Surveillance: ECB, BOE Lift Rates

are so thrilled to bring it. Someone truly expert on the political economics and fabric of Europe, Aungrish Media, joins us, chief economists of Barenburg Holgo. I'm gonna go to one brilliant sentence in your note, Thank you France, Thank you Spain. You made real clear the lift that provides comfort to institutions in Europe as France and Spain are leading the way away from recession. Does that have legs? Can it continue? Yes?

I do think it does have legs. What we are seeing is that Europe as a whole is not falling into winter recession, but in what you could call a winter stag nation. Germany, most exposed to Russia, is having a contraction in its GDP, but some of the other countries, especially France and Spain, are making up for that. They are not as exposed to Russia as Germany and not as exposed to some downturn or weakness in global trade

at the moment. And this is of course good news that the region Europe, which really last year was the focus of all the bad news war in Europe energy, the shock that Europe is now actually outperforming expectations. Olger Do you think that in the e CP press conference, uh Madame Leguard should push back on the market activity, perhaps more aggressively than j Powell did yesterday. That is quite possible. After all, the e CP has de facto pre announced they're going to do another of fifty basis

points in March. Thereafter, however, they will re evaluate their approach. That leaves the door wide open to going just up twenty five basis points in May and beyond that we'll have to see. The press conference may provide some clues, but probably the e CP has not made up its mind yet on what happens after March, so Laguard probably cannot give us clear guidance relative to the FAT What is clear the ECB, having started later, still has some more route to go to the upside than the FED.

From where we are now, Okay, sufficiently restrictive? Was this phrase that we heard a lot in December. Do you think we are now? Well? My personal view is we are sufficiently restrictive. But I'm fairly certain this is not the e CPS majority view. So the majority on the Council will want to go further fifty basis points in March and at least twenty five basis points in May,

with the risk that they could more. But as we have seen, for instance in the generally data or Eurozone inflation coming down sharply and more good news in the pipeline for March and April, it probably does not take the ECB to go much further to get invasion back better under control. How can I squeeze this in just quickly? What happened to German CPI this week? And how much

can we actually read into the Eurozone CPI data? Well, the eurone CPI data maybe revised significantly because simply for Germany there's a change in the methodology and apparently the Stats Office was not ready and is not ready to apply that in time. The German data could be weird and raise the Eurozone first estimate somewhat. What happened to German efficiency? Holga? What happened to that? Everyone looking very good? Question. We probably have a lack of thought the qualified staff

in many places, including some statistics office bottles. If that's usually that's so efficient? I know it's you're telling me the Germans weren't ready for a change in methodology. Really, you're going to really put this out there, this battle betunity in Germany conficient shocking Abraham right, Barry joins us now chief currency strategist at City. Abraham's amazing at the ECB at March sixteenth, the telling us that data dependent at the same time they tell us they've got another

fifty Would you make of this? I actually think the March meeting is going to be really interesting for the e c B, and it was Chair Powell that made it that interesting. So when you look at the market reaction today, I think what they're telling us is that string of hawkers Central Bank meetings is over and the

market was surprised very much yesterday. You saw that in the reaction, and what we're seeing today is telling us in March we won't be surprised by a similar I think people call it pivot by the ECB in March, and I'll be very curious to see what we hear from President Laguard, but I would strongly advise her to be a bit more like Powell and stop guiding too strongly about intentions from here, because the CB two has gone a long way, and as your colleague just said,

the data actually come in pretty cloudy of late, even in the Euroszone. Ibrahim, Are we coming up with a narrative to fit the flows that are going on in markets right now? So I do think the price action we've seen since the beginning of the year is very

strongly flow drip. Obviously, a number of things have fallen into place, fundamentally to chiny to reopening a degree of this inflation, but particularly when it comes to the performance of risk assets, and particularly the riskiest of risk assets. That's really because there's so much cash on the sidelines and that's been that under positioning in these assets. So there is a big flow element to the price action we've seen yesterday, but really throughout this year so far, Ibrahm,

what's the dollar going to do? And as we're getting lots of research notes that markets clear, we get clarity, we move on to a lesser volatility. Does that put new legs to an ever weaker dollar. So we do think that that a string of dollar weakness has has further to go. And we think that's particularly evident still in the areas of the market that benefit from lower rates and lower rates volatility. So that's Carrie Trades em areas that have seen large outflows over the last few years.

Within g turn in the currency spectrum, that's probably the end in In the end, it's the Mexican pay so that tends to be most strongly related to th U S rates. But if you put these things together, it does tell you the dollar probably still has a little bit further to go. But I would also mention Cha Powell used to say, be humble and nimble. We're still going to be in a in a in a very

challenging environment this year. So I don't think we're going to see the dollar straight down down in a straight line. I think it will go down from here and then we'll reevaluate over the next couple of months as that

soft landing debate continue. Abraham, this was great. It's just fantastic to catcher with you and I'm sorry this was so sure as we worked through the e c V right decision, Abraham like married there a city group right now, an important conversation with Ray Luberg's wealth with this now global chief investment strategies of black Rock, and she knows Lawrence fi think is going to walk back the chairman's comments yesterday, what were you thinking at PM yesterdaynd your

Bloomberg and seeing what we saw, it was quite an incredible day. Going into the meeting itself, we thought the focus would be around the disconnect between market pricing in terms of cash paths, future Ray cuts and what the fat is going to say, But what we ended up having is a disconnect between j Powe and himself. Right in his prepared remarks, he was very clear that they

will stay the course until the draw is down. He was also very clear that parts of the market service inflation, core service inflation, they have yet to see signs of this inflation. But in the unscripted part the press conference, he then was not clear in pushing back against the financial conditions, and he was also distancing a little bit from the December forecast, but without giving any clue intense of what he thinks it could be, and that's why

markets didn't just jump. Do you have an institutional call of a shorter duration I'm gonna call it somewhat higher yield strategy. We're all conversant in equities and shorting. There seems to be a massive short beat in the in the in the bond market as well. Do you worry about a jump condition where you get a bond shortcover and you get price up as a general statement and yield shockingly lower. Is that part of your probabilistic structure? I think, Well, we have seen so far this year?

Is everything really right? So John talked about equity really but he has been an incredible really in bound market as well, and part of that was driven precisely as you said, Tom, this short covering short squeeze and also

this fear of missing out. So think about everybody finishing deeply traumatic year across aquities and bonds, and start of twenty three, sentiments seems to be taking a turn and people just two just wants to jump in without kind of assessing how much of the damage is being priced in which at this juncture, none of the damage is being priced in People are talking about is it going to be recessioning, is going to be soft lending markets are pricing in takeoff from here. We're not talking about

landing anything. So you know, it's it's it's it's a huge amount of animal spirits boosted by cash being deployed into the market. And this is the momentum that we're seeing. If J. Powell doesn't push back against this market, as he did not yesterday, what's going to trigger some sort of reversal And what we're seeing right now, I think when it becomes clear that part of the inflation complex

is still persistent, is still sticky. So specifically we're talking about core service acts shouter right like yes, goods service rotation leading to goods disinflation. There is a trend that has been many months in making shelter, expecting that to come down over time as well, but service uh, core service acts shelter very linked to wage dynamics as well.

Labor market is still very very tight, and I think the jury is still out there that we can become comfortable and complaisant that inflation is on the way down, all the way to targets. What's your conviction level? I mean, it's just the time to lean heavily against the tech rally, to basically sell everything cash out and just hide out in cash until you start to see that down. For I think this is the time to stay invested right now.

We don't want to chase the tech really, just because of the incredible momentum that yourself described as well, and more broadly looking at would developed market occulties a pricing very very positive outcome is priced for perfection. It's hard for us to chase that. But we have had a preference for emerging markets that have been doing really well

on a year today basis. We have had a preference for short duration bonds and I credit and mortgage agency bagged mortgages and all of that have been holding up okay as well. We're talking about and everything really, so staying investors is important way just to finish on the Feder reserve if we can. We talked a long time about the end of the FED put the introduction of a FED called did that get done away with yesterday? And that news conference, well, he was not very consistent

within himself. So I think markets are reading into it what it wants to readly into it, which is to jump and kind of build momentum and chase this. Really so I think it's too early to say do we have a fat put turning into a fat called turning back into a fat put? We don't have a very consistent fat at this moment. We're here from chairman po next week. Why can I just say thank you, thank you, thank you for tolerating from now and after every third meeting.

Really absolutely not that next time. I have thought for days that there's only one person I want to talk to in the tech season, and all I can say, I'm looking it up right now. The copyright he was like eighteen years old when he wrote this, but you know, the copyrights back twelve years. And what book can you say, Paul about technology with a copyright of two thousand and ten? It is still worth still absolutely if you want to understand Zuckerberg, you start with David Kirkpatrick and is the

Facebook effect. I can't say enough about the book At the time, I gave it as much acclaim as I could. David, thank you so much for joining us on your show more often. You gotta be on my show, David that you went in the book. I remember this, He's backing out of a parking lot or something, and he's just had his world turned upside down by the success of all this. You were with me the day they went public. You absolutely nailed the tobacco and the recovery. What was

to come to Jesus of Mr Zuckerberg yesterday? What does the new Zuck look like? Well, I think it's taken a few quarters for him to come to Jesus, so to speak. He finally The way I'm looking at it is, he's finally decided to be a business person and no longer a starry eyed visionary, which he was able to sustain for pretty much a decade of of of a period when the stock and the results and the user growth just kind of kept magically rising and he could

do whatever he wanted. And he can't do whatever he wants anymore, although he's still got this weird obsession with the metaverse. But I really think it's a stunning turnaround that he's trying to be a real manager again and more for the first time ever. Really, in your new book, it's like seven hundred pages, folks. I'll give you the punchline, chapter forty two. Kirkpatrick on the metaverse. Help me, David, what's the metaverse? Well, if I really knew, I might

be more excited about it. I the metaverse as Facebook and meta portrays it their newly renamed company in homage to this excuse me effect doesn't work. No, no, well, you know it's a it's a legless, cartoony game like space that most people wouldn't want to enter. Uh and and in fact, it takes tremendously inconvenient hardware to access and and money and and and and an extraction from the real world rather than engagement with it, which I

don't like. And just that alone I don't like. So I think it is crazy and strange, weird, inexplicable, whatever word you want to use. Why he was so and still is so obsessed with this that he had to rename his company. And he's willing to spend four billion plus per quarter in losses in order to build out this timerical vision. It is never in the near term going to be a great business for billions of people, period,

end of story. And I don't know where he's going with that, David, who is the voice of reason within the senior ranks of Facebook these days, We used to think it was Cheryl Sandberg, she has now departed. Talk to us about who was who surrounds Mr Zuckerberg. Well, I always had tremendous respect for Chris Cox, who left in protest at one point and was lured back and is now head of Product and really a very smart, very visionary, very thoughtful, balanced human being and quite close

to Zuckerberg. So he would be my top choice, actually my trap for who was the chief technology officer for over a decade and was was on on stage with me at the tech Onomy conference in November and he was actually he still works there two days a week as a fellow, and he was saying, you know, we haven't explained this man diverse thing very well. And there there's some brilliant people surrounding Zuckerberg, but Zuckerberg has a

tendency not to care what other people think. He is so confident in his own judgment he will just go that way no matter what. David bro at the time we got left broader question and this goes to Techonomy and all that you're doing with your leadership of thinking about our American silicon valley. Well, I don't know if you knew this, You know the ubiquitous shoes of the

stupid white souls. Kirkpatrick was the first one where has a long time ago the rage David, you go into some overpriced Lante stop fifteen dollars for a coffee of him picked organic beans from Saskatchewan. Whatever. You go into one of those pretentious shops. How is the mood changed in your Silicon Valley? Oh, Silicon Valley is fundamentally changed. I think forever change. I feel that the era in which a small number of giant internet companies lad global

markets upwards has ended decisively. We are looking for a new economic phase that cannot and will not be led by those same companies. So that is a real disappointing turn of events for a lot of these true believers. Look, I'm very excited about climate tech myself, and I think there's huge necessity for great investment in climate and a lot of economic opportunity in doing so. So I'm hoping that's the next phase. We are not going to see another era of the companies like metago to three D

eight and people expected to keep going up. It's not gonna happen. Tim Cook Apple this afternoon. Maybe it's not the Kirkpatrick expertise. But David Kirkpatrick, Tim Cook, is he the CEO of the pandemic for for Silicon Valley, Well, I think him and Sakia Adela both are extraordinary leaders

who have been shining in recent times. And yeah, you know, Apple has the benefit of not being an advertising based business, um and that really has insulated it and the fact that it's led by a supply chain genius, which is what Cook is UM. So I still am optimistic about

Apple long term very much. What's your first event with your climate text sellers forward on David Kirkpatrick and climate, Well, I'm actually trying to come up with a book idea that's an optimistic take on how climate can really save the economy. Climate action can turn the economy into something truly marvelous. I really believe that, and I don't think that's understood. Look forward to hearing that. Of course that dovetails is what we're doing in Bloomberg Green as well,

David Kirkpatrick, the Facebook effect. Where else can I say? Paul a book twelve years old is still worth still remember I remember when he was on our on our set on talking about it and us people were really trying to get a handle on who is this Mark Zuckerberg? What is this Facebook thing? Um? What is social media? Isn't social media? Pick up the phone and calling a buddy, you know. So that was where we were back in the day. Subscribe to the Bloomberg Surveillance podcast on Apple, Spotify,

and anywhere else you get your podcasts. Listen live every weekday starting at seven am Eastern. I'm Bloomberg dot Com, the I Heart Radio app tune In, and the Bloomberg Business app you can watch us live. I'm Bloomberg Television and always I'm the Bloomberg Terminal. Thanks for listening. I'm Tom Keane, and this is Bloomberg