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00:00> > THIS IS BLOOMBERG "DAYBREAK: EUROPE." THE STORIES THAT SET YOUR AGENDA. MANUS: PREPARING FOR PAIN, JAY POWELL GIVES HIS HAWKISH SPEECH, SAYING HE'S READY TO RAISE RATES , AND COULD NOT FLOAT A POSSIBLE JUMBO HIKE. THE WHITE HOUSE IS SET TO BLOT RUSSIA'S ABILITY TO PAY U.S. BONDHOLDERS, PUTTING MOSCOW ON THE BRINK OF DEFAULT, BUT JAMIE DIMON DELIVERS A RARE BLOW TO WALL STREET TITANS, AND PROTECTS THE CEO COMPENSATION PLAN. BREAKING NEWS, THIS GET STRAIGHT TO IT ON THE BANKING SIDE. COSTS WILL BE HIGHER DUE TO ADDED AML PROVISIONS. THIS IS THE TOP LINE FOR ADM AMRO. THE OPERATING SIDE OF THE BUSINESS ALSO DOING WELL, BUT THEY ARE SAYING THAT THEY ARE GOING TO HAVE ADDITIONAL PROVISIONS ON AMR. THERE'S A POTENTIAL SECOND ORDER EFFECT FROM UKRAINE, AFFECTING MORTGAGES BY 17%. DANI: FOR THE REST OF THIS MARKET, IT WAS PERHAPS A BEAR MARKET BOUNCE YESTERDAY. I LOVE THIS DESCRIPTION, SOMEONE SAID IS A BEAR MARKET COUNTS WITH SQUIGGLY LEGS. POWELL FEATURED HEAVILY INTO IT. LET'S GET TO OUR MARKET CHECK AFTER THAT ABN AMRO BREAKING. MSCI ASIA PACIFIC INDEX UP .5%, BUT CHINA TECH TRADING CAUTIOUSLY, BASICALLY RETRACING ALL OF ITS GAINS YESTERDAY, VOWING TO BACK TECH. AFTER THE U.S. ADR'S JUMP, YOU'RE LOOKING AT A FIVE-YEAR EUROPEAN SESSION. PLEADING GUILTY TO FRAUD, AGREEING TO PAY 5.8 BILLION DOLLARS OVER HEDGE FUND THAT COLLAPSE, AND FINALLY S & P 500'S -- S & P 500 FUTURES DOWN .8%. THE BIGGEST DROP IN EARNINGS SINCE 1986. MANUS: WE DID PUSH ON THE IDEA THAT THE BOARD SHOULD'VE DUG A LITTLE BIT DEEPER. JUMBO, JUMBO RATE HIKE. 50 BASIS POINTS IS ON THE TABLE. IT REPRICED THE EURO, UP OVER 1%. 106 BASIS POINTS BY CHRISTMAS TIME. WE ARE NOT THE -- THE FED IS NOT THE ONLY ONE WITH TEETH. LET ME SHOW YOU THE IMPACT ACROSS THE BOND MARKET. WAS POWELL THE MOST POCKET SHEAVE EVER HEARD HIM? I DON'T THINK SO. THE DOLLAR WENT UP, THE THREE YEAR AT THE SHORT END OF THE CURVE DID GO HIGHER. BONDS, 68% IN THE BANK OF AMERICA SURVEY SEE INFLATION TOPPING OUT AGAIN. THE EQUITY MARKET IS SO BRUISED THAT IT DIDN'T REALLY REACT. VOLATILITY DROPPED BY 5% ON THE VIX YESTERDAY. THERE'S NO SIGN OF CAPITULATION THERE. WE'VE GOT REPORTERS AROUND THE WORLD. OUR GUEST HAS THE LATEST ON THE MORE IN UKRAINE. DANI: AND WE HAVE JULIETTE SALY, AND OUR FINANCE EDITOR JAMIE'S -- LET'S STICK WITH THE U.S., JAY POWELL HAS MADE IT CLEAR THE U.S. IS READY -- THE FED IS READY TO KEEP HIKING RATES UNTIL IT IS CLEAR ABOUT INFLATION. > > INFLATION IS COMING DOWN, THAT'S WHAT WE REALLY NEED TO SEE. IF THAT INVOLVES MOVING PAST BROADLY UNDERSTOOD LEVELS OF NEUTRAL, WE WON'T HESITATE AT ALL TO DO THAT. WE WON'T. HONESTLY, WE WILL GO UNTIL WE FEEL LIKE WE ARE AT A PLACE WHERE WE CAN SAY, YES, FINANCIAL CONDITIONS ARE AT AN APPROPRIATE PLACE. WE SEE INFLATION COMING DOWN. MANUS: DANIEL MAAS, HOW DID YOU READ JAY POWELL'S COMMENTS, IS THIS TRYING TO RE-GRASP THE NARRATIVE WHICH GOT AWAY FROM THEM LAST WEEK WHEN EVERYBODY LAMBASTED THEM FOR PUSHING BACK THE NARRATIVE AGAIN OF 75 BASIS POINTS THAT COULD BE ON THE TABLE? DANIEL: I'M SYMPATHETIC TO YOU WHEN YOU QUESTION WHETHER THIS WAS REALLY THE MOST HAWKISH THAT JAY POWELL HAS SOUNDED. I AGREE WITH YOU, THIS WAS NOT SUBSTANTIALLY, AT ITS HEART DRAMATICALLY MORE HAWKISH THAN ANYTHING HE SAID. WHAT I TOOK AWAY FROM IT WAS THE LINE THAT THEY NEED TO SEE, NOT PROJECT, CLEAR EVIDENCE THAT INFLATION IS COMING DOWN. NOW WHY IS THIS VISIBILITY SO IMPORTANT? IT RAISES THE RISK THAT IF YOU WAIT FOR IT TO BECOME OBVIOUS, HAVE YOU WAITED TOO LONG? AND THE DOWNTURN TAKES HOLD, AND THEN YOU HAVE TO ACCELERATE MEASURES TO ALLEVIATE THAT SLOWDOWN WHICH YOU CREATED. DANI: I'M JUST TRYING TO GET SOME VISIBILITY INTO YOUR WARDROBE. THAT IS THE BEST SHIRT I THINK WE'VE EVER HAD ON THIS PROGRAM. THANKS SO MUCH. THE BIDEN ADMINISTRATION IS POISED TO FULLY BLOCK RUSSIA'S ABILITY TO PAY U.S. BONDHOLDERS AFTER A DEADLINE EXPIRES NEXT WEEK. THIS IS A MOVE THAT COULD BRING MOSCOW CLOSER TO THE BRINK OF DEFAULT. BEN, WHAT WOULD BE THE RAMIFICATIONS OF THIS? > > IT WOULD BE THE FIRST RUSSIAN DEFAULT ON INTERNATIONAL DEBT , IN THE DEBT CRISIS OF 1998 DATE MAINTAINED THEIR DEBT PAYMENTS ALL THE WAY THREE. BEYOND THAT IT WOULD JUST REALLY CEMENT THE PROCESS OF ECONOMIC ISOLATION THAT HAS BEEN UNDERMINING THE RUSSIAN ECONOMY AND BRINGING ALL THE PAIN OF THE WAR TO THE RUSSIAN PEOPLE. MANUS: THANK YOU VERY MUCH, BEN SILLS WITH THE LATEST ON RUSSIA AND THE UKRAINE. AND AFTER CUTTING THE FULL YEAR FORECAST DUE TO INFLATIONARY PRESSURES , JULIETTE SALY HAS THE LATEST. THIS WAS A MONSTER MOVE, THE BIGGEST DROP SINCE 1987. THAT TURNS MY BLOOD COLD. JULIETTE: INDEED, AND AS YOU MENTIONED, THE WALTON FAMILY FORTUNE AFTER THE SLIDE IN THE WALMART SHARE PRICE. PRICE PRESSURES ARE MOVING FASTER THAN WALMART CAN PASS IT ON, ESPECIALLY IN FOOD AND FUEL, WHICH IS SOMETHING EVERYBODY NEEDS TO BUY. THAT MEANS CONSUMERS HAVE LESS CONCERN -- LESS DISCRETIONARY INCOME TO SPEND ON GOODS. THEY HAVE CALLED THIS REFLECTING THE UNUSUAL ENVIRONMENT AND THE BOTTOM LINE AS UNEXPECTED AND IT HAS LED WALMART TO NOW INDICATE THAT THEY'RE EXPECTING EARNINGS TO DROP BY AROUND 1% THIS YEAR. THAT IS DOWN FROM THE PREVIOUS FORECAST FOR A SINGLE DIGIT GAIN. THEY NOW EXPECT EARNINGS TO BE FLAT TO UP SLIGHTLY. LAST YEAR WE HAD THOSE STIMULUS CHECKS FROM THE GOVERNMENT BOOSTING SPENDING, SO WERE COMING OFF A BIT OF A DIFFERENT COMPARABLE PERIOD. THE WARNING FROM WALMART COMES AT THE SAME TIME YOU HAD A ROSY PICTURE ON THE RETAIL SALES FRONT. IT NOW LEADS TO WHAT WE WILL SEE FROM OTHER RETAILERS. TARGET ALSO REPORTING EARNINGS IN THE NEXT COUPLE OF WEEKS. THE CHIEF U.S. ECONOMIST AT RBC SAID IF YOU'RE WAITING FOR A BROAD-BASED EXTENSION FROM COMPANIES WHO BELIEVE IT'S BREAKING DOWN, YOU'RE GOING TO BE LATE. WE START TO SEE THE OVERALL IMPACT OF RISING PRESSURES ON THE CONSUMER AND OF COURSE ON THE RETAILER. DANI: JULIETTE SALY, REALLY FANTASTIC ROUND UP ON THE U.S. CONSUMER MOVEMENT THERE. JP MORGAN SHAREHOLDERS HAVE REJECTED A PAPER FOR -- PAY PROPOSAL FOR CEO JAMIE DIMON. IT WASN'T THAT LONG AGO THAT JAMIE DIMON GOT THE PAY PACKAGE APPROVE THAT WAS PRETTY HEFTY. WHY THE CHANGE THIS TIME AROUND? > > I THINK THEY'VE JUST GONE A LITTLE BIT TOO FAR. THE BOARD WAS CONCERNED THAT MAYBE JAMIE DIMON SHOULD RETIRE AT 65. SO THEY SWEETEN THE POT, BRINGING HIS TOTAL PACKAGE TO $84 MILLION. THE PROXY FIRMS BOTH RECOMMENDED INVESTORS REJECTED PACKAGE AND THEY DID EXACTLY THAT, RESOUNDINGLY SO. THE BANK IS REALLY GOING TO HAVE TO CONSIDER THEIR NEXT STEP HERE , IT'S NOT A BINDING DECISION AT ALL, BUT IT IS AN EMBARRASSMENT FOR DATE -- FOR JAMIE DIMON. MANUS: I'M CURIOUS TO SEE IF IT WILL BE A LONG-TERM INCENTIVE, DEFERRED COMPENSATION, DRIVEN OUT OVER 10 YEARS WITH A VESTING PERIOD. WHAT REALLY PAINS HIM PROBABLY, HIS BUDDY ACROSS THE STREET, DAVID SOLOMON GOT A 90% BONUS. IS THIS SIGNIFICANT? > > CLEARLY THE BANK DOESN'T HAVE TO DO ANYTHING ON THIS, IT IS NONBINDING. BUT IT DOES SUGGEST THEY WILL HAVE TO RECONSIDER THIS NEXT TIME. IT JUST HAVE IMPLICATIONS FOR THE REST OF WALL STREET. MAYBE THAT'S THE CEILING. MANUS: CAN I JUST SAY ONE THING TO YOU, DAVID? YOU CAN BEGIN TO UNDERSTAND WHY SHAREHOLDERS LOVE DIFFERENTIALS. DANI: YOU CERTAINLY CAN. THOUGH I FEEL THE NEED TO WRING OUT THE WORLD'S TINIEST VIOLIN FOR THESE FIGURES, BUT YES, YOU ARE RIGHT. MANUS: THE DIFFERENTIALS ON PAY ON THE STREET, DAVID SCANLON THERE. COMING UP, WE'LL TAKE A CLOSER LOOK AT THE IMPLICATIONS FOR YOUR INVESTMENT OUTLOOK. DANI: WE WILL ALSO HAVE OUR EXCLUSIVE INTERVIEW AND TALK ABOUT THE BANK'S EXPOSURE TO RUSSIA AMONGST OTHER TOPICS. THIS IS BLOOMBERG. > > INFLATION IS COMING DOWN. THAT'S WHAT WE REALLY NEED, SO WE ARE WATCHING FOR THAT. IF THAT INVOLVES MOVING FAST -- PAST BROADLY UNDERSTOOD LEVELS OF NEUTRAL, WE WON'T HESITATE AT ALL TO DO THAT. WE WON'T. > > I HAVE A CONCERN THAT WE TAKE AGGRESSIVE ACTION TO KEEP INFLATION UNDER CONTROL, BUT RIGHT NOW WE LIKELY HAVE A GOOD LAND. > > A LOT OF ECONOMISTS OF RETCHING THEIR HEADS AND WONDERING ABOUT, IF WE REALLY HAVE TO BRING DEMAND DOWN TO GET INFLATION IN CHECK, IS THAT GOING TO PUT THE ECONOMY INTO RECESSION? AND WE DON'T KNOW. I WILL SPEAK FOR MYSELF, WE DON'T KNOW. MANUS: FED OFFICIALS THERE ON THE FIGHT AGAINST INFLATION. POWELL'S REMARKS HAVE BEEN SEEN AS HAS MOST HAWKISH YET, SENDING THE TREASURY EVEN HIGHER. STOCK FUTURES ARE LOWER THIS MORNING, BUT STEADY. INVESTORS ARE HOARDING CASH AT A LEVEL THEY HAVEN'T DONE SINCE 9/11. THE CIO FOR EMIRATES MVD IS FULL OF FEAR. GREAT TO HAVE YOU WITH US. POWELL APPARENTLY THE MOST HAWKISH THAT HAWKISH CAN BE. WHAT DOES THE 15 BASIS POINT HIKE IN THREE YEAR PAPER TELL YOU ABOUT THE PROCLIVITY FOR MORE HAWKISH NEWS FROM THE FED? > > FIRST, WE KNOW THAT THE FED IS HAWKISH IN THE MARKET CORRECTION IS RESTING ON THE STOXX. PEAK HAWKISH NEWS IS NOT FAR AWAY. TO SEE THIS KIND OF FLATTENING WITH DOUBLE DIGITS CONTINUE EVERYWHERE, IT'S ABOUT THE LIQUIDITY OF THE MARKET. [INDISCERNIBLE] THERE WAS REALLY ABSOLUTELY NOTHING NEW. DANI: IF IT LOOKS LIKE WE MIGHT BE REACHING THAT LEVEL OF PEAK HAWKISH AND IS, WHY CUT YOUR STOCK EXPOSURE? MAURICE: I'M SORRY, I DIDN'T HEAR YOU VERY WELL. MANUS: BECAUSE OF YOUR VIEW ON LIQUIDITY, ETC., IF YOU THINK WE ARE HERE PEAK HAWKISH AND IS, WHY HAVE YOU CUT YOUR ALLOCATION, CUTTING STOCKS TO NEUTRAL AND VERY MODESTLY NEUTRAL ON DM? MAURICE: WE THINK THE MARKET WILL PLAY WITH THIS, AND SPECULATION WHICH MAY HAPPEN. FROM AN INDUSTRY POINT OF VIEW, WHEN THIS HAPPENS, YOU HAVE BOTH EQUITY AND BONDS SUFFERING. YOU HAVE NOWHERE TO HIDE. HAVING SAID THAT, OUR BEST SCENARIO IS THAT IT WILL END UP WELL, AND AS YOU MENTIONED, POSITIONING MUCH LIGHTER. FRANKLY WE ARE READY TO FEED THE RALLY. MANUS: DANI IS GOING TO TRY AND JUMP IN AGAIN. DANI: I WANT TO GET YOUR THOUGHTS ON WALMART. THIS WAS A HUGE DROP IN THE STOCK. YOU DID SEE CONSUMERS LESS WILLING TO SPEND ON EXPENSIVE GOODS, THEY ARE JUST SPENDING THEIR MONEY ON FOOD. BUT WE HAD STRONG RETAIL NUMBERS YESTERDAY. WHAT DO YOU MAKE OF THE STATE OF THE U.S. CONSUMER? MAURICE: WALMART WAS A SURPRISE AND FRANKLY A SHOCK. SO FAR IN THE U.S. ECONOMY, IT WAS JUST BOOMING. MAYBE THERE IS SOMETHING SPECIFIC IN THE WALMART NUMBER. I WOULD NOT TAKE THAT AS A BROAD INDICATOR OF WHAT IS HAPPENING. THERE ARE SEGMENTS OF THE POPULATION THAT HAVE DIFFERENT NEEDS. YOU HAVE NO CHOICE, YOU HAVE TO BUY FOOD AND PUT GASOLINE IN YOUR TANK. I GUESS THAT WALMART IS THE LINK TO PEOPLE IN THESE MARKETS [INDISCERNIBLE] PEOPLE HAVE MONEY AND THAT'S WHY THE MARKET IS SO ACTIVE. MANUS: TO BE FAIR, IT'S ONE OF THE BROADEST MEASURES OUT THERE ALONG WITH THE BLOOMBERG SURVEY. I AM DRAWN TO THIS VIEW OF CAPITULATION. I WANT TO GET YOUR SINCE FROM IT. THE BANK OF AMERICA SURVEY, LET'S HAVE A LOOK AT SOME OF THE POINTS. THE MARKET IS MISSING CAPITULATION. WHAT NEEDS TO HAPPEN TO REALLY SAY, THE EQUITY MARKET HAS CAPITULATED. I KNOW YOU SAID LIQUIDITY IS DIFFICULT TO GET YOUR HEAD AROUND. WHAT WOULD SAY CAPITULATION TO YOU? MAURICE: FOR ME, VOLATILITY IS MUCH HIGHER. IT LOOKS LIKE WE ARE IN A BEAR MARKET CONFIGURATION. I THINK NEXT YEAR , YOU WILL HAVE A RALLY. I WOULD TAKE IT WITH A PINCH OF SALT. WHAT I SEE, I DON'T SEE -- WHEN I SEE THESE FUND MANAGERS, I SAY THAT IS IMPRESSIVE. MANUS: I'M GOING TO DO A SHAMELESS PLUG. THROW THE DOG A BONE. THIS IS FROM BANK OF AMERICA. WHEN THE BIG BAD WOLF OF RECESSION IS AT THE DOOR, THE APPEAL OF U.S. TREASURIES BECOMES MEANINGFUL BOTH OUTRIGHT AND -- I'VE ASKED IF YOU WANT TO BE LONG THE DOLLAR AND THE YEN. YOU JUST CALLED A BEAR MARKET RALLY IN STOCKS. SO WHERE DO YOU HIDE? MAURICE: THERE IS NO QUESTION OF THAT, NO DOUBT. IT'S NOT THE END OF THE WORLD, IT HAPPENS EVERY SIX OR SEVEN YEARS. IT DOESN'T KILL YOU IF WE HAVE A MILD RECESSION. IF WE HAVE A MILD RECESSION, IT'S NOT THE END OF THE WORLD. AND ULTIMATELY EQUITIES WILL RECOVER. DANI: SO IT DOESN'T COUNT UNLESS YOU HAVE ACTUALLY GONE TO LINKEDIN AND PHYSICALLY VOTED IN THAT POLL. I'M PLUGGING MANUS'S LINKEDIN ACCOUNT. > > LOOKING AT RUSSIA, THERE ARE TWO ORDERS OF EFFECTS THAT WE LOOK AT. ONE IS DIRECT SHOT FROM OUR EXPOSURE TO RUSSIA. I THINK THAT IN THE LAST TWO MONTHS, WE HAVE REDUCED MEANINGFULLY BY ABOUT 2 BILLION. WITHOUT THAT COSTING THE BANK ALMOST ANYTHING, WHICH WAS NOT WHAT WE EXPECTED. AT THE SAME TIME, WE KNEW VERY WELL IN A GRANULAR WAY WHAT THE RISKS ARE AND WE TOOK A VERY CONSERVATIVE SET OF PROVISIONS TO TRY TO INSULATE OURSELVES THE MOST POSSIBLE FROM THE DEGENERATION OF THE SITUATION. > > THE MARKET TOOK IT QUITE WELL. IS THAT HOW YOU WOULD DESCRIBE IT? > > I THINK SO. WHAT WE LEARNED IS THAT DURING THOSE TWO MONTHS, WE WERE ABLE TO CREATE AND A DETAILED WAY WHAT IS ARE EXTREME LOSS SCENARIO FOR RUSSIA. CONVERT IT IN NUMBERS, IT'S ABOUT 130 BASIS POINTS OF CAPITAL. IN THE FIRST QUARTER WE TOOK ABOUT 195, TO BE EXACT. > > ARE YOU FRUSTRATED THAT YOU KEEP GETTING ASKED OVER AND OVER WHAT WILL HAPPEN TO RUSSIA? > > I THINK THAT ANYONE WHO HAS A LARGE OR SIGNIFICANT PRESENCE IN RUSSIA, WE BELIEVE STRONGLY, LET US SHOW YOU WHAT WE HAVE ACCRUED AND LET'S TALK ABOUT IT THEN. WE HAVE A NUMBER OF OPTIONS THAT WE COULD PURSUE. THE OPTIONS ARE VERY MUCH AFFECTED BY THE NEXT WAVE OF SANCTIONS, BY THE COUNTERPARTS AND WHAT WE CAN DO AND WHAT WE CANNOT DO. AT THE SAME TIME WE SHOULD NOT FORGET THAT WE HAVE 4000 EMPLOYEES IN RUSSIA. WE DO HAVE 1500 CORPORATE CLIENTS. WHAT PEOPLE SOMETIMES FORGET IS THAT EUROPEANS ARE GOING THROUGH THE SAME THING WE ARE GOING THROUGH AS A BANK, WHICH IS DEAL WITH THE SITUATION THE BEST WAY POSSIBLE. DANI: YOU CAN CATCH MORE OF THAT EXCLUSIVE INTERVIEW ON YOUR BLOOMBERG TERMINAL. COMING UP, GLOBAL WHEAT COSTS ARE POISED TO CLIMB EVEN MANUS: THIS IS BLOOMBERG "DAYBREAK: EUROPE." THESE ARE THE STORIES THAT SET YOUR AGENDA. DANI: PREPARED FOR PAIN. JAY POWELL GIVES ONE OF HIS MOST HAWKISH SPEECHES YET, SAYING HE IS READY TO RAISE RATES PAST NEUTRAL TO TAME INFLATION. THE WHITE HOUSE IS SET TO BLOCK RUSSIA'S ABILITY TO PAY U.S. BONDHOLDERS, PUSHING MOSCOW TO THE RING OF DEFAULT. PLUS JAMIE DIMON REVIEW. A NONBINDING VOTE TO REJECT HIS COMPENSATION PLAN. THE FRONT END OF THE CURVE GETTING LIT UP ONCE AGAIN, COURTESY OF JAY POWELL. MANUS: YOU TURN TO THE ECB AND YOU GOT THE FLOATING JUMBO RATE HIKES OF 15 BASIS POINTS. I SAY IT'S MUCH MORE ABOUT HIKES BY THE END OF THIS CALENDAR YEAR. THE OIL MARKET, THE U.S. EASING SANCTIONS ON VENEZUELA IN ONE OF THE BIG STORIES. INVENTORIES HAVE DROPPED BY 5 MILLION BARRELS. WE WILL ASK OUR NEXT GUEST, THROUGH YOUR PAPER RATCHETING YESTERDAY IN THE BOND MARKET. THE POSITION ON THE BANK OF AMERICA SURVEY IS SHORT TREASURY 25%. QUITE AN EXTREME POSITION. THE DOLLAR BACK AT FLAT THIS MORNING AS WE AGAIN DEBATE WHETHER POWELL WAS REALLY THAT HAWKISH YESTERDAY. THE VIX DOWN BY 5% AT THE CLOSE OF BUSINESS LAST NIGHT. THAT DOES NOT SMELL OF CAPITULATION. DANI: FRIENDS DON'T LET FRIENDS QUOTE THE VIX IN PERCENTAGE POINTS. MANUS: WE WILL UNCLICK THE MONITOR AND THEN MAYBE WE WILL HAVE THE BASIS POINTS. DANI: I AM LOOKING AT THE MSCI ASIA PACIFIC. WAS YESTERDAY A BEAR MARKET BOUNCE IN THE U.S.? HONG KONG TECH DID NOT DO VERY WELL IN THE U.S. SESSION. ADRS DID WELL, BUT WERE LOOKING AT EUROPEAN STOCKS FUTURES INDEX MOVING HIGHER .2%. ALSO LOOKING AT S & P 500 FUTURES, LOSING THE STEAM OF THAT BEAR MARKET BOUNCE YESTERDAY, DOWN ABOUT .25%. LET'S TURN OUR ATTENTION TO COMMODITIES, SPECIFICALLY STOCK COMMODITIES. GLOBAL FOOD COST ARE POISED TO CLIMB EVEN FURTHER WITH DROUGHT, FLOODS, AND HEAT WAVES THREATENING PRODUCTION. THIS AS THE SAME TIME RUSSIA'S INVASION OF UKRAINE THROTTLES THE GRAIN SUPPLY. HOW SEVERE IS THE WEATHER DISRUPTION FOR THE SOFT COMMODITIES? > > IT'S PRETTY BAD, ACTUALLY. 2008-2012 FOR THE LAST PERIODS WHEN WE HAD GLOBAL SUPPLY DEMANDS OF THIS TYPE. WE HAVE SHOT FACTORS IN TERMS OF SUPPLY-SIDE, AND WHERE DO YOU GO . YOU WANT TO GO THERE, THERE IS A WAR. YOU GO HERE, THERE'S A FLOOD OR A DROUGHT. THE EXPORTING PRODUCERS ARE STRUGGLING TO PRODUCE ENOUGH CROP. THEY ARE SUFFERING FROM THE ABILITY TO INCREASE YIELD. I THINK INFLATION IS HERE TO STAY FOR A WHILE. MANUS: DO YOU THINK WE HAVE QUITE GRASPED HOW SEVERE THE RESTRICTION IS, WHEN YOU SEE INDIA IMPLEMENT IN RESTRICTIONS? THEY HAVE CAP YACHTS AND THEY WILL HELP CERTAIN COUNTRIES, ETC.. THAT I GET THE SENSE THAT WE ARE DRAMATICALLY STICKING OUR HEADS IN THE SAND IN TERMS OF THE RISK. TELL US ABOUT THE RAMIFICATIONS. > > UKRAINE IS A POWERHOUSE IN TERMS OF GRAIN AND WHEAT IN PARTICULAR. THE WORLD WAS ENJOYING BEING ABLE TO TURN TO INDIA, BUT LITERALLY OVER THE WEEKEND, INDIA HAS HAD TO PLACE A BAN ON THEIR EXPORTS. THE REASON IS BECAUSE THERE HAS BEEN SCORCHING HEAT THAT REALLY IMPACTS SOME OF THE CROPS. THE GOVERNMENT BASICALLY HAS TRIED TO TAKE MATTERS INTO THEIR OWN HANDS AND SAY WE ARE NOT GOING TO BE EXPORTING ANYMORE. THEY WERE RELYING ON INDIA TO FILL THE VOID THAT UKRAINE AND RUSSIA COULD NOT. THEY SAY THEY WILL NOW ALLOW CERTAIN GOVERNMENTS -- DANI: THIS IS THE THING THAT I'M TRYING TO GRASP WITH WHEAT. THIS IS A CROP, IT IS HEARTY, IT HAS A WIDE GEOLOGICAL SPREAD SO PRESUMABLY ONE PLACE GOES OFF-LINE AND ANOTHER CAN PICK IT UP. IF THAT'S NOT THE CASE, WITH WHEAT WHAT YOU'RE GETTING IS A CROP THAT WE THOUGHT WOULD BE IN VAST SUPPLY. WHAT IS IT MEAN FOR THE COMMODITIES WORLD AS A WHOLE? > > TO A CERTAIN EXTENT, CORN RIGHT NOW IS BEING GROWN IN VERY DRY CONDITIONS, IT IS VERY DELAYED IN THE USA. IN FRANCE, PALM OIL -- THE EXPORTS CANNOT BE RELIED UPON. THIS IS SUCH AN UNTIMELY SITUATION IN THE MARKETS GET VERY TENSE BECAUSE THERE'S NOT SO MUCH AVAILABILITY CONSIDERING GLOBAL DEMAND. THERE IS NO ROOM FOR ERROR AND IT SEEMS LIKE THERE ARE ERRORS HAPPENING EVERYWHERE. MANUS: WHAT IS YOUR VIEW ON THE OIL MARKET? ON A DAILY BASIS, WE REPORT ON AND TALK ABOUT ZERO COVID IN CHINA, SHANGHAI ON THE BRINK OF REOPENING. THE LANGUAGE HAS CHANGED. WE SEEM TO BE MOVING TOWARD THE EXIT OF ZERO COVID. I HAVE NO IDEA WHEN, THAT IS HIGH SPECULATION ON MY PART. EVEN WHEN CHINA REOPENS, WHAT WILL IT MEAN TO OIL, WHAT WOULD CHINA REOPENING DUE TO A TIGHT COMMODITY MARKET IN OIL? > > IF YOU THINK ABOUT IT, THE HEIGHT OF CRUDE OIL TODAY IS AROUND $110 A BARREL. FOR ME IT SHOWS THE MARKETS ARE PRICING IN THE FACT THAT THERE ARE HIGH PRICES HISTORICALLY SPEAKING. NOW ON TOP OF THAT WE HAVE ONE OF THE WORLD'S LARGEST ENERGY CONSUMERS, AND YOU KNOW DEMAND IS GOING TO PUSH THAT MUCH HIGHER. DO WE HAVE ENOUGH SUPPLY TO MEET INCREASING DEMAND? IF WE DO, PRICES WILL HAVE TO GO TO A HIGH LEVEL. DANI: DO YOU HAVE A LEVEL IN MIND? > > IT'S PROBABLY PRICING IN THE FACT THAT CHINA IS ABOUT TO REOPEN. I SAY WE COULD TRY TO TARGET 120. WE HAVE TO TAKE IN THE FED CHAIR JAY POWELL. IN TERMS OF DACHSHUND TERMS OF MAJOR SHORT-TERM DEMAND, THERE'S GOING TO BE AN IMPACT. MANUS: ONE OF OUR LAST GUEST TALKED ABOUT A SOFT RECESSION IN THE U.S. WILL CERTAINLY PLAY INTO THE COMPLEX AS WELL. THANKS FOR BEING WITH US. LET'S GET UP TO SPEED, JULIETTE HAS THE FIRST FURRED HEADLINES FROM SINGAPORE. JULIETTE: THE U.S. IS PREPARING A MILITARY AID PACKAGE FOR INDIA THAT IS LOOKING TO REDUCE DELHI'S DEPENDENCE ON RUSSIAN ARMS. IT WOULD MAKING THE ONE OF THE LARGEST RECIPIENTS OF U.S. MILITARY AID, BEHIND ISRAEL AND EGYPT. YOU CAN GOVERNMENT PLANS TO INTRODUCE LEGISLATION WITHIN WEEKS TO OVERRIDE PARTS OF THE BREXIT DEAL IT NEGOTIATED WITH THE E.U.. THE SITUATION IN NORTHERN IRELAND RISKS ESCALATING TENSIONS WITH THE BLOCK. A UNIT -- AFTER MISREPRESENTING THE RISK POSED BY A GROUP OF HEDGE THAT COLLAPSED DURING THE PANDEMIC. THE DEAL CLOSED AND EMBARRASSING EPISODE FOR THE GERMAN GIANT. THE WALL STREET JOURNAL IS REPORTING THAT DATA FOR A CHINA EASTERN AND LINES JET THAT CRASHED EARLIER THIS YEAR SUGGEST SOMEONE IN THE COCKPIT INTENTIONALLY TIPPED THE PLANE INTO ITS FATAL DISSENT. THE JETLINER WAS CRUISING AT HIGH ALTITUDE WHEN IT SUDDENLY NOSEDIVED AT HIGH SPEED INTO A MOUNTAIN, KILLING EVERYONE ON BOARD. GLOBAL NEWS, 24 HOURS A DAY, ON AIR AND ON QUICKTAKE BY BLOOMBERG, POWERED BY MORE THAN 2700 JOURNALISTS AND ANALYSTS IN MORE THAN 120 COUNTRIES. THIS IS BLOOMBERG. DANI: THANKS SO MUCH, JULIETTE SALY IN SINGAPORE. LET'S GET THE LATEST ON THE TWITTER TAKEOVER AND IT SEEMS LIKE THERE'S A NEW FOLD IN THAT STORY EVERY DAY. THERE IS UNCERTAINTY ABOUT HIS BID TO TAKE TWITTER PRIVATE. ADVISORS ARE WORKING BEHIND THE SCENES TO SEAL THE TRANSACTION. THIS IS WHAT I COME BACK TO, THE MAN SIGNED A CONTRACT, I GUESS HE FAILED TO DO DUE DILIGENCE BUT HE CAN'T REALLY RENEGE ON THIS, RIGHT? SO IT'S TWITTER JUST PUSHING AHEAD? > > IT SEEMS THAT WAY AND TWITTER RELEASED A STATEMENT TO BLOOMBERG SAYING THEY INTEND TO PUSH ON WITH THE DEAL. AN SEC FILING SHOWS ELON MUSK RENEGING ON THAT FULL DUE DILIGENCE PROCESS. THE SOCIAL MEDIA CLOSING AND POSITIVE TERRITORY YESTERDAY AFTER SEVEN STRAIGHT DAYS OF LOSSES. IF EITHER PARTY WALKS AWAY, THERE IS STILL A $1 BILLION EXIT FEE. AND THERE IS A SPECIFIC PERFORMANCE CLAUSE. IF ELON MUSK HAS THE FINANCING IN PLACE, HE WILL STILL HAVE TO GO AHEAD WITH THE MERGER, LESSIE CAN SHOW THAT SOMETHING HAS MATERIALLY CHANGED. THAT IS JUST WHAT ELON MUSK IS TRYING TO DO. YESTERDAY ANOTHER TWEET FROM THE WORLD'S WEALTHIEST PERSON, CHALLENGING THE STATEMENT FROM TWITTER THAT LESS THAN 5% OF THEIR ACCOUNTS ARE FALSE USERS. ACCORDING TO PEOPLE FAMILIAR WITH THE MATTER, ADVISORS ON BOTH SIDES ARE STILL WORKING DILIGENTLY SO THIS CAN IN FACT CROSS THE LINE. AS WE LOOK AT THIS PIE CHART THAT SHOWS YOU THE STATE OF PLAY WITH THE FINANCING, CALL IT COINCIDENTALLY OR STRATEGICALLY, SPACEX CONDUCTING A FUNDING ROUND THAT IS SUPPOSED BE COMING UP WHICH COULD VALUE THE COMPANY OF 125 BILLION DOLLARS, WHICH WOULD MAKE IT THE MOST VALUABLE U.S. START UP ON RECORD. IS ELON MUSK DOING THIS SO HE CAN AROUND -- ERADICATE -- A FINAL THING IS THE INTEREST EXPENSE. IT EMERGED EARLIER THIS WEEK THAT DEBT AGAINST TWITTER WHICH CERTAINLY DESK CURRENTLY STANDS AT $13 BILLION, THAT WOULD MEAN $1 BILLION IN ANNUAL INTEREST PAYMENTS. MANUS: THANK YOU VERY MUCH, GOOD TO SEE THAT GOLDMAN SACHS AND JP MORGAN ARE UP THERE FOR $130 MILLION IN FEES. THANK YOU VERY MUCH. COMING UP ON THE SHOW, A POSSIBLE JUMBO HIKE. THAT STORY ON BLOOMBERG, NEXT. MANUS: THIS IS "DAYBREAK:EUROPE." TRADERS ARE PRICING IN MORE AGGRESSIVE POLICY TIGHTENING FROM THE ECB GOVERNING COUNCIL. THEY CANNOT RAISE THE PROSPECT OF JUMBO HIKES THIS YEAR. FLOATING SUPPORT FOR 50 BASIS POINTS IN JULY, IS HE A LOAN HAWK OR COULD HE GATHER A FLOCK BEHIND HIM? > > AT THIS STAGE I DON'T SEE A VERY STRONG POSSIBILITY. AS MOOSE BECOME MORE CONCERNED ABOUT INFLATION, AT THE SAME TIME, I DON'T SEE A POSSIBILITY OF BRINGING SOME OF THE MORE DOVISH MEMBERS OF THE GOVERNING COUNTRIES TO AHEAD. AS LONG AS WE HAVEN'T SEEN THE PEAK IN INFLATION, THERE ARE ECB CONCERNS OVER THE BOND FEES FROM TIGHTENING CYCLES. WE DON'T WANT TO SURPRISE THE MARKET WITH A JUMBO HIKE. DANI: I'M GOING TO TRY ONE MORE QUESTION, WERE HAVING SLIGHT AUDIO ISSUES. WHAT ARE YOU EXPECTING FROM THE APRIL RATINGS? > > THE PRELIMINARY ESTIMATE, WE SEE INFLATION UP FROM 7.4% IN MARCH, DESPITE A BIG DECLINE IN THE SESSION. [INDISCERNIBLE] AT THE SAME TIME WE SEE FOOD INFLATION WORSENED BY THE WAR IN UKRAINE AND CORE INFLATION IN APRIL AS INFLATION IS PICKING UP. I DON'T EXPECT ANY SURPRISE AS WE CONFIRM INFLATIONARY PRESSURES IN THE U.S. MANUS: COMING UP ON THE SHOW, REJECTING UP A PROPOSAL FOR THE TOP EXECUTIVE, JAMIE DIMON, THE CEO. MANUS: I AM MANUS CRANNY IN DUBAI. DANI BURGER IS IN LONDON. THIS IS "DAYBREAK: EUROPE." THERE IS A DEAL, A 10 YEAR CARGO PARTNERSHIP. THIS IS THE REAL DRIVER SUPPORTING SOME OF THESE AIRLINES THROUGH COVID. THIS IS INTERESTING, ON THE SUPPLY CHAIN ISSUES WITH THE NEW DEAL IN AIR CARGO PARTNERSHIP. DANI: BEN SMITH SAYING IT WAS A LANDMARK STEP TO BOOST THEIR POSITION IN AIR CARGO. A 9% STAKE WOULD MAKE THEM ROUGHLY THE FOURTH BIGGEST SHAREHOLDER. MANUS: ONE OF THE BIGGEST RALLIES IN THE YUAN 24 HOURS AGO. ALL LOWER ONSHORE AND OFFSHORE. YOU'RE SEEING THE DOLLAR RISE AND THE YEN DROP. YOU SELL THE NEW BEGINNING TO FIGHT BACK FROM THE BANK OF ENGLAND AND FROM THE ECB OVERNIGHT IN TERMS OF THE NARRATIVE ABOUT JUMBO RATE HIKES. LOADING UP ON CASH THE MOST SINCE 9/11. THAT'S A VERY BIG DECISION. DANI: MAYBE IT'S GETTING EVEN BIGGER THIS MORNING. FUTURES SELLOFF ACROSS THE U.S. SPACE NOT TO SEVERELY. IT DOES COME OFF A RALLY YESTERDAY OR U.S. STOCKS RALLIED MORE THAN 2%. BUT IT GETS BACK TO THE THING OF BEAR MARKET BOUNCES. DO YOU REALLY WANT TO BUY THESE DIPS, BECAUSE WITH THE DIRECTION OF TRAVEL LOWER, JAY POWELL YESTERDAY SAYING WE WILL PUSH UNTIL WE GET CLEAR OF THAT INFLATION COMING DOWN. JP MORGAN SHAREHOLDERS HAVE REJECTED UP A PROPOSAL FOR TOP EXECUTIVES, DEALING A RARE DEFEAT TO CEO JAMIE DIMON. JOINING US TO DISCUSS IS OUR TOM METCALF. NOT THAT LONG AGO, WE JUST DISCUSSED IT NOT THAT RECENTLY. > > JUST A BIT OF CONTEXT, PRETTY MUCH EVERY PROPOSAL HAS THEM GIVING BACK 90% TO SHAREHOLDERS. A $50 MILLION PAYMENT IS WAY OUT OF KILTER, AND A REALLY BIG REBELLION, THE BANKS DON'T HAVE TO DO ANYTHING ON IT, BUT IT'S A VERY BIG SIGNAL AND I WILL BE CURIOUS TO SEE HOW THEY REACT. MANUS: WHAT IS THE BROADER SIGNIFICANCE OF THIS? JAMIE DIMON IS A VETERAN, HE HAS DELIVERED THROUGH THICK AND THIN. IS THERE A TAKE AWAY FROM THIS, DAVID SOLOMON IS AT 90% FOR HIS PAY PACKAGE, BUT I KNOW THERE IS A GAP. > > IT JUST SHOWS THAT EVEN JAMIE DIMON IS AN ABOVE THE PRESSURES FROM SHAREHOLDERS. IT'S A BIT OF A SLAP ON THE WRIST AND ASSIGNED THAT EVEN THOUGH YOU'RE IDENTIFIED WITH THIS BANK AND YOU ARE A CENTRAL FIGURE, THERE IS THE PATIENCE OF SHAREHOLDERS. DANI: AND CHANGE AT THE TOP AS WELL. ? > > HE'S NOW GOING TO BE STEPPING DOWN I THINK NEXT YEAR. IT'S A BIG CHANGE IN FRENCH BANKING. MANUS: IT IS, IT IS ALL CHANGE. WHAT WE ACTUALLY WANTED YOU TO COME IN AND TALK ABOUT IS OUR BLOOMBERG COMMISSION SURVEY ON THE CITY OF LONDON. WHAT WERE THE KEY TAKEAWAYS? > > WE COMMISSIONED ABOUT 500 EXECUTIVES IN THE U.K. AND BASICALLY THE POINT WAS, WE DON'T WANT TO GO BACK TO THE OFFICE FULL-TIME. WHEN YOU LOOK AT THE BROADER INDUSTRY, REALLY NO ONE IS INTERESTED IN GOING -- IN DOING THAT. BASICALLY PEOPLE REALLY WANT TO COME INTO DAYS A WEEK AT MOST. SO IT'S A VERY DIFFERENT MESSAGE THAT YOU HEARING FROM THE RANK-AND-FILE AS OPPOSED TO PEOPLE LIKE JAMIE DEMON -- JAMIE DIMON WHO HAS BEEN PUSHING PEOPLE TO COME BACK TO THE OFFICE. MANUS: THE MAGIC NUMBER WAS ALWAYS SAID TO BE THREE, BUT IT LOOKS AS THOUGH IT'S BEING SHIFTED TO TWO. A BOND MARKET REPRICING, AND EQUITY MARKET IN FLUX. YOU MAY WILL NEED YOUR CASH. THAT'S THE MESSAGE FROM THE SURVEY. DANI:

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'Bloomberg Daybreak: Europe' Full Show (05/18/2022)

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