Live on Bloomberg TV

00:00People are somewhat insecure the risk off mode but our house humor still is that there won't be a recession either this year or next year there will be a slowdown. I think I know to global GDP 2.8 percent for this year and 2 4 9 for next year. I'm talking with secretary. We're at home. I am considering it. We do not impose any of those tariffs that are imposed by the last ministrations and they're under consideration. I think there is a lot of demand for starting to rebuild bridges cooperating again. This is Bloomberg Surveillance early edition with Francine Lacqua. Well good morning everyone and welcome to Bloomberg Surveillance Early Edition on this Monday the twenty third of May. Francine Lacqua in Davos for the World Economic Forum. And here's what's coming up on today's program. European stocks surge after Joe Biden hints at a relaxation of Trump era tariffs. U.S. futures also gain after the S & P sidesteps a bear market close. U.S. President Joe Biden says he will intervene if China invades Taiwan. Speaking alongside Japan's concede the two leaders present a united front against Russia. Plus the World Economic Forum in Davos kicks off. Stay tuned for an outstanding lineup of interviews including Canada's innovation minister and the chief executives of Mahindra Mahindra and Standard Chartered. Now first thing is first let's check on the markets especially since a sunny day here in Davos. And the markets aren't doing too badly either. Now the story is one of China. The story is one of trade out there. Let's get the board up to look at the European stock 600. It's very clear that both stocks but also the Chinese renminbi advanced after Joe Biden said China tariffs imposed by the Trump administration were under consideration. I'm looking at dollar and treasuries both retreating. Now if you look at energy and basic resources those shares actually leading the gains for Europe stocks. Six hundred seventy futures also jumping more than 1 percent. Stocks rising in Asia and emerging markets. We had a good conversation with the IMF head about the dollar rally and what that means for some of the countries that may need debt restructuring and that it may also need the IMF support going forward. So we'll have a full roundup of markets. When you look at the European map a lot of green on the screen just a bit of pressure on the Italian footsie mabe. But overall again if it means less tariffs this is something that would be considered beneficiary to the world. Now the U.S. has reached a trade deal with Asian economies. The pact brings together countries with 41 percent of global GDP. Now for more we're joined by Bloomberg's chief Asia economics correspondent and occurrence of ENDA. First of all good morning. What more can you tell us about this deal. Well it's early stages in this from saying that seems to be basically a loose kind of economic framework. Like you mentioned about a dozen members in Asia including some big economies like India and Japan South Korea Australia a handful from Southeast Asia 17 societies. Asia as well are four pillars to it centred on the such as a clean economy the digital economy a resilient economy that's about basically getting ready for future kind of a disasters and shocks for example. And so the thinking is that these countries will come together and coalesce in these matters. But it's not a deal to bring down tariffs per say. There isn't any guarantee that the U.S. Congress will necessarily weigh in. It's not yet clear which of those countries who've signed up are really on board for which pillar on which part of this Indo-Pacific framework. So as I say it's kind of a US push in the region to gain its first signs of pulling out of TPP back in 2017. But it's not necessarily a major kind of trade agreement. A lot of the details have yet to be worked out. And if you look at stocks around the world I mean they're really taking this in their stride. They think this is great. Does it just show that globalization is not dead that would benefit actually markets or are they getting ahead of themselves. Well I don't think this particular framework is going to be a game changer Francine. I mean again the details remain to be seen. But when you look at what we do know it's not about bringing down tariff barriers for example. It's more about cooperation on some of these core pillar areas. And when it rains we're seeing who signs up to what exactly those pillars. Well I think perhaps the other takeaway from today's trade story is the China and the U.S. perhaps going to start talking about bringing down some tariffs. President Biden make the point that it could reduce some tariffs on U.S. goods. That's probably more though about the U.S. inflation story than any kind of warming of U.S. China relations because China themselves were quick to make the point that they viewed as the Indo-Pacific economic framework as as divisive. So I would say this particular framework doesn't seem it doesn't necessarily appear to be a game changer for markets. And neither of course will the reduction I think the entire speed game changer for U.S. China relations. Is it a game changer the fact that the president of the United States of America actually said that the US would intervene if China were to attack Taiwan. Well obviously it's a very hawkish comment. He was asked a direct question. He gave a direct answer. Francine and the same answer as though he did also say that the US is committed to one China framework that they have agreed already. And in fact his spokespeople afterwards are making the point that the president reiterated one China framework of strategic ambiguity so to speak. So again it's a hawkish headline and it will generate a response from Beijing. It does show that the US is committed to Taiwan. And in the context of what's happening in Ukraine of course it's a very significant remark. I think though the question remains is it really a game changer for the U.S. China relationship over Taiwan. That will be debated by the experts. But I think he did reiterate sticking to the one China framework. Taiwan is not included in the new Indo-Pacific framework that was announced today either. So those are kind of points that add to the kind of ongoing status quo of the US China Taiwan sort of relationship. And I think so much as always. NIKKEI and there are chief Asia economics correspondent. Now let's also get into the key drivers market drivers with our live Ed nor Ali. Great to speak to you as always. I guess less recession concerns rest inflation concerns and the markets really latching onto what we heard in terms of trade deal. Yeah absolutely. Because any sign of a reversal of the Trump imposed tariffs on China is a good thing for Chinese stocks. And in retrospect that's the positive contagion finally coming through from Asia. Well typically when we see Asia rebounding you do see a bit of that good news coming into the European session. And that's exactly what we've got this morning. But the question is for how long. Yes if I was going to ask you know just put you on the spot because you know it's a Monday. It's for how long. We were almost on the verge of a bear market and then we see that reversal. How much volatility are you expecting. I think this week might be a good week for stocks in the in the short term interim hoping that nothing else happens. But I think that's a little bit difficult to ascertain. Right. We did just run an M life survey where you know the median or majority of the responses expect another downfall. First stocks about falling to S & P 500 is expected according to a survey respondents to fall to thirty five hundred. It's not trading at the thirty nine fifty level or so. So I do think that the market is a little more pessimistic than we would expect but the departures are still trying to make a comeback. Let's see if they'll last. Nor anything else that we should be watching out for which is maybe not on everyone's radar. So I know you look at a factual look at currencies in great detail. Is there anything in terms of the dollar rally that we should worry about if it goes much higher from here. I think the dollar rally as we've been flagging on the markets lifeblood for quite some time has fizzled out. I think also this is good news for commodities. This is good news for emerging markets. This is providing temporary relief for emerging markets currencies that have just been battered by this rallying dollar. We are seeing a bit of you know it it has come down off these highs. And I don't think the dollar is king narrative sticks through just yet. You do have recessionary pressures or fears coming on. You do also have inflation. And now if those tariffs do come out or unwind between China and the US that imposes some pressure on inflation because the yuan would rise. And so we do import a lot of goods from China. So ultimately I think we're we're entering in a very tricky situation for the dollar. And I don't think it can hold its haven trademark for for for long. Thank you so much. And life editor there Nora Ali. Now coming up we speak to Canada's innovation minister. Also happy champagne. This is Bluebird. Economics finance politics. This is Bloomberg Surveillance early edition on Francine Lacqua. Here in Davos it's day one will have been day to day three and day four. Of course the focus is on Ukraine. The focus is a lot more on this inflation surge what it means for energy security and of course how the world can cope and whether we tip into recession. So we're going to have some great discussions. Not without their critics of Davos. So we'll see exactly what happens over the course of the week. Now joining us to talk more about Davos is expectations. Maybe some of the things that he would do differently is Paul Sweeney Champagne. He's Canada's minister for innovation. So Minister thanks so much. Great pleasure to catch up with you on Devils. It's not winter. As a Canadian it's quite a different stress. Me but it's good. I keep you know it was 20 years ago my first Davos at the time. So things have changed. But I would say I said that to Klaus Schwab yesterday. Davos always remain relevant. I think today design the emphasis on energy security climate change obviously the war in Ukraine. But Mr. what are you here to do. Is it business because you need to meet with suppliers. I know we'll talk a little bit about how we like it or is it really to try and be part of this global voice. The. You know one of the reason you're here is to make case is to make the case for Canada. You know I think that top of mind for people are energy security where I think Canada can be part of the solution. You mentioned supply chain which are becoming more regional. So the whole issue around critical minerals. How can we help. The whole concept of ESG. And and lastly I spend the whole week in Germany and an honesty listening to a lot of German businesses. We're trying to see how Canada can can play that role. Greening the supply chain how can we help. And obviously to your point how can we help in the global agenda as well. Yes. How tricky our supply chains right now. I know we're talking about green supply chains but really it's getting from A to B getting some of the shipping costs under control. That would help the world first. Well what we've seen from our perspective you know we have a big auto sector. We've rebuilt the bio manufacturing sector. We see global supply chain becoming more regional. Certainly more emphasis on resiliency than pure efficiency. Germans have called that local for local. So when you're looking at that at least in our case in the context of North America thinking about critical meanwhile thinking about how can we make sure that we use our renewable energy to green our supply chain whether it's green on the minimum green steel green batteries how can we power the world with wood. Greener solution. This is really the team. So talking to business people here but also wanting to influence the global agenda. I think the imperative is there and we have solutions. But Minister Canada's still so reliant on fossil fuel. Well I would say part of it. But I mean you have to remember that if you look at the you know the production of renewable energy we're close to 80 percent in Canada. So electricity I mean everything is becoming electrified the way we've most. For example in the steel industry we're moving to electric furnace. So we're trying to decarbonise in order to be able to for example in our case produce a car of the future which are going to be much greener. Yeah. I mean you know the critics will say that actually Canada could have done a lot more when it came to climate change pledges. And the question is whether that changes in the future. But talk to me about why. So this was the big news. Yes. In the last 10 days is banning of Norway. Well we decided that our intention was to exclude them and visit to from our network the 5G network in Canada. This was the right decision. It was the right decision for Canadians. It was the right decision for national security but also considering what what the fight is going to be in terms of our lives. I mean I was you know there'll be many points of connection. So protecting the network is very much aligned with what our allies have been doing in Australia the United Kingdom the United States. And certainly this was a decision that we made after consulting with allies but also our own intelligence agencies. Mr what are you afraid of. So I mean 5G again it's you know shorter frequencies. Is this because it's a foreign entity or is it because you're worried that the Chinese would be spying. Well we we have to look at a number of factors. As you know when you make these decisions that we're very much informed by intelligence reports. You would expect I can go into the details of that. But certainly I think that our conclusions are very much aligned with others in the sense that we want to protect the integrity. You know if you look at the digital world today the the network infrastructure is going to be vital. I mean people think about physical infrastructure but if you think of the world the digital world we're going these networks which are going to be with us for decades to come to protect them to make them more resilient to make sure that we there would be no state or firing apparatus that could eventually play in the network for us was key in order to protect that Virginia. Right. Because this and I know it. So I can tell you it's reports to come. But what's the danger in this. Is it components inside. Is it listening into conversations like it's unclear you know. Yeah well it's still unclear exactly why or what. National security. It's a whole range of things. I know you've you've heard that from our American call. From our British colleagues I think our conclusion I guess is very much the line we've been talking to a number of on on that. And I think when it comes to national security the viewers would understand. I always work on the basis of prudence. You know you have to be prudent. You're talking about one of the most critical infrastructure that will drive our economy in a way which will impact the daily lives of Canadians in our case. So that prudence is certainly in my opinion what you need to apply when you're looking at that especially that you want resilience for decades. Minister what are you expecting here. So are we becoming global de globalisation or is it. You know there's it seems that so we went into Davos where a lot of people say you know what is going to be very difficult. Everybody has a mind of their own. They're thinking internally. And then we wake up and there's news that actually the US signed an agreement with 13 other countries in the Asia-Pacific region. I think it's a bit of both. In a sense I see supply chain. Like I said being more regional. But what I do see that you know stability predictability and the rule of law and I demand in short supply. That's DAX in the world. So certainly countries like Canada we've been working with a concept of trusted partners and making sure we're more resilient. You mentioned a number of thing. You know we went from vaccines not to microchip. Yeah. With my colleagues in the United States and Europe were always saying okay what's the next thing. How can we plan for 30 30 years ahead. So we don't find ourselves in where we have been with respect to vaccines. So. So there's a sense that we will need each other that there is some economic blocs being formed there. There's certainly a race to standards and norms that will dictate some of the products that we'll see and technologies that will come. But I think there's also an emphasis on science technology and innovation that because that's where you find a breakthrough. Thank you mr. How many languages is because you have to understand Mr. Shop and sat down and spoke to me in perfect Italian and that took me by surprise. Well try that. Three of the three. But you know this is going to being you know Canada's this this inclusive society. So it's not uncommon for people to speak 2 or 3 languages in our country just like you do in Europe. So three languages for now and then I'm sure by the time dozens of people have picked a fourth one. Thank you so much for joining us. Also if need champagne there. Canada's minister for innovation. Coming up stocks gain after President Joe Biden says China tariffs imposed by the Trump administration were under consideration. We'll look at what's moving markets today. And this is Bloomberg. If only I knew you don't know. I know but I can't tell you. I don't have the crystal ball at all. Like mine is just dark when I look into it. I can't see anything. I think we're getting close to it actually. When you look at the trend it's still pointing downwards. We still have further to fall. I think we're going to end the year slightly higher than where we are today. Once we get past that and get some clarity from the Fed I think the markets will ease up. You're going to need more than that to to sort of stop this fall. We think that over the summer. Yes. The touch down to around about 3600. If somebody here has the bottom indicator just my phone number I want to know that. Well that was our M life survey. Considering when the S & P 500 might hit rock bottom. For more on this we're joined by Dani Burger Danny. Good morning. What level did the majority of our respondents expect the S & P to get to. Well Francine a lot of different opinions. I want to show them. I'll get to the screen. Having fun. I mean just mind about the economy. I want to see the levels first. We do have a graphic of this. And essentially only 4 percent of the survey respondents in the NY Post survey which surveys about a thousand people see a bottom. Only 4 percent Francine. Now the majority of them see the S & P convalescing around thirty six hundred. That would be about a 10 percent drop from the current levels a 27 percent drop from the January high. It really is this mantra of don't fight the Fed. The Fed has been very clear that they want to tame inflation. There you go. There's the chart right there. So here's where the majority are around thirty five hundred. So you have the Fed saying they want to tame inflation. To do so they're going to tighten financial conditions. And what titans financial conditions a sell off in stocks. So if you believe that you even get some people here saying that we might see a retest of the pandemic lows around the twenty four hundred survey response level. So Francine a lot of differing opinions and I should say the professionals the pros who it is to say where the S & P will end. Those are also one of the most split in the past decade. Yeah. Can I just say Danny I didn't do very well on that survey. So I asked all of my guests and none of them would give me a level. So they're going to give an answer and find it a bit lower. I know because then you hold the account to it. Danny thanks so much. With the very latest on the survey now we're just also getting some breaking news out of Christine Lagarde. This is her comments in a ECB blog post saying that the ECB is likely to exit negative rates by the end of the third quarter. But I mean again that president ECB also says ECB can design deploy new tools if needed. So this is the big deal of course out of Christine Lagarde saying that they are also expanding to end net purchases very early in the third quarter. Don't miss our exclusive interview with Christine Lagarde from Davos. That's tomorrow. That will be a good conversation to try to understand exactly her thinking on what negative rates and what we could do better to alleviate some of the concerns from some of. Of course the people that are hit the most by this inflation rampage. Coming up the U.S. reaches a trade deal with Asian economies. The pact brings together countries worth more than 41 percent of global GDP. So we have more on President Biden in Asia next. This is Bloomberg. European stocks bounce after Joe Biden instead of relaxation of Trump era terrorists. U.S. futures gain also after the S & P cites DAX a bear market close. The American president also announces a new U.S. led to Asia Pacific trade pact made up of 13 countries. He says he will intervene if China invades Taiwan. Plus the World Economic Forum in Davos kicks off. Stay tuned for an outstanding lineup of interviews including chief executives of Mahindra Mahindra and Standard Chartered. Well good morning everyone and welcome to Bloomberg Surveillance Early Edition on Francine Lacqua day one in Davos. Now the US has reached a trade deal with Asian economies. The pact brings together countries with 41 percent of global GDP. The United States is deeply invested in the Indo-Pacific. We're committed for the long haul. Ready to champion our vision for a positive future for the region. Together with friends and partners including nations in this room. That's who I believe will win the competition of the 21st century. Together for more we're joined by Bloomberg's chief Asia economics correspondent and are in doubt. What more can you tell us about this deal. Well we're getting some meat in the bones of this kind of framework. Now Francine is about a dozen members in some big economies like India Japan South Korea the veteran seven from South East Asia. There are four pillars to it that will include topics such as resilience. So preparation for the next economic shock or disaster. There is a focus on the digital technology and climate change among others. Now that's the kind of outline of us if we don't have much more detail beyond that just yet. For example it doesn't deal in areas such as bringing down tariffs or trade barriers. That's not part of what this is about. And of course we don't yet know how much political support it will get on the U.S. side of things either. The details of this will be worked out over the coming weeks and months. In terms of which country is going to sign onto exactly what part of this agreement it's kind of U.S. efforts to get going again in the region after pulling out of TPP back in 2017. It's their way of countering China's economic wave. Of course China's saying this is another divisive measure by the U.S.. So as I say it's some detail on its initial idea by the by the administration but it probably has a way to go yet before we have a full idea of how it will operate and what it will mean economically. All right. And thank you so much. And occurring there was the very latest of course on all of this region and the intricacies and inter links between them. Coming up folks Fagen and Mahindra are aiming to electrify the Indian autos market. We'll be live in Davos with the managing director of Mahindra Mahindra and Sharp about their plans. This is Bloomberg. Economics finance politics. This is Bloomberg Surveillance early edition on Francine Lacqua here in Davos. Now Credit Suisse chief executive Thomas Goldstein says he has a clear mandate from the board to continue in his position. GHOSH Time has come under pressure because of a string of scandals. He was speaking to me a bit earlier on and here's what he had to say. With the high inflation shocks that we see now in certain areas of this world it's very clear that people are somewhat insecure. They are risk off mode. But our house you are still is that there won't be a recession. Neither is here. No next year there will be a slowdown. I think our house to global GDP three point three percent for this year and two point nine for the next year. They have come down. If you look at certain markets whether it's equity markets or high yield markets they clearly come under pressure. Under pressure. They've been a bit crazy. Well they're basically been pretty pretty quiet. Let's put it this way. But our our clients they don't panic all day. They are looking out of how things develop. They stay engaged. And that's very important for our well-structured clients involved with relationship reduction as they say in front of the clients. So that's what I'm really focused on. So thought that there's no you're not seeing any outflows are still fully invested. Well what we see like many of our competitors is some deleveraging as part of asset management going down prices going down. So something average and especially in Asia and obviously with what's happening in Russia in some other parts that have gone down. But no no outflows as such. Does it actually hurt your ability to collect some of the fees in certain parts of the markets with some of your wealthy clients or not so much. Well if you look out for our three revenue streams so net interest has come under pressure because we have lower lending volumes. But now with interest rates going up that should be a positive elements going forward. Recurring revenues have also come down because of lower volumes and transactional revenues are actually starting to stabilize. Now volatility sometimes is a good thing for transactional revenue. So I have started to pick up but it's clear that 2022 will be will be at lower levels than last year. There was a credit squeeze. Chief executive Thomas Goldstein speaking to me a bit earlier on here in Davos. Now let's stay in Davos and read the World Economic Forum. Earlier we also spoke to the firm's managing director about of course what she's expecting in the next four days. She sat down for Hedy. More than 2000 leaders coming together again two and a half years after the last time that we met. I think there is a lot of demand for starting to rebuild bridges cooperating again. The serendipity of connection between people of course so much work has continued here at the forum in the virtual world as well. But this is the moment to actually really lock that down. The star power that we had in the past doesn't seem to be showing up this year. Just change the way you work. Fifty heads of state fifty ministers of finance and central banks and the economy is one of the key topic. So I think we've got really the right set of people to make this the right kind of serious working meeting to ensure that we make progress on the issues that matter to states. What do you say to the critics that say look Dallas is very nice but it's all the elite. They come together they talk. But there's never anything concrete that comes out of it. Look. Day one right. We're going to have President Zelinsky speaking to kick off this meeting. And then two days later we've got over 100 CEOs coming together with all of the Ukrainian government leaders and young people that are here in person to start working already on what it is that they could do to support Ukrainian refugees in Europe. And at the same time start thinking now about a sort of Marshall Plan for rebuilding Ukraine in the future. That is the type of thing that will be happening here at this meeting. And of course I can give you several examples from reskilling jobs climate so much that moves forward. But of course it doesn't sort of you know start at this meeting and it doesn't end at the meeting. It's ongoing sets of work. She says Ukraine. You have of course inflation concern economic concerns. You have climate change. What do you think. That's the biggest worry right now is for a lot of the elites maybe away from the war in Ukraine. I think a big focus is going to be the economy. Right. So if we just look under some of the technical terms that we're all focused on what this means right now is a cost of living crisis. But we're talking about here is a real impact on people's lives and livelihoods. We have for after a very long time a major risk of famine of hunger of starvation and making it very difficult for people to make ends meet. So a big part of that will be the focus here. How do we ensure that we not just get emergency aid to those that need it but also how do we get the system rewired so that we don't have these. Issues in the future. That was the managing director. Sad to say he did. Now let's get straight to your Bloomberg business flash. Here's the emperor in Thailand. Hi Francine. Sources tell Bloomberg that broad commerce and talk survive cloud computing company IBM where the chip maker has been making a series of purchases. As it looks to expand the business into one of the largest and most diversified in the industry VMware has a market value of about 40 billion dollars. Now the FTSE is reporting that HSBC has suspended an executive after he downplayed the risks of climate change. Stuart Kirk is the head of responsible investing for the bank's asset management unit. He criticized HSBC for paying too much attention to climate and other environmental and social issues. The HSBC CEO Noel Quinn says his remarks are inconsistent with the bank's strategy and do not reflect the views of senior management. And Saudi Arabia's sovereign wealth fund has bought a 17 per cent stake in Prince Alwaleed s investment company for one point five billion dollars. Alwaleed will retain a 78 per cent stake in Kingdom Holdings while the remaining 5 per cent will be listed on the Saudi board. The investment brings the billionaire prince closer to the Saudi government after years of operating independently. And that's your Bloomberg business class. Francine Lee IBEX so much now we're here in Davos. Day one we have four days. A lot of the conversation will be on possible Marshall Plan for of course Ukraine. And we'll talk about inflation we'll talk about recession. We'll talk about everything in between which is the inequality out there in the world. But I'm delighted not to be joined by the Standard Chartered chief executive officer Bill Winters for a robust conversation on the economy and what we should be worrying about work. Bill as always thanks so much for joining us. Last time I saw you in Davos was January 2020. Yeah I was right at the beginning of Covid-19 and now they're back and it feels like the world has really changed yet. Do you worry about a recession. Do you how much you worry about the cost of living. I worry about a recession. I worry about the cost of living. And the two things are severely linked. But I'm pretty encouraged by the the overall level of economic activity which remains robust. And I know that central banks have some really heavy lifting to do to get inflation back under control. It's clearly going the wrong direction right now. And the likelihood that that translates into a material economic slowdown is high. Does the tipping into recession and everybody will have the view built. I mean is there anything that banks actually can do to alleviate that or is it up to governments like it's unclear whose responsibility. After two years of Covid it is now. Well I think the responsibility for inflation is squarely with central banks. And to the extent that there are people to exercise that responsibility they will there will be higher interest rates and that will lead to lower economic growth. I think that's inevitable. That is the transmission mechanism. No no no no. Getting around it. But I think there's a real question whether when push comes to shove with the Fed and others really go all in on the inflation containment versus maintaining a level of economic growth. And we'll see. Do you think there's a policy mistake in the making from central banks. I think because one of the making I think we can we can all speculate on whether a central bank should have moved earlier. But we know that there's been a series of supply shocks as well that have taken place that the central banks realistically couldn't have couldn't have forecast. But clearly is a concluded confluence of events right now is to make the central banker job very very hard. If you do have a recession I mean you've lived through the global financial crisis. Would it be different from that. Is it more like an 80s pattern. Because we talked about recession but actually recessions are are all different. I think that is the really big difference between recessions is does it trigger a financial crisis or does it not. And thankfully this time I'm pretty sure that there would not be a financial crisis because the financial system is extraordinarily strong. So we obviously got a lot of things right after the financial crisis not least increasing bank capital levels liquidity levels fewer places and the non banking sector to hide. And that's very encouraging. So I think the likelihood that a slower economic growth translates through to a credit crisis such financial crisis is very low. And typically when you have recessions or credit cycles that aren't linked to a financial crisis it's not so severe. So I would hope that if we do go into recession it feels like it's a dip in growth coming back out rather than something more structural. This morning we also had this agreement. This accord between the US and 13 Asian nations to have a trade pact. I don't know whether this means that we're all going to see more globalization in certain parts of the world and globalization other parts of the world. But how does it change how you run your bank. There's certainly shifting trade patterns. And I would say broadly these these are good things for Centre Bank. There's much more intra Asian trade and trade amongst the global south which is our natural as our home markets. At the same time we know for sure there's going to be on shoring into the U.S. and Europe. Both for security of supply but also for job creation. We can look at the unemployment rate and see how much job creation do we need. But we know that. Nevertheless high quality jobs is a priority. So we're in a state of flux. And I can see some some very good things for the global economy. I can see some things that will lead to further inflation. But all this on shoring and domestic sourcing of supply is inflationary. It's structurally inflationary which makes the central bankers job ever harder. But perhaps it's it's for the best in terms of getting a stable geopolitical environment. But if you look at HSBC and of course one of their main shareholders trying to break up the bank. I mean how do you look at it from what it could mean for four Standard Chartered that were totally focused on just running our business. We were having a very good time right now. Trade is increasing. We got a bit of a tailwind of higher interest rates. Credit quality for our bank has been very good and income growth is strong. So. So we we feel our strategy as we've got it articulated and we've were very specific in our guidance that we gave the market back in February. It's working. That strategy is working. I'm skeptical of these inorganic solutions where you end up taking something that is a reasonably well functioning integrated whole and splitting it up in pieces. I think that certainly for Standard Chartered Bank the cost would be much greater than the benefit. But thankfully nobody is suggesting that in our case. I mean do you see a Senate charter evolving. I you've been in charge what seven years. Did you get it to where where it needs to be or do you see it you know changing a lot more from where it's now. You know we we've been pretty consistent with certainly for the past five years or so. We had a couple of years to clean up when I wrote for the past five years we've been focusing on growing our cross-border corporate business growing our proposition to affluent customers digitizing everything that we do and then more recently a real focus on sustainable finance. Those four things have citizen very good stead. So we we definitely took a step back during the pandemic with as a result mostly of lower interest rates zero interest rates. As interest rates are normalizing. Well we're right back on track. We've got a high degree of confidence that we can hit our financial targets. We set a very specific target for 2020 for my comment when we used when we rolled this out in February it was if not earlier. But having some insects and you're sticking to that earlier. Do you think we'll be earlier. I hope so. I hope so. I think the guidance is guidance. 2024 is what we're saving for. But interest rates are going up a little bit faster than than the market had expected even when we spoke. And the the business still feels good. Bill thank you so much for joining us from Davos. Bill Winters are the Standard Chartered chief executive officer. I'm not crying because of what Bill is saying. It is very very afraid here in Davos. Coming up Volkswagen and Mahindra are aiming to electrify the Indian autos market. We'll be live with the chief executive of 100 Mahindra and Sharp next. This is Bloomberg. Economics finance politics this is Bloomberg Surveillance early edition of Francine Lacqua here in London. Now folks in London Davos it's a sign it's not the Sun Fault slogan exploring the possibility of supplying electric vehicle parts to 100 hundred Mahindra driven automaker looks to tap into the enormous growth potential of the Indian market. And here we have a good conversation of course about a very successful global business and what they need to do to go into the next step. You're right. And when you talk about India this is the fifth largest auto market in the world. So it is important where it goes from here. When it comes to us. Yeah. And we have a great guest to talk about this. Exactly. On show. Good to have you with us CEO of Emma Chandra Mahindra. It's good to have you with us. We talk about this drive towards even. I mean it is a huge market in India. But you know one of the criticisms against Mahindra Mahendra is that perhaps your are not global standards. How are you rectifying that to ensure the adoption and perhaps it attracts you know the global the global markets. So I said that's a pleasure to be here with you. And obviously beautiful in Dallas this time. It's always pretty in winter as well. But we don't to worry about the snow and the ice. So it's not than it's at this level. Yes of course. So with regard to Evey I want to first talk about three wheelers because he does tend to focus a lot on the four wheelers only but there's a huge set of things around it. Previous commercial vehicles and so on. In three wheelers today we've managed to get everything that's required for the consumer low cost of operations range anxiety being addressed and the infrastructure that's required because swapping in three wheelers is easy. And from that perspective that market's going to take off very quickly. Might there today has a 70 percent share. We've made ISE as well. And we've seen that transition go from 25 percent of our vehicles being Eby in three wheelers to 70 percent in our portfolio as well. So in terms of market share what are you looking for. What are you targeting. Two to five. Yes realistically. So on TV loads we will continue to maintain the market share we have. It may come down a bit with competition coming in but we do expect to have at least 50 percent as we go on on the four wheeler side. We do expect to get leadership back. And if I were to answer your question directly. Yes because we've been making movies since 2008. But they were with all technology and the market in India has taken slower to develop which they can lose more time for a variety of reasons. But we are seeing India at the cusp of embracing this and moving forward. And we have very exciting plans for a whole range of world class views that will be launched in the next two to three years. We have huge reveal that's planned later this summer. Who is your biggest rival. What you think of you unmask rivals around the world. And if you go back 20 years Indian manufacturing was written off because we had all the global manufactures coming into India and we survived and thrived. And if I were to just give an example of a world class car in ISE we launched the SUV seven double window a few months ago and we sold 50000 cars in three hours which is a global automotive record. And we have 11000 bookings every once since then. So we have the ability to make world class cars. We manage to compete very well with everyone who's come coming from outside India because we've managed to deliver cars that the Indian consumer wants. And that's something we feel confident about as we get to do business. It is about supply chain disruptions. It is about chips. Automakers have been hot hit. When will we see an easing. When will we see the end of this chip shortage. So the world as we see it today is going to have one challenge after the other. So that's one thing. Covid has taught us is find a way to deal with it be resilient. Today chip shortages have eased significantly. So they in fact about 10 to 15 percent of our production overall. And that's something we've been able to manage with a variety of things that we've put in place. But there will be challenges that come up with supply chain impact due to the Russia Ukraine prices. It's trying to lockdowns impacting us as well. So it's a whole host of things and we're working through those more challenges. So you're expecting more challenges to come at the forefront. The way the world's going over the last few years yes there are more challenges we expecting. We don't know what they are today but that's something we'll just have to be ready for. India's economy is slowing but still 6 percent growth. I mean inflation is surging. How do you think it all can be fixed and how will it impact companies like Mahindra. So India's position very well in the world today because inflation hasn't gone up as much as compared to the western markets. Yes we've seen an uptick with this 200 300 basis points. I would not expect a significant rise in rates. RBI the Indian Central Bank has been proactive in taking action already and we don't see a significant decrease in demand. You've had commodity prices go up over the last two or three years and despite that we've seen good demand. Four automobile factories are hospitality business real estate business. So things have been very strong. So from that standpoint I would say fairly optimistic about India despite the challenges around the level of auction there as well. But overall pretty good. Sir thank you so much for joining us. Any shop there. Managing director of Mahindra Mahindra joining us today. Also thanks to Haslinda Amin. I love Davos because I get caught up with has Bloomberg Surveillance. EARLY EDITION continues in the next hour. We'll have plenty more from Davos throughout the day tomorrow. An exclusive interview with the ECB president Christine Lagarde. You don't want to miss that one but we'll have plenty more. Always. This is Bloomberg. We have to navigate the next few months. We need to navigate the rising rate environment. I still think that the capitulation is to come when every single headline is negative. It's time to buy. I still think the worst is not behind us. This is Bloomberg Surveillance early edition with Anna Edwards Matt Miller and Kailey Leinz ISE. It's 10:00 a.m. in London 5:00 a.m. in New York and 5:00 p.m. in Hong Kong on this Monday May 20 said. Our top stories today. U.S. stock futures rose off. The S & P 500 narrowly missed a bear market close. Still a new survey of finance professionals sees the index losing another 10 percent before bottoming out. President Biden says the U.S. military would defend Taiwan if China attacks. Meanwhile the president is reconsidering tariffs imposed on China during the Trump administration. And the Davos forum is back with fewer Russians and billionaires and no snow. But we will hear from the CEO of the Hong Kong Exchange and the chairman of the State Bank of India. A very warm welcome to the program everybody. This is Bloomberg Surveillance Edition. I'm Anna Edwards live in London with Christy Gupta and Katy Lyons over in New York. Matt Miller is off today. And Kaylee European equity markets suddenly looked suspiciously positive earlier on this session. Some of that pulls us even though it has wound back a little bit as we've gone through the first couple of hours. Yeah and you've seen some of the gains for futures winding down as well as we get closer to the opening bell. But of course it's still about four and a half hours away here in the U.S. So we'll have to see how things shake out. As for how things were shaking out in Asia overnight it really was a mixed session. Overall you had the MSCI Asia-Pacific index up by about a third of 1 percent. Markets like Japan were higher but both Hong Kong and China ended the day in the red. There's a couple of competing factors here. On the one hand you have Covid-19 and a record number of cases being reported in Beijing. That raises concerns once again of a potential lockdown in the Chinese capital. So that was weighing on Chinese equities overnight. You saw that reflected in the six tenths of a percent decline for the CSI 300. But on the other hand perhaps brighter news is President Biden on his trip in Asia saying that when he gets back he will discuss those tariffs on Chinese imports with Treasury Secretary Janet Yellen. So that providing a sentiment boost to the Chinese currency the yuan the big outperformance in Asian IBEX today stronger against the dollar by about four tenths of one percent. We're trading right around that six sixty seven level. And then finally I would note while you are seeing a bit into a lot of global bond markets you actually we're still seeing selling pressure evident in New Zealand specifically at the short end of the curve up about four basis points on the two year to 314. Of course New Zealand's RBA NZ will be deciding on Wednesday. Creating the market is bracing for a 50 basis point rate hike. We'll certainly have our eye on that for you. For now Kelly but let's take a look at those premarket trading here in the U.S. session because you are seeing green on the screen. Remember some of this is going to be purely a technical bounce. We did hit that intraday bear market as of Friday. But I guess some of the concern here is that we didn't close in bear market territory. So in terms of technical definition is that bounce really justified. Nevertheless you have it up four tenths of one percent. How much of that is the tenor of conversation you were just referring to Kaley. How much of that is simply the gains on this idea that perhaps you are seeing a little bit of a a weakening dollar against the yuan. You are also seeing some of these other kind of mostly recession talk perhaps wind down as more and more people say this is the dip to buy. Of course we'll hit that throughout the program as well. Let's look at this cross. Ask the picture. The 10 year yield hovering around two hundred eighty one basis points up three basis points from where it was on Friday. You're also seeing some green on screen when it comes to crude up five tenths of one percent bitcoin up one point three percent. But Anna when it comes to this cross that's the picture. Put this in the context of volatility. This is actually a muted picture compared to what we see in the last couple of weeks and arguably months. Yeah indeed. Equity here in Europe we're a little more muted than we were at the start of the trading day. So two hours ago we were much more positive across the European equity markets perhaps reflecting a little bit of the polls. The CBC open the US on Friday. At the end of the session the option markets expiring all the excitements attached to that. But then we also had U.S. futures pointing a little bit higher than they do now. So both of those measures of risk appetite dialed back a little bit. The CAC Carol and the footsie made in France and Italy taking the worst of the losses in Europe today. But we kind of mix them across this European equity market picture in terms of where we are on the individual assets on the move. I can tell you that the energy sector is one sector that is benefiting today from some risk appetite and indeed from higher energy prices. So was that oil price remains fairly buoyant. We see the stock. Six hundred energy sector up by one point four percent. Basically sources the mining sector also moving higher. Talking of energy this is a renewable energy business wind turbine business and that stock up by six and a half percent says Siemens Good MSA because Siemens Energy is going to buy the part of this business. They won't say that they don't already own. To follow up on a Bloomberg scoop from last week. Here's the euro up by nine tenths of 1 percent for the euro against the dollar. We've heard from Christine Lagarde saying she thinks we're going to get to the end of negative interest rates in Europe by September. That means to 25 basis points in July and September. That's what you could read into that statement. And so the euro go higher as a result. We're going to be speaking to Christine Lagarde exclusively from the Davos forum. Of course that's going to be tomorrow during Alcoa during a during the early part of the of the European Day. And the pound also up by eight tenths of one percent. A lot to watch here in terms of the underlying economics. Andrew Bailey of the Bank of England will be speaking later. Also focus on the politics. We'll get that civil servant report. Those so-called party gate gatherings that were happening at Downing Street during the pandemic. All right Annabelle in addition to those comments from Andrew Bailey there is a lot else going on today. And of course throughout this week including as you mentioned the World Economic Forum taking place in Davos Switzerland. Although the snow is replaced for a little bit more sunshine in this May meeting. Then on Tuesday we'll get PMI data from Europe as well as the US. Plus Twitter will be holding its annual general meeting on Wednesday when shareholders are expected to vote on Elon Musk's 44 billion dollar takeover offer for the company. Also on Wednesday Fed minutes will be released. What kind of insight will we be getting into the thinking of the FOMC. And finally on Thursday. Ali Baba will be reporting its earnings results Kristie. Yeah let's start with a market theme here and go a little bit broader. With the S & P 500 flirting with a bear market last week notching more than one trillion dollars in losses participants in the latest online poll survey see more pain to come. Bloomberg Sandy Berger has the details Danny. Break it down for us. Is this the bottom. Well only 4 percent of respondents in our M Live survey said that it was the bottom. This is a more than a thousand professionals. So judging based off that sentiment critique I've got bad news for you now. The average of those respondents said that they think the bottom will be around thirty five hundred twenty six. Put it in about a 200 range point range. Beyond that that would indicate a 10 percent decline from Friday's levels a 27 percent decline from January's level. Look it's this don't fight the Fed mantra. They want to tighten financial conditions to get inflation in check and of course falling stock markets. That's something that surely helps tighten financial conditions. Although something good could get even worse some respondents a handful of them saw us hitting the low of the pandemic. Now in terms of what lifts us out of the bottom in terms of what gets this economy really going. The responses there were pretty broad. They're pretty macro and perhaps on offer too much help because let me hope. Rather let me dig into the Fed hiking ending the hiking cycle. That was one thing that will provide provide an economic boost. But that's definitely not a twenty story. There's twenty seven percent saying China ending Covid zero. There's no cite an end for that at least for now. And then the last two that were most commonly cited lower oil and peace in Ukraine both of those and at this point just very unknown. Danny thanks very much for the update. Dani Burger on the equity markets now. The US says a dozen countries in the Indo-Pacific will join a sweeping economic initiative designed to counter Chinese influence in the region. According to the White House the nations involved in this framework constitute roughly 40 percent of global GDP. Meanwhile President Biden says he'll be talking about US tariffs on Chinese imports with Treasury Secretary Janet Yellen when he gets home from his Asia trip. For more we're joined by Bloomberg's chief Asia economics correspondent and the current and at first on the. They said this agreement between 14 or so countries the US stepping back into the Asian trade sphere I suppose. Post the Trump administration. Yeah it's early stages on still a lot of detail to come on this but as you say the idea is that the US is trying to get back on the trade story here after they pull out of the TPP back in 2017. This latest idea did Indo-Pacific economic framework is meant to bring together as you mentioned about a dozen countries. There are four pillars in it. It's going to cover areas such as obviously climate change and the digital economy resilience which is all about preparing economies for future shocks and disasters. That's the kind of headline. But this isn't a form of trade agreement. There's nothing here about reducing tariffs or anything like that. And of course it's not yet clear whether or not it can get enough political support. Back in the US there is opposition in Congress to this latest initiative too. So it's more of a headline push by the US to try and get back in the trade story in Asia rather than anything so significant. And as you mentioned the bigger story today might be that President Biden has acknowledged they may roll back some of those tariffs on Chinese goods. Well and that's not the only commentary we got out of President Biden. And he also used some of his strongest language yet on Taiwan specifically. He was speaking at a press briefing in Tokyo and said that the US military would intervene to defend Taiwan in any attack from China. Take a listen. Are you willing to get involved militarily to defend Taiwan if it comes to that. Yes you are. That's a commitment we made. All right. So the president being pretty clear on that and I can't imagine China will like it. China has already pushed back against these remarks and fact calling them deplorable. As China consistently does when it comes to U.S. commentary on Taiwan. In that press conference President Biden's remarks as you just heard there was obviously quite hawkish. But he also went on to say that the U.S. still sticks with the one China policy. There's no change to the U.S. approach to Taiwan. And indeed his and his staff afterwards are making the point that this is all about giving aid to Taiwan and the independent invasion military aid for example rather than sending boots on the ground. So it's not really clear what this change is is obviously a hawkish statement. It certainly won't go towards helping or reconciling U.S. China relations. Well I think we need to hear more from President Biden during the course his Asia trip as to whether he wants to clarify his remarks further. Bloomberg's undercurrent thank you as always from joining us from Hong Kong. Let's go to Davos where executives politicians and central bankers are meeting over the next four days. The first in person World Economic Forum in two years. Bloomberg's Haslinda Amin is there and joins us now with the Hong Kong Exchange CEO CEO Haslinda Amin and Pretty. It is a windy Davos right now that has like all over. But never mind that as you said the Hong Kong Exchange CEO is with us Nicholas who's in good shape. Good to have you with us. I mean Hong Kong has been slammed by the Covid restrictions imposed by China. We have your IPO market getting hit in a big way at the lowest level in about nine years. Do you expect things to pick up the rest of the year. Yeah. Well what I'd like to look at usually is how's the pipeline. Are companies actually coming out and submitting their filings their applications. And right now we have between 170 to 100 needy applications of people that have shown an interest to to file for their IPO. What's happening. I think it's not that related to Covid as much but like to the environment the economic environment and the fact that valuation seems to be a little bit like down and soft. And so people are interesting. They're filing we have almost record level of filing applications but they still haven't pulled the trigger. And in a significant way when do you expect the trigger to be pulled. Because right now it is impacting your earnings. In fact you're looking at earnings at the lowest level in five years. When do you see a reversal of that. When can you grow that again. Yeah. Well last year we had record earnings. I mean it was all time record. I mean so. So when we look at the the numbers the numbers are actually quite good. If we look at the last five years and what we see is that the general sentiment has lowered the amount of trading that happened. I mean there's less trading and at the same time valuations are lower. So what we see is that eventually the market will come back. It always has. I mean there's like periods where valuation seems a little bit lower than they pick up. So I mean this time will pass. I cannot predict whether that's two months six months seven months. What I what I know is that if I take a bit of a longer term approach and I look at five 10 years the opportunities around China and capital markets it's been challenging for you the past one year. In fact you took over as CEO of Hong Kong Exchange almost one year to the day 24th of May. You did a trip to China in April. What was the conversation like. What was the message you sent across to China. Yeah. We have a lot of stakeholders in China. We have a lot of partnerships. And we forged some new partnerships like with the China Climate Exchange. I mean. And so. So there is a lot of positive interactions that we have now. The key message that I heard this around the importance of Hong Kong developing and continuing to develop as a key international financial center. I mean a global international financial center with preeminence. So that is very important. And that was very very clear. We have a unique role as the most international city of China and the most Chinese city outside of the mainland. More cross-border projects expected. Yeah. I mean I think there is there is increasing. The opening up of China will continue. I want to touch on the LME the volatility that we saw on that fateful day prompting the likes of Ken Covid to say that you know it was the worst day he's had in his entire career. You endorsed the CEO Matt Chamberlain yet again and you said that you agreed with how it was managed. But having said that three investigations are ongoing right now looking at whether or not something had been done wrong. If it's proven that something wrong was done would you take personal responsibility for it. Yeah. I mean clearly it was a very difficult moment for the commodity markets and there was a lot of tension around that time and those few days. I do think that the decisions that the management of LME took the executive management took around that time were in the interests of the market as a whole. And considering that and until I mean I have to you know endorse the decisions that they've taken because they were thinking about the overall market. Is this something LME could have done that it didn't do on hindsight. A lot of the investor the reviews independent reviews that are taking place at this point we see there are things that could have done better. Of course we support evaluating the market as a whole how the market operates. What are the changes that could be done in terms of market structure. But I mean I do believe that if there's something to be done we'll do it. What can be done to regain investor confidence at this point. We have to make sure that the micro market is in a trustworthy market and that there's. Confidence in the type of investors that we have in the type of products that we are delivering and that will take some time. Because I mean there's a lot of things that are being done around that. Investigations have been done even by the Bank of England. Do you expect changes a tightening of of of any sort. As a result of that investigation. I mean the reviews that are carried out including some reviews that we are carrying out I mean are with the objective of trying to see how we can make the market better. I mean that's a key focus. How the markets have been slammed to say the least seven weeks of declines. Is that a reflection of how investors view the global economy. What's your take on it. It's interesting that we're now hearing in Davos after more than two years that we couldn't attend in person. And if I look back at the the last Davos and today I mean at that point we didn't have any Covid really. We didn't have any of the you know situations around the conflicts in Ukraine and Russia. It was a the inflationary pressures were not there at that point. So we do have a complicated global macro environment. It is very soft in terms of like the the outlook of many investors and the market is just reflecting. It's complicated for Jerome Powell tried to navigate the self lending. Do you think he can have a soft landing. I think that the inflationary pressures will continue for some time. Nicolas Sarkozy. Always good to have you with us. Thank you. Really. We made it. That was a Sea of Hong Kong exchange. Nicholas I was in there. Back to you guys. All right. Bloomberg Markets Linda. Amen in Davos with the Hong Kong Exchange CEO. Thank you so much. And of course we'll be back with us later on this hour. First though we want to take a look at some stocks moving in premarket trading here in the U.S. And really there is one story that is capturing attention this morning not necessarily merger Monday but at least merger talks. Monday Bloomberg reporting overnight that Broadcom is in talks to acquire VMware which is a cloud computing company would be part of Broadcom push to expand into that highly specialized area of software. Now according to our reporting the talks are ongoing. There's no guarantee a deal will happen. Also not sure what the offer price would be. But remember VM whereas a 40 billion dollar company. So if you assume the difficult premium that is put in place on deals like these this could be a really really large one. And you are seeing that reflected in premarket trading this morning VM where surging 18 percent in early hours trading at about 113 a share. Broadcom on the other hand is slightly lower in the free market trade down about two and a half percent. The. Kelly coming up on the program more from Davos. Dinesh Carr a State Bank of India chairman will be joining us. We'll also talk to senior Akerson Sachs so bank's CIO. That's coming up in this hour. He says the economic agenda is moving to a better and more rational place. We'll get details. This is Bloomberg. This is Bloomberg Surveillance Early Edition. I'm Anna Edwards in London with Chris. He gets out and Katie lives in New York. Matt Miller is off today. Let's get to market analysis. Noor and Ali Bloomberg Markets live editor joins us here in London. No really nice to have you with us. We talked. We started off with some sort of appetite for risk assets stocks moving higher in Europe. That's faded a little bit. Something that's been pretty consistent and has intensified has been dollar weakness this morning. Yes we got some additional lines on the euro that add to strength there. But why we'll focus on dollar weakness do you think. You know it's it's a lot of headwinds that are coming. The dollar's way definitely. We're now starting to seeing a lot of central banks playing catch up with the Fed which could potentially a pressure on the dollar because there is the narrative that perhaps the Fed has maybe you know waited too long to raise rates. You do have potentially even lifting the tariffs on China even though we're in early talks there you could add another distress or on the dollar versus the yuan. Now the euro as well you know you do have a life that's going on against the dollar which is why we're seeing some weakness. Nor talk to us a little bit about the ripple effects of that dollar weakness. When you think a weaker dollar immediately what comes to mind is higher commodities. But there are broader implications as well. Walk us through the. I think about gold courier and I think that's a really good question because there is that cross the implication here. Gold has been gaining strength you know on the on the back of a weaker dollar. I don't know if that's going to last though. I do think that gold in of itself has a stronger correlation with rates. And we've seen that that relationship and the strength of that relationship perhaps give us a better insight on what gold goes into. So if you're in the camp that thinks higher rates are up ahead than you you're probably in the same camp that thinks gold is not going to sustain this rally. Well on the subject of higher rates you also had ECB President Christine Legarde saying that negative rates will be over by the end of the third quarter. How are we seeing the market react to that. I think the market is finally saying finally. I mean we've already seen this. We've already been pricing this money markets have been pricing in higher have been betting on higher interest rates on the Bloomberg terminal. You can see this through the function W R P. It's a fantastic. It's a fantastic fantastic function. Apologies. And I think what's really interesting about this is that you've seen a bit of a bounce for the euro yields. Maybe you took it rose a little bit but the reaction hasn't been as vast. This is predominantly because markets have already been pricing this in. And finally the ECB is reacting to what the market has been seeing. I mean at this point will we be in a recession. I think that's what's on everyone's mind. And that's why you've seen stocks also fade slightly in this morning. All right. Nor Ali of Bloomberg Markets live. Thank you so much for joining us. Now keeping you up to date with news from around the world. Here's the first word. The International Monetary Fund is warning against global economic fragmentation stemming from the war in Ukraine. It says that undoing decades of integration will make the world poorer and more dangerous. IMF managing director Kristalina Gauck gave us says nations should lower trade barriers to alleviate shortages and lower prices. President Biden is seeking to reassure Americans about the current monkeypox outbreak. At a news conference in Tokyo the president said it was unlikely to cause a pandemic on the scale of the Corona virus. He said the U.S. has enough smallpox vaccine stockpiled to deal with the outbreak in Australia. The Labor Party's Anthony Albanese has been sworn in as prime minister. Albanese defeated defeated Prime Minister Scott Morrison in an election held on Saturday. He's promising swift action on climate change and greater gender equality and improved wage growth. And in New York police are searching for a man who shot and killed a Goldman Sachs employee on a subway train. Daniel Henriquez was 48 and had worked for Goldman since 2013. Goldman calls the death a senseless tragedy. An increase in assaults on New York's subway system has prompted Mayor Eric Adams to boost the number of officers on patrol. And of course and it was not so long ago that we saw the mass shooting on a subway train in Brooklyn New York. It really goes to show the challenges and not just crime in New York but also as banks to Wall Street in particular and companies across the board are pushing people to return to the office having to do so in public transport. This feeds into whether or not people really want to do that. Yeah. Adds into the rich sense of Wolf's debate. The tragic news that coming up on this program we'll get back to Davos. We'll bring you an interview with the State Bank of India chairman. This is payback. This is Bloomberg Surveillance Early Edition. Here's what you need to know. U.S. stock futures rose after the S & P 500 narrowly missed a bear market close. Still a new survey of finance professionals sees the index losing at least another 10 percent before bottoming out. President Biden said the U.S. military would intervene to defend Taiwan in any attack from China. Those comments appeared to break the longstanding U.S. policy of so-called strategic ambiguity. But then those comments were later walked back by the White House. And the devil's forum is back after a two year pandemic enforced hiatus. There are fewer Russians and fewer billionaires and no snow. But we will hear from the chairman of the State Bank of India in just a few moments time. Good morning everybody. I'm Anna Edwards in London with Chrissy Go to and Katie Lyons over in New York. Matt Miller is off today and at risk assets Christie than just losing a little of the momentum as we've gone through the first couple of hours of the European trading day. Yeah. And I can remember waking up and actually seeing stocks futures up over I think 1 1/2 percent. You have certainly seen some of that steam roll out of the markets. I think an important part of the equation is that whether this is fundamental or whether this is technical because we did as you pointed out hit that intraday bear market on Friday but we did not close in bear market territory. And that seems to be the loophole if you will on the technical basis that nevertheless you did see a bounce back just given the volatility of last week. I believe that wraps up seven weeks of losses. So once again in that context Natalie to see some green on the screen there is a fundamental driver as well. You did have President Biden reiterate member. He has made these comments before that they are considering potentially looking at some of the tariffs against China. Remember that has been a major kind of contributor to inflation in terms of import costs especially for say producers or factory owners. That's something to keep in mind. But nevertheless take a look at the cross asset picture here because the 10 year yield at two eighty two basis points up about four basis points here from the Friday session. Also keep in mind that the dollar actually weaker to the tune of seven tenths of 1 percent. Compare that to the yield picture. You're seeing that divergence which we usually don't see. That tells you that one of the two is likely going to snap back. Also keep an eye on bitcoin of 1 1/2 percent Kaylie. All right. Kristie well I also am keeping an eye on some maybe potential deal news today or at least reports of deal talks between Broadcom and VM where of course Broadcom the big chip maker IBM where the cloud computing company it would be a part of Broadcom push into a specialized software. As a result you are seeing VM. We're surging in early hours. It's up about 19 percent trading around one hundred fourteen dollars a share. Remember this is a company worth about 40 billion dollars in market valuation. So interesting to see if this deal does go through which according to our reporting is no guarantee what kind of premium will be put on the stock. Broadcom on the other hand down about three point four percent in early hours trading. And of course another story we continue to focus is the monkeypox outbreak here in the U.S. President Biden says don't worry it won't be a pandemic on the scale of Covid-19. But nonetheless you are still seeing some areas of the market reacting to it specifically those stocks of companies that make therapies to combat viral outbreaks. That includes SGA technologies. It's up thirty eight percent in the early hours. Trade you also have similar except by about 21 percent before the bell Leon. And of course monkeypox a topic of conversation in parts of Asia and here in Europe as well Kaylee. We are seeing those strengths to European equities not as much as we were seeing earlier. Iran is as I was just discussing with. But we are seeing them stronger this morning up by four tenths of 1 percent in aggregate. Get on the stock 600. Katie was just talking about a bit of money in the United States. Will this some of that here in Europe as well. This is Siemens Good MSA which is a wind turbine business based in Spain. And that big shareholder which is Siemens Energy has decided it wants to buy the parts of the business it does not already own. And as a result we see the stock up by more than 6 percent. That was something we certainly were reporting on is likely to happen last week here at Bloomberg. Here's the euro up by 1 percent. We're going to hear from Christine Lagarde. She'll speak to Bloomberg exclusively tomorrow. And in the run up to that she's been saying today that she sees the end of negative interest rates by September. So we're at minus 50 right now from the ECB. So that means what 25 in July. Twenty five again in September. Takes us up to zero. And the euro likes that up by as I say over 1 percent. Keep an eye on the pound as well because this is a broad dollar weakness story as we were discussing with our colleague Norah Lally from the Monkeys Life blog as well. Keep it on the politics here in the U.K. on the pound as well Kelly. All right Anna. Well let's return to the stock story here in the U.S. because of course as we mentioned the S & P 500 on Friday narrowly avoiding plunging into a bear market on a closing basis. But Morgan Stanley's Mike Wilson says it's too early to turn optimistic on stocks. Writing in a note today quote Equity clients are bearish. A necessary condition for a sustainable low but an insufficient one. Given the risk to growth are just emerging it is too early to get bullish. Joining us now is Stephen Yacoub since DAX Bank CIO. Stephen what do you think. How bullish or bearish are you feeling this morning. Well I have to say based position I've had since November with the Fed pivot that we saw and that is that you need to be. Hence if we are nowhere close to a panic in the market we are starting to see some hedge fund fail. We're starting to see momentum going out and clear. The market is impacted by this fact that a lot of the constituents are off to the High Flyers stock has been basically a zero coupon. Thirty five year bond. So the convexity is now biting them. And as Mr. Wilson says you know basically we haven't even started the quantitative tightening that will happen in June. So for me it's more of the same. The script has been the same for the last seven weeks but in essence this is all about the major central banks. It's now kind of indicating that we will see no liquidity provision and inflation remains priority 1 2 3. And all the way through to number 50 priority. Well as you say Stephen you've held these views for quite some time. And I was looking back to one of your previous at times that you joined us on this program when you would just put out your ten outrageous predictions for 2022 at the tail end of 2021. Among them the plan to end fossil fuels gets a raincheck. Of course we've seen a pivot back to fossil fuels. Given the war in Ukraine another one on here U.S. inflation reaches above 15 percent on a wage price spiral. Of course we're not at 15 yet but we do have an eleven handle on PPA. Stephen are you surprised about how more right than wrong you were on some of these things. Well of course as you as you know they are called outrageous prediction for a reason and the 15 percent is entirely picked because that was the peak back in the 1980s. But I'm not surprised at the underlying inflation. What I'm surprised about is that the market continued to feel that it needed to trade peak inflation at all times. Any show I go on any interview I do any clients I talk to the first question is is this peak inflation. And I have to tell them. Well when the fundamental change of why we have inflation then inflation will be we have done absolutely nothing in that energy transmission. We have done absolutely nothing in terms of doing anything on the monetary tightening and above everything else. We are now moving into a phase where we have to pay the price for the excess liquidity that's been in the system. OK. And yet you say the economic agenda is moving to a better and more rational place. Is that because I mean that's because you like that we are heading towards a slightly maybe higher interest rate environment will give us the context between that. What looks so bright to you. Exactly. And so my my premise is that when you have negative real rates it's really equal to that. You have no productivity go into the future. So when you have an increase in price discovery from the market itself. And on top of that that you start to move into positive real rate or even just moving the needle to zero. But you then having is that the market needs to find a higher relative return on the capital invested. The freebie is the ability to just be rent cheers and and and basically taking rental income is disappearing. And we need to move an agenda which is entirely built on productivity. So what we as market players tends to forget is that at the end of the day the only thing that keeps an economy growing is productivity. Productivity can almost entirely only happen when you have a positive real yield because a negative real real real yield is a basically saying to you something like the green transformation can only happen if you subsidize by keeping interest rates too low. So yes and a very positive that this is bringing the the rooster home to to do that right now. Okay. So you think that that's positive then in terms of what it means for productivity Stephen. What about what we're going to see on the fiscal side. Well we've seen some governments in Europe talking about more defense spending as a result of war in Europe. How substantial is that going to be. How substantial a driver is that for Europe's economy. It's big. And I think if anyone wants to draw and look at productivity just to look at what happened to European productivity since the Berlin Wall came down in 89 of course the Berlin Wall also was the peak of military spending because of the former so-called Cold War. And what we've done over the past many decades is that we have kept military spending very low. But what we forget there of course is that the military expenditure expenditure and fiscal spending actually very often have a very private spillover effect. It's the private sector that drives this is the private sector that benefits from some of the innovation that happens in that space. And the most important military expenditure you can have right now is telecommunication the ability to navigate the Internet and certainly also communication overall. So yes Anna I actually have one of the few people who thinks that defense is not only ESG complying because he maintains our constitutional right and our democracy but is also from a capital allocation perspective. They very efficient use of capital because the private system simply cannot do research and development. They get too over focused on buybacks and paying out dividends. You mentioned your time on defense here but defense is not the only major export of say even the United States. You're looking at commodities you're looking at of course technology as well. I have to ask and put all this into the context of a dollar that has been strengthening. Of course today it is much much weaker. But I'm curious about the ripple effects of the dollar as we talk about this inflationary period. And as our former guests talked about other central banks finally catching up to what the Federal Reserve is doing. So you know if you only had one indicator for the liquidity in the world it would be the strength of the dollar. So right now we've just coming off the peak high dollar which indicate that the liquidity is tightening globally. Well then translate into the emerging market and non U.S. is that the euro dollar markets. So the dollar that is traded outside the U.S. gets too expensive relatively. It slows like the global demand and then ultimately it drives the U.S. dollar down because the only way this system can reset is a lower dollar. So sometime in the next three to six months we will probably reach the peak rate in terms of interest rate. And then the only thing left in terms of attracting capital to the U.S. is a weaker dollar. So this is probably not the ninth inning but it's certainly the seventh on the eighth inning we're in in terms of the dollar strength simply because we are reaching and getting very close to what is the terminal rate that the U.S. economy sustained with the amount of debt has right now. So we're in the seventh eighth inning. We're not yet at. Does that mean that there might be broader implications for example a sort of debt crisis when it comes to a lot of these emerging markets. The IMF director Christine Elina Gore gave it has notably warned about a sovereign debt crisis of some sort among these emerging market countries. We've seen it with Sri Lanka for example. Do you see something like that before you start to see that pullback in the dollar. Yeah. And we are already seeing it. As you indicate Sri Lanka has had to had to default. And we have Pakistan Egypt and a number of other countries already applying for additional help that are being issued from the IMF which is on the record. So yes it is happening. And we also have the food prices in common. And don't forget the amount of people who live in poverty right now is increasing almost daily by millions of people due to these inflated food prices but also the energy prices that sits very central to why the food prices are higher. So yes we unfortunately have to move to sort of the final stage the panic the reset off the system before we move to what we just discussed in terms of productivity and a market that could see a bottom coming up steam Kristie. There was just talking about the emerging markets where regionally do you want to be allocated right now. I like China. I think China is of course seems to be extended to lock down. But anyone who observes China will know that when President Xi walks out on the stage in September October they will start one of the biggest fiscal impulses in human history simply because they have lost not only the first quarter but also now to second terms in growth. And the only way a system like the Chinese can reengineer itself is to spend fiscally. So there is another another goal similar to what we saw in seven and eight that will catapult of course commodity prices high globally. And it will certainly make sure that inflation stays way way way above the level that Fed and the ECB is still dreaming hoping and wanting to see next year. OK. Seeing what will happen then if China does spend fiscally as you suggest but that policy kind of works in the opposite direction from the Covid zero policy which is which is obviously weighing on the Chinese economy. So will the Chinese economy needs help in many shapes and form at the center of the Chinese system. At center of any plant system sits the central since the banking system. So the banking system will need to get a higher margin. This banking system needs to be lending out and as such that will elevate and float all boats in his system. But don't forget Anna and you know this. Ditch the Chinese equity market is not an equity market to us. We did a multitude of different ages in it. It's really a lack of a better word. It's a speculative one dimensional Margaret where the Chinese authority tells you that a market has to reach a bottom has reached a bottom and then starts to move up. And I think if you look on a relative basis the technology names in China is now very very cheap. And most of the names in China it's down more than 50 percent some from a value perspective in terms of the emerging market exposure. One that Chinese deputy my my number one uptake in terms of doing the risk allocation here. But again as you know Anna I'm a very defensive mode right now and I continue to play a multi asset strategy which has long volatility long the deep convexity that that is ongoing in terms of the interest rate right now. All right. Stephen Jackson Saxon Bank CIO thank you so much for joining us and giving us some of your insight this morning. Let's turn our eyes now back to Davos Switzerland. Ukrainian President Vladimir Zelinsky is currently delivering a virtual address at the World Economic Forum. He is urging more sanctions against Russia including specifically Russian I.T. companies and reiterating his call for sanctions against Russian oil. He also invited companies that leave Russia to Ukraine and says that Ukraine needs more weapons and financing. It looks like Warner's Lynskey has just wrapped up his remarks. But of course we will continue to monitor all of the happenings and interviews at that World Economic Forum in Davos Switzerland. Throughout the day this is Bloomberg Quicktake. What is your dream. How do you see Ukraine in. What is your wish for Crane. Oh. But they never know. Thank you for the school's tennis club make it for a stay. Complex. Yeah it's simple and ponder philosophical on that specific alarm. Yeah but it's and that's just a different kind of mean less whole grain being the president of the states will be already be thinking zany. What is the Ukraine of today. Because every morning Scarlet Fu for me with getting the number of people killed the most and I've been on runs for peace. Unfortunately we do John Micklethwait according to their statistics and he said. We've got stats 82 7. She said it was not just because victims like to take place. This is Bloomberg Surveillance Early Edition. You're looking live at the principal room coming up later today. Intel CEO Pat Carlson. That's at ten thirty a.m. in New York. Three thirty p.m. in London. This is Bloomberg. This is Bloomberg Surveillance Early Edition. I'm Anna Edwards in London with Chrissie Gupta and Kelly Lyons over in New York. Now back to Davos where executives politicians and central bankers are all meeting over the next four days. At the first in-person World Economic Forum in two years. Credit Suisse CEO I spoke to Bloomberg's Francine Lacqua about the global economy. With the high inflation shocks that we see now in certain areas of this world it's very clear that people are somewhat insecure there in risk off mode. But our house you are still is that there won't be a recession either this year or next year there will be a slowdown. I think our house to global GDP is three point three percent for this year and two point nine for next year. They have come down. And if you look at certain markets whether it's equity markets or high yield markets they have clearly come under pressure. Under pressure. They've been a bit crazy here. Well they're basically been pretty pretty quiet. Let's put it this way. But our our clients they don't panic all day. They are looking at how things develop and they stay engaged. And that's very important for our wealth natural clients and those clients with relationship and action that they stay in front of the clients. So that's what I'm really focused on. So it's ISE said that there's no you're not seeing any outflows are still fully invested. Well what we see like many of our competitors is some deleveraging as part of your assets the management going down certain. Prices going down. That's something averaging especially in Asia and overstating what's happening in Russia and in some other parts that have gone down. But no no outflows as such. Does it actually hurt your ability to collect some of the fees in certain parts of the markets with some of your wealthy clients or not so much. Well if you look at our three revenue streams so net interest has come under pressure because we have lower lending volumes. But now with interest rates going up that should be a positive elements going forward. Recurring revenues have also come down because of lower volumes and transactional revenues actually have started to stabilize. Now volatility sometimes is a good thing for transactional revenue. So I have started to pick up but it's clear that 2022 will be will be at lower levels than last year. How was the Credit Suisse CEO Thomas Goldstein speaking to Bloomberg's Francine Lacqua in Davos. It was delayed so no snow because at the time of year. But you still get helicopters. Apologies for the air for the noise of the helicopters at the start of that interview. More Davos when we return. This is big back. This is Bloomberg Surveillance Early Edition. I'm creating Gupta with Kailey Leinz in New York at Anna Edwards in London Matt Miller is off today and and I usually get about this time we go to Tom Keene with his single best char. But given that he is on the not so snowy hills of Davos I thought I'd take over and throw in my chart of the day here. And I really want to put that bear market that we're looking at in context when it comes to the S & P 500 for our radio audience. Stick with me. Here we're looking at the peak to trough draw down so far that we've seen in the S & P 500. So we know that it hit an intraday bear market territory yesterday. But if you go all the way back to 1929 and put this into some perspective the biggest sell off when it comes to recessions when it comes to inflation stagflation have actually been 40 percent drops. Look at it in 1972 in 2001 even in 2008. And you aren't seeing that this current drop looks a little bit more like 1987 Black Monday panic or 1962 the Kennedy slide ending with the Cuban Missile Crisis. So Anna I don't want to say this isn't that bad because it is there is some extreme selling pressure. But put this into history and it looks like this is more of one of the more muted times in history we're seeing that bear market. Yeah. And I don't know if that comes as a comfort for those who along with the Monkees or whether it makes people think oh there's more to come and we'll watch for how much we can we get from here and quit thinking about that. There are plenty of events taking place to ISE releases speakers this week that could act as catalysts in either direction for these Monkees. We have the Feds Bostic and Jewel speaking the Bank of England England's Bailey speaking today and intend to the data. We get PMI ISE from a whole host of countries tomorrow which is going to be really important as we've seen this pivoting market thinking away from of course the focus on inflation. We won't lose sight of that but also adding in a focus on growth. Yeah there's so many other cross asset pictures to look at to the commodity story the dollar story even the bonds Troy all of which are ultimately going to reflect in what happens to the stock market. Yeah absolutely. And later on this week we'll get to of course a lot of retail a lot of retailers reporting their results and we all remember what we learned about the strength or lack of strength of the US retail customer last week. So certainly a big focus on retail names once again. That is it for EARLY EDITION. Surveillance is up ahead. Lots more coming to you from the slopes of Davos. That was speaking to Joseph Stiglitz amongst others. This is Glenn Beck.

No schedule data available.

'Bloomberg Surveillance: Early Edition' Full (05/23/22)

Bloomberg Surveillance: Early Edition, live from London and New York. Francine Lacqua, Anna Edwards, Matt Miller, and Kailey Leinz deliver the latest news and analysis on the markets with leaders in global finance and economics. François-Philippe Champagne, Canada's Minister for Innovation, says energy security is top of the agenda. Bill Winters, Standard Chartered CEO, says lower economic growth is inevitable. Nicolas Aguzin, Hong Kong Exchange CEO, says eventually the market will come back. (Source: Bloomberg)

Bloomberg Markets
"Bloomberg Markets" is focused on bringing you the most important global business and breaking markets news and information as it happens.
More episodes and clips