tv Bloomberg Daybreak Europe Bloomberg January 10, 2022 1:00am-2:00am EST
global bond market rolls on positioning for the fastest inflation in years. goldman has called for four rate hikes in 2022. u.s.-russia talks kickoff in geneva as the white house considers harsher curbs on moscow. cases in the u.k. drop for a fifth day as the government drafts plans on how to live with covid-19. it is amazing how quickly these calls for high rate hikes come but my favorite line from bank of america is about liquidity, supernova coming to an end and we are grappling with that, aren't we, dani burger? >> treasury cash markets might be closed but futures continue to tumble. manus: i think when it comes to understanding the cause, this is
it -- has a bubble in tech burst ? what are the outlier risks that we are not factoring insufficiently? dani: speaking of things not priced in, bank of america also points to a rate shock from the ecb. we talk about four potential rate hikes but what happens if we get hikes from europe and asia? the cash flow might not be around this year. manus: one opinion columnist wrote the number of the day --it is? dani: we are officially below that figure. the first time in open one -- in over 20 months. let me take you to this morning's markets. futures for the bond market are
off. s&p 500 -- tech leading the gains this morning as well. looking at a stronger dollar following the payroll report from friday. bitcoin still declining. we have a conversation with deutsche bank on all things crypto later in the program. manus: it is time to buy? to the bond markets. slumping continues. investors bracing for the fastest inflation in four decades. enda curran is with us. will they run down the balance sheet faster as oldman calls for four hikes? your assessment. --goldman calls for four hikes? your assessment. enda: fairly robust wage gains. that has a market chattering
this market and the labor markets are pretty tight and that bodes for central bank tightening. goldman talking for four hikes and not three. talking also about balance sheet normalization as soon as july if not quicker. we have some testimony from fed chairman jerome powell this week to keep an eye on and we have u.s. inflation data later in the week pointing towards fertile territory. dani: that is enda curran. with the bond rally going global, let's get the details with juliette saly in singapore. >> as we had treasuries close due to a holiday and japan, we are watching a spike in aussie yields. their premium from the aussie tenure to the u.s. tenure
winding by 10 basis points. at one point, it touched 1.93% matching its november high. we have -- even though you have a raft of analyst downgrading australia's growth forecast due to the omicron concerns. nomura seeing 0% growth for the australian economy in the first quarter. let's look at what is happening in cash markets. japan out of action. weakness in the tech players in south korea. a bank of korea rate decision this week as well. the be ok expected to hike by 25 basis points. a rebound in the hang seng players. and outperformance in singapore. manus: juliette saly with the latest on the global bond market. let's get to the other key market. risks.
the u.k. is moving to pandemic. according to the former vaccines minister. the comments come as a government drafts plans on living with covid-19. >> we know with covid, there are always variants. i believe we are on a path towards positioning from pandemic to endemic but you have to make a contingent plan. manus: let's get to our analyst with the latest interpretation of where we are. you have a discussion in the u.k. -- pandemic to endemic. that is not the case in asia, is it? >> is a big contrast to where i am in hong kong where it is still covid zero. what the u.k. is going through is not what countries -- if you look at a seven day average, the
u.k. has already reached a peak and has been going down for a few days. that is a good sign. if that can continue, if the u.k. can go through these omicron challenges, it may mean we are at the end of the tunnel for the pandemic. dani: thank you very much. the biden administration may put export controls on russia. the white house is discussing with its allies potential restrictions on sensitive technology and electronics. maria tadeo, welcome back. what can you tell us about these potential curbs being considered? >> we know this is a crucial week for the ukraine situation. tough talks going to happen between the united states,
russia, and the european union. going in, we are hearing a lot of the positioning from western countries suggesting they could go up to russia hard. there are 100,000 troops stationed on the ukrainian border. in an extreme case, you could see russia being shut off and companies going through major restrictions to operate internationally outside of russia. you could also see export controls. and in an extreme case, russia could operate like syria and iran do. everyone -- a lot of the positioning that goes ahead of the tough talks that we are expecting. manus: maria tadeo on what we
can expect from the superpower discussions. >> china has launched a massive testing blitz in a northern port city as it strives to maintain its covid zero policy after confirming two locally transmitted omicron cases. neither of the people had traveled outside of the city in 14 days. kazakh forces backed by russian troops crushed the biggest protests in decades. the official death toll stands at 164 people while the real number is expected -- is thought to be much higher. 6000 people have been detained. bloomberg has learned read it is pursuing an ipo as soon as march. the community is working with morgan stanley and goldman sachs and may be value as much as $50 million. there was a funding round.
global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. dani: juliette saly in singapore. coming up, four rate hikes in 22 is the call from goldman sachs as well as a faster runoff. we will discuss that as well as market moves with our next best, sarah hewin from standard chartered. manus: and more on u.s. considering export controls on russia as tensions rise with ukraine. ♪
economy has normalized to quite an extent. >> the signals are that the labor market is tightening. >> we are still moving along around a full employment dynamic. >> the fed cannot is gape the issue. -- cannot escape the issue. >> they are going to chase this thing and hike aggressively. >> four rate hikes are on the table. manus: our tv guests weighing in on the data and implications for the fed policy. the fed could raise rates four times in 2022 as it starts its balance sheet runoff a little earlier. a lot to absorb. sarah hewin is part of europe and americas for standard charter bank.
a lot of voices there. they have the ammunition they need in terms of the unemployment numbers and the wages component in the jobs report. for you, you are at two rate hikes. you are a contrarian. good morning. sarah: good morning. we are expecting two. the first in march and the second in june. we think at that point, the fed can afford to pause if we are right about the economic picture and particularly the inflation picture. inflation obviously will get the data this week on cpi and that is expected to go above 7%. the fed has to take some action. looking at the trajectory over the course of the rest of the year, while inflation for the first order is going to be even higher than what we saw in the
fourth quarter of last year, we think we will see prices starting to dial back. we expect inflation to start to move closer to the fed target and that to be pretty clear by the second half of this year. the big issue is 2023. by the time you get to the june fed meeting, they will be looking ahead to 2023 and we think we could well see inflation dropping below the fed target at that point. to us, that would word our caution rather than an ongoing rate hike. dani: if your estimates for the economy for gdp are correct, you see 4% growth, that is below estimates, if we get that, however, perhaps the rate view for goldman plays out, will that be a policy mistake for the fed? sarah: it is tough for
policymakers in the current environment and it is interesting that there is a clear signal that policy tightening is on the way despite covid cases skyrocketing and hospitalizations back at the peak they were last january. the current quarter looks to be a pretty weak story for growth, i would say. the unfortunate thing for central banks as that they are having to raise policy rates with a view toward what is going to be happening in 1-2 years. the full effect is not likely to be felt until then. presumably, if you do get three or four rate hikes this year, that would be under the assumption the economy is steaming ahead. i think in particular concerns over inflation, inflation does not ease up in the way that we expect, and we have some clear
signs i think that is going to happen and you will see costs starting to ease already on energy. we are below the peaks where we were in september and october of last year and it is likely that we will see supply chain disruptions easing. that should cool down prices on durable goods which have been forging ahead. in recent months. the big question is wages, services inflation and again, we think there is a bit more slack in the economy and the labor market which will allow wages to normalize. still, reasonable pace of wage growth but maybe not the very elevated levels we have seen in recent months. manus: as the head of europe and america in research, the conversation -- i want to understand what you're talking
about. we started the show with the bank of america line that we would see an end to the tsunami of money we have had. is that going to come to an end? that we are at the end of a liquidity supernova. what is the biggest risk or consequence from that supernova ending? the scale of qe over the last year and a half to where we go at the end of the year? sarah: i think the biggest risk is a policy mistake. a move to qt, which i agree, the fed will be moving to certainly by the end of the second half of the year. if that comes in an environment that is still relatively unstable, we have seen a big buildup in debt over the course of the last decade or so and qt
if it comes prematurely could really prove to be disruptive. from a european perspective, we still are quite a long way off from the european moving to qt but the bank of england is likely to start moving to qt relatively soon this year as well. in that environment, maybe there will be less support for equities but the risks of a policy mistake, if there is an aggressive qt process could be a risk. dani: of course, all of this comes at a time when we are dealing with covid and many countries are looking at shortening the quarantine period because of the hit that the absences from work will take. if we do get a shortening of these periods, does that improve our growth outlook? sarah: it helps.
the good news with omicron is that the symptoms are not so severe and the disruptions, those we are seeing in the u.k. at the moment, is down to the people being off in quarantine isolating and that is effective -- and that is affecting public services and affecting businesses to continue as normal. to the extent that we can reduce the quarantine and reduce people's isolation period, that is clearly going to be a support for the economy. but, the extent of the virus across the european countries and increasingly across the u.s. i think is going to mean that the first quarter does take a hit even if you limit the quarantine requirements. dani: sarah is going to stick around with us.
quickly i want to mention some breaking lines. the novak djokovic check drama is unfolding. the courts in australia have said they acted too quickly to cancel his visa. they say he should be released shortly, within the next 30 minutes. it seems he can be released. he has been staying in a hotel room in australia over concerns. does this mean he will be able to participate in the australian open? we will monitor. russian risks. concern of what an invasion of ukraine would mean for europe. we will discuss geopolitics next on bloomberg. ♪
we have been watching the drama unfold, novak djokovic in australia and it looks like he might be released from his quarantine covid detention shortly. manus: the judge on this case -- it is a real blow to the government. it looks like novak djokovic has challenged the decision from the australian government to cancel his visa and it looks like he will be released. that is where he spent the last four nights. the number one tennis player and draw but this has drawn such huge political angst in australia because of the quarantines that the people of australia have had to suffer. it blew up despite him saying he had covid a couple of weeks before. there is a great deal of back and forth on this at the moment but at the moment, it looks like
.2 novak djokovic. dani: this is something the entire world is grappling with. a microcosm for what everyone is dealing with. from australia, let's turn to europe and there is growing concern about geopolitical risks that russia poses to the continent if it invades ukraine. europe is facing an ongoing energy crunch. russia says this could send prices soaring. sarah hewin, if the u.s. does hit russia with sanctions, what would be the economic risks and impact to the rest of europe? sarah: first of all, sanctions would come as a result of russia invading ukraine so that in itself would mean a very big challenge to sentiment across europe and it could well have an impact on the euro and on
european rates. i think that would be the initial issue. the concern is europe's reliance upon russia for gas and as you mentioned, gas prices already are elevating energy costs across the region. sanctions would be ramped up potentially on russian securities. that is the big blow that could be launched. i think that would be a specific element of investments that would be hit. more broadly my view is the bigger impact on europe would be the hit to sentiment as a result of this conflict happening within europe for the first time in many, many years. manus: we are also looking at
the repricing of bond yields across the world. this was the debate last week. when you look at outlier risks, we put it up there as bank of america saying the ecb could perhaps tighten more quickly than we all think. you are going for two rate hikes in america, what is the risk in europe? sarah: the risk is the ecb tightens sooner than we think. we are not expecting the deposit rate to be raised until the second half of next year. we know we will see a step down in inflation when the january numbers are released. the good news from the european perspective is that there still is labor market slide. we are not seeing wage activity
in the same way that we see in the u.s. accelerating wages and that suggests the ecb's view which is inflation will move back below target by next year, that seems to hold and there you have it. woah. wireless on the most reliable network nationwide. wow. big deal. we get unlimited for just 30 bucks. sweet, but mine has 5g included. relax people. my wireless is crushing it. that's because you all have xfinity mobile with your internet. it's wireless so good, it keeps one-upping itself. take the savings challenge at xfinitymobile.com/mysavings or visit an xfinity store to learn how our switch squad makes it easy to switch and save hundreds.
dani: good morning. we have just gone 6:30 in the city of london. i'm dani burger, alongside manus cranny from the bike. this is "bloomberg daybreak: europe." markets position for the fastest u.s. inflation in 40 years. goldman calls for four rate hikes in 2022. high stakes. u.s.-russia talks take up in geneva as the white house ways
harsher curbs on moscow. cases in the u.k. dropped for the fifth day as the government drops plans on how to live with covid-19. manus, happy monday to you. $10 trillion. this is the number of the week compared to robert burgess. we have seen negative yields and debts dropped to that level. are we in a period where the era of tina is over, you don't have to move assets because of this debt? manus: it is interesting. we should welcome to bloomberg valerie. i am sure i have not done her surname any justice. a very good morning. i am sure that this pivot in the yield is down to belgium, france, and the netherlands. it is a different landscape in
europe than it is to the united states. we are coming to the end of the liquidity shot. this is the point. what is the consequence of the end of the liquidity supernova shot across assets? where do you want to hide? goldman wants to be in commodities. dani: they absolutely do. you have to look to these points in the market. if you no longer have that europe, asia capital flight to u.s. stocks, which they say might end if we get the rate shock of them all from an ecb and boj. manus: goldman has four hikes, standard chartered two. how does it play in the markets this morning? the treasury implosion around the world continues. cash is closed, futures are open. let's have a look at the board. equities bouncing back. let's have a look. up 0.1% on stocks.
126 on the futures. we are looking at prices falling. dollar-yen, 115. bitcoin, are we in the value zone? shall we have a little bit of bitcoin? dani, what do you reckon? dani: michael novogratz certainly think so. let's dig into this picture more and get to the feature side of crypto. jinping's out has gone from flipping a burger to financing the world's largest cryptocurrency exchange. he is now worth at least $100 billion according to the bloomberg billionaires index. when he sat down with era checks or in november -- eric schatzker in november, he said he is not motivated by wealth. >> i don't really care about wealth or money and all the rankings, it's at or -- and all the rankings, etc.
i am happy to donate my wealth away. manus: it is easy to say you don't care about wealth when you have buckets of it. the meteoric rise. we are discussed by our across assets market editor joanna. it is amazing how this time last year people were poo-pooing crypto assets, now it is mainstream. how did he make all the money? reporter: he has just done a great job of riding that crypto wave. finance has done really well in an environment that did not have a lot of regulation. they came out after other exchanges had issues in 2014, 2015, 2016, and they have a pretty good user experience. people like using binance. when jurisdictions are cut off from binance, people are sad
about it. they want to keep using it. so it has done really well. it is still huge compared to any other rival. as one of the cofounders, he owns quite a lot of that. dani: if your wealth is tied to crypto, it is a bad weekend for you. bitcoin back below 42,000. what do you make of the weekend's price action? reporter: actually, one other point on the valuation for cz of 96 billion dollars, that does not include his crypto holdings. so it could be much bigger than that. the weekend's action was still not great for crypto. bitcoin is holding above 40,000, so it is not tumbling drastically like it has sometimes in the past, and there are signs that some people are trying to get back in. across the board, crypto is
still in a pretty depressed period. it is definitely in the dow or -- in the downward phase right now. manus: great read. joanna also injured, cross assets -- joanna oassinger, cross assets editor. let's continue with the crypto conversation. our next guest is an analyst at deutsche bank. thank you for joining us this morning. we are in a swoop in bitcoin and the overall crypto land. let's stand back for a moment. sometimes when you see these flush outs in markets, it is good because what we end up with our perhaps the more robust investors. what do you make of the current washout? is it done? guest: i would say that looking long term, in 18 months, bitcoin and assets [indiscernible]
if we look at the liquidity, it is low over assets. the average is equivalent to less than 0.1 percent. it is very likely to remain volatile due to the low liquidity we have. i think there are two key indicators that we can watch. manus: -- dani: apologies for interrupting. i wanted to jump in because when it comes to liquidity and volume, coinbase and ftx u.s. said during the most recent slide volumes have been lower. oppenheimer warns this quarter could be a mini crypto winter. are those volumetrics a concern to you when it comes to the support underlying these cryptos? guest: that is a good question,
and i think the volume is low, but the good thing is regulation. regulation is coming in 2022. we should expect to see regulation in most economies. if we have this framework, it is easier to invest. we can expect to see higher liquidity and more price stability. manus: what is the worst type of regulation that could injure the rally of cryptocurrencies? what is the worst case scenario? guest: regulation is moving. if we look at what is happening with the european commission, at the very beginning when this started, this is something that is moving all the time. 2021 --
[indiscernible] i would expect by late 2022 to early 2023 to have something which is robust. and with more corporates on the crypto market. dani: in terms of regulation, what about the transition many countries are making in energy? we saw kazakhstan has its own idiosyncratic issues, but because of energy concerns they have limited intense energy industries like bitcoin. how big of a risk does this sort of action from governments pose? guest: that is a good question. and actually, if we look at the number of bitcoin which is mined, mining one bitcoin [indiscernible]
there are several ways to approach it, including regulation. it is possible to impose taxes. we can also switch. the next move that can be done as well is regulating miners. this is something people are looking at, especially elon musk. he discussed it last year. but there is a lot of work to do. manus: marion, you said as we started this conversation that we needed to be aware of regulation and inflation. the big argument last week, the proposition by goldman is crypto and bitcoin's stored value, its
capacity to grow as resilience or value in an inflationary environment will grow at 16% or 17%. that e equates to $100,000. is that a price target? are you a proponent of the target? guest: first, bitcoin can serve value. i would agree with that. so far, i wouldn't say -- it is very volatile. you cannot pay with bitcoin everywhere. but things are moving quickly. el salvador shows it is possible. dani: before we let you go, i do
want to ask about alt coins and their staying power. recently, there was an advertisement with matt damon got got a lot of criticism from crypto.com. he compared crypto to going to the moon. how much of these types of coins have staying power? a lot of it is tied to marketing. guest: i think we have over 7000 different coins. if we look at bitcoin transactions, it can be potentially traceable. if it is not the case offshore and all of them are very different. so we should not put all of them in a basket. my personal view is that bitcoin are here to stay. i would say that bitcoin is
probably closer to the digital gold, while tehran -- [indiscernible] dani: thanks so much for joining us this morning. that is marion laboure. let's get to the first word news. juliette saly is back with us in singapore. juliette: australian minister says the u.k. is on the path toward transitioning from pandemic to endemic. the education secretary also backed a move to cut the self-isolation period from seven to five days as schools and hospitals continue to battle high levels of staff shortages. >> we know with covid there are always variants. we keep a close eye on it. i am confident we are on a path towards transitioning from pandemic to endemic. but you've got to make a consistent effort. juliette: china has launched
testing in shenzhen as it strives to maintain its covid zero policy. this after two locally transmitted omicron cases. neither people have traveled outside the city in the past 14 days. german douglas flint says he is optimistic about hong kong's future as a leading financial hub. speaking to bloomberg, the leader of the asset manager says the city's entrepreneurial spirit will overcome recent hurdles. >> i think hong kong will continue to be successful. i think it is important for hong kong and it is important for china in the broader sense of which hong kong is a very important part. i think hong kong will retain its position as one of the leading financial hubs in the world. juliette: global news 24 hours a day, on air and at bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg.
manus: i'm manus cranny in dubai, dani burger in london. politics, eh? the biden administration may increase export controls on russia as it seizes more of ukraine. if that risk rises, that is the result. that is something the white house is discussing with its allies, restrictions on sensitive technology and
electronics. let's get to maria tadeo. this is the risk, isn't it? it will be a decisive week for security. what are we expecting? maria, good morning. maria: yes, manus. it is coming to a boiling point. we have known for months that russia has staged troops at the ukrainian border this week. this week, we have officials meeting, and we have the very important nato summit. a lot of this is stemming from tensions on nato, whether or not ukraine would like to join nato, whether or not the alliance would take in ukraine as a member. a lot of the sanctions that you mentioned would see russia essentially shut off from the payment system. we could also see big export restrictions coming and a restrictions for international companies. in the most extreme case, russia could operate under conditions of low to that as syria -- similar to that as syria. a lot of that will depend on the
outcome of the talks this week. we heard the united states say they want to go for a diplomatic solution, but if there is no diplomacy, sanctions would be massive. russia repeating their own standard line that they are going into these talks not to make concessions. dani: that emphasizes the conundrum the european union finds itself in. it reiterated yesterday that there is concern about economic cause. how do they reconcile the two? maria: this is such a difficult situation for the european union. on the one hand, we are in a situation where they are trying to maintain momentum. the fact that the eu says how much roman to him -- how much momentum they have lost. vladimir putin managed to get that phone call with president biden and now has completely
sidestepped the european union. the other thing has to deal with the economic costs. there are tensions, and it is winter. the gas story plays into this. we have the nord stream 2 pipeline that is due to be approved by the german regulator. a lot of this mixes gas, energy, and policy into this. that you says whatever happens this week we have to be at the table and approve it. but the eu does not have a lot of talking points in these talks. dani: maria, thank you very much for your coverage on that. coming up, these are cancellation squashed. i think that is a double negative. an australian judge orders the release of novak djokovic. we will have more on that next. this is bloomberg. ♪
dani: welcome back to "bloomberg daybreak: europe." i'm dani burger in london come alongside manus cranny in dubai. an australian judge has ordered the release of novak djokovic after squashing the decision to cancel his visa. manus: the 34-year-old world number one tennis star argued he did not need proof on vaccination because of evidence of a recent coronavirus infection. the court agreed it was unreasonable to cancel his visa in these circumstances. paul allen has been tracking this story from sydney. good to have you with us. what does this court decision actually mean? is djokovic free? paul: at the moment, he is free, and his lawyers argued two prongs. proper procedure was not
followed at the border, he could not respond properly to the cancellation, and secondly you had a medical contradiction to covid because he tested positive on december 16. the judge ruled he should be immediately released from immigration, detention he should have his passport and belongings return to him, and the government should pay costs as well. during the hearing, the judge said, what more could this man have done to assure his entrance into australia? he ticked every box. dani: but of course, this kicked up a lot of frustration given that it is so strict in australia for its own citizens to come home. so what does this decision mean for the country's strict covid and immigration policy moving forward, paul? paul: it is a good point. this isn't over yet. in at the closing moments of the hearing, the government lawyer said the minister for immigration will not consider using his personal -- will now use his personal consideration.
he could ban djokovic for up to three years and not give a reason. he has four hours to decide whether or not to do that. as to why he would do that, you make a very good point. it has been externally difficult for even australian citizens and residents to get back into the country. you need to be double vaccinated. in the city where he is going to, melbourne, where the australian open is held, is one of the most locked down cities in the world. people are tired of this. they are 93% vaccinated, currently in a group of the wave of the virus. but here you have a famous tennis players seemingly able to breeze through without getting vaccinated and having some argument based on having a prior infection is not going to go well in australia. it might go very well in serbia. manus: indeed. let's see what the last hurrah on this story is. a quick set up for the week is
about inflation and recent sales. for tomorrow, it will be the fed. chair jerome powell's confirmation hearing. wednesday, chinese and ups cpi figures. dani: we also get the fed's base book released. -- beige book released. we are hearing from president biden's vice chair. friday, it is all about the banks. wells fargo, citi, jp morgan release earnings. the cash market might be closed for bonds, but we have to look at this future. we are looking at futures down again this morning as we consider what it means for liquidity to disappear from these markets. manus: absolutely. we are getting ready for the highest reading on cpi since 1982.
so get the flexibility of the new mobile service designed for your small business. introducing comcast business mobile. you get the most reliable network with nationwide 5g included. and you can get unlimited data for just $30 per line per month when you get four lines or mix and match data options. available now for comcast business internet customers with no line-activation fees or term contract required. see if you can save by switching today. comcast business. p- [announcer] imagine. having fuller, thicker, more voluminous hair instantly. all it takes is just one session at hairclub. introducing xtrands. xtrands adds hundreds or even thousands of hair strands to your existing hair at the root. they're personalized to match your own natural hair color and texture, so they'll blend right in for a natural, effortless look. call in the next five minutes and when you buy 500 strands, you get 500 strands free. call right now. (upbeat music)
anna: good morning. welcome to bloomberg markets europe. mark cudmore joins us from singapore to take us through the market action this hour. the cash trade is less than an hour away. here are your top headlines. talks kick off geneva as the white house weighs tougher curbs on moscow. china sees its first omicron cases in the community.