be invested in equities? peter: we need to put this in context. the markets have absorbed a huge
change in expectations about interest rates. the markets were pricing this year and perhaps towards the end of next year. we are looking at prices this year. markets have held up quite well on the back of that shift. largely because normal gdp is still growing. that is where equities are making it. i feel like the movements we see are quite rational. they are the things that are most expensive and have the longest duration. we have been arguing for quite some time that these inflections really support the value in the market, commodity and energy related sectors in particular.
also, things like banks, resources as well. i things -- i think dosing still have to benefit. but i think it will be much more alpha orientated. within and across sectors. margins are the key to that. tom: we will discuss more on the after the break. peter oppenheimer, chief global equity strategist from goldman sachs stays with us. to the downside, hermes, they have supply chain challenges. their sales actually fell about 5.4% in the fourth quarter. investors are turning sour not -- sour on that stock. a different story across much of the luxury space. francine: i guess it is the raw materials. an amazing story of about or
francine: welcome back. happy friday. it has been a long week. 14 minutes into the european trading day. u.s. futures, european equities climbing. gold bonds dipping. this is on the back of talks between russia and the u.s. over ukraine. this seems to alleviate some concern. there is also a couple things and make people worried. that is really filtering to the kind of gains we are seeing in europe. tom: let's get more analysis with peter oppenheimer from goldman sachs. thank you for your patience. when it comes to the question. i want to look back to some comments he made before the break around how we hedge these political risks. we were speaking to ubs a couple days ago and they said, one way to hedge is with in equities, around banks and energy.
you align with that? peter: yes we do. we have been for some time. it remains very cheap for us. it is a very different situation were after the financial crisis -- they were facing unique headwinds. risk capital lower interest margins. commodity sectors facing falling commodity prices. another fundamentals of change. there is an issue of rising inflation expectations and interest rates. i do agree they are a good place to be in the market. they remained relatively cheap. energy stocks are around 40% discount to the market.
they are generating more than double. we are not holy focus on value. there are some growth areas that are started to look quite attractive as well. francine: how much ukraine risk is priced into the markets? i know a lot from gold and oil, suggesting a significant turnaround in risk appetite if we have a diffusion. what about stock markets and share prices? peter: this is a known unknown. it is reflected to a large extent in the market. as you mentioned, we have seen a big increase in the volatility, that is a good sign that concerns are being priced in. if there was an incursion, it is to focal to know how far that would go. i think the markets would be quite heavy hit on that. we look at many historical
examples of geopolitical tensions and you get to get a -- you tend to get a spike. i don't think we really see that yet. there is downside risk associated with this issue. it is very difficult to know if and how it may and. i think there is a good deal priced in. we could see some downside risk on the back of these tensions that are escalating. tom: back to health care and technology, around tech. this is the year for alpha. how do you look for al thought within tech? -- alpha within tech? peter: this will be a different cycle to the last one. the last one was about rising rates as they collapsed. that will not happen again.
we can expect less of that and more alpha. the last cycle was very focused on technology and it did not matter so much what companies you bought. it was all about growth and long-duration. we have been arguing is that there should be a big differentiation across the tech sector and others, depending on how cash generous the companies are. many of the profitable tech companies are very long-duration. hope of huge profitability in the future. that makes sense. the cost of capital changes. many technology companies are very cash generative, very profitable, they have strong balance sheets and good visibility. we think that those are not terribly expensive to start with. they're beginning to offer some interesting opportunities.
we are looking at profitability already and strong balance sheets generating cash. strong competitive notes around. francine: you have a favorite indicator or chart to figure out what time you need to sell stocks? peter: we have a few indicators. one of them is a bear market indicator, it is aced on six fundamental drivers. everything from the labor market to growth momentum. this has been flagging a high degree of risk since late last year period it had not hit levels consistent with the major bear market but it was consistent with the correction in a much lower return. that is our forecast. we have a more tactical indicator which is really based
on pairs of assets within the different classes. risk on verse risk off expressions. this is a good indicator of positioning and sentiment. is now a much more modest level suggesting a lot of successes have been fleshed out. the tactic markets are looking more attractive. together, i think these things are suggestive of an inflection point in markets as we move higher rates of nation. low-end returns and higher volatility below alpha. francine: thank you so much. peter oppenheimer there. we will have plenty more from stocks we are watching and inflation, rising prices hurting many people. we tell sectors seem to that. that story, next. -- retail sectors seem
that is sparking fears of the widening of the wealth gap. joining us is our correspondent from the consumer sector team. we are seeing hermes is struggling. gucci did well. when it comes to them, hermes, they struggle. what is the top line and what does it say about the ability to pass on cost? >> that is one of the makeup brands when it comes to profitability. today they recorded record profitability. the market is not reacting well to what they said about the decline in their leather goods section. that is the section that makes their bags. they cannot keep up with demand. that is why there is that the client injures or falling. they're saying they're going to boost production. francine: this seems to be a
positive story. if you say you have so much demand you cannot meet it, what is the share price down? >> the decline was greater than expected. the fact that they could not quite -- they were not able to keep up with demand more than the market expected is not enough. it takes a while to boost demand. much of their production is in france. takes 15 hours to make one bag. is not something they can come around quickly. all the other luxury houses are posting booming demand. there is the fear they may lose out period tom: what are we learning about this division about how the retail and consumer is reacting in the division we are seeing? >> inflation is across-the-board. all consumer goods companies are dealing with that. what is interesting is if you
are someone who is able to buy a $10,000 bag, marginal increase is not going to dent your buying habits. it is when you get to the mass-market where we may see consumers trading down. francine: thank you so much. a nice breakdown of some of the software watching. coming up, elian's -- allianz takes a hit. more coming up. this is bloomberg. ♪
natwest estimates and upgrades -- more from the chief executive this hour. futures in the u.s. are pointing higher. not huge gains. european equities importing a move away from -- havens. tom: one other headlines should be we are mention -- matching with the salmon pink. how much is there really when is so difficult to see what is going on between the u.s. and russia when it comes to that crisis. the ftse 100 is also up. today marks a day options expire. love volatility around these
days. bear that in mind. we need to be about that 2% level. we will see how that filters through as well. the assessment around what is happening in march. switch over and see how things are breaking down sector by sector. oil, is currently off. looks like it will be the first week where you see oil ending lower. in terms of how things play sector by sector, auto parts has been gaining. brent oil will be a factor and is certainly playing into what we are seeing period investors reward them even as supply chain
issues continue. on the bottom of the list, travel and leisure followed by technology. that sure check 30 minutes into the session. francine: we are looking at the price of were oh could go. this is one of the most important things. here we chose brent to put it could be anything else. there are these conflicts of factors. a couple days ago we did not think we could get a deal and now, it could unravel. it looks like we may get a deal which brings more oil to the market but the same time, we look at ukraine with wary eyes. tom: if they are looking at $150 a barrel, $200 a barrel, that does not bring it back to the market. one is the shortage of staff. the other is a they want to reward their buyers in terms of stockholders with birx.
that picture not coming back. they're currently back to levels not seen for three decades. francine: they think they can inflate -- inflation. allianz ensures more chances are coming. he spoke to the chief financial officer earlier. >> there was an important stake. we achieved an agreement with the majority of the investors. there are still ongoing conversation. we also have conversation with the doj. from that point of view, there is still uncertainty on the issue. it is important we make steps
towards the resolution. from that point of view i cannot talk much on the topic. that has been a major step. manus: i understand. i also understand the difficulty with active negotiations. the market as put numbers of nearly 6 billion that this could cost you. is that a firm estimate by the market or is that too extreme? >> [indiscernible] when the situation evolves we will provide an update. today at which was a major step.
manus: that bears the question, when you look at the language around the lawsuit, simple question, have you implemented a root and branch overhaul of risk control there is a business? >> we think our control is strong. we are looking very carefully at what did not go how it was supposed to go. we are going to take those steps that we need to take in order to make sure this kind of situation is not going to happen again. manus: let's talk about the rest of the business. operationally, profits are at 3.5 billion i know we have this provision reducing the overall position. where was the strength added
operational level? where is the alpha in the quarter? >> the alpha was across the franchise with the five-year model. all segments has strong performers. if you look closer, for all the segments they were able to be. the out [indiscernible] achieved profit. if it was very high where you are looking, it is very strong. it is also very impressive performance. there is an operant a -- operating profit with how they deal with it.
they achieved a lot of profit this year. strong performance across the sectors. tom: allianz ceo speaking to manus cranny. let's get the bloomberg business flash. >> edf has announced measures to bolster finances as earnings are slashed. the company needs to sell 2.5 billion euros of stock, dispose of assets and offer investors dividends instead of cash. macquarie group aside to consider buying a controlling stake in gas. sources tell us the deal could bump the asset up more than $10 million. -- $10 billion. they want to focus on a low carbon future. a massive cargo ship carrying
thousands of vehicles burned. it is adrift after 22 crew members were successfully evacuated. in n-terminal email says there were almost 4000 vehicles aboard the ship. that is your bloomberg business flash. francine: what an incredible story. tom and i were discussing in the break. 4000 cars, including porches and audis. it is a friday disco kind of feel. would you get an email saying i'm sorry your car is stuck in the ocean. tom: there was someone tweeting about it because his porsche spider, he was watching it burn on the cargo ship. i think there were lamborghinis as well. people are distraught by this.
francine: welcome back. 42 minutes into your training day. the picture, equities are getting more support than they were a few minutes ago. nothing huge. we are seeing a bit about risk move out of havens such as gold. the focus is on whether this agreement between the u.s. and russia actually leads to anything. i would bring everyone without pinch of salt and see what happens. tom: the lack of transparency is an issue. teleperformance is surging this morning. that is after the reported earnings. rapid growth during the
pandemic. the ceo daniel julien joins us now. sessions are making up some of those here today losses. in terms of the earnings, sales are above 5%. there is a revenue target of 10 billion euros. we'll get to their? daniel: we have a steady growth trend. the expansion of the digital transformation. the economy grows more digital. between e-commerce, the social platform the blockchain. fintech, all of these magic companies they still need --
they are fiction. we need to help them. francine: i've called a lot of call centers during the pandemic. when added to times i cannot hear them because they were working from home. what has been your biggest challenge? what has been performing better than others? daniel: during the pandemic, we had to transfer something like 17% of our growth to home. that is about 250,000 people. it was quite a technological challenge. at the end of the day, it worked. there is a switch that is coming . tom: as we returned to the
office that trent accelerates across europe, does that pose a challenge that the business performed so well or is there a stickiness to the way people have change their behavior and the way businesses have changed? daniel: there are on again it forces. even our management would perform to get back our people to brick-and-mortar to help with security. also, teambuilding, the spirit. at the same time, we have been speaking about the great resignation. employees love to work from home. it will be a trade-off. francine: i am sure there will be. want to ask you a little bit about debt collection more important, for france, we are in
an election year, what are you hoping from the next government? daniel: the teleperformance is -- of the global business of france. we are much more close with that u.s. business and around the world, and india, and brazil, then france. francine: given your listed in france, usually thirtysomething for investors -- usually there is something for investors? daniel: there's always something. do you think that the supply chain is working well? there are so many things. we are here to fix, to help the
frictions. sometimes, when things do not go so well, we can still do well. francine: thank you so much. make sure only call call centers we can hear them clearly. daniel julien joining us. we have a full french election special next week. we'll take a closer look at the upcoming election with two special guests. france will decide on bloomberg tv on monday. tom: coming up, we talk about the situation in ukraine with the lithuanian president. that is next. this is bloomberg. ♪
francine: welcome back. the west says the russian prime minister has agreed to meet the secretary of state for talks in europe next week. that comes as president biden warns that the probability about russian invasion of ukraine remains high. moscow denies they have any plans to attack their neighbor. let's get back to maria tadeo in brussels with the lithuanian president. maria: good morning. we are joined by the lithuanian president. thank you so much for joining us.
when the reasons i like speaking to you is you you are very clear in your views. over the past hours there has been a lot of information and things conflicting. in your view, is russia attitude de-escalation? >> i think they tend to keep both open. they want to keep certain ambiguity of their plans. we see the concentration of military troops and this process going on. there can be a turnaround in their military capabilities. but i see a concentration there. probably this is a reason or they want to just get better, stronger. in order to keep the dialogue.
in this situation, we need that unity. this is encouraging. maria: yesterday there was a meeting here and a big topic with sanctions. a prime minister said that if russia invades it will be hit by the mother of all sanctions. >> exactly. not only that, we also have an opportunity to talk about possible diplomatic responses and also about the cooperation with ukraine. economic, financial, military means. very important. right now, ukraine is suffering because of huge tension. it is easy to explain why their suffering because of capital fall, investment, leaving the country.
this is our reason why we need the financial package of ukraine. what is probably even more important, we need a clear perspective for ukraine. yes, we have the summit in december. it is set very good. but moscow needs a more exact action plan. maria: you mentioned the capital outflows, how fragile is the situation for ukraine? >> i do not want to talk about exact figures. this is a moving target. they lose the money every day those amounts are impressive. not talking about capital, only about official reserves. of course, it creates, not panic
but tension in the society. under such circumstances, it is also -- almost impossible to implicate reforms. you see this vicious circle of efforts and goals. maria: every official i've spoken with in the past few hours say they are nervous about what is happening. is that your perception? >> i do not want to talk about perceptions. i believe in the business solution of this conflict. there are a lot of rumors and we should stay calm and talk about the possibility to solve this problem of conflict. i would like to draw more attention to belarus.
we're talking every time about military capabilities along the border but we are not talking about what is happening in belarus. maria: the concern is that -- is a puppet with weapons. >> yes. it could be a place of deploying military missiles -- nuclear missiles. we already have the 45,000 troops there. military, helicopters, air force. this equipment could be left in that territory even after those drills. maria: the president said we are running out of time. very precise question, are you expecting more troops in your country? >> yes. [indiscernible] we are talking about the
altercation that is threatened by those facts which have threatened the security of ukraine. maria: thank you for your time. ray good to see you here in brussels. francine, back to you. tom: i will pick it up from here. thank you for bringing that to us. lithuanian president. in terms of markets, holding onto gains. stateside is pointing up. stay with us. this is bloomberg. ♪
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we are prepared to go into ukraine. >> [indiscernible] >> if you wanted to put downward pressure on inflation, you have to get to neutral and go beyond neutral. announcer: this is "bloomberg surveillance: early edition" with francine lacqua. francine: good morning on welcome to "bloomberg surveillance: early edition." i'm francine lacqua in london.