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00:00The most crucial moments in the trading day. This is Bloomberg Markets the close with Caroline Hyde Romaine Bostick Ken Taylor Ray. It is 2:00 p.m. in New York 7:00 p.m. in London and way of life. That's world headquarters. This is Bloomberg Markets. The I'm Caroline Hyde I'm Romaine Bostick. I'm Taylor Riggs. And Powell perceives carefully U.S. stocks staged a rebound as the Fed chair signals his support for a rate hike in March. Despite that geopolitical risk but just a quarter point hike Taylor on the Treasury whipsaw remain on oil's much higher. I'm on that worldwide inflation pressure. We've got you Covid plus off the back of Paul's comments where honing in on consumer prices and the global supply chain crisis and speak with the CEO of Dine Brands Global which owns Apple's comfort food favorites like I hope an Applebee's. And of course we discuss the war in Ukraine. We'll get a read from the ground with a foreign policy adviser to Ukraine's deputy prime minister. And take a look and what all this means for global quantities on the emerging markets. All that and so much more coming up this hour. Yeah interesting day here in the markets. Of course we talk about that 2 percent sell off that we had over the previous two days. That's been recouped here today on the S & P on the Nasdaq. The Russell we should point out is up two point seven percent right now transports up about 3 percent. So a little bit of dip buying to be sure as some folks come back into this market. Your course seen a significant reversal going on in the Treasury market. A 15 basis point drop yesterday now turned into a 15 basis point rise. And one 10 right now on WTI crude we were up around 112 51 I believe was the high of the day on WTI crude. Brent crude got up almost to 114 year on the day. So certainly not out of the woods yet when it comes to the ripple effects of what's going on with the Ukrainian war there. But at least for now right now risk sentiment is maybe a little bit better than what we saw the last couple of days. Indeed it was Ramon as you certainly see that and you get a VIX coming down just a little bit to a 30 handle. Don't get me started about yields. I mean we talk about where we've come in the last 10 days and we're north and then migrating south and then we migrate all the way back north in yield. You're up 16 basis points on the day. Look you're right back at 150 on that 2 year old now. All right. Well there was also sort of something else going on watching of course. Jay Powell was in Washington for a semi-annual testimony to Congress. He kicked it off today before the House Financial Services Committee. Michael McKee Bloomberg international economics correspondent joining us right now to talk a little bit more about what we learned. And Mike it seems like the big takeaway here was it rate hikes still on the table maybe not as aggressive as some people in the market depressed. Well basically telling Wall Street what it already knew that the Fed was going to raise rates this month. Jay Powell says and they are going to probably do 25 basis points. That's what he's in favor of. And since he's the chairman that's probably what they're going to do although he said 50 basis points could come in the future. Now the Beige Book is just out. And it's very interesting because it sort of parallels what Jay Powell was saying in today's comments when he was assessing the economy overall that it expanded at a modest to moderate pace since the last time the Fed met. And that was because of the Covid surge. Paul mentioned that today and said that had started to fade. And so the economy is getting a little bit better. Labor markets still very very strong according to the Beige Book. And wages are rising as employers are having a hard time finding workers. But one of those issues was people staying home because of Covid and maybe that'll get a little bit better. Did he was he able to clarify the willingness and ability for the Fed to tackle inflation while also dealing with the uncertainty that we're getting given the war on Ukraine. Well they've got to tackle inflation. It's their job. And when a Fed official says we're going to be vigilant on inflation they're just doing their job. They do. Although Jay Powell says they do have the ability to bring the United States in for a soft landing. When the Fed raises interest rates it slows economic activity. And that in theory would push the unemployment rate up which is what they don't want. And they think they can raise rates enough to bring down inflation because they're going to get a hand from the fact that a lot of this is temporary inflation. And the only thing they don't know is what the war the Russian invasion is going to do to that. It's obviously pushed up oil prices now. How long does that last. And what is the reaction function from the likes of Biden the administration some sort of steps to be taken to ease the pressure on consumers. We're looking more at the Beige Book and saying in terms of prices the vast majority of businesses continue to report rising input prices. And they noted shortages and exceptionally high cost of freight. That doesn't feel like it's changing anytime soon. It doesn't. And Paul was asked about that today and basically says well we got it wrong because we thought this would end rather quickly. But the economy started growing faster than we anticipated and created all these supply shortages. And that's still going on. Now we've got on top of that the war. Interesting to note that a lot of auto plants in Europe are having trouble because they make parts in Ukraine and those factories are closed. And that's the issue that we've been having in this country is not enough cars and that's pushed up the prices. And so I mean I'm just skimming through. The Beige Book now and it seems like all the banks are basically saying OK employment strong wages are strong. They did seem to sort of cite this idea that consumer spending did moderate a little bit at the beginning of this year although they attribute some of that to the crown a wave here. Is there a general sense here that the playbook that most investors had at least prior to the Ukrainian crisis are that that is still relatively intact. The idea here that in order to tamp down inflation the Fed needs to end QE and begin to hike rates. Yeah and Paul confirm that today. That's the plan. How many times they have to raise rates is going to depend on how all of this stuff unfolds in the future. And he would not. And just to be clear they're still doing QE right. Well they are technically. They are still the 15th of this month. I think or something like that because they do it in mid-month. So the things they approved in February get bought in March and then that's it. Which is why they can raise rates the next day. IBEX. And so that that plan is still in place. We have a countdown clock for that. Yes. And our view is that he will come to Wellesley will come back right when it's over with. OK. All right. Well thank you. Our daily reminder QE is still happening and we're still happy to have Michael McKee Bloomberg International Economics and policy correspondent. In the meantime you guys we take a look at these markets. I'd mentioned a two year yield all the way back up to a 150. Take a look at the 10 year yield as well. You're up to a one eighty six to really sort of racing all of the big losses that we had. When you think about yields lower yields climbing right back up to pretty much where we were sort of before a lot of that risk off sentiment had pushed bonds higher yield lower you change changed. The board though in Romania thought this was interesting yesterday. You talked about that negative real yields. You know when we were contrasting that to sort of the tightening financial conditions that Powell had also mentioned that the market was already pricing in this could be though in effect maybe lower growth on the horizon. Right. Which is why you're seeing further negative real yields and a big rollover and those pretty much all the way across the curve. Caroline Hyde know within your European story as well you're relooking back to negative yields again going back in Germany as well. Yeah. Really the swift change that people are now not pricing in the ECB to move even this year is some of the banks. It's notable change of policy tone. Meanwhile Corish life's going to be with us to dig into these market moves. Deputy chief investment officer with BMO Family Office. Twenty one billion dollars in assets under management and cattle inflation front and center geopolitics of course adding to that concern. What do you make of the gyrations we see in the market. I think investors are really working hard to recalibrate to new information a lot like we did in the spring of 2020 when or when Covid first hint we shut the global economy down and people had to figure out what to value different asset bust buckets with. We've had a similar situation here where we came into the year. The Fed all of a sudden was more hawkish than they had been last year. And then we throw Ukraine on top of it and all of the other issues. Some markets were really struggling to try to figure out where that new base level was or normal. And I think some of that Fed testimony today reassured investors that the Fed's not going to move with a big amount right out of the gate and that hopefully some buyers can creep back into the markets because a lot of times they back right away when when the news is different like it has been in the last couple of weeks investors have had a time to grapple with. Yeah that's just to say the least here. Do you see sort of upside catalysts as sort of what could sort of be that thing that really starts to bring a lot more cash back into this market. The rearm brace of risk in full. I think a piece of it would have to be some stabilization in what's going on overseas because I mean we won't be able to assess the true impact on supply chains for example for another quarter or two. We're still a ways away from getting first quarter earnings which we won't start getting until the first week of April. So we got three or four weeks there so we could see some increased volatility. But there comes a point too when investors anchor to newer highs. A even two months ago if you had said the oil was going to be over 100 bucks a barrel you would have assumed that the market would would have reacted a lot more negatively other than today. It's up and markets are doing OK. How do you think as you go across that set for us like you always do about what sort of re inflating yields mean but still nowhere near at least some of the highs of a 2 percent on the tenure that we had just a few weeks ago. I think a big piece of it is this we're trying to figure out do we move cash balances into fixed income or into elsewhere. And we've been underweight fixed income like so many people have for a very long period of time. Don't think this is the time to change that especially when the Fed's out there with what's the market telling us 6 7 increases potentially this year into next year. So stepping into fixed income isn't necessarily the way to do it. But cash has actually been a pretty decent place to sit and try to figure things out in the short run. And I think that's what a lot of people are doing. It's one of the reasons why you've seen selling pressure without any sort of buying support. What about outside the U.S.. The tool Carol is that space that you're eyeing and is it one they are backing away from. Well we've we had backed away progressively through most of last year in terms of we'd been above the way we went to neutral weight room went to under way both emerging and developed markets a lot related to supply chain issues and zero tolerance policy coming out of China for Covid shutdowns and the disruptions in supply chains. We're not ready to to change that. Now based on all of the geopolitical things going on and the disruptions again to supply chains and money movement and lots of things I mean not only have you messed up the ports. Now additionally but you've messed up airspace in terms of how are people going to get goods from one to the other. Yeah well you talk about sort of I guess where we stand right now in the global economic cycle not just necessarily here in the U.S. here. Is there a case to be made here that we are still in early cycle mid cycle terms right now or do we need to rethink that. I think I think there's a case to be made. We're early cycle because the one thing that's getting lost in all of this is really the understanding that the U.S. economy is really strong. Chairman Powell talked about we're not the only country with inflation issues and a piece of that isn't necessarily inflation for inflation sake. It's because demand coming out of the pandemic is strong and we're early on in those cycles. I mean the optimism the optimism in the air just with the lifting of some of the mask mandates and and large employers starting to call people back. It will be interesting. We're going into summer and I think we're early on in the reflation cycle. All right Carol. Always wonderful to catch up with you Carol. Sly BMO Family Office deputy chief investment officer helping us kick off today's discussion here. Coming up we are going to of course hone in on what's going on with the war in Ukraine as Russia shifts to more aggressive aerial attacks on urban centers. We're going to go down to Ukraine. Adviser to Ukraine's deputy prime minister going to be joining the program. Plus we're going to hear from our interview with the CEO of Ford. Jim Farley a historic reorganization of course of the company that I guess. Well they popularized ISE mass production of gas combustion vehicles and now pivoting towards a visa. We're going to hear from John Payton the CEO of Dine Brands. I hope Applebee's Caroline's favorite. All that more coming up next. This is Bloomberg. But he badly miscalculated. He thought he could roll into Ukraine and the world would roll over. Instead he met with a more wall of strength he never anticipated or imagined. He met Ukrainian people. President Biden speaking about the war in Ukraine in his State of the Union address. Now for more on the situation on the ground and well really the stance that people there are taking and hoping that the international community take its fitting honor is with us. On Atlanta solution foreign policy adviser to the deputy prime minister of Ukraine and former member of the Ukraine parliament. Joining us now live from the country first and foremost Phil Ana just paint the picture of what it's like for you for your people on the ground right now. This is the seventh day of full fledged war. What I've seen during these days it's pain and misery because people's kids are being killed. People are leaving their homes and don't know whether they're gonna come back at the same time of course. It's what we've seen here. It's anticipated unprecedented unity and also courage of our army and just people ordinary people who are willing to join an army and join in a territorial defense units taken by guns despite the fact that they have nothing to do with military. But they are going to protect their home because in the end we have 40 million people nation and we are not going to immigrate. We are not going to leave. We have nowhere to go. So this is for many people it's the only choice to take a weapon and to protect its home. Are you getting what you need in terms of the military help as well as some of the economic sanctions that members of the EU Europe the US have also imposed on Russia. First of all I'd like to say thank you to all of the governments and people who are helping us in this difficult moment. We do feel this is it's tangible support. We feel it at the same time. I'd like to say that some of the response has been unfortunately delayed. Ukraine has been asking for pulled weapon already for months since we have been very well informed that Russia Putin is amassing military troops around our border. So at the moment when we are when we started to get some weapon from NATO nations some of the logistics is also a problem. However it has to be said that of course at the moment we've got a big big support from from many countries in terms of weapons and protection and so on. Now when it comes to sanctions ISE I still think that our response has to be stronger because the calculation has to be to stop the Putin and the the codification of the response should be whether we stopped him or not. And if you ask me what is needed. I think that the companies let's stop must stop trading with Russia and funding Russia's war indirectly. Of course there is a need to boycott Russian business today because every day U.S. U.K. and EU together buy from Russia more than 700 million dollars almost a billion of oil gas and other commodities and indirectly finance in this Putin military invasion of Ukraine. So we need a stronger response from business which will in the end I'm sure will impact the society. You know very well that Russian citizens they are censored. They can't see what's really going on on the ground. They don't get that information. So they have to feel this on other level and they have to demand from their leader they have to be in the streets. I think that angry Russians in the streets of their country will help us to stop this war. Talk a little bit about the flow of information footlocker through the Ukraine and to that extent into Russia as well here. Are you getting enough information about what's going on about what the world's responses. And is that information flowing on filtered not only to the Ukrainian people but to the Russians. When it comes to Ukraine I mean of course we had revolution of dignity in 2014 we fought for our freedom of speech freedom of gathering and expression. And we have properly political democratic ambience here in this country. Whoever wants to say something. They have such right and platforms. So I don't see any problems with information circulating in Ukraine. However when it comes to Russia you know very well that people dared to say the truth. Like Alexei Navalny. He has been poisoned for daring to say the truth. And at the moment we also see that the truth is completely censored from Russian citizens. I'll give you a couple of examples. First of all Russian government refuses to inform its own population of what are the casualties amongst their soldiers on Ukrainian ground. Today's for the first time they managed to say something about the casualties but they diminished it by 10 times. And I'll tell you you know what is one of the biggest problem of humanitarian crisis in Ukraine. It's not even humanitarian aid but it is the fact that Russia refuses to pick up their corpse from Ukrainian territory. We ask international community to provide us with some special refrigerators like trainer for Doritos to keep those bodies because no one wants to take them back because Russia is so much afraid to show to their own citizens or what's going on. And secondly we know that you know you've seen these videos and pictures. That's what's happening on Ukrainian territory. There are a lot of war crimes and crimes against humanity being committed by Putin and its army. You know that International Criminal Court already opened a procedure for investigations of those crimes. But at the same time Russians are being told and I've seen it myself that it is Ukrainian army that is bombarding bombarding its own civilian population. It's such a cynicism. All rights fit Alina. We really appreciate you taking time to be with us today given the circumstances here. Well we wish you the best fit Alina. Sally Shook she's a foreign policy adviser to the Deputy Prime Minister of Ukraine and also a former member of the Ukraine parliament. We'll be back in a moment. From New York this is Bloomberg. What is a humanitarian crisis also becoming in large part an economic one too and we want to look at some of the strains that geopolitical tension is also putting on a theme we know already too well. Taylor Inflation. This chart phenomenal. You pointed it out while the European area inflation numbers did today. And of course a lot of this has to do with oil and gas prices. But this is just February. Whole March paint a tale of a five point eight percent on year on year increases in prices and then five point eight percent remain. Just jump in. It was five point one percent the previous month. So it's accelerating and it's accelerating at a pretty fast pace. And what really stood out to me was the 10 year German sort of their inflation protected debt fell to a record negative two and a half percent. And obviously this is driven by energy prices but not just energy prices the energy prices that feed into everything else. So it affects the cost of industrial production and a lot of other things here that feed into those inflation numbers. You can see that reflected here in oil prices right now. I thought this is interesting. So what you're looking at basically is you know contango Taylor. Right. That's why US futures prices are higher than soft prices. That's not where we're in backwardation where spot prices are way higher. And that line on the far right of your screen. You take the first month's contract you're minus it by the six month contract. You're at seventeen bucks right now. DAX. This is data going back to 1990 the most on record that we've seen right now as the market is distorted to say the least here. And we even know that again these are futures prices and we know that even in the futures market those prices aren't a true reflection of what's going on. And the entire Brent curve I think through the end of this year is above 90 dollars a barrel. So there is in signs of easing really at all this year. The extreme nature of the moves the farther we have to talk contango in backwardation and the real time that you learn something today. I did you teach me that. This is Bloomberg Markets clothes. Little after two thirty here in New York. Let's get you caught up on what's happening in the commodities space of course. All eyes on the war in Ukraine the worst security crisis in European history. Going back of course to World War Two having a big impact here on commodity prices 110. Eighty six right now on nine makes crude. That's the price on your screen. Yesterday we closed at the highest level since 2014. Today's settlement takes us to the highest levels since 2011. Official sentiment right now 110 60. To be precise natural gas futures not very much better. Over in the Netherlands right now you're paying 36 percent more on that front month contract than you were just about 24 hours ago. And of course we have to talk about a lot of those soft commodities which are really getting roiled here. Corn higher slightly higher on the day. It was much higher there. But you're looking at wheat right now above 10 bucks a bushel for the first time in a decade. Here up seven point six percent here today in the futures market. And just looking at that corn futures price at 727 a bushel. That's the highest in nine years. Taylor Riggs and Caroline Hyde. All of this feeds into the higher input costs the higher food inflation that big brands are facing big restaurant companies are facing. Take a look here at Don Brand's global now. The shares are off about 10 percent. The top line numbers frankly actually looked pretty good. Same store sales for I hop right in line with expectations. Applebee's comp sales were better than expected. The bottom line better than expected. But Carolyn when you think about going forward the rising input costs the inflationary environment said are coming pretty much everyone's way. That is also top of mind for a lot of these investors and also consumer sentiment and people getting out there. Are they dining. Well pleased to welcome now Diane Brown's global CEO John Payton. In the flesh in the studio. It is great to have you back here John. First of all let's just let's talk about the inflationary pressures you're experiencing right now as we all have Ukraine Russia and the impact that has on front of mind. How are you experiencing it. How are you navigating it. So thanks for having me back. I'm glad to be here. Inflation is a concern right. We all feel it as consumers and certainly as business leaders. Let me help you with the math and then I can talk about about what we're doing. So inflation last year in 2021 for for our two brands. Cost of goods into the restaurants was about six point five percent. And this year for 2022 we're thinking it'll be about 10 percent a little less for I hope a little bit more for Applebee's because of the mix in there in their products to make the math a little bit easy. Two ways to think about that. If if restaurant if food costs are about 25 percent of a restaurant's menu you've got to raise prices two and a half percent to cover 10 percent of inflation. Right. Historically our franchisees raise their prices and it's the franchisees who do this one to three percent a year. Last year it was three to four percent. So they were covering the cost of goods and a little bit also of labor. Another way to think about it is the oil. You can eat pancakes. And I hope if that price goes up 15 to 15. I'm sorry. Two and a half percent. That's about 15 to 18 cents. And so you know our brands are all about value. And our franchisees are balancing now their margins with making sure we still maintain that value. How much guidance do you give them on that. Because I mean the calculus. I mean yeah sure. 18 cents on pancakes doesn't really matter. But people also look at the total bill. And if you're used to going to a restaurant with your family and spending say 50 bucks or 100 bucks and then you go back and now it's 110 instead of 100 here. People notice that. Yeah that traffic is his up since last year and it's increasing every quarter throughout 20 20 21 and now into into 22 at a time when when prices are rising a little bit more than they haven't they have in the past. And if you join the Applebee's the eye hop system as a franchisee you know that you're you're you're joining restaurants that are all about value. Right. And delivering value to our consumers. And so while we can't tell them how to price we're very much aligned on the strategy that it's important they protect their margins. But we can't move ourself out of this value proposition. You talk a lot about the mix. People who are eating in versus the takeout that we saw in the pandemic. Does that mix stay the way it has been in the pandemic. How do those trends shift when we are now thinking we're fully back to being reopened. The the off premise business is something that is a great really benefit of what happened during Covid for us. So we were are off prem business was less than 10 percent of our mix before Covid. Now it's north of 25 percent for both brands and the absolute dollar value of that about nine thousand dollars a week for I hop thirteen or fourteen thousand dollars for Applebee's has been steady for 15 16 17 months. So we view that as incremental business that we need to nurture and grow which is why we've been investing so much in technology. No Applebee's dot com. I hopped on com flipped aecom are new. I hop to go concept as well as the related apps are all new last year and this year. To really facilitate all that to go business that we now have to invest in technology. You need people need people at the parent company. And also you're talking to franchisees a lot about their own labor as well. You're talking a little bit about trying to offset the costs. How is labor right now for you as an executive. It's getting better. So the last couple of quarters in 2020 we were flat at about eighty five percent of full staffing and now we're north of 90 percent. And this is just in the last January February last couple of months. And I'll give you an interesting sort of statistic on that. We did a Applebee's National Hiring Day and through social media digital back in May. And we attracted 40000 applicants. We did it again last week and had more than 70000 applicants. Why. Because people are coming back to work. And we've talked about is the great retirement permanent. Why is it. Don't know why it is but it's seeming less permanent. I mean once thought another great stat from this hiring day we had one hundred and fifty five percent increase in applications for cooks which is our hardest job to fill. So that's an indication to us that people coming back to work and when they come back to work. It's great to work it out with these and I hope. Is it too early to start talking about expansion. I mean investors kind of want to know when that resumes if at all. We opened 45 restaurants last year and so that's that's the best we've done since pre pandemic. And so that's an indication to us that our franchisees are beginning to pivot from defense to offense and they're becoming confident enough to begin opening restaurants again. Some of that offense you mentioned was investing in technology making it more seamless if you will. Some analysts though noted that on the call that that was maybe going to impact some of your forward guidance for 2020 with EBITDA margins. Are you confident that you can restore those eventually and that the investment in that technology will pay off. Absolutely. You have to invest to win in one of the things that I think is important to share is that I think the dying coming out of the last two years is stronger than ever. Taylor And the reason is as recently as five years ago. To win in the restaurant business you just had to have the most number of bricks and mortar stores today. It's an and you have to have the most stores that scale which we have and you have to have consumer facing technology efficient restaurant technology. Loyalty programs off premise business. Virtual brands. And so we've been investing in all of that because that's how we build growth and margins into the future. So this 20 22 is an investment year for us. We're tripling our tech spend. And we expect it to pay off in 2030 and beyond. All right John always wonderful to see you. Great to catch up with you. John Payton there he is the Dine Brands Global CEO. All right. We need to pivot from that. Back to the situation in Ukraine. We are getting some headlines right now from the U.S. secretary of state speaking there. As you can see on your screen giving an update here on additional sanctions. Twenty two Russian defense firms now having sanctions imposed upon them. Blinken also announcing they're imposing export controls on Belarus which of course has been used as a staging ground for some of the Russian operations. And of course we have to talk about the humanitarian toll of all this according to Blinken. A hundred and seventy four thousand refugees have now fled Ukraine. Again this is based on U.S. estimates. We'll be keeping an eye on this will be keeping an eye on the markets from New York. This is. It needs to be a lot more profitable. We think we're going to have to take about three billion dollars out of our structural cost to make that business fully competitive on a return basis. Some of that would be quality. A lot of it will be just waste in the system and we can't stop there. We have to grow too. And that's why we're committing to two million vehicles on the road on the battery electric site. Of course Jim Farley that Ford CEO which takes us rather smoothly onto our Stock of the hour because well we wasn't a total surprise but now it's official Ford announcing plans to separate its Eevee. And I seen units both under one roof. Max at Ludlow has been following the story by helping break it. Joining us now with that discussion and before we ask you about some of the Russia implications and oil and gas and all that element of things. One hundred and eighteen year old company is a pretty historic reorganization going on here. Yes. It's historic. And as you said you know we first broke this story earlier at the beginning of February. And in that clip Farley is pretty clear about what the plan is here. Stripped back make the gas legacy business gas engine legacy business as sort of a leaner meaner profit machine. Take those profits and pass them on to an IVA business. Well evey operation that will be run in isolation. It's a double sordid double sided kind of impact they want. They want to basically sell fund but also have an evil unit that can move with more freedom and move much quicker than they had originally planned. I thought this was an interesting announcement too and talk about it from the other side of the Ford Blue Division basically the legacy cars in this statement. They talked about cost cutting and other sort of constraints for that Ford blue unit. And I'm wondering what message that that sends right now. Is this a full on onslaught into electric vehicles. Are they really going to try to bridge this gap for some years to come. It's a great point because the elephant in the room is how finite is the life of the gas business. But ultimately we know that Farley and Ford have their sights set on Tesla. That is the model they're following. That is the end goal. Yes. They're not starting from a blank slate. They're starting where all of their profit comes from pickup trucks the F 150. So what he's saying is make that even more profitable. And in the short term and by the way short time is basically to the end of the decade. Take that money to fund faster more aggressive pace. Because remember they also announced more spending on 80s and faster rate of production ramp. OK. And they've got to produce these things. So to it. Right. Right. Right. Because that's not really happening right now. No. But but now they have a road map to do it they say. All right. Ed Ludlow there giving us an update here on a big announcement by Ford. And those investors seem to like what they year shares higher by about 9 percent. All right. Let's turn now to our muni moment. Taylor Riggs. Yeah. You know Romaine everything comes back down to the theme of inflation. And of course continuing to digest Campbell's testimony before the House this morning. The Fed chair reiterating plans to hike interest rates later this month but some investors are expecting an economic slowdown amid price increases and of course the ripple effects that we continue to see given Russia's invasion of Ukraine. Let's discuss all of this with Arlene Boehner managing director and head of U.S. public finance at Fitch Ratings. And our Arlene I am curious how you're thinking about the fundamentals the economics if you anticipate a slowdown. And if so how does that impact state and local credits. Sure. Thanks Taylor. Thanks for having me. So twenty one was really a year of recovery after the roller coaster that was 2020 for our credit. So we're really searching for more predictability and 2022. We are expecting economic growth to continue a little bit slower than last year but we do think we're going to continue to see above trend economic growth. We're also watching the employment recovery. We're at about 80 percent of pre pandemic levels at this point and we're looking for that to improve going forward as well. How do you look at revenue. If you look at employment that's 80 percent of what it was. A lot of these states and cities depend on the sales tax revenue the property tax revenue as well. How do those compare. Right. So sales taxes and income taxes are all important. A lot of our local governments rely on property taxes sales and income taxes tend to react pretty quickly to economic slowdowns whereas property taxes are a little bit more durable. Any kind of impact would be delayed. So that often works to our issuers benefit. Well they can sort of react. What do you see as some of the biggest issues for municipalities in this post Covid world. We've talked a lot of analysts and they continue to like airports given the reopening or toll roads given people are driving again. What do you see as maybe the biggest catalyst on the horizon. Yeah. So we think that the fundamental credit strengths of muni credit is still there. We're going to be watching for that continued economic recovery. But we do see that there will be some headwinds. Inflation labor shortages rising costs rising rates all of these things are going to pressure some of our credits. And now to layer on the geopolitical pressures that we're seeing in the market as well. That's a concern for some of our creditors particularly with respect to cybersecurity. So they're very focused on that right now. But really a lot of our municipalities have a lot of federal aid still sitting on their balance sheets. And we think that's going to be an important cushion as they move forward to face those challenges. So many implications. Like you mentioned it's always related to Russia in Ukraine as well as some of the domestic issues as well. Arlene Voter managing director and head of U.S. public finance at Fitch Ratings really appreciate your time will be next. We'll be back next with more on these markets as well. This is Bloomberg. We believe that our approach to all the governments and regulators around the world is to be collaborative and to be very transparent to be available to explain what we do and who we are and answer any questions that you have. That's the approach we have taken. And that approach has been an approach that has been very beneficial for us over the course of the last few years. That was the Ticktock CEO speaking with David Rubenstein. Make sure to catch more of that interview on The David Rubenstein Show peer to peer conversations. It all happens tonight at 9:00 p.m. in New York on Bloomberg Television. We now want to turn back to our emerging action segment. We've talked a lot about commodities pretty much across the board rising. I want to point out aluminum here again continuing to jump to some record levels that we haven't seen in years and years. What was interesting here is that government agencies in China have now ordered some of their state owned buyers to scour the markets pretty much get their hands on anything they can. All in anticipation of prices just expected to climb higher. Let's do all of this and our emerging action conversation with Bloomberg Shery Ahn co-anchor Bloomberg Daybreak Asia. I point out aluminum Caroline would call it aluminium but really it's across the board. Yeah that confuses me so much as well. But yes aluminum Russia. I know right or right before 12 percent of China's imports. So it's not just aluminum right. It's also palladium shipments. Russia being one of the top sellers of oil for China. And in fact China has increased energy purchases from Russia. Given that the trade links diplomatic links have also improved and it's about food as well. Right. We have seen as that chart shows that really food CPI has been very volatile in China. We have had supply chain disruptions a pandemic not to mention the diplomatic spat with Australia hasn't helped China procuring these grains. And you now have Ukraine taking what. Twenty nine percent of China's total corn imports. I'm not going to have an issue. You want to get that corn that barley anything that you can get your hands on at this point like Taylor mentioned. So China really refocusing in the moment really sort of starting to nuance its its focus on how it's cut. Drawing the line on Russia Ukraine actions talked about the nuance of how certain countries in Asia are impacted right now because China is not only the key exposed to oil prices for example. Yeah. We have so many oil importers in Asia. And right now the two biggest ones are taking a big hit. We're talking about India and South Korea. Their oil imports some of the largest when it comes to Asian countries. As this graphic shows right now when we can see that their currencies are now the worst performing in Asia for when funds are net sellers of Indian and Korean stocks. And with rising costs is really going to hurt these companies profits as well. So we are seeing the brunt taken by these two countries and risk real quickly here. We're gonna get some GDP numbers out of South Korea later tonight. Yeah. Growth seems to be continuing to stay strong in South Korea for the fourth quarter sequentially one point one percent which is a rebound from the third quarter. We are already seeing exports in the double digits. So external demand remaining strong. We're also getting back in the GA Malaysia coming out with a policy rate decision. So we'll be watching that tonight on DAYBREAK. Asia they're expected to hold a given of course the pressure pressures all over. But interestingly Malaysia is a net oil exporter. So they will actually see some positive impact from rising commodities prices. It'll be interesting particularly after that. A little bit of a sell off we saw on Asian stocks overnight our time. Shery Ahn co-anchor of Bloomberg Daybreak Asia. You can get your every. Here we are. Focus here on the U.S. markets which are still around the highs of the day here. The S & P up about 2 percent here. Interesting move though higher in oil here as we get a little bit closer to the close back above one point above 112 here on the day right now at 111 81 on WTI 114 on Brent. I think it's also interesting supply chains feeding into all of this and we haven't sort of discussed as yet potentially the relaxation of some 0 Covid policies coming from China. What that really means for the longer term too. All right. We're counting down to the close. This is Bloomberg. Come down to the clue Bloomberg's comprehensive cross platform coverage ahead of the US market starts right now. This is Countdown to the Close. Just 60 minutes left in your trading session. Caroline Hyde. Romaine Bostick. Taylor Riggs. Joined now by our colleagues Tim Steinhardt Katie Greifeld in the seat as we go across platforms where they make TV radio YouTube to basically get whiplash because this time yesterday we were talking that we're off by about 2 percent on the S & P and volumes were up today. Volumes are up but up. Yes. And a completely different tone today. Certainly a risk on tone that we're seeing almost every stock in the Dow is higher. At twenty nine out of 30 the S & P 500 more than 90 percent of stocks are higher. So this is what you call broad based Kitty. Absolutely. I mean every single sector is higher right now. Yields are higher too. The only thing that isn't hired feels like is bitcoin actually down four tenths of a percent. Yeah. Finally maybe people questioning whether there'll be sanctions towards stopping any potential Russians using crypto currencies to circumvent certain restrictions. Didn't write in here. Right now we look at a one point eighty eight percent increase on the S & P 500 where 81 points higher. That is a 13 percent increase in volumes as well. We're up there. Similar tunes on the Dow up one point eight percent. The Nasdaq up one point seven percent. Even the Russell big outperformance in the small caps up two and a half percent. It's unbelievable. We think about some of the inflationary pressures that are underway. Caroline when you talk about inflation Reflate shared the big outperformance by some of those domestically focused stocks that tend to do well in those environments you really see that on a sector level as well. I mean the energy sector is up more than 30 percent now for the year and it's only the second day of March. But you're also seeing a big broad based advance mean. Take a look at where we are for the day as well. Energy you're up two and a half percent alone and remain. This comes as Brent is now topping one hundred fifteen dollars after the market closed for the first time since 2008. But even some of the worst performers on the day are actually still green on the screen to utilities and staples. Not quite. Signs remain yet that some of the inflation is hurting the consumer just yet. Yeah 115 even here right now. That was your high right now in the new session on Brent crude 112. Fifty one on WTI. Interesting to see those moves on a day. We're also of course seeing stocks are rallying hard on the day. A lot of what was sold off over the last few days and bought over the last few days being unwound a bit into tech stocks. Apple shares up 2 percent. Some of those defense contractors that have gotten bought up the last couple days and now that's being peeled back. Lockheed Martin down about one point six percent here. And you were just mentioning this a little bit earlier on the TV broadcast Caroline about the 0 Covid policy over there in Hong Kong and China and the idea that it's being dropped. We have TripAdvisor on the screen three ninety seven of the trip dot.com which is of course a big Chinese travel agency kind of the Chinese version of Booking and Expedia that they're rallying here on this day with the expectation here that a lot of those folks we kind of forget that a lot of people in China particularly the mainland really have been able to travel freely internationally speaking. So even domestically for that matter. So to get them back out that could generate a lot of economic activity. And we have to talk a little bit later about the results that we got out of Nordstrom. You're looking at a thirty seven percent gain on that stock and obviously it's coming off some pretty low lows. But nevertheless here to see that type of rebound year a vote of confidence here in that turnaround plan. Department stores just have really flummoxed many who thought you should show them. Meanwhile well everyone is close right. Yeah. Everyone these close. And if one must get back in their stores at Amazon. Right. Amazon doesn't want people to get back in their stores. Right. Well why are you also enlightening about the lack of food going on in the Amazon though Tim. Exactly. Meanwhile let's we digress from issues here at Lexington Avenue and we look at what's happening. One consistent theme you talked about yesterday the whiplash we've had in certain stock names on the benchmarks. I'm afraid that Bloomberg Commodities Edge index for our radio audience continues to march higher. We are once again in a new 2014 level high yesterday with the biggest move since March 2009. Today we push up once again and we're now up 43 percent over the course of the year and the bring back quantity index. All right. Well make no mistake a lot of the rally that we're seeing today has to do with comments that we got from Jay Powell. He did of course speak earlier today before the House Financial Services Committee kicking off two days of testimony on Capitol Hill. Check out what he had to say about rate hikes. I do think it will be appropriate to raise our target ranch for funds rate at the March meeting in a couple of weeks and I'm inclined to propose and support a 25 basis point rate hike. And to the extent inflation comes in higher or is more persistently high than that then we would be prepared to move more aggressively by by raising the federal funds rate by more than 25 basis point at a meeting or meetings. That was Jay Powell chair of the Federal Reserve speaking earlier today before the House Financial Services Committee Kitty. He kicking off two days of testimony but the market essentially breathing a sigh of relief saying that OK a 50 basis point hike at that March meeting. That's pretty much off the table. OK. Equity markets breathing a sigh of relief. But the bond action is fascinating. If you will get two year yields. They're up almost 17 basis points today. So equity markets viewing this as maybe dovish. But I mean the bond market. Those yields ripping higher. Is this dovish Taylor. Well because you guys you guys are enraging. We were talking earlier on TV and we'll fill you in here about how far we've come in the last five seven days that we were sort of right where we were before the war in Ukraine started. Then you had a big flight to quality and that's when you had a big rally. Yields are sort of recouping some of those. But it is notable that I think Jay Powell mentioned this that the bond market has done a lot of the work for them. And you've sort of seen the market react to the commentary. And so 150 on the two year is really sort of right where we were maybe a week ago or so. These correlations once again bonds sell off stocks rally you'll kind of reverting to that old playbook before it was inflation is up and we don't like either. Well inflation. So I know we're going to get a big inflation report a week from tomorrow here. And I mean look you had the Bloomberg Commodities Edge index there. When you sort of strip out energy and you take a look at the Bloomberg Agriculture Spot Index. Guess what. That's also at a record high. If you strip that out and you look at the Bloomberg Metals Commodity Index that's also at a record high here. These are real tangible things that go beyond just the gas you're putting in the car or how you heat your home. But it's about powering factories and whether those factories continue to pump out the goods. We've already seen this happen in Europe. We've seen anecdotal evidence of it happening here in the U.S.. These are real issues. These are the inflationary actors the non transitory pressures that I believe just a few weeks ago. We're all saying what sort of what was needed I guess was oh a 50 basis point by earliest some sort of aggressiveness by the Fed if they're going to come in Dublin in a week and a couple of weeks. It'll be interesting to see how the market reacts to that. Yeah it's really you bring that up Romain. We just spoke to Hewlett Packard Enterprise CEO Antonio NEARY. This hardware company obviously that has struggled with supply chain issues. The company did though raise its profit outlook for the year. Antonio NEARY telling us that the real problem with the supply chain has to do with these smaller components though not necessarily the really high tech chips that everybody's talking about. They're having trouble getting that sort of like less expensive those transistors as well. And I mean that's been an issue for a while. How fragile supply chains are now to remains point. You layer on top of higher food prices higher energy costs. You're already worried about inflation but now maybe we're worried about growth to give him to just say maybe that China needs that for the moving away from a zero policy on Covid. Maybe that does just ease up that issue with supply chain even if it doesn't confront some the inflation. Yeah that's really good. Really good point. No longer have to shut down those factories with over 1 Covid case. We're going to continue this conversation in just about an hour but that does it for our cross platform coverage at least for right now. We're gonna be back in less than an hour for Beyond the Bell on Bloomberg Radio Television and on YouTube. All right of course keeping an eye on the markets. We continue to see the rally here a bit of a rebound rally after two days of selling David Bonds. And joining us right now. He's a chief investment officer over at the Bond Fund Group which has three point five billion dollars in assets under management. David always wonderful to catch up with you. Let's start off here with the volatility that we've seen in this market volatility. We should point out that predated the war in Ukraine but of course it's accelerated since the Russian invasion into that country here. How are you managing through that volatility right now. And do you anticipate that it could tamp down anytime soon. I wouldn't expect it will tamp down anytime soon but I think it'll tamp down eventually. The problem is it's still pretty early into this geopolitical distress event. But you're right the volatility predated Russia Ukraine and a lot of that was focused in what we at my firm called the shiny object asset class. A lot of the kind of hot tech cool tech some of the crypto sparks these mean stocks IP shows all the things that were so popular for various parts of the last 18 24 months that have just gotten clobbered. And so you actually had pretty low volatility and certainly low drawdowns and a lot of the value areas and a lot of the dividend areas of the market and of course in the energy sector. So what do we expect going forward. I expect the volatility now to continue but for a different reason. It's not so much purging out the excess valuations as some of that tech stuff. It's now more focused on the uncertainty around Russia Ukraine and uncertainty around some of the inflationary pressures that of course we don't want to shy away from the fact that this is a human conflict and a humanitarian disaster as we can see. But there's also an element that this is one that has economic ripple effects and inflationary ones when. Well one was already experiencing already David. Does that impact the most. How do we. Well should you be looking to invest in that scenario. Certainly in terms of exploiting it and actually capitalizing on it. The energy sector has been and will continue to be the place to benefit. Now some of the energy opportunity also predates the Russia Ukraine situation. That is more exacerbating a trend that also was already in place. But when we ask if the inflationary issues are why volatility is exacerbated. I'm not sure that's the case. I think the volatility almost always goes higher for no reason other than the uncertainty. It's a self-fulfilling prophecy. Things are volatile because there's an uncertain outcome. Fundamentally the inflationary pressures ought to be on the table as to what ends up being resolved. Longer term and yet I don't think that's what's happening day by day right now. I think you really can't get a couple up six hundred seven point days in a couple down five hundred four hundred point days. If the reason people are concerned is inflation because the inflation story didn't change yet. The up and down volatility did that to me as a sign of weak hands that gets sold out and value hands that come in to take advantage of lower prices. Interesting. You also talk a lot about appreciating the intent of asset allocation go across asset for us the role of bonds a full faith and credit and the volatility that we've seen. What does that role play in asset allocation. Well you know unfortunately even for a big believer in asset allocation like we are. My firm. The fact the matter is a 60 40 investor right now is not benefiting from asset allocation because you have Treasury bonds down at the same time that equity portfolios are down. It has happened to a grand total of three times in the last 100 years that people had their bond portfolios and equities go down in the same year. We're only in the very early part of March. We have no idea where things go from here. But asset allocation right now has to be more thoughtful than just 60 40 and particularly on the 40 side of things using a long dated treasury when you are already at the one and a half percent on a 10 year. That doesn't give you enough hedge against equity volatility. And that's the downside of the zero bound interest rate policy as it's taken away the ability of bonds to be an effective diversifying instrument inside of an equity portfolio. So we're big believers in alternative investments for utilizing hedge funds real estate private equity commodities. Those are not risk free assets obviously. It's just there different risk assets rather than traditional interest rate risk or equity. Bayda risk. It invites a different risk but still a diversifying component. Do you look at commodities at all in this environment under these circumstances as a hedge. David. No I think if anything they're probably higher beta component and so we for example is big energy investors. We don't want to take that position through a long oil position. We want to buy Chevron right. We want to be invested in natural gas infrastructure companies that are gonna be exporting LNG for example so that as a commodity exposure to it. But we don't want to just simply take on the price risk of the underlying commodity which to your point may not be a diversify or in an asset allocation right now. It might actually just leverage up Beda around global cyclicality. David Johnson so straight talking we love it. Thank you. CIO of the Munson Group. Stay well. See you soon. Meanwhile coming up we're counting you down to the close and this time it's not Davis. With us founder and chief investment officer of Quadratic Capital Management. Plus we dig into the biggest investment risks poised by the war in Ukraine. The seven Williamson CEO of the nonprofit CLTV Global. What are asset managers thinking right now. And an What'd You Miss?. We catch up with the NFIB chief economist Bill Dunkelberg on how small businesses are trying to overcome inflation. All that and so much more coming up. This has been like. This is the countdown to the close about forty three minutes left to go here on this trading day. We're talking about an interesting rebound here on this Wednesday afternoon. Remember the last two days we dropped about 2 percent in total here. We're recouping basically all of those losses on this day here. But round trip here we've basically been in a little bit of a status here as a lot of people try to assess the situation going on in Ukraine. The Russell thousand up two and a half percent year to year yield all the yields across the curve right now in the Treasury space continue to move higher 16 basis points on your two year yield. But a lot of concerns right now is still about what we're seeing in the commodities space particularly when it comes to energy. The Bloomberg Commodity Index right now at its highest level going back to 2014. If you strip out energy just look at soft commodities. We're at a record high flip with the board. Take a look and you'll get a good sense here of why some of these stocks are getting bid here. Alcoa of course the biggest aluminum producer here in the U.S. at least publicly traded higher by about three point six percent here on this day nutrient. Interesting company here. Of course they make ammonia and a lot of the fertilizers out there a potash source a lot of that material of course out of Eastern Europe here. Those shares are higher by about 3 percent. The CEO was interviewed and was talking about the potential for some disruptions that should put upward pressure at least on market prices. And I guess investors betting that that might actually help. The bottom line for that company Archer Daniels Midland up about 3 percent here on the day. And Schlumberger rebounding. It was actually down the last couple of days. One of the worst performing energy stocks out there since the Ukraine war took off here but primarily because of concern here about its exposure to Russia. All right. Abigail Doolittle joining us right now as she does every day at this time for our Options Insight segment. And Abigail there's a lot of talk out there right now I guess about how a lot of these this in commodities how that feeds into the inflationary pressures worldwide of course feeds into market pricing and whether there needs to be a reassessment. Yeah it is a really interesting feedback loop because as you have oil grains metals go sharply higher. It does create that sense that there's inflation and yet you have these geopolitical tensions this Russian Ukraine war that creates the bid for bonds although not today. As Jay Powell reassures investors that the Fed is likely to hike. And that's important because we have stocks rallying on that suggesting that investors do you want some sort of normalcy. And Michael Barr managing director values at CAC Rock Rockefeller Capital Management. Thanks so much for joining us. Normalcy in this year of tremendous volatility is important. What are you seeing out there right now. What are you talking to you about relative to your clients. Yeah. Thank you Abigail. The strange part about markets right now is there's so many different factors that are unusual for the markets. You have the geopolitical all over and you have inflation you have rates you have Covid hopefully coming to an end you have supply chain. Is it real. And you know these inflation real. Is this really the next five years or is this an inflation that was driven by the unusual circumstances of the last two years with Covid. So you know we're trying to advise our clients just to just to stick to a plan based on the risk tolerance. We do believe alternate investments are are a crucial part of the asset allocation whether it's hedge funds private equity options strategies and anything to do with non correlated assets. We do believe that you know 25 to 30 percent of your assets should be positioned in a way that's not correlated to the traditional fixed income and equity markets. Well speaking of options we of course have that VIX that fear gauge. It is on the rise over the last several months six months maybe more than six months of higher highs and higher lows suggesting that more volatility could be ahead. Right now it looks as though there could be reason to think that there's going to be a rally. Some people are calling this a rolling bear market. Do you agree with that assessment or do you think that this is a real buy the dip opportunity for the long term. No I really don't agree with that assessment. I do think it's a buy the dip for the long term because you have valuations that are pretty reasonable. I mean the the shift from growth to value that happened late last year was predicated on such a massive gap between between growth and value. A lot of the high growth companies with minimal earnings shot up a little far too fast. And I think the value companies were lagging. But now there's a flight to quality which is we think going to push the markets higher especially on high quality names. Energy you know health care and and of course some tech names will continue to grow and push the markets higher. But I do think that the markets are reasonably priced right now and you're just seeing non earnings based non fundamental based factors that are really driving the volatility surrounding the options you mentioned and bringing yields into the story. If the Fed does in fact rate hike in March and other hikes this year where do you see that 10 year yield going and what do you think that means relative to volatility. Does it create this continued choppy whipsaw action that we've seen this year. Yeah. You bring up a great point with with with that and hopefully the yield settle. You know if the yields settle the 10 year between one 18 to 20 something like that they would be more normalized. They couldn't stay in the race couldn't stay low forever. And and Chairman Powell has as indicated that we're going to see a 25 maybe 50 50 raise and or score to common in the coming year. So I think the less volatility we have on the on the tenure or any yields we want you want to pin probably the more strategic fixed income will lessen volatility. The biggest issue right now is the uncertainty around the markets. Everything you know you know whether it's fixed income whether it's inflation whether it's Covid whether it's geopolitical. It's just there's so much going on right now. It's hard to get your arms around. So with certainty indeed. And really the driver of volatility Michael Barr is great to get your market perspective. Thanks for joining us today. Perhaps since then. Thanks Erica. Thank you as always Eric to our very own Abigail Doolittle. Let's get a quick check though on some of the other business flash headlines that we're following at this hour. And it all comes back down to Russia. Rich Russians are now spending big on luxury jewelry and watches all to preserve the value of their savings. Sanctions have sent the value of the ruble plunging. Well Gori says its sales and its Russian stores have risen in the last few days. Cardi watches also are still available and Russians and so of course are those timepieces from Jamaica. And Russian billionaire Roman ad from the feds. There we go. We'll sell the famed Chelsea Football Club and donate the net proceeds from the sale to victims of the war in Ukraine. Abramovich has said that so far he's remained off the list of Russian individuals who've been sanctioned in response to the Ukraine invasion. But he is under increasing pressure the last few weekends and he did hand off control of Chelsea to the trustees of its charitable foundation. And you guys this is just the stories we watch because we've talked a lot about some of the billionaires how they're skirting some of the sanctions how they're trying to plan where they're trying to hide out their wealth. And so this will something that we'll continue to watch. This is Bloomberg. Big comments out of Jay Paul Allen Caroline Hyde you wonder if the equity markets in the bond markets are responding to really sort of a firm line that the Fed is moving and some confidence that they will tackle inflation or relief that it won't be 50 basis points. Meanwhile inflation pressures remain. The UK natural gas prices up 35 percent. Yeah. You wonder how the Fed response at least what the commentary with the discussion is going to be. Bring back. The most crucial moments in the trading day. This is Bloomberg Markets the close with Caroline Hyde Romaine Bostick Ken Taylor Ray. Twenty seven minutes to go. We counting down to the close yeah and the losses we saw over the last couple of days. Well they appear to have been recouped. Yeah. It's interesting though when you think about the time frame it feels sort of range bound given where we were yesterday to where we were today in that story on a sector level actually looks pretty much the opposite of what we had yesterday. But remain dare I say it broad based green on the screen for every sector. Of course energy just continues to blow it out of the water. Now what 3 percent on the day. Yeah 3 percent on the day. You're seeing those energy stocks rally. You're also seeing a bit come back into some of those tech stocks of course even the tech stocks to head that defensive nature the ones that nobody really wanted to touch a couple of days ago. Microsoft Apple up a couple of percentage points here and then keep an eye on Ross stores. We had those earnings out earlier today from Ross stores as well as from Nordstrom. Nordstrom shares up more than 30 percent here on the day. So a little bit of optimism coming back into this space for some of those companies. And then of course we have that announcement from Ford today. The idea that they're finally going to sort of splinter off at least restructure the business in a way that puts a little bit more focus on the eve space. Investors liked what they heard out of that. That's up 9 percent. And investors apparently starting to like what they're hearing out of Citigroup. That company holding its first Investor Day under Jane Frazier this year has been all over the place. They actually opened lower by about 2 percent or so. They were down as much as 5 percent but now higher by about one point. And many were discuss a little bit more. Many worrying about the profitability of cities and restructures and many actually sell side analysts right here right now. What about profitability in general. In fact we haven't seen sell side analysts get this bearish since all the way back to May 2020. When you're looking at the measure it's a measure of revisions downgrades versus upgrades in terms of the performance of companies. And we are sinking. This is all related to geopolitical risk of false inflationary pressure how companies weather increasing in rates coming from the central bank atmosphere out there. Taylor the mood music has soured. It has. And what's so interesting Caroline as you talk about the rate then of course the impacts on some of the geopolitical events and really the banking the financial sector is one that we're closely watching. Earlier we were hearing from Citigroup. Now of course those shares were earlier but right around noon turning higher and really started bouncing back along with the rest of the market and the bank announcing that while profitability though it will fall that companies pursuing this strategy shift that will raise expenses in the near term. CEO Gene Frazier spoke earlier from the Investor Day conference. Everybody listening today knows this isn't a quick fix. This is a multi-year journey in which we will improve and deliver better results over time whilst also making the right investments for our future. For more let's bring in our Bloomberg Wall Street correspondent Shelley Bostic. Our investors buying that and there's a lot going on. And what was a full school day for her. Citigroup's Investor Day here starting at 9:00 this morning. When you look at what investors say it's all across the board. You have Betsy Grayson over at Morgan Stanley. You know sell side analysts calling these revenue targets punchy. But then you have Evercore ISI saying the plan here is straightforward in concept but actually hard to execute. When you look at Jefferies we look at that RTS target 11 to 12 percent Taylor. And while that's lower than last year if you exclude what the reserve releases had done it's actually higher meaningfully. So now the pressure is on Jane Frazier in a big way for the next couple of years to hit those revenue targets while also investing in technology and talent which she's been getting a lot of. Is this a move further away from the traditional consumer business that a lot of us know Citi for. Is that what she's putting out there. Interestingly they're leaning very hard into wealth. And on top of that also yes you think about Citi is a big consumer business. Now think about it also very much as a digital business as they invest in technology. Everything's a digital business in theory. Very. But these big global banks they solve a massive real estate footprint with Citigroup. I want to also point out that ties into this big global story that we're talking about. They're leaning in very hard to their investment bank here. Their Treasury and Trade Solutions businesses their investment bank that deals with multinationals in dozens and dozens of crises around the world. Let's go global for a minute though because that interestingly Citigroup felt like it was ahead of the game when it started to put a number on its exposure to Russia. But it's also got a human measure as well talking about the employees on the ground in Ukraine. How much did Jim phrases speak to that today. It was very interesting. She did give a lot of detail about the hundreds of employees they had in Ukraine in particular. That's hundreds of colleagues that they have been helping get across the border into Poland that advances on their payrolls help with medical help and also emergency supplies. So you see Citigroup really tending to the needs of their employees in Ukraine. They did address the Russia risk and what they're doing about it hedging their exposure the fact that you know they don't know what the buyback picture will look like till they understand the full extent of the sanctions. Why are we hearing from other banks as well talking about their exposure talking about employees. Well there's a couple of things here. One is Citigroup has one of the biggest exposure. So that's one of the big aspects here. Remember also interestingly their exposure in Russia is not all Russian clients. It's a lot of American European and Asian clients that are based in Russia and some Russian nationals that are based outside of Russia. So that's that's one reason. But remember I want to go back to that scoop that we had Friday about this idea that Citigroup and J.P. Morgan were really cautioning the Biden administration about the ramifications of Swift here. When you're a big global transaction bank I think you know there's a very limited number of banks across the world that dominate at that scale. And Citigroup is the biggest Sonali Basak giving us that update. Jamie Frazier's big day first Investor Day over there at Citigroup for her. We are still counting down to the closing bells here. You're looking at equities right now around the session highs on the day. Commodities also around the session highs and treasuries around the session lows. Taylor I'm actually taking a look at your two year yield up 17 basis points your five year yield up 16 basis points. The 10 year yield up 15 basis points. Get 30 year yield up 14 basis points. What's going on. Maybe Caroline as you were saying maybe not a relief perhaps that we won't be as hawkish a 25 basis points instead of 50. You can also argue inflation is here and it is in back. And maybe we no longer need to do the deep deep hedging the deep flight to quality that we had in the last few days because we are migrating northward when it comes to yields. That commodity index shows that inflationary pressure. You hear them counting in our ear. I do. That's why I stop talking. This is Bloomberg. What a difference a day makes when a difference Powell makes to be perfectly frank because of course we start to refocus on what the central bank policy might look like and we think maybe not 50 basis points we go up more than one point eight percent the Russell 2000 up two point six percent. And the small caps the VIX just pulling back a little bit still elevated above a 30 level. But of course as we look at the geopolitics on one side and then the reaction function and the Fed on the other we start to balance those risks. The New York crude though continued push higher in terms of inflation eight point two percent on crude. You're seeing Bloomberg Commodities Edge index at ever new highs. Nancy Davis is with us founder and chief investment officer of Contracted Capital Management. Jews also portfolio manager for the Quadratic ISE ETF. About two point two billion dollars in assets on that Nancy. As we march towards this market close I mean talk to us about volatility in the market. What do you see to some of the levels we are having and whether we continue to experience. I think volatility works on both sides up and down and I think it's a very opportune time for investors to be thinking about non correlated assets historically. Volatility has helped. And I think the thing to keep in mind is there are lots of different types of volatility. Any market with the options market whether it's the oil market the gold market the rates market equities anything with the options market has a bull market. So ball and options are kind of like a Kleenex versus a tissue. It's really the same thing. I think Kleenex would appreciate that. I'm curious and I'm curious here Nancy about I guess whether you view what's happening now as good vol for lack of a better phrase. No not good ball. I mean obviously having I feel my my heart goes out to those in the Ukraine and the fight for freedom and policy and safety. So I definitely don't think it's good vol. I think it's just a reminder though that you know whenever anyone's worried about something happening the future it's usually something that's coming out of something unexpected that surprises the market like this environment or like inflation expectations or things that are out of people's control. So that's why I think you can't really time when to have volatility in your portfolio. I think especially in the fixed income side it's just something that you should have as part of a diversified asset allocation. But do you get a little bit nervous when you get these big types of rallies but a VIX still maybe with a 30 handle. What is that signaling to you. Well this is uncharted territory right. We've had years of quantitative easing. And right now the Fed is tapering but they're still right today still buying bonds. We haven't really experienced the injection stopping let alone potentially balance sheet reduction or rolling off. So I think it's really time for investors to be prepared for more volatility especially in the bond markets because we've never we've never had this before. And right now you're looking at a market that appears to be trying to reprice that in a Nancy. Sit tight for one second when conversation with Nancy Davis founder and CEO over at Quadratic Capital Management as we countdown to these closing bells. Look at the equity markets. Just a quick check here on those bond markets 18 basis points right now year to year 17 on the five 16 on the two on the Dow 152 on a two year fully repricing. Caroline sort of what we'd raced in the last few days whiplash read a change kind of a day once again. But how long will it last. We take it to the closing bell 50 minutes ago. This is betting that. This is Countdown to the close and Caroline Hyde ISE Taylor Riggs yields. You'll Brad Stone. Yeah. Okay. How are you guys doing. Fine. Arts jokes. It is tiresome. Meanwhile let's have a little look at some. We'll find out stuff for you. Let's look at the whiplash that we're currently experiencing in the market because this is a three day chart. We're actually higher on the week thus far. After all of course the concern the the worries the angst that we're seeing with Russia and Ukraine the impact this has from a global commodity perspective a global market perspective. And now Paul speaks well across the board stocks. Russell 2000 leading the charge up more than 2.5 percent. Yeah. Still of course a well off the highs of where we were just a couple of months ago here. But you can see this is broad base. As we say more than 90 percent of the S & P is higher on the day. Bank stocks finally getting their mojo back up 4 percent year on the day. Transports having a great day as well as a lot of those energy stocks in the bottom of your screen. Those are the apparel makers actually seeing a pretty decent rally there. And a lot of those names has a lot of people start to bet on the idea that consumer spending will still be resilient. Still with us of course Nancy Davis founder and CEO of Quadratic Capital Management. Nancy earlier we'd hinted about talking about Bonds. So let's go there now. And I am curious if we sort of got this sense today that the Federal Reserve is continuing with rate hikes. They see a path and that they are really serious about tackling inflation despite maybe any sort of economic slowdown that we could get. Given some of the geopolitical events. It's definitely a pressure politics or you know to your point. We have geopolitical events but we do have real domestic inflation. So the Fed is in a little bit of a pickle because we do have inflation in terms of realized. I think it's just a question of whether rate hikes will actually matter and whether that's enough to stop the inflation that we're seeing in everyday lives. Stagflation. What do you make of it. You know stocks and bonds are down year to date you know. Yes. Powell has has kind of squashed some of the fears. And we're having a classic equities up bonds down day. But if you look your NIKKEI those stocks and bonds are selling off together. And that's textbook stagflation. So it's hard to say. All right. So I mean even now there's some concerns here that OK we're going to head into a tightening cycle of some degree or another. You've got oil prices at levels that we haven't seen in years other commodity prices as well here. If the growth doesn't hold up if we do find ourselves in this situation we're stagflation is now something that's on the table something that we're going to talk about here. How does it change your investment thesis if at all. Well I think investors just need to have a rethink. The 60 40 portfolio and have diversifying assets into the in their portfolios. It's also not where the spot curves are. It's all about where the forward curves are and the oil market. The VIX market the rates market all these markets are in backwardation meaning the spot prices are much higher than the future forward prices. So that low growth environment is really being priced into markets. And I think it's an opportune time for investors to try to take advantage of not what is expected today but what's expected in the future. And power has been very successful with his fiery guidance. He's really convinced the rates market that they are going to be hiking and it's priced in. Yeah. And you see that reflected in the price action today. Of course with that 10 year yield up about 16 basis points the biggest move higher in yields on the 10 year going back to the pandemic in March of 20 20. In conversation right now with Nancy Davis over at Quadratic Capital Management. She's sticking with us as we count down to those closing bills which are just a little bit more than six minutes away. To get back to Nancy in a moment. Taylor you're at the board taking a look at you know remain. You talk a lot about yields higher today and it is bringing back into focus which is my stock of the hour the growth year of the growth companies the reevaluation that we've seen on a daily basis. Of course this is a stock that's up one point two percent. It is snowflake. We're going to get some of the corporate results the quarterly results after the bell. Revenue up three hundred seventy three million earnings per share eking out a gain here of about three cents. But this has been a really big lesson long term of this stock that went up to 400 dollars a share from 120 and then hovers right back down to about a 266. How are we thinking about these growth is sort of the growth companies when we're thinking about a rising rate environment. And if we change up the board. Nancy let me bring you back in here because the rising rate environment comes down to well right where we started the inflationary environment. And I think what's catching my eye here is in this chart when you have a two year break even that's at record highs but you're still getting some anchoring a 5 10 30 year inflation break evens out on the horizon. Are you confident that you can keep those long term inflation bases. Anchor Despite the records that we're seeing in two year break evens. Well tailor to your point. The break even market is definitely pricing in and more transitory environment. Even one year break evens are significantly lower where than we've had five prince of CPI above five to above 6 to above 7 and the break even curve is very very downward sloping especially the further out you go. So the rates market is pricing in inflation is a transitory thing and it's going to abate over time. So I think the opportunity for investors is not what do you think is going to happen. It's more looking at what's priced in and finding those in every market. It's all about buying low and selling high. And long term inflation expectations are not are not high. The market really believes that the Fed with these rate hikes are going to stop this. This inflationary burst that we're seeing. Meanwhile I mean we continue to have the ongoing narrative coming from this time Treasury Secretary Yellen who's talking about well whether there will be a major impact or not on the U.S. trajectory from the war in Russia and Ukraine. They don't expect a major impact thus far. So Nancy just to sort of circle back to the volatility and something that I know you're so focused on an inflation hedging that I know people many people turned to you for at the moment. Are people dramatically changing up their portfolio response to what's happened in the last couple of days. Well our phones have been ringing off the hook with the ISE ETF because in Ukraine the situation is obviously very unfortunate. But it is the breadbasket to the world and you are seeing a spike in energy prices because of Russia's exports. You know it is it is a concern. I feel like investors are looking for a long volatility which I'm all ETF is long fixed income all as well as potential inflation exposure during these uncertain times. So we are seeing a pickup in investor interests and it's definitely not an expensive time for inflation expectations because the market doesn't really have those priced in is something that's going to stick around. Nancy it's always great to catch up with you. Stay well. Nancy Davis founder and CEO of Quadratic Capsule Management should get back to her phone ringing off the hook. Meanwhile we look at a market that has completely reversed yesterday's losses it would feel. Yeah. Be interesting to see just how sticky this is of course as we get some key data of course on Friday with the jobs report a big inflation report next week. And then of course heading into the Fed meeting in about two weeks. Those two year break evens are unbelievable. It's four point three percent. We've never seen that before. Yeah. And we should point out too with regards to nominal yields right now in the Treasury market. We're not back to where we were. Was it a couple of weeks ago percent. All right. We are moving closer to the closing bells here as we have our eyes on the equity markets for market coverage as always. As we take you to the bell and beyond beyond the bell Bloomberg's comprehensive cross platform coverage of the U.S. market close starts right now. And right now we are two minutes away from the end of the trading day. Romaine Bostick Caroline Hyde. Taylor Riggs. Gotten you down to that closing bell to help take us Beyond the bell. It's our global simulcast tombstone. Vicky is here. Katie Greifeld is here. Carol Massar nowhere to be found. Nevertheless we welcome in our Bloomberg Television Radio and YouTube audiences to go through everything all the moves that we've seen here in the market today. A pretty stunning reversal here. You talk about what we saw the last couple of days where it didn't seem like anyone wanted to hold risk assets. And today a lot of people jumping back into the pool. Yeah I mean we have Jay Powell to thank for that giving his testimony today and from the members of the House Financial Services Committee. We don't know about a 50 basis point rate increase for after the March meeting. He certainly didn't take that off of the table. In fact he said that could absolutely happen. But investors right now breathing a sigh of relief that that's not happening at the March 16th meeting. Even still I mean you have yields higher and as a result you have financials higher. That's actually the best performing sector today nudging out the energy sector even with all of the crazy moves that we are seeing in oil markets. Well crazy to say the least. The commodity pressure is still so front and center. The only consistent theme that we've seen over the last three days is the never ending march higher. Bloomberg Commodities Edge next. And an 8 percent move in oil today. It's been unbelievable. We've been talking a lot. Tim and Katie at least here for the radio audience about some of the huge moves that you've seen in break even. I think what was noticeable was a few weeks ago remain you had a two year break even that was really high but still a lot of anchoring out on the long term. Those are still anchor but those long term break evens are starting to lift up as well. And we should point out Paul kind of made it clear that you didn't expect the situation in Ukraine to set up in the U.S. economy in any way. We heard from Treasury Secretary Janet Yellen also making similar comments about that as well. So even as we look at the ripple effects in the commodities space there still seems to be some confidence that at least the U.S. economy will remain on track here. At least that's the bet that you're seeing today as we get the closing bell. The Dow Jones Industrial Average higher by about one point eight percent. Similar story for the S & P 500 higher by about one point nine percent. The NASDAQ going to close up by one point six percent. The Russell 2000 national performer here on the day going to finish the day higher 10 by about 2.5 percent. You know we spoke to Amanda got the chief investment officer at PNC Asset Manager Group just a few moments ago. She said the big moves that we've seen with commodities especially oil in recent days it's she's writing notes in the morning. She said in a few minutes later she's tearing them up because they're irrelevant based on the big moves. That's certainly really interesting Tim when you think about how quickly some of the news flow has been changing. We take a look at how quickly the news flow is changed from yesterday as well. For radio audience as we do with the sector level we're going to a few sectors down within the S & P to really figure out what is driving these markets higher. And it is green across the screen. Katie even for some of the worst performers it is still green. Let's start with some of the gainers. As we know this is banks giving a big lift up that we've had in yields. That sector is up three point four percent. It's transportation. It's stable goods. Semiconductor equipment that really feels like that reopening. Right. That risk on trade that's really back in vogue. Three point two to three point four percent higher down at the bottom. Of course it is some of the bond proxies given yields higher utilities are some of the worst performers but they are still up one point three percent. Otherwise it's technology. And some of those household and products Katie that are up just less than 1 percent. Taylor on a day like today wasn't too tricky to find some gainers. Let's start with Hewlett Packard Enterprises. They reported earlier today posted a 20 percent growth in orders. That is the third consecutive quarter with at least a 20 percent increase. We spoke with CEO Antonio NEARY a little while ago. He highlighted that very strong demand that his shares closing over 10 percent higher. And we should also talk about Ford. The company announced today that it's going to separate its Eevee operations from the legacy business. That's confirming a Bloomberg News scoop from a couple of weeks ago. Shareholders clearly welcoming that news with open arms. You saw Ford shares close over 8 percent higher but everything pales in comparison to Nordstrom. They also reported the outlook was strong. Debt levels are coming down. Shares up the most in two decades as a result but remain pointed this out earlier. This stock needed a win really has been trailing some of its peers over the past year. All right Kitty you might have had no problem finding gainers today but it was kind of a challenge to find decliners. You know when you're seeing more than 460 stocks higher in the S & P 500 today really though finishing the day down by thirteen point five percent. Shares fell after the company said it's raising its prices on its debut vehicles for retail buyer by your side citing a shortage of semiconductors higher costs for other components that supply chain pain continues Carol. And we remember we heard from Lucid. Was it yesterday right. The base yes. Said that they were cutting their production targets for the day early because of those supply chain issues. And then you put that in sort of in light of what Ford announced today. Here you just wonder whether these automakers are really going to be able to get this stuff out the door. You do. And you I don't see that as somebody who is waiting for his car. But there are a lot of people waiting for cars. But it's interesting you make that connection remain because I did check out shares of Tesla. Tesla was unaffected by this news. And they've been able to actually navigate the supply chain to a certain extent a lot better than these. I didn't much smaller companies. Abercrombie and Fitch finished the day down 13 percent. Speaking of supply chains the company's shares falling after a supply chain was in that crucial holiday quarter drove a disappointing earnings report. And this was kind of a head scratcher I got to tell you. Charter Communications finish. They're down by 4 percent. It was downgraded yesterday by truest securities. It did finish lower yesterday. But a lot of the pain for charter actually came today down 4 percent. Let's have a look at the patent trade that happened if you were of course searching for havens across asset. We go and I'm looking at the effects market. Of course the yen and Swiss franc have been bid up over the last few days. Today they pull back somewhat Japanese yen off by five tenths of a percent. It's interesting that actually the pound gets a bit of a rebound after we saw some of the sharpest reversals in sentiment on the great British pound we've seen since before the pandemic. That as we start to reprice where central bank policy will go in the Bank of England the ECB people pulling back in terms of what they think the ECB will raise rates but the Canadian dollar flies high up nine tenths of a percent. So too does the Aussie dollar. We're up six cents percent. Why the only lending pressure in commodities that sees Brent crude up almost 9 percent. Gas oil up 13 percent. WTI up zinc up. Natural gas wheat limit up. What moves in Chicago would have. There's nothing wheat to the high since 2008. Aluminium at record highs. Oil pushing at the highs as 2013. Relentless inflationary pressure coming from commodities as we worry about what happens in Russia and Ukraine and the impact on global supply chains. And indeed we will see what a paring back of what we see the Federal Reserve move. But we certainly see a paring back on some of the incredible moves we've seen a flight to safety UK gilts to yet actually yields bouncing up 25 percent to 25 basis points. Remember yesterday I was talking about how we had about eighteen twenty eight basis points pulled back on yields. So we're seeing that reversal in bond markets. But the inflation impression hasn't changed at all Taylor. No. And certainly maybe within here a full faith and credit with yields higher. It is a full commitment that inflation is here and is here to stay. But growth may not be hampered as either. And new Federal Reserve rally that came out Tim and really sort of signaled that they're not so concerned about any sort of economic slowdown. But this is the Federal Reserve that is going to be moving and yields are going to be moving higher. You see that with now a two year yield closing up 19 basis points on the day to a 153 18 basis points on the day. We've climbed our way all the way back to one ninety one on the 10 year yield. Now a few dip maybe we said to. So. Yeah we were over 2 percent. So we're not quite there but we have come back down to 1 70s I believe it was. So we've sort of tried to make our way back up. I think it is firm to say that yes the path here is yields higher. Yeah. That was like two weeks ago when we got up to a forward to a 5 2 0 6. The banks need to see if we get back there as we get a little bit closer to that Fed meeting particularly in light of the data that we're going to get out Friday here. If you do see see a labor market that is as strong as Jay Paul alluded to today in his testimony then I guess that means the green light is back on for a pass I guess to rate normalization. Yeah what you see is analysts also changing their tune just ever so slightly on what they expect. And look you know we know that a lot of people in. In recent years in recent months have been getting the job estimates wrong each and every month. But it went last week from 400 big time analysts surveyed Democratic Begley. Do we feel. Well depends on your definition of that 400000 jobs added. That was the estimate last week. It ticked up to four or five. Now I believe it's at 450000. And the revisions of course incredibly important to them. But how much does the job report matter for Marcus beyond just the intraday basis. Because all the action all the excitement has been around the CPI report. As the Federal Reserve's focus has shifted from that labor market recovery you know it's very strong very healthy to inflation. That's the real big problem. And that's where the focus is. It feels like. Yeah I've felt that you know maximum employment. That was no shock of a headline coming from Jay Powell earlier today. We've hit that level. In fact I thought was interesting. He talked about immigration being an issue to the labor supply shortage at the moment as well. But really it's about inflationary pressure. And that's why wall with oil prices where they all look soft commodities where they are. That's relentless. It's interesting that the stock market still grinds higher even as the bond market seems to be feeling that while the Fed is going to try and curtail that. And the signal here that corporations are still confident. We've talked a lot about the buybacks that have been coming in this market. Tim some of those if you think about Chevron these buybacks are coming when the stock is at a record high. But if you have stocks that are lower this is confidence that this is the best place to reinvest for these companies and they're not hoarding cash. Now the latest buyback we heard about MGM Resorts announcing a two billion dollar share buyback. That is gonna do it for our cross platform coverage of Beyond the Bell on YouTube on Bloomberg Television and Bloomberg Radio. Join us tomorrow same time same place. This is Bloomberg. All mark coverage coming right up as we bid farewell to Katie and to Tim. We're going to delve into well what asset managers are thinking about how are they repricing risk. That conversation with Sarah Williamson CEO of FTSE LTE Global. It's a nonprofit working to rebalance capital markets to support long term sustainable economic growth. Sarah spent a long time at Wellington as well an alternative asset management. Stick with us. Bring back. So in a market that was moving pretty much today one area took a breather just on the day and it was crypto. Remember it's rallied 60 percent over the last few days over the last couple of days. They've just only up 5 percent. That says politicians are turning their attention to the potential role of crypto as a vehicle of getting around sanctions on increased sanctions in fact to prevent such activity. But as many exchanges and crypto voices will claim such large transaction sanction evaders they would be expected to perhaps be actually tracked the be easy to see in these current market. So far exchanges such as the world's biggest finance are freezing the accounts of those included on international sanction lists. Take a listen to CEO Sisi who spoke with Newberg earlier today. I just think it's not our decision to make to to freeze user accounts et cetera so family that Facebook has not been rushing users. Google has not blocked off Russia etc. United States have not done that. So we just follow rules. We don't make them. And also just for my ethical point of view many Russians do not support this war. So I think we should we should separate the politicians to the normal people. But it's easy if you don't go a step further. Do you worry that this explicitly puts crypto on the wrong side of the law and on the wrong side of international norms. I mean morally is you know. Are you comfortable with your position. We are following the position supported by governments all around the world including the UN. We again we do not make the sanction rules. They are organizations will make those rules. We follow them. So we are doing exactly what what what what what their recommendations are. Dani Burger. Can you give us a sense of the number of flows or outflows out of Russia since the sanctions were imposed on Saturday. And again if you don't go a step further or do you think you'll be more regulated by regulators who see still crypto as a bit of a dodgy way of moving money around. So I think this is not a crypto specific issue. The essential points applied to banks and crypto at the same time. We're following the same rules. So that's that's why we're following. So banks are following exactly the same sanction list as we follow. So this is not a specific thing business yet. We are fully. We are following exactly the resources faddish by the regulators. So yes. So I don't see this as crypto specific issue. That was easy of course. The founder CEO of Finance is the world's biggest exchange and as it was sort of fronts he was referencing that the volumes that you're seeing particularly trading volume bitcoin from the ruble has surged a lot the most since May. It has surged. And I mean obviously we'll never quite know exactly why. But we are from the Treasury Secretary Janet Yellen. She actually talked about that. They are keeping an eye on the crypto sphere here for in her words I think she said leakage with regards to the sanctions. I think Francine had a good point there that if they don't do something it's sort of self-imposed. Does that mean that more regulation could come their way. If this is seen as a way to skirt around some of the sanctions E.U. leaders German finance minister talking about sanctions upon some of these exchanges while suddenly on crypto moves by certain Russian players. But also remember we're not not every Russian is an oligarch now. Every Russian is a billionaire. And every Russian is affected by the erosion of the value in the ruble and perhaps some sort of desire to to protect one saving. Yeah. I mean but this is sort of the balance right. And it's a hard balance to create that. How do you sort of allow the good actors to sort of use platforms like this and at the same time prevent the bad actors from using it as well. And is it worth maybe just shutting it down or cracking down I should say in order to prevent those bad actors KYC. That's why it's important now keeping you up to date with the news from around the world. His first work with Mark Crumpton Caroline Hyde. Thank you very much. The United Nations General Assembly has approved a resolution demanding that Russia stop war in Ukraine and withdraw all troops. Ukraine says it may hold a second round of talks with Russia which has been intensifying its attacks on key Ukrainian cities. Western military officials warn that this new phase of the war will be a more deadly time for the country's civilians and its army. U.S. Secretary of State Anthony Blinken visited a Ukrainian church on the seventh day of Russia's invasion. He lit a candle and spoke with a group of people at the Ukrainian Catholic National Shrine of the Holy Family in Washington. Secretary Blinken said We have tremendous faith in Ukraine's future and the peace and prosperity of its people he continued. I think President Putin has made a horrific terrible mistake. Oksana McCarver Ukrainian ambassador to the United States met Secretary Blinken at the church in a show of unity. McCarver joined First Lady Jill Biden in the House Gallery for President Biden's State of the Union address last night. The Iran nuclear talks have narrowly avoided collapse but European and US officials warned that time is running out. Diplomats trying to salvage a landmark deal remain stuck over key disagreements. Iran demands that IAEA monitors and their investigation into its past atomic activities. Western diplomats have rejected that. The Senate Judiciary Committee says confirmation hearings for Supreme Court nominee CAC Brown Jackson will begin March 21st. Keeping the Senate on track for a possible final vote next month. Judge Jackson met this morning with Senate Majority Leader Chuck Schumer and Minority Leader Mitch McConnell. Local news 24 hours a day on air and on Bloomberg Quicktake powered by more than twenty seven hundred journalists and analysts in over 120 countries. I'm Mark Crumpton. This is Bloomberg. Right the Russian war in Ukraine drawing new focus to the links between politics and finance. With a growing list of firms announcing plans to cut ties with Russia as the fighting intensifies. Let's bring in Sara Williamson. She's the CEO of FTSE Global. It's a nonprofit working to rebalance capital markets to support a long term sustainable economy. She brings more than 20 years of experience at Wellington Management most recently as a partner and director of alternative investment. Sara you're here today. I mean kind of talking with folks about I guess really just how to navigate the business environment overall. But of course we're here on a day where now a lot of these companies a lot of these executives have to find a way to navigate what is effectively a war environment something that we haven't really had in recent years recent decades really not to this scale here. What do you say to them. What do you say to them with regard to how you pivot how you manage in a world where it any day your customers could be taken away from you through sanctions or your customers demand that you take a side and something that maybe in the past you wouldn't have taken a side on. Yeah I think that this conversation is even more important today than it has been because of all the things that have been happening in Ukraine. Most people today who are running a business or running an investment organization have seen globalization as a positive driver of their business probably for the last two or three decades. And they have really worked under that mindset that that that is a good thing. And so I think what we've seen in the last five or six days here is boards feeling a bit of whiplash which is how do we really pivot as you said and thinking about how do we move from thinking about efficiency to thinking about resilience. Those are different objectives. Thinking about why somebody is operating or investing in a particular country. Are they is there. Is that related to their core purpose their core strategy or or was it a nice to have. And then the third and really important thing is the reputational risk of of being caught wrong footed here. People are making decisions in very short order about very strategic long term issues. And that's a very challenging environment for anybody. I mean just fascinating day. The reporting coming from Bloomberg in Italy with Bulgari owned by LVMH for the CEO. They're very committed to Russia to developing a hotel in Moscow saying that they know they want to remain open while other key luxury companies are either not making statements at all or some of them even making demonstrations against the impact of Russia versus Ukraine. I'm interested in is that the number one risk public relations to a large extent and which stakeholder they were worried about. Is that the talent pool. Is it the shareholder or is it is it actually I don't know the government. Who are they most worried about. I think they're most worried about who the most DAX most important stakeholder is to them. So I think that the best companies and the best boards are taking a step back and saying who are our key stakeholders. It may be customers in a particular country. And obviously being cut off from your customers is not helpful. It may be their own employees. Clearly many of these companies have employees both in Ukraine and in Russia. How do you worry about that situation. And it's really about their long term strategy. So if one of these countries is central to strategy that's a very different situation than if they have you know a couple of people there because you know they really hadn't thought about it but they were just expanding globally. So I think it's really going back to what's the purpose of the organization. What's their long term strategy. And then who are those key stakeholders. And that crystallizes the decision very hard decisions but for for boards and for CEOs. But is this a new sort of structural shift in boards of directors being proactive. They don't technically have to pull out. But Nike Netflix Apple we're hearing Spotify now right. Saying that we're going to take that proactive approach and not be associated with that. Is that a new shift for boards of directors. I think it is in that boards traditionally have had a hard time dealing with issues that are very long term slow moving usually not this week but usually geopolitics are like that. Relations with countries between countries value change over time. Even other long term issues like climate change boards many boards have have live reactive but typically they take a very slow measured response. What's happened in the last week is very different than that. And I think that that these long term issues are all of a sudden short term issues. Well let's talk about some of the other issues. I think the war in Ukraine at least for a lot of folks is a pretty black and white issue. It makes it a little bit easier for executives to make decisions take something like climate change. We've seen a lot of companies sort of slow walk and in some cases even be very resistant to making any sort of meaningful changes to their company based upon some of what activists want with regards to climate change. What's the transition there. Do these companies sort of evolve in their thinking if at all. Or do they not need to know. The way that I think about it is that companies really need to invest and have a strategy not necessarily for a net zero company or decarbonise company but for a net zero world. Right. So the world is changing. And if we think about future oriented companies the kind of companies we'd like to invest in today and hold for long periods of time they are thinking about where the world is going. The world is decarbonising the world in five or 10 or 20 years hopefully quickly. We'll be very different than it is today. So I think many companies are now realizing they need to have a long term climate strategy. The path is kind of murky. Some are very clear. Some continue to have a corporate strategy and a climate strategy that are not linked. And that does not work. And that's not holding up in the marketplace and move halfway Frank. Things like geopolitical tension and the worry about supply chain and access to oil and gas suddenly makes an even murkier. I'm interested by the role of Mitt Romney mentioned it activist investors out there who have made seismic moves. I mean what we saw with the upheaval of the Exxon Mobil story last year is not something new. The boards are having to get their head round. I think it is. I think they're the kind of activists some of us grew up with. Right. The traditional activists short term financial engineering bring earnings forward. That was the sort of traditional financial activist. Now you've got a new kind of activist that is saying now wait a minute you haven't thought about sustainability issues that are related to your company. So the Exxon Mobil example or others where again the world is changing your events see if you're investing now you hopefully are going to hold this stock. A company has to have a strategy for the future. I think the third kind of active if you will is the more we're expecting this shareholder proxy season which is with a universal proxy. Many many issues coming to boards. And so people putting issues on the proxy that may or may not have a lot to do with the company itself. And so boards are being forced to really think about all of those. There are still very clearly traditional financial activists who have come after a company. There are these new activists if you will who really want to think sustainability. And then there are also people who are going to have very small numbers of shares and and try to get some airtime. All right. Well a complex job for a complex world Sarah. Really appreciate you stopping by. Sarah Williamson CEO of FC LTE a global. That wraps up our coverage here on Bloomberg Markets Clothes. Stick around. You're the big triple take is where to focus in on Jay Powell on Capitol Hill today. That testimony and really the trajectory of our economy inflation and everything that falls into it and the calmness the steadiness of the hand Caroline that we heard from Jay Howard today and how the market reacts to it. What about small businesses. We got some great guests for you. This has been that.

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The Close Full Show (3/2/2022)

Caroline Hyde, Romaine Bostick & Taylor Riggs bring you the latest news and analysis leading up to the final minutes and seconds before the closing bell on Wall Street and tackles the latest on Ukraine, Citi's strategy shift and investment risks amid war in Ukraine Guests Today: Carol Schleif of BMO Family Office, Foreign Policy Adviser to the Deputy Prime Minister of Ukraine Svitlana Zalishchuk, John Peyton of Dine Brands, Arlene Bohner of Fitch Ratings, David Behnsen of The Bahnsen Group, Nancy Davis of Quadratic Capital Management, Sarah Keohane Williamson of FCLTGlobal (Source: Bloomberg)

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