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00:00I believe that gradualism is actually the way to go. As long as inflation expectations are well anchored. The third point is are they spending. And that's what's interesting in the first two weeks of May. The consumer spent 10 percent more than they did last May and that's over top of the payments that went out to pay taxes. So the consumer spending and the people say well it's inflation or eight percent more transactions in the last few quarters. We had our fair share of volatility. We actually don't see claims but we know fears of what could happen. And of course is all this is coming at a moment in which the economic outlook is not so rosy. This is Bloomberg Surveillance early edition with Francine Lacqua. Well good morning everyone and welcome to Bloomberg Surveillance Early Edition on this Wednesday the 25th of May and Francine Lacqua here in Davos. It's day three and here's what's coming up on today's program. Hawks in Frankfurt more used to be governing council members say half point hikes should be on the table. But President Lagarde tells me there's no rush. I believe that gradualism is actually the way to go. As long as inflation expectations are well anchored. Now if we were in a situation where we anticipate d anchoring or if if we had a surge in demand that's a different story. Inflation out of control and investors losing faith in the Fed's ability to fix it according to Bill Ackman we get Fed minutes tonight. And don't miss our conversations with Edina Friedman president and chief executive officer of NASDAQ Annmarie Horden is that the chairman of Standard Chartered and Julie Sweet the chief executive of Accenture. All of this coming up from Davos. Now first things first. So let's check on the markets because there is quite a lot going on when it comes to the markets. Yesterday was a big day for technology today. A big day also for some of the currency moves that we're seeing out there. Now stocks are rising. The rate path still the number one thing that investors want to know about yields and treasury yields actually stabilizing after a sharp retreat. As markets now assessing the outlook of course for the Federal Reserve's monetary tightening dollar still pushing higher. Now the European stocks you can see utilities miners and energy shares actually leading gains. U.S. futures also advancing overnight after stocks fell. SNAP profit warning pummeled companies that rely on digital advertising today. It does seem like we have a bit more we think famous last words a bit more of a smoother transition. So we look for that. And then if you look at the European map of course the mood out there not only talk about inflation but the energy reliance to Russia. We had three great conversations this morning about officials from the commission that were talking about the oil embargo. The last one in point was Commissioner Genteel only saying we're just moments away or at least a week away from possible oil embargo against Russia. He thinks they'll be able to to bring Hungary back into the fold. You can see we're seeing a screen across a lot of these European stocks. Now one of the key topics of course dominating this year's Davos is the outlook for a global recession. This as a Covid recovery war in Europe and the energy crisis put pressure on the business and political elite attending the euro summit. For the moment we are not seeing a recession in the euro area but clearly the economy is starting to weaken really. To me it comes down to inflation and supply shocks demand shocks all together mixed in one. Of course it is unclear at this moment in time we may see prices even going call yet. Be much more volatile and becoming a major risk for recession for the global economy. I worry about a recession. Eurozone and European Union will not go into recession. There will be a slowdown. But you know labor markets are so tight there is now an increased risk of recession. But we do not anticipate a global recession. Now we're joined by Donna Friedman of course president and chief executive officer of NASDAQ. Dana great to have you here. I mean there's so much to talk about market volatility and then we'll talk about NASDAQ and some of the things that you're putting in place there. But are you expecting a lot more volatility. How is it like living it. You know from the inside. I think right now it's really difficult as an investor to figure out what is the future. You know what does it look like. Right. And if you think about the stock market it's really about investors predicting the future earnings potential and capabilities of companies with all of the extra realities that you just mentioned in terms of supply chain shocks still from Covid as well as the geopolitical risks as well as inflation. I think it really makes it difficult for investors to make conviction buying decisions. It's a risk off environment as a result. And therefore I think you are seeing a lot of liquidity. So news ends up having an outsized effect on investor sentiment when they don't have a kind of conviction in the future. So I think that that's really what's playing out. And I think that will continue for a while while certainly at till the end of this year could it be actually a lot longer. Well I think honestly it has to do with whether or not we can see that the Fed work and work that the Fed is doing is going to have impact positive impact on inflation whether we're gonna see any sort of progress on the geopolitical challenges in Ukraine and whether or not we're starting to see some easing of those supply chain challenges. If you see any of those as positive signals I think that will have a calming effect on markets. They are as I said investors will have a better ability to predict the future. They'll have a better ability to put their conviction behind certain companies and deploy their capital again. So I'm hopeful and I'm an eternal optimist honestly but I'm hopeful that as as the year progresses some of those unknown to be more known and we'll have a little bit more calm. So how does NASDAQ in this environment actually sustain revenue growth. You know again it's high volatility post pandemic world. Yeah I thought today NASDAQ actually is a broad technology company that serves the capital market. So about 70 percent of our revenue is recurring revenue from software and analytics capabilities that we provide to a really broad selection of companies. So whether it's corporate clients investment clients exchanges and broker dealers so we have thousands and thousands of clients who use our technology solutions for antique financial crime investment analytics indexes as well as the markets. And as a result we're kind of I would say if I look at ourselves is a little bit more of an all weather company. Volatility in markets creates a lot of trading but of course it takes take some of the you know the new IPO is are really year. Taking a break for a while. At the same time our software services are in many respects more important than ever. Banks ability to manage crime is crime management and and root out the sanctions and other things that they have to comply with. That is a great opportunity for our technology business. Seven difficult. I mean going through all the sanctions we actually put a new sanction screening module in place for all of our banks. And because we are a cloud based software solution we can deploy that to all of our clients simultaneously. So we are we really try to make sure that we are very nimble and being able to manage and help the banks manage through those challenges. And I think at the same time our investment analytics business we provide the ability for acid owners to figure out where they want to ask and allocate their assets. Well right now it's a very dynamic environment. So they use our tools more than ever frankly to make different asset allocation decisions in this environment. When do you expect the IPO market to be back. Yeah. We have about two hundred and seventy companies that are on file wanting to come to NASDAQ from what is done. Mainly Americans rolled merrily primarily the United States. But we do have companies that list from all over the world and NASDAQ. I think that the fact is though that as I said it's a risk off environment for investors. So they need to feel like if they're going to come out and deploy capital that the investors are going to be ready to invest in them. And that is not the enviroment we're in right now. So I think that you know again if we can see some of these unknowns become more known in particular in the United States that if we see some easing of inflation I think that will actually help give investors a bit more confidence and therefore hopefully we'll see the windows open in the second half of the year. But it's hard to tell. So really they're worried about monetary policy adjustment or monetary policy is a mistake. What I would say it has more to do with will the monetary policy changes have the effect on inflation. We're looking for and we'll supply chain challenges become is eased over time. Hasn't the market's view improved. How can Mark Crumpton function in terms of the way. You know I actually have to say I think that if I look at just purely from an equities and options world I think that we do actually feel like the markets have been incredibly resilient through a lot of shocks like whether it's the Covid. Crisis or you know that all of that you know frankly the opportunities that came in the markets in the last couple of years or the liquidity challenges we're having now in terms of volatility. I think that the markets have behaved well. However it is always important to realize that it's a it's a forever challenge to make it set. The markets really operate in an optimal way. Is there anything that you would change on trade or data usage. Well I think has more to do with there's some. I think that there's some work that the FCC is doing to look at retail investment. Institutional investment the markets. How can we optimize market structure. How can we strengthen the national best bid and offer which is the displayed price. How can we make it to market structure more. It really works for all investors and brings more liquidity onto exchanges. That's I think you're going to see also play out the second half of the year. I mean there's been so much regulation or so many regulation papers. Is it almost too much. Is it difficult to actually wade through what what's really needed. I think that the S.E.C. is very busy but they're busy across a spectrum of different areas of the market within the equities markets in the options markets. I think that they're still evaluating how they how they might want to evaluate some know proposed new new improvements. And we're we're engaged with them as well as with our market participants to understand what works what doesn't. The big thing you have to worry about with regulation is the law of unintended consequences. Yes. So as you're putting regulation in place let's really go through a concentrated period. Let's really understand what might happen. And I think that. But I also believe that there's it's always opportunity for improvement in markets. Yeah. And using that's happening. Is there a danger to the regulation could go too quickly. And so you know put together haphazardly. I actually think that the U.S. system doesn't is really built for that not to happen. And I say that because of the common period. Right. If the FCC proposes something the industry comments and then they do have to take that into consideration and do a lot of work on the back of that to turn a proposal into a rule. And at the same time you know we obviously don't always agree with those rules. And in some cases we have challenged whether or not they've done their their work. I think that in this particular case they're still not consultative period. I think last year we also announced a deal I guess with the Amazon Web Services to move things to the cloud. How's that going. It's going really well. Actually what we've done is we've partnered with the eight of us to bring an edge cloud compute system into the data centers that we operate in the United States. And we work with them on a hyper low latency compute system called don't code. Develop that with them. So we're going to be moving our first options market into a cloud environment in Carter out in the latter half of this year. And it's going I saw on plan. It's going really well. All right. Wonderful. Thank you so much. Thank you. And our devil's set. That was Dena Friedman the president's chief executive officer of NASDAQ. Now coming up despite inflation fears consumer spending continues to hold up. That's the view from the Bank of America chief executive Brian Moynihan. We'll have more from that interview next. And this is Bloomberg. Economics finance politics this is Bloomberg Surveillance early edition on Francine Lacqua here in Davos. Now the Bank of the boss of Bank of America says U.S. consumers are holding up well against inflation increasing their spending and paying down their credit card balances. The chief executive Brian Moynihan spoke with Bloomberg's Tom Keene and Lisa Abramowicz. The account balances the consumer pre pandemic to now are multiples bigger. So a person had to three thousand average collective balance in accounts now has never been about 40 hundred. Actually if you wanted two thousand what about fourteen hundred is now almost 4000 bucks. A person had two to five thousand but about thirty five hundred on average. It now has thirteen thousand dollars. So just step back and think about it. Grew 5 percent in the month of April from March. So what you're seeing is consumers have more money in their accounts. The idea that they spent the pandemic money that came in January March last year just not true. Now the second question is they pay down their credit card balances from 100 million. We were down to 70 of its backup 80 lots of Barak capacity. The third point is are they spending. And that's what's interesting. In the first two weeks of May the consumer spent 10 percent more than they did last May. That's over top of the payments that went out to pay taxes. So the consumer spending. And people say well it's inflation you're 8 percent more transactions. So he doesn't just I just I don't want to interrupt because we're doing extends to 45 minutes. This is the real Moynihan guys. This is the bank nerd giving us operational stuff. This actually goes to the heart of a lot of the economic questions of the moment. Right. Because everyone's talking recession here and stagflation. We were speaking with Bob Prince of Bridgewater. What you're saying does not scream of stagflation a recession. So that's this. That's why I said this. We've talked earlier. This will make the job of the Fed's job hard and easy. Hard. Hard. Easy in that. You have consumers in good shape. You're not over leveraged. The home values went up. But frankly that LTV in our portfolios in the 50s. So to give you a sense so you know that the prices went up and people in borrowed out and stuff. So that's the good news. The bad news is what's going to slow him down. So if you look at TSA travel Sunday it was over top of 19 by 10 percent. That's a number of people went through the airports. I saw them down. Yes. So what's good slowing down. Nothing right now. And so the question is you know so the Fed has this tip at this very difficult thing of getting to a slowdown without slowing down too much. And then second thing is the unemployment rate is really low. And so if you look at our Michael Barr. That's a great economist. Yeah he is. He's got he's got you know he's got this year you know mid to high to you know he's got next year you know mid ones. But it's slowing down the next year. If you look at the quarters it's slowing down. So the idea is the Fed's the Fed's work slows you down. Now the problem is he still has unemployment 3 and 4 percent. You're saying wait. DAX kits you can't slow consumer down is is working because they have money spent. So that's a difficulty I believe. You know I believe it's I believe that is going to be able to manage this flow but it's going to be tricky execution in those things outside to control the pandemic resurgence. Is something going different. The more that America's much different than Europe and other places because this dynamic of the vibrancy the U.S. consumer. Well that was Bank of America chief executive officer Brian Moynihan. Now let's get straight to the Bloomberg first word used in London. Is Laura right. Hi Laura. Good morning Francine. President Biden has called for new restrictions on firearms after a gunman killed at least 19 children and two adults at a Texas elementary school. Police reportedly killed the attacker at the scene. He's been identified as an 18 year old man who was armed with a handgun and possibly a rifle. As a nation we are DAX when in God's name we're going to stand up to the gun lobby. Pfizer says it will sell its entire portfolio of brand name drugs at cost price and as many as forty five lower income countries. The initiative will start in five African nations with drugs for cancer rare illnesses inflammatory conditions and infectious diseases. The plan is one of the most comprehensive drug access programs ever announced by a large pharma company. U.S. banks and individuals have been barred from accepting bond payments from Russia's government. That's after the Treasury Department letter came. Russian sanctions waiver expire at midnight New York time pushing Moscow closer to a potential default. India is restricting sugar exports as a precautionary measure to safeguard food supplies. Capping them at 10 million tonnes in the year to September. After Brazil India was the world's largest sugar exporter last year. The move adds to a growing list of restrictions on free trade in recent days including Malaysian palm oil and Indonesian chicken. Global news 24 hours a day on air and ISE Bloomberg Quicktake powered by more than twenty seven hundred journalists and analysts in more than 120 countries. This is Bloomberg. Francine thank you so much. Laura. Now we're live coming up here back live here at the World Economic Forum in Davos. We'll be joined by the Standard Chartered chairman who's even yells. That's just a few moments. That's a conversation of course on banking. It's a conversation on recession and inflation. Don't miss that. Conversation is up next. And this is Bloomberg. We're on the cusp of it the way we look at stagflation is in terms of how it affects markets and the way it affects markets is if the inflation rate is higher than discounted and the growth rate is lower than discounted. And we're in a situation right now where there's a very low inflation rate discount and therefore it's easier easy to be above that. And we've got a high growth rate discounted. Therefore it's easy to be below that. So relative to what's discounted we could very easily be into this very quickly. Well that was Bridgewater about Prince talking to us about stagflation. Now the UK government. In other news football news. The U.K. government has approved the sale of Chelsea Football Club to American investor Todd Boulis. Now brings a close to Russian billionaire Roman Abramovich as your 20 year ownership of the football club. Well joining us now is Bloomberg's David Hellyer. David I know this is very close to my heart because I'm a Chelsea supporter. What does this actually mean for the best club on Earth. The hate mail I get and yeah I mean it's great news for Chelsea. It brings an end to three months of you know crushing uncertainty for the football club. So why are American investors actually so interested in the Premier League and American Sea Premier League football as a globally expansive and much more TV revenue than any other any other league in the football world. And and the valuations are all they you know they look quite chunky. They're on something like four to five times revenues whereas an American franchise could be eight to ten times to buy it. And there's very few if for sale. Yes. Sure. How. I mean is a price too high. What's your take on this David. You've been following this right from the very beginning. I actually think the price is about right. I mean that the price for the shares in Chelsea it is 2.5 billion. And that that is I mean football benchmark which is the rep's bill. And you know financial analysts has estimated that Chelsea is worth about two point two billion euros. And there's always going to be a premium involved when you break a club like this. And the 4.5 billion figure includes one point seventy five billion of investment in the team going forward. So it's really the 2.5 we should look at. All right David thanks so much. David Hillier there who covers everything football and sports for us at Bloomberg. And of course I've had many scoops on Chelsea Football Club. Now let's get straight to Bloomberg Business Flash. Here's Laura Heller. Hi Francine. Glencore has admitted to more than a decade of bribery and market manipulation. The Swiss commodity trader will pay about one and a half billion dollars to settle probes in the US UK and Brazil. Glencore units have agreed to plead guilty to charges including bribery corruption and price manipulation. New Zealand's central bank has raised rates by half a percentage point. For a second straight meeting the RBA NZ lifted the official cash rate from one point five to two percent. As expected by economists the bank also raised its forecast for rates to peak up close to 4 percent in 2023 as it battles inflation. Bank of America is boosting pay for tens of thousands of US employees that earn less than one hundred thousand dollars a year. Base salaries will climb as much as 7 percent for workers who have been with the funds since 2021 or earlier. The size of the raises which start next month will depend on time spent at the company. That's the Bloomberg Businessweek. Francine. Thank you so much Laura. Now coming up we're live back at the World Economic Forum this week. Of course it's been busy. Three days will bring you great interviews. We'll bring you everything you want to know about inflation banking. We'll be joined by the Standard Chartered chairman. Was it. So we that conversation. This is Bloomberg. Potts in Frankfurt. More ECB Governing Council members say half point hikes should be on the table. But President Christine Lagarde told me yesterday there is no rush. I believe that gradualism is actually the way to go. As long as inflation expectations are well anchored. If we were in a situation where we anticipate d anchoring or if if we had a surge in demand that's a different story. Inflation is out of control. Investors are losing faith in the Fed's ability to fix it. That's according to Bill Ackman. We get Fed minutes tonight and dominate our conversation with the chairman of Standard Chartered. Julie Sweet the chief executive of Accenture. Those are coming up shortly from Davos. So good morning everyone and welcome to Bloomberg Surveillance early edition of Francine Lacqua here in Davos. Day three it's certainly not dull. We've had two huge panels and conversations on NATO and security on energy and inflation on the economy. And then today we continue also looking at Europe and possible more integration. Well joining us now to put all of these pieces together and to talk about the cost of living and of course the crises that we will face because of the energy transition and the war in Ukraine is Standard Chartered chairman. His was a veneer. Mr. Daniels as always thank you so much for coming on. And you know what the biggest concern you have right now because it seems there are concerns from left right and center. And there's just not really a glimmer of hope apart from maybe maybe you know countries coming together. What do you worry about the most. Well I think I think that what I worry is about the accumulation of different critical issues crises not only for the global economy but they'll. John of course we have the macro crisis with his stagflation. We have the energy crisis. We have the food crisis coming in. We have the confidence crisis after the global security order has been shaken. We have the crises in globalization because they are now there is no further fragmentation in the global order of trade and capital flows. And there are also some cracks in global governance because the West is united. But the world is divided. I mean this could be a perfect storm the way it is. It is a bit of a perfect storm. And I think we've had big crises in the past. But coming from so different dimensions this may be quite unique. So is there a danger that politicians and policymakers get distracted and miss the big picture of taking care of the ones that have the least. Well I hope not. But when one focuses on its own domestic priorities it may be that there is a lack of international action. I think that we have seen positive signs though in the way that you know Europe and the United States and other Western economies have come together in these in this situation. But I think that there are many other issues where we need more working together rather more dispersion. And I'm particularly worried about further fractures in globalization. I think I think that's that's something that worries me a lot. So you see supply chains actually moving. So people reestablishing and how much inflation is now. Well you know supply chains are moving from jazzing time to just in case meaning they do do not only have efficiency considerations but also resilience considerations. That that's something which is likely to lead to higher prices. And I think they worry even more about the rationing in their own sharing because this is something which runs contrary to the logic of of a global economy. And I can understand that from some political points of view from security point of view. But I think the world would be much better served if one tries to get diversification of global supply chains in order to have the resilience that the real tick. But what needs to happen for that to actually continue that way. Because we're also seeing you know more than a fracturing. It's really almost a world split into right now. I think there are things that need to happen from the public sector in the private sector. I think the public sector should not put in place policies that actually Vincent evade the reshuffling. It may be okay for a couple of strategic sectors but I'd like semiconductors. Semiconductors would be one one one one one case. But I think this is something that should not go across the board because I think it's back to protectionism. And I think the private sector can do a lot also in order to make sure that supply chains become more secure more transparent more resilient anything that they digitalization for example of trade in global supply chains and making these global supply chains have more and more you know sustainable is something that will grow in the positive direction. We're going to have the WTO. Yes. Giving them industrial confidence. And I think that is an area where policy should be discussed. What's the role of banks in this crisis. Is there anything that actually your bank and other banks can do to alleviate the crisis. Well yes I think that fortunately in this crisis banks were part of the solution rather than part of a problem. And we had been very close to our clients trying to hold them clients in both in emerging markets and developing economies in advanced economies. And for example we had been helping claims to carry out the diversification of their supply chains in terms of loans for international corridors. And to give you an example from northern Asia into southern Asia in the first quarter of the year our income come from that corridor has gone up by 35 percent. So this is something which is good for our clients we're helping them navigate these difficult circumstances. And there is a business opportunity. This is through loans or is it what kind of support can you give for for the economic transition or is it actually helping just with finding the funds to be able that you know that they can electrify their economies and businesses. Well we can finance the capital flows which are needed and a reallocation of of production facilities which are needed to make global supply chains more resilient for example. But beyond that we are taking a very strong stand on resetting globalization and working with many partners for example to improve the access over small and medium sized enterprises to general global trade by providing them with the services that they need with trade financing that they need. And I think again the digitalization of trade is something that improves access of small and medium sized enterprises to global trade. Do you think China wants globalization. I think China has benefited enormously from globalization. I think the world has benefited enormously from globalization. I think that they are to come to say see it in the world. Those who want to do away with globalization and those want to affect globalization to make it more inclusive more sustainable more resilient than the charter as a global trade bank is clearly on the second camp. And I hope that reason prevails over short term political considerations. Thank you so much as always for joining us. That was the Standard Chartered chairman was vinyls. Now we're also just getting some breaking news out of Prudential. They have a new chief executive. I know what one. He is now group chief executive. We'll see what it means with the sharp rise. But for the moment it's pretty much expected. I mean we knew that actually the currency exactly. Was going to step down. And now we just have the nomination of someone to replace him. Coming up don't miss our conversation with Julie Sweet chief executive officer of Accenture live at the World Economic Forum in Davos. That's next. And this is Bloomberg Daybreak. Economics finance politics. This is Bloomberg Surveillance Early Edition and Francine Lacqua here in Davos. Now we're now joined by Julie Sweet the chief executive of Accenture as we go round various industry groups trying to figure out exactly some of the challenges and what they can do. Going forward. Julie thank you for joining us. First of all my fact of the day is this is incredible. How many employees do you have. Seven hundred thousand. And thinks that. Seven hundred thousand employees. How many did you add in the last few years. Two hundred thousand. I mean that's just incredible because there was so much demand. There's been so much demand. And you know the one constant right now despite the backdrop of the economy is that I.T. spending is core to the solutions of the day whether it's you know cost pressures because of inflation or the need to figure out new growth because of the you know the problems in the supply chain or how to address sustainability. I mean I speak to recruiters about the job market but you are the job market. You hire 200000 people in the last two years. Have you had to pay them a lot. Do you see inflationary wage pressures because there's people that change jobs. Absolutely. Wage inflation is real and paying market is absolutely critical. However in a tight labor market it's not all about money. That's table stakes. You know we have a philosophy. We say that when people come to Accenture they need to feel like they're not better off. And that means not just financial security and a great career opportunity but also things like mental wellness. And in fact I got my first my eight hundred leaders top 100 leaders together for the first time in two years. And the first agenda topic was not our great results or our future. It was about caring for our people and our leaders. Is this I mean does it really make a difference. We were having a conversation before about you know people resigning the great resignation. Do you think you've been able to scoop up a lot of that talent because you're focused on things that in the past were considered maybe softer. I think it's partially what you would call softer but it's really the philosophy of to win. You have to be able to access talent. And that's a lot about diversity. So we'll we'll we're already 47 percent women. We focus on diversity broadly. You have to the right talent pools 20 percent of our hiring and the entry level hiring in the U.S. will be apprenticeships. And so it's about access. And we're also a huge talent creator. So we spent a billion dollars on training our people. And so that's both great for our current employees. But it's really attractive if you're going to join if you're way too optimistic. I need to pour a bit of cold water that I'm getting. Well what's tech spending like. Well tech spending today is 5 percent of the GDP. It'll be nearly 7 percent in 2030. And despite the recessionary concerns that we're all hearing about we continue to see in the latest reports that tech spending will increase. And of course there's a reason for it. Right. Supply chain. What's the answer to the supply chain. It goes back to tech spending. We're working with a company today who has a lot of supply chain shocks and we built an analytics platform. So they have early warnings around you know their supply chain and they can adjust which they didn't have pre pandemic. So it tech is really a solution to many of the issues today. There might be parts of the business or actually some sectors that say look I'm worried about inflation. I have to pay my staff more. I'm worried about the future. I'm not IPO ing I'm not doing this. And so I'll cut down on tech spending. Is there parts of an industry that do that or is it still all guns roaring ahead. What we're seeing is that is the conversation we need to cut our costs. But how do we automate more. Right. How do we cut out redundancies particularly in the supply chain. We worked with a South American oil and gas company that wanted to decrease efficiencies. And they're doing it by actually cutting energy consumption using data. So they're saving money saving energy usage and decreasing carbon ization. And that is a very common theme particularly with the energy crisis is how do I use data and technology to automate and kind of meet all of those goals sustainability and costs. It's a complex world where chief executives more worried about those data centers or cybersecurity. I think it's both really. The move to the cloud is actually more secure than on Prem and having their own data centers. And of course if you're not in the cloud you can't access data. And it's a pretty simple formula. The leading companies they need to be in the cloud. They use their data and then add a eye to differentiate. And that is the winning formula today. What are banks focusing on. So again you know there's multiple complex issues that they're dealing with. Where do they decide to put their dollars. Interestingly two big themes there. One is the continued technology transformation so that they're tapping new new markets. BBVA is a great leader in that around core banking digital sales really an amazing example of compressed transformation basically transforming. A lot. But the other theme is sustainability. And I think it's really exciting. Particular heroes of the World Economic Forum is the conversations around having a greener portfolio and a better way to run the banks. And so those two groups are coexisting. I know we talk about it but the problem is greenwashing. When you look at the data unless there's something you know a real taxonomy is it's gonna be difficult for banks to convince that they're doing the right thing across the board. Well I think though you're going to see that based on what we're seeing with clients that the whole myth around either greenwashing or that there's a tradeoff between business success and you know societal benefits is actually being blown up. Because if you use technology and embed sustainability at the same time which is what we're seeing the banks doing you can actually achieve both. And you're also seeing banks for example Barclays was talking recently about how they're giving home mortgages for better energy efficiency. Right. And so you're seeing banks help that transition as well. Talk to me about fintech. Are there are big banks going to be left behind because you had these exciting new propositions. They're more nimble. They're only mobile. And what can big banks do about it. Well you're seeing a lot of big banks start their own digital banks. And so Mizuho Bank is a great example of that in Japan. And and so what we're what we see is the financial services industry is doing what other industries is. How do you yourself become an innovator and how do you partner. Yeah. The most difficult question the world. Thank you Julie for joining us. Julie Sweet there the chief executive of Accenture with seven hundred thousand please. I'm not going to forget that. This is like my fact of the week. Coming up we'll speak to Stephen Engle said he's the chief executive officer of London. And that conversation live here at the World Economic Forum in Davos. This is Bloomberg. Economics finance politics. This is Bloomberg Surveillance Early Edition and Francine Lacqua here in Davos. Now to the war in Ukraine. And NATO's secretary general has called on Russia to lift its blockade of the Port of Odessa and to end its senseless war. Well Jens Stoltenberg was speaking alongside European leaders at a panel on EU security. It's actually the European public that looks at this and that says please for those big challenges we know that the nation state on its own cannot do it. Please do it. As European Union healthcare was not exactly a European competence. Energy isn't really as well. And defense isn't really either. The public demands from us more integration. And yes so there's more demands of how much we should do. But if we do it as an injured in an integrated where we can do it in a more efficient way and we can do more administering than I have many questions for the secretary general also from the audience. I'll get to that in a second. Just just briefly I think yes we are increasing our budgets for defense. And that is also you have to prioritize. You cannot do everything at the same time. But I think it's not only about defense. It's not only about having military at our borders. It's also about our freedom. It's about rule of law. It's about democracy is what we all stand for. So that's why I think we all feel it's important to do it but to do it in a smart way. As prime minister of Belgium it's just stated and I think also you have to look at the future. So at the same time with climate change with the importance of having a well educated population there are countries and these are the choices that you have to make. And sometimes it means raising taxes being smart. But we also have our budgetary rules and they apply to all of us in the European Union at least. Thank you. I have many questions for the secretary general. So we'll start off a bit rapid fire. This one is is it time now for naval coalition of NATO states to secure a free and open Black Sea by escorting vessels from a desert supply grain to the global south. Sir first and foremost time for President Putin to lift the blockade Odessa and order Ukrainian ports to allow grain to be exported out of Ukraine because this is really his responsibility. The war is causing the food shortages under increasing prices is not a need for EU sanctions is actually the vital consequence of the war and the Russian blockade. Then I welcome efforts by EU buy by NATO member states and others to try to find a way to get more grain out of Ukraine by rail on land and also the efforts that are addressing. Is it possible to get it out on ships. That is a difficult task. It's not an easy way forward. The best is easiest ways to end the war to drop the blockade and let the food go out. About one more thing. And this is a war in Ukraine that affects all of Europe but it has global consequences. The increasing energy prices energy and food prices affects everyone and the poorest people all the world. It just makes the whole war. The Russian invasion even more senseless. That was the NATO secretary general Younes Stoltenberg speaking at the World Economic Forum with the Belgian prime minister and the defense minister of the Netherlands. Now let's get to another conversation from Davos. The IMF first deputy managing director Peter Galpin Art says global food inflation is a major concern and it will likely continue to go up. Bloomberg's Tom Keene and Lisa Abramowicz spoke to here in Davos. Don this is a major concern for us. I mean it's not just India but if you look at food exports since the start of the war on 20 countries have put restrictions on food explicit beef wheat or be it palm oil. And many other such products and fertilizers also are in serious shot. So I we worry a lot about what's going to happen with food prices. I think it's one of those prices where there's probably more that's going to go up in the future than it was GDC. And it is a major concern. Joel Weber the history here is a domestic government will come to the rescue. Flatten prices like the cost of bread in Egypt has been flat for decades and subsidize whatever the commodity is until it breaks. How close in your study country to country are we to a breaking point of that domestic subsidy to feed people after two years of the pandemic. Governments around the world especially in countries like Egypt do not have the fiscal space to provide widespread support. And this is something that we are tracking very closely. Exactly. This question of how many countries are now facing these rapid increase in import prices and therefore are likely to have balance of payments problems. This is one of the trackers that we have and this is a major concern. How much is this a failing frankly of the developed world from supporting Ukraine more. In other words from actually providing more financial aid in order to get some of those supplies to the rest of the world. You know this is a very challenging issue but how to get Ukraine's supply out of Ukraine. The problem is the embargo on the Black Sea. Is you just cannot get the ships to take the wheat out thinking of creative solutions in terms of putting them on trains and sending them out through that way. But that's going to take a lot more time. In addition to the war we we're also seeing the effects of climate change around the world. And one of the reasons why India is has put its export restrictions on wheat is because of poor eels and bad weather. So that's another big negative. But we really do need to try very hard at this point to try and get supply up at as much as possible around the world. The IMF first deputy managing director Peter Gup enough talking about the vital issue on food inflation. Plenty more from Davos throughout the day. In the meantime this is what the markets are doing. A lot of the focus certainly on inflation. A lot of the focus on what we have from the Fed a little bit later on. Markets on a path to a bit more normality after an ugly day yesterday. We're seeing across the board gains not only in Europe but also in the U.S. Treasury. Yields stabilizing after a pretty sharp retreat. Again the markets are trying to reassess or assess the outlook for Federal Reserve monetary tightening the dollar pushing higher. We'll have plenty more across from Davos throughout the day. But now Bloomberg Surveillance EARLY EDITION continues in the next hour. Matt Miller Kailey Leinz in New York are Anna Edwards in London. And this is Bloomberg. We think of this as a monetary inflation. We think we're in a monetary inflation. Are they worried about inflation. Because every time they open a paper the paper says worry about inflation. I don't think we're facing into recession. Not as rapid growth as you might have hoped for certainly. But you know who knows. And we can't tell that. There are headwinds. Absolutely. There are many downside risks. This is Bloomberg Surveillance early edition with Anna Edwards Matt Miller and Kailey Leinz. It's 10:00 a.m. in London 5:00 a.m. in New York and 5:00 p.m. in Hong Kong on Wednesday May 25th. Our top stories today massacre at a Texas elementary school. At least 19 children ISE shot and killed. President Biden demands the U.S. stands up to gun makers. Russia is one step closer to default says the U.S. Treasury allows a key sanctions waiver to expire. U.S. banks and individuals are now barred from accepting bond payments from Russia's governments. And economists say China is almost certain to miss his growth target by a large margin for the first time ever as Beijing's strict Covid zero policy hammers the economy. Welcome to Bloomberg Surveillance Early Edition. I'm Anna Edwards in London with Matt Miller and Katie lines over in New York and the global growth story. Very much the conversation when it comes to those on the slopes of Davos Caylee. Modest gains being made here on European equity markets. I imagine many in the US waking up though with their thoughts elsewhere after what happened in Texas yesterday. Yeah absolutely. And especially those parents waking up getting ready to send their children to school. Of course all of our thoughts are with those families in Texas. Our thoughts also as you say are with global growth. That has been a story very prevalent in China for weeks now as it continues to grapple with its Covid zero policy and monetary and fiscal responses that there's questions around how much they can actually offset that negative growth impact. Nonetheless it was a mostly update in Asia overnight. The MSCI Asia Pacific Index up essentially flat. Up about a tenth of 1 percent. But Chinese equities were indeed higher up about six tenths of one percent. Now the other story out of the Asia Pacific region that we were monitoring overnight wasn't New Zealand. The RBA aims at hiking rates 50 basis points plus signalling that the path forward is going to be more hawkish than previously thought. Rates getting up to three point nine five percent by the end of 2023. So that more hawkish outlook really showing up in the short end of the New Zealand bond market. Bacteria yield up 2 basis points to 325. And the New Zealand dollar. The Kiwi one of the only G10 currency stronger against the US dollar today. It's trading right around 64 cents. All right. Very interesting stuff there. And in terms of markets we've had a little bit of a roller coaster action already this morning. It's no longer buy the dip. Now it's sell the wrap. We had futures up and now they're down just one tenth of one percent. But the move is about 1 percent. In the last hour or so U.S. 10 year yields coming down as investors now buy that debt. We have to 74 which is in line with what we saw yesterday. So not really a lot of movement in the last 24 hours for yields but we have seen them come down dramatically from 3 percent last week. Now Max crude up 1 percent at one ten ninety one. It's been hovering around the 110 level as well as not a heck of a lot of movement there and almost nothing on Bitcoin. Twenty nine thousand seven sixty two. So it looks like this market really has to assess how it feels about growth. It doesn't look like traders are making really big decisions right now because we're just doing a whole lot of nothing I guess waiting for the open. Anna what do you see in Europe. Yeah. A whole lot of nothing here essentially as well. Mads really assessing where we are in the inflation story on the inflation fight and then the growth implications of that fight. That's the big question hanging over markets these days isn't it. We see that in bond markets that those moves up we see in those yields and then that that that that demand for for sovereign debt that steps in. So this is what we see on European equity markets right now. It's a pretty mixed picture. A fairly flat picture with just the right side of the flat of the flat line. If you are along of these markets of course up by three tenths of a percent on the U.K. market some of that comes down to basic resource stocks and also to equity and also to energy stocks. Sorry. So I can show you that we've got the energy sector moving higher. The basic resource sector moving higher is basic resource is up by one point nine percent. The euro is interesting. We tracked higher yesterday. We showed it to you yesterday. It was moving higher in session now down 1 0 6 down by six tenths of 1 percent for the euro yesterday. The money is higher on the back of Christine God setting out her expectations for rate hikes. That was then followed by a lot of hawkish voices saying can't we move faster. Today was the day of the day for the doves to speak out. We've heard a few cautious voices saying hang on let's be a little gradual here and see what happens with Growth Drax Group. This is another story hangover from yesterday. Yesterday we talked about Drax and SSA and Centrica these power generating businesses in the UK that dropped on the threat of a windfall tax to pay for the cost of living crisis here in the UK. Well we see. Ports in the other direction from other media I should say that are suggesting that maybe those taxes won't be applied to these businesses and so we see DAX and others regaining some of that lost ground from yesterday. And that in case this one I put in just to cheer everybody up this morning pets at home. And because we were talking about Petco Matt yesterday as well they stock up by eight point seven percent. It seems that despite everything despite inflation we are still very happy to go out and spend a lot of money on our pets as usual. Yeah I can definitely say that is true for me and my 8 month old. So her lab Anna. Now let's take a look at what is ahead today. Twitter will be holding its annual general meeting at 1:00 p.m. New York time where investors are expected to ask questions about that pending transaction with Elon Musk. Then G-7 energy and environment ministers are set to start a three day meeting in Berlin. And finally 2:00 p.m. Eastern Time the Fed minutes will be released here in New York. We'll look to see what clues we get out of the FOMC met. All right. We will definitely be watching that very closely. But one of the things that is. Sort of occupying our focus this morning is a terrible story. The deadliest school shooting in almost a decade. A teenage gunman opened fire at an elementary school in Texas killing at least 19 children as well as two adults. A number of others were wounded. The gunman was then shot and killed by law enforcement. President Biden spoke after the attack. As a nation we have to ask when in God's name we're going to stand up to the gun lobby. Annmarie Horden and Bloomberg Washington correspondent joins us now from Washington D.C. What do we expect the ramifications of this to be politically Emery. Good. Good morning Matt. Yeah. You don't think this story can get worse but for me I went to bed and actually woke up and the death count of second third and fourth graders actually rose. By the time I got to bed this morning politically we've we've been here before. This is the deadliest mass shooting of an elementary school since Sandy Hook in 2012. And there has been pushes in Congress a very angry America pushing for gun legislation but it has been blocked by Republicans. And the issue they have right now is of course that the Senate is divided 50 50. The House last March passed legislation that would expand background checks to bills that would expand background checks before being able to buy certain guns at gun shows and online. And yet that has not been able to move in the Senate. Politically it depends what this could mean for the November midterm elections that really comes to mind. If this is something that can galvanize people to put lawmakers in place that would want to move on this kind of legislation on the subject of those midterms. And Anne-Marie obviously we had primaries in a number of states yesterday and in Georgia Trump backed candidates ended up losing. What signal does that send. Yeah governor camp not just lose not just winning but really winning over Trump backs Perdue. This was really a mixed bag so far when you look across the United States on the primaries. But this really just shows that Trump's handpicked choice was not able to turn it out. And this one is very interesting because Kemp has been the governor that has said that the 2020 election results were fair. And Trump has constantly campaigned against this individual. And he won big last night and he's gonna be running off against Stacey Abrams. So it remains to be seen. We need to get a lot of other results in place. But it does seem that at least in Georgia Trump is really losing his hold. Emery thanks very much. Beanbags Emery Holden joining us there from Washington. Back to the market stories now. And Russia is edging closer to a potential default. That's after the U.S. Treasury Department's. Unless a key sanctions waiver that had been benefiting American investors they let it expire. Let's get more with beanbags. Dani Burger. He's with us. Well she gets closer and closer to default it seems Danny. Exactly. So this license that has had been enforced since the first round of sanctions allowed U.S. banks to bring in dollar denominated bond payments from Russia. So it was let expire on midnight as of midnight New York time this morning. And that will make of course it really difficult for Russia to service debt for those holding it in the U.S.. Again as you say pushing them closer to default. A few to be sure is here to be sure. We did have them start to step up payments in anticipation that come today. They would no longer be able to do this. And there's a lot of European debt holders. So Russia might find a way to pay them and perhaps avoid default if enough of that money is paid out save for that for the U.S. And they do have about a billion dollars in coupons do through the end of twenty twenty two. And if this is a way to really hammer down on the Russian economy one thing that shows that perhaps it's not having that impact is the ruble. The ruble barely moved on this news. Now it is a lot of capital controls in this market. So that a lot of questions to how accurate it is. But one thing that has been happening is this huge trade surplus in Russia. Money has just been pouring in because of the sale of commodities. You get the ruble hitting the strongest in quite a few years. And sort of adding insult to injury almost on the day that this license expires pushing Russia towards a default. They announce that they're having an emergency central bank meeting the purpose of which is to talk about and combat this very very strong ruble. They haven't said their options but many think it will indeed be a rate cut. Anna. Yeah. We often talk about the commodities exports of oil and gas but also on the food crisis. We had a story just yesterday saying that Russia is winning from the global food crisis that it helped to create as something new. No doubt we will return to reporting on Sandy. Thanks very much Dani Burger with the latest on Russia there. Let's pivot to China. And China is all but certain to miss its economic growth targets by a large margin for the first time ever this year as the country's Covid zero policy hammers the economy. Bloomberg's Tom Mackenzie has the details and so on. We talked just yesterday about a couple of banks taking down their forecasts for growth in China. Now we have this kind of consensus emerging that these targets will be missed. Yes. So this is a Bloomberg survey. The median forecast is for four and a half percent growth out of China for this year. The target the government set themselves is about five and a half percent. So obviously a substantial mix. Bloomberg Economics actually see growth falling as low as 2 percent the first time that the U.S. will outpace according to Bloomberg Economics. China since about the 1970s. So again it just underscores the concerns about the impacts of Covid 0 and the utility or not of announcing new policy measures when so much of the country remains in restrictive territory lockdowns in Shanghai and restrictions in places like Beijing. So what do they do. Well they could fund the numbers. Goldman Sachs saying you could smooth over the statistics and maybe increase GDP by about 1 percent. Of course there's been long running concerns about the veracity of Chinese data. But in this case Goldman Sachs says the hit from Covid is so big that they probably won't be able to do that. All they just downplay this talk it. And certainly they haven't mentioned it since March. But just to underscore the concerns in of course just to reiterate an important very important political year for Xi Jinping as he seeks to get a third term. The front pages of some of the biggest state run newspapers hailing Xi Jinping ISE Economic advanced his economic successes in the media today in Chinese media and pointing as well to a magnificent and bright future for the Chinese economy. Well when I speak to people on the ground in China that bright future that magnificent future seems a very very long way away. The interesting thing to me Tom is that they let these numbers see the light of day. I mean we assumed we always assumed previously that you had to take Chinese economic figures with a massive grain of salt or many. And at this point especially for Xi Jinping to to allow this kind of information to get out doesn't fit that narrative. It doesn't. The most recent data or official data does tally with some of the high frequency data that economists look at suggesting that they haven't been fudging those numbers at least. And in the last few years you have had economists within China saying look let's downplay the target. In fact some economists in China have said let's just drop the target altogether. Others pushed back saying it's important because it motivates officials at the local level to achieve certain targets. But it is less important than it once was. Still significant. And many officials and countries will be judged on their economic performance. Xi Jinping himself may be being judged as well as it leads up to that third term that Tom Mackenzie. Thanks very much. Covering all we need to know out of China now. Twitter holds its annual shareholder meeting today where investors are expected to ask questions about Elon Musk's takeover planned takeover of the country. Well what we thought was a planned takeover of the company. Let's get more of Bloomberg's Laura. Right Laura. Twitter marginally higher in premarket trading. Yes it's the AGM today while there won't be a vote on Musk's proposed acquisition. The key question really is whether Elon Musk the world's wealthiest person will show up in person or virtually. Will he make any inflammatory comments. Remember at present. Musk is still the social media platforms largest shareholder with a 9 percent stake. Now the spread between Musk's offer price of fifty four dollars 20 cents a share and wet which it closed yesterday stands at eighteen dollars. That's the widest since we learned of Musk's initial stake all the way back on April the 4th. Now in various threads on Twitter Elon Musk has indicated that if 25 percent of accounts on the platform of false his offer should be 25 percent lower. And you could argue that the fallout from Snapchat yesterday bolsters Elon Musk's ambitions to lower the original offer price. So where do we stand on the deal at the moment. Well according to advisers on both sides who are close to the deal they are working diligently. So this crosses the line under the original format. But there are a couple of other scenarios at play here. A lower price is agreed between both parties or either Musk or Twitter walk away with a one billion dollar exit fee. Maybe another investor shows their interest but that's unlikely given the platform is now synonymous with Elon Musk. All the offer becomes legally void. That's quite a tricky scenario to materialize. Elon Musk for example would have to show that something has materially changed. Now Tesla has taken a huge hit throughout all of this down some 40 percent year to date. Another tough close yesterday for the world's most valuable electric vehicle maker. In fact pulling Elon Musk's wealth below two hundred billion dollars for the second time it signals a lack of conviction. Pre-existing shareholders believe his pursuit of Twitter. That is. But as if to try to assuage that concern Musk tweeted last week he is only spending 5 percent of his time on this deal. I don't think the world is ready for when Elan Musk ramps up his energy levels. Will any of us be able to cope. All right. Bloomberg's Lara Wright thank you so much. Now let's get back to some of the other stocks moving social media stocks moving in premarket trading in the US one of them being SNAP which of course was the big story of yesterday had a more than 40 percent plunge its worst day on record. The bleeding does not stop. This morning that stock down another half a percent or so after its outlook cut of yesterday. A more positive story though for Nordstrom. It is of course a department store retailer and actually was able to raised its outlook really highlights the difference between the higher end and lower end consumer and their propensity to spend in the face of inflation. Nordstrom is up about 10 percent in early hours. And another big move is Wendy's try and fund management. Nelson Peltz Fund actually says it may be looking at buying this company that stock up about 9 percent. As a result Nina. Coming up on the program more from Davos. We will speak to the Siemens Energy Chairman Joe Kaiser. He'll be live on the slopes with us. And Simon frankly from Alix Partners the CEO of that business. We'll be talking to the team in Davos. Plus he was the go to banker for the wealthiest Russians bringing in billions for Credit Suisse. But now the money has come to a sudden standstill. Read more of today's Big Take story by the end. Big take into your terminal. This is Bloomberg. Actually right now my main concern is not the components. My main concern is that we don't follow up on the targets. I'm absolutely one that is at transition in energy takes probably three decades. So please don't slow down. Be ready to follow up. That was the CEO of Vestas the world's largest manufacturer of wind turbines speaking to our own Francine Lacqua out of Davos. Francine joins us now with Joe Hazar chairman of Siemens Energy. Yeah. Thank you so much Matt. I am delighted as always to catch up with Joe especially Joe since you're really at the heart of some of this transition. A lot of the people in Europe need to transition because of the dependency to Russian oil gas. Germany really at the forefront of this. What industries will not be able to do it without a lot of pain. Definitely. It's all those industries which lead a lot of energy. Think about a chemical industry. All the basic materials like glass and steel cement. Those will be the most affected ones. So what's the right way to help them. Well to to set the priorities right. So I think that earlier those industries are in a value chain for example to chemical industry is supplying the car industry and many many other industries in the value chain. They need to have the biggest priorities the ones you know which can do which we can do without for a while. You don't need to have the lowest one. It's painful. But that's you know crisis management is all about setting priorities. These subsidies help. No. You need a good plan you know energy and energy agenda. It's a long term plan not the pilot. You know for your new cover entry to the next big thing. And remember two years ago here in Dallas it was who is the greenest of all time. Today everybody talks about crisis. Neither one is right. The problem is that you need about a 20 year plan to make the transition work. Do we have that time. Can we afford that time. I think we can do it in five to 10 years. If he you know get out the regulations the bureaucracy and all that stuff you know if it takes eight years to build a grid for 500 kilometres you have a problem. He could build a technically in a year or a year and a quarter. But if you need eight years you have a problem. And so it is about the political will to set an agenda even if it hurts some of the voting community going forward. So you want what deregulation American style. Mullins wouldn't say American style. I think we do a thoughtful you know sit together make an agenda and say what's important for our country in the long term. And that's obviously about the energy agenda. Then we listen to people and say look at tell us what you think. But then we need to make a position you know in 88 in crisis management. Building the next generation is not a basic democratic process. It's about leadership. There is a lot of American voters watching us now. How can America not it America actually helps the Europe in this transition. Well first of all if they help us contain the Russian Ukrainian war the United States is the only one power which can do that. And that's really important. And then the European Union needs to get together and find a foreign economic policy and how it acts. It's China. It's the United States. And then we need to get a policy on how to build or rebuild Europe. When you talk about renewables there's a lot of people here in Europe that say you know this will save us the future. Not everything's working. I know you're having trouble with some of the wind turbines. What's the problem with wind. Well think the issue currently on renewable and predominantly in the wind energy is that not a single of the big companies neither Siemens Commissar nor our competitors are making any money. So that means the profit pool of that industry is negative. So if a profit pool is negative this is so attractive. How come. But why. Why. Why is it so difficult. I know it's supply components. I know there's delay. The industry got caught flat footed. First of all on the on on the cost inflation of raw materials. But that's only temporary 1 2 years. Second topic is the industry has cut has gotten ahead of itself in terms of forward pricing in August 7th. Anna Edwards. Hang Seng. And people say well you if you want to build this you need to have three cent people that jumping into that trying to understand. Well time will tell you I really couldn't find some savings along the way and it didn't. The fact of the matter was that actually through the inflation of the raw material prices you only go the other way. So are we too ambitious actually with trying to do this too fast. We didn't think it through the end to turn summation is about going from a sort of functionally okay conventional power supply to an all renewable one. So you need to make a plan how you make that work. And the priority number one is to get it. It is the greatest start building more wind or solar. It is about connecting the generation. I mean there a huge question marks out about hydrogen. When will you make hydrogen profitable. Well depends on which one. You know you have to so-called create hydrogen as a profitable already. Linda Praxair Others are very profitable through hydrogen. They just the blue hydrogen which basically does the CO2 extraction and put it back into the competitive but complicated because whenever you know people want to put it into the ground through a will. But what happens is it comes back up. So environmentally complicated the green hydrogen today if you want to make that out of electricity. I think that's a bad idea. You need to first serve the society with electricity. Once you're done with that you should convert electricity into clean hydrogen. Joe thank you so much. Very thoughtful in terms of the sequencing of all of this. Kelly back to you in New York. All right. Bloomberg Surveillance Lockwood thank you so much. We of course joined by Joe Keyser chairman of Siemens Energy and France. And we'll be back with us shortly with more from Davos. But Matt I find this conversation around renewables so interesting because it's called a transition for a reason. You can't just snap your fingers and be in a green energy fueled economy. And especially when we talk about sources like solar and wind. The sun doesn't always shine. The wind doesn't always blow. So you need to be able to solve that intermittency issue. And that's going to take some time. Yeah. And I think it's doubly interesting in Europe especially in Germany where they've decided to phase out nuclear energy completely which provided so much clean energy and now they're having to rely on pretty much the dirtiest source of their lignite coal. Yeah. And meanwhile the piles of LNG keep coming pit piling up stocking up here in the UK where we have lots of LNG terminals. Can't use it all at the moment. At the moment. But it also don't have quite the capacity to send it all to Europe where they could use it. So interesting dynamics to think about in energy markets. More for examples when we return. I'm a freaky addict policy. We'll be with Francine. This is Glenn Beck. This is Bloomberg Surveillance Early Edition. Here is what you need tonight. It's the deadliest school shooting in almost a decade. A teenage gunman opened fire at an elementary school in about a Texas killing at least 19 children and two adults. President Biden demanded action to curb the violence but gun control legislation has stalled on Capitol Hill. Russia is one step closer to default as the U.S. Treasury allows a key sanctions waivers to expire. U.S. banks and individuals are now barred from accepting bond payments from Russia's governments. And China is almost certain to miss its growth target by a large margin for the first time ever. BEIJING Strict Covid zero policy has hammered the economy. Economists median full cost for Chinese growth this year has dropped to four and a half percent a full percentage point below the official Chinese target. I'm Anna Edwards in London with Matt Miller and Kailey Leinz in New York and Matt. Global growth continues to be the topic of conversation really when it. When it comes to Davos and elsewhere at Monkey. It's not moving a great deal though. This morning I guess we got fed minutes later. Yeah absolutely. So maybe traders are waiting to see the Fed minutes. And actually it does look like from money market funds that the pricing in a rate cuts has come down a bit. We had been expecting more like our sorry rate rises more like 3 50 basis point rate rises. Now it's coming down closer to 2 over the next three meetings. The S & P futures not doing a lot right now. Very little changed down about one tenth two tenths of one percent. U.S. 10 year yield also very little changed at two seventy three. We saw it to 70 for a few minutes ago. So investors are buying those bonds and pushing the yield down next. Crude continues to rise some now gain and one and a half percent at one eleven forty five. We saw it just 30 minutes ago at 1. So we're seeing some movement there as well less so in Bitcoin. We've seen that hovering around this 30 thousand dollar mark although it is on the downside of that market has been for the past couple weeks right now. Twenty nine thousand six hundred seventy. Kelly what do you see in terms of the pre market movers. Well of course the action in free market isn't as dramatic today as it was yesterday when we saw SNAP and other social media stocks absolutely decimated after snack snap cut its outlook for profit and revenue warned about a deteriorating macroeconomic environment and as a result advertising headwinds. This morning though much more muted action. SNAP is actually gaining a little bit of that 40 something percent loss of yesterday back. It's up about six tenths of one percent in early hours. So really nothing to sneeze at. You are seeing some bigger moves though for the likes of Nordstrom. Of course a department store retailer it reported after the bell yesterday actually raised its outlook stands really in stark contrast to what we heard from Target Walmart retailers that cater to the lower end consumer the higher end consumer apparently still spending in the face of inflation. And that has a positive read through to Nordstrom peers like Macy's which is up about 2 percent before the bell. Finally also making note of Wednesday's Wendy's. This is on news of a possible acquisition by Triumph and Management. That stock is up eleven and a half percent in early hours into. Kelly here in Europe a little bit of treading water going on waiting for a little more clarity perhaps on the Fed. Those Fed minutes as we've said due out later on today. So stocks here of six hundred up by three tenths of a percent. We still have energy stocks basic resource stocks rebounding from some of the losses that we saw yesterday. Of course technology was really the half of it yesterday and media. The euro is retreating a little. Yesterday we saw that move up. That was on the back of comments from Christine Legarde and hawks at the ECB today. It was the turn of the doves doves. We had some more dovish lines coming out from Fabio Panetta for example talking about taking things gradually and being alert to downside risks at Drax Group. This is the power generation business here in the U.K. yesterday. These stocks in this sector Drax group and others were really hit by reporting and other media that suggested there could be a windfall tax on those businesses. Today we've seen some of that reporting dial back a little bit. And as a result these stocks rebound pets at home. He was just mentioning some of the spending that we're seeing on luxury names. Well it seems we still find it within ourselves despite inflation Katie to spend on our pets and pets at home. Great reporting. Strong numbers today. And the stock is up by just shy of 9 percent as I always tell my husband Anna. The dog needs more toys to store them pretty quickly. So really we need to replace. We always pretty often of course while we all are spending maybe on our pets there is a broader question out there about how much consumers are going to be willing to spend in the face of higher prices. And as policymakers act to tame those higher prices what is that going to mean for the growth outlook. Here's what some of our top Davos interviewees have said about the risk of a recession. For the moment we are not seeing a recession in the euro area. But clearly the economy is starting to weaken really. To me it comes down to inflation and supply shocks demand shocks all together mixed in one. Of course it is unclear at this moment in time we may see prices even going higher. Being much more volatile and becoming a major risk for recession for the global economy. I worry about a recession. Eurozone and European Union will not go into recession. There will be a slowdown. But you know labor markets are so tight there is now an increased risk of recession. But we do not anticipate a global recession. Joining us now is Janet Mui head of market analysis at Brewin Dolphin. All right Janet where do you come down on the risk of recession and the market's pricing of it. Hi good morning Kelly. Well our view is that our growth is slowing it is a pretty strong consensus now but we do think that a recession this year is still unlikely. But I think the question should be how best if a recession is coming how bad it is going to be the duration of that relevant if that will happen because we all know that every economic cycle ends with a recession. But in our view we think that the recession wouldn't be too bad because consumer resilience is still there. I mean households have state jobs and also a lot of mortgages on fixed rates in the UK in the US. So that's a skill the households from these occasions of high interest rates. And of course the labor market is very strong. And we do think that the high number of job openings should also help to absorb symbol for labor that maybe laid off during a slowdown phase of the business cycle. So all of us I mean there is of course slowdown but we're not too pessimistic. So the unemployment rate clearly a bright spot still a spot still for the for the US economy. But what should we look for in markets Janet. Janet as we see the Fed actually enact these rate hikes that have been priced in. What are you expecting to see that. Because if we get 50 and then we get another 50. If that is all pricing should that cools downward movement or would it allow stocks to recover and move on. Yeah. Would you think that the markets look a bit oversold at the moment. Clearly the concern has shifted more from inflation to now. The concern on the recession. I think because on more pricing in the high possibility of a recession. But we do think that a lot of interest rate increases already reflected in a market that already. The interest rate futurist suggests a U.S. racer potentially reached almost 3 percent by the end of this year. And I think that's realistically the max that they can get through this year. So I do think that if the economy starts to slow a little bit and inflation of course T.K. and more signs of slowing down then I think the narrative for the Fed has turned slightly less hawkish by the end of this year. And I do think that the sell off has been a bit too harsh. So that that could be some more stabilization from here. What do you what do you make of the inflation expectations picture at the moment. Janet there does seem to have stabilized. In fact coming back a little perhaps reflecting the fact that a lot of people are talking about peak inflation in the US and that point having been passed. We'll wait to see if that happens. What does that mean for investment. What does it mean for treasuries for example. Yeah absolutely. Although the program I think got lost last month talking to you about that and yakking about price expectation as well. Well we did read that inflation expectation has eight. Well you can see that previously in the U.S. are keyed on race and we actually have reduced inflation linked bonds exposure last month because we feel that the peak is coming because oil prices are peaking and growth is slowing. And of course my kids are trying to get more aggressive rate hikes that naturally will lead to slower prices going forward. So there's a lot of pain in this. How how more inflation can go from here. And I also think that bond yields Heidi has come back you know quite sharply recently and that that consolidation can still happen because we're talking about potential high risk of a recession. Markets are concerned and peak in inflation and transsexual. So I do think that you know in the meantime what have been surprising volumes can grow slightly more than we've seen Janet Equity while the S & P 500 at one point intraday was off 20 percent. Now it's down seventeen point three percent year to date. And we've seen PS come down below 20 back to more normal historical levels. But we haven't really seen capitulation. Right. I mean the VIX I think the highest it got was like 30 to do. We need to see that like 40 or 50 before we can go back in. Yeah. I do. I mean at this point we do think that by force a price in the merchant for risk. All right. I mean intraday that S & P 500 jet did pay to get buried. I can suggest for us that it is increase in price. I mean the risk of a recession at any time each. It's a bit oversold given that the economic resilience is still there the moment. And also we say that with money is coming off a little bit. That's it. How. With a bit of relief as well. But of course markets are very concerned. So that's why we wouldn't rule out the Trump volatility and we can never put it on or when the market may fall term. But we do think that markets are pretty open so you can't you can't time the absolute bottom is what you're saying. But if you had cash to invest right now would you put it in equities. Having a gradual deployment could make sense given that valuations as you mentioned CAC return actually to pretty much more normal levels by the US. Full AP earnings have returned to more like a 10 year average so that that is starting to look attractive. So if you're a long term investors you you know that you know in the future you're going to see market recover and you will see more substantial gains if you buy extra levels. So I think maybe a gradual decline in capital could make sense in this environment given we never know where the bottom. Janet thanks very much Janet Wee. Thanks for joining us from Brewin Dolphin. Coming up on this program more coverage from our team on the ground in Zappos. We will speak with the Eurasia Group president Ian Bremmer. Cisco CEO Chuck Robbins and Guggenheim CEO Scott Mine. And all of those conversations coming to you throughout the day. This is Beck. This is Bloomberg Surveillance Early Edition. I'm Anna Edwards in London with Matt Miller and Kailey Leinz in New York. Let's get back to its apples. Francine is there. Francine Lacqua and she is joined by the CEO of Alix Partners from. Yeah I'm delighted to be joined of course by scientifically of Alix Partners so much to talk about Simon. The recession is it coming and what's it mean for businesses. How many will go under. Well whether we're technically heading for recession I don't know. We're certainly heading for choppy waters. You know the spike in energy prices the spike in food prices all of which get passed onto the customer. I think we're heading for some challenging times. Are there industries that you worry about more than others your lead indicator because you do a lot of debt restructurings. Well you know we've come through Covid-19 ship with biggest disruption of our lifetimes. And now of course are into this humanitarian tragedy happening in Ukraine. Another profound disruption. You know the Covid-19 was a dress rehearsal for challenging times to come. Truthfully I think it's going to going to affect every industry. But in terms of where you're seeing the most stress is it retail consumer. Is it something else. Is there a part of the business that you really worry about. Certainly retail consumer products are going to be affected because of course people's discretionary spend most manifest itself in those sectors. But what's happening in the energy sector what's happening of course with the dual challenge of energy transition during a time in which we're trying to deal with the profound disruption to gas and oil supplies is going to put real pressure on those sectors. How many of zombie companies are in the UK right now. How difficult is it to estimate. Well of course the arguments always being that these companies are zombie companies and carry ongoing as interest rates are so low. Well we're now in a rising interest rate environment. So I think that we will see a whole bunch of companies have been hanging on by their fingernails not being able to do so. How many. I don't know. Should we look at also some of these stress pressures. In the US we seem to underestimate the severe impact that actually all this cheap monetary policy has done for them as well. Well I think it was mean politically. Of course there had to be federal support programs coming through Covid. But now we are in inflationary times. You know the real economy does catch up. Interest rates are going to go up. So we are going to see the effect of that in all Western economies. So what do you hear in Davos for. Do you like it. Do you think it's the beginning of the end for this World Economic Forum. Well it's a very different Davos of course that you know there's that obviously the Russian and also the Chinese contingents aren't here but there are fewer people. It's certainly easier to get around. But there is something missing. I don't know whether this is going to be regenerated in January or whether time has moved on. We've yet to see. But I think there is an awful lot of good debate on important subjects still going on. So you're here not to listen to the sessions I imagine but actually to speak declines. I get business. Well we certainly speak to quite a few clients but I am here to listen to some of the sessions. I went to an excellent debate last night on the metaverse. I'm going to a session today on criminal justice reform. There's some really excellent debate going on. But of course the connections that are made and refreshed here an important part of being here. Is there a glimmer of hope anywhere when you look at the world economy when you look at world affairs there's crises from crises from crises. Is there anything good that can come out of it. Well you know I think that Covid-19 was a dress rehearsal for many disruptions that are yet to come. You know we're obviously in the middle of the Ukraine crisis but there are many disruptions happening in every geography and every industry. The medium to long term view I think is still one can be optimistic in the short term. Lots of challenges but businesses have been very good at pivoting on the back of these challenges. So what do we need to get ready medium term to make sure that it's not a ship for a longer term. But I think looking at through the lens of business what business leaders need to do is to make sure they stay agile with their strategies to the extent possible have their cost structures and variable rates rather than fixed cost structures so they can pivot quickly actually executing their strategy even if it's not perfect. But doing it now is important and just making sure that they develop their businesses on the back of changing circumstances. Is it very difficult to execute plans where everyone's resigning and the great resignation. Well huge pressure on the labour markets of course but of course shrinking labour markets and many of the Western economies attrition rates are up in all industries. So it is challenging for certain industries like restaurant hospitality. It's critically challenging. But I think that in the medium term I think there's a lot to hope for. Simon thanks so much. We would think about a lot to hope for but it's difficult actually to see a missile this doom and gloom where we see it next. Matt Miller back to New York. Yeah. Francine thanks very much. Gloria Francine Lacqua there sitting down with Simon frankly of Alix Partners and pointing out that it is difficult to be optimistic. I want to get to what we're watching on that note because Michael Burry has tweeted something cryptic or I mean he did tweet this yesterday but now I'm on Twitter and it's been deleted. Fortunately people saved these tweets so he sent the copy. It's sorry. You saved the coffee. Well Sarah has always saved a copy our producer. Thank you Sarah. And here here it is. As I said about 2008 it's like watching a plane crash. It hurts. It is not fun. And I'm not smiling now. You have to suspect that he's talking about markets here. And of course in 2008 he predicted the housing crash. Yesterday we got housing news out of the U.S. that was far worse than expectations in terms of new home sales. We have had red hot housing market here. And. But obviously as prices rise there's no inventory and now mortgage rates are going up. It seems that it could turn around. Yes there's some sticker price shock happening in a housing market. It goes Michael Barr a big short fame as well as of Scion Asset Management. Let me tell you I'm watching UK politics map which probably won't surprise you because today we just heard already this morning actually that simply civil servant could sue Gray. You might know might not have heard of her outside of the UK. She was tasked with conducting a probe into these parties that took down took place during lockdown rules here at Number 10 Downing Streets and a few other places. She's concluded her investigation. The prime minister's already been fined by the Metropolitan Police for some of the policies. Well for one in particular that he attended. So we'll see what kind of language she uses here. This is he says he wants the employees. I might. I really go all the way across the frame like isn't there more important stuff to work on in the UK. Well one could also be part one. Well that's exactly what the government will say because in the aftermath of this we might hear some news about help for those who are really being hit by the cost of living squeeze by those who can't who are going to be struggling to pay their energy bills. And that might be the sort of the way that the media and the media timeline plays out shall I put it like that. As soon as we hear the details of the secret report which we should do today look then for that to be followed by the government trying to reset the conversation with some help for those affected by the cost of living. That is it for the early edition. Surveillance in Davos is ahead. This is Glenn Beck.

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'Bloomberg Surveillance: Early Edition' Full (05/25/22)

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. Adena Friedman, President and CEO of Nasdaq, says it's hard for investors to make conviction decisions. Jose Vinals, Standard Chartered Chairman, says the private sector can do more to secure supply chains. Simon Freakley, CEO of AlixPartners, says we're heading for choppy waters. (Source: Bloomberg)

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