WEBVTT - Bloomberg Daybreak Weekend: Fed, Ukraine, Poland 0:00:02.320 --> 0:00:04.960 This is Bloomberg Daybreak Weekend, our global look at the 0:00:05.000 --> 0:00:08.039 top stories in the coming week from our Daybreak anchors 0:00:08.119 --> 0:00:10.479 all around the world, and straight ahead on the program 0:00:10.480 --> 0:00:13.760 of peek at what the FED is really thinking about 0:00:13.800 --> 0:00:17.080 interest rates. I'm Tom Busby in New York. I'm callin 0:00:17.160 --> 0:00:20.240 Headker here in London, where we're looking at the consequences 0:00:20.280 --> 0:00:23.239 of all in Ukraine. I'm Joe Matthew in Washington. What's 0:00:23.280 --> 0:00:26.600 at stake as President Biden visits pol I'm Bryan Curtis 0:00:26.680 --> 0:00:29.200 in Hong Kong. We read the tea leaves on where 0:00:29.320 --> 0:00:32.959 the incoming bo j Governor Casual Uda is going with 0:00:33.000 --> 0:00:36.800 the whip in his hand. That's all straight ahead on 0:00:36.920 --> 0:00:40.159 Bloomberg Daybreak Weekend on Bloomberg. He Love on three O 0:00:40.280 --> 0:00:44.440 New York, Bloomberg one, Washington, d C, Bloomberg one oh 0:00:44.479 --> 0:00:48.120 six one, Boston, Bloomberg nine sixties, San Francisco, d A 0:00:48.240 --> 0:00:51.680 B Digital Radio, London, Sirius XM one nine team and 0:00:51.760 --> 0:00:54.680 around the world on Bloomberg Radio dot Com and via 0:00:54.720 --> 0:01:00.680 the Bloomberg Business App. Good day to you, Tom Busby, 0:01:00.720 --> 0:01:03.560 and we begin today's program with the Fed and minutes 0:01:03.600 --> 0:01:06.479 from the Fed's latest policy meeting coming out on Wednesday 0:01:06.480 --> 0:01:09.800 and joining me to talk about it. Bloomberg's Global Economic 0:01:09.840 --> 0:01:13.160 and Policy editor Michael McKee. Michael, thanks for joining us. 0:01:13.160 --> 0:01:15.400 Happy to be here now. These minutes from the f 0:01:15.480 --> 0:01:18.120 O m C from their last meeting. It's wrapped up. 0:01:18.160 --> 0:01:21.320 On February one, the central bankers announced the pretty modest 0:01:21.800 --> 0:01:24.880 basis point hike in benchmark rates. The key, of course, 0:01:25.160 --> 0:01:28.319 is what policymakers see looking ahead. So what are we 0:01:28.360 --> 0:01:31.760 hoping to see this time? Well, ordinarily you'd say you 0:01:31.800 --> 0:01:34.120 don't get that much from the minutes because it's three 0:01:34.160 --> 0:01:36.360 weeks old, and we've had a lot of data since then, 0:01:36.640 --> 0:01:38.800 and we have had a lot of data that may 0:01:38.880 --> 0:01:42.520 have changed their views. And this week we got some 0:01:42.640 --> 0:01:45.920 of those views start to starting to change in public, 0:01:46.440 --> 0:01:50.800 with Cleveland Feds Loretta Mester, for example, saying that she 0:01:51.040 --> 0:01:54.720 thought that they should have done fifty basis points at 0:01:54.800 --> 0:01:58.680 that February first meeting. Uh, that would have been something 0:01:58.720 --> 0:02:01.480 we were looking for. In the minutes. Well, let's hear 0:02:01.840 --> 0:02:05.880 a sound from Loretta Mester right now on why she 0:02:06.000 --> 0:02:09.440 says the case was made for a much bigger basis 0:02:09.440 --> 0:02:12.920 point hike. So at this juncture, the incoming data have 0:02:13.000 --> 0:02:15.200 not changed my view that we will need to bring 0:02:15.240 --> 0:02:18.639 the FED funds rate above five and hold it there 0:02:18.680 --> 0:02:21.640 for some time to be sufficiently restricted to ensure that 0:02:21.760 --> 0:02:28.000 inflation is on a sustainable path back to two. Indeed, 0:02:28.040 --> 0:02:31.160 at our meeting two weeks ago, setting aside what financial 0:02:31.200 --> 0:02:34.720 market participation participants expected us to do, I saw a 0:02:34.760 --> 0:02:39.320 compelling economic case for a fifty basis point increase. We 0:02:39.440 --> 0:02:43.040 should have brought the top of the target range to five. Alright, 0:02:43.120 --> 0:02:46.960 Loretta Mester, there, and now let's go back some of 0:02:46.960 --> 0:02:51.640 the things that you just talked about. These data points 0:02:51.680 --> 0:02:54.480 that really may have been exactly what she was referring 0:02:54.520 --> 0:02:58.079 to about better than forecast jobs report for January, better 0:02:58.120 --> 0:03:01.920 than forecast Q four GDP, better than forecast retail sales 0:03:02.000 --> 0:03:04.040 for the same month, and and how that may have 0:03:04.080 --> 0:03:07.080 influenced the FED in the last three weeks. It's gonna 0:03:07.080 --> 0:03:10.520 be interesting to see how it might have influenced the FED, 0:03:11.000 --> 0:03:14.919 because we've seen inflation come down a lot in November 0:03:14.960 --> 0:03:18.040 and December and then rebound in January in both the 0:03:18.080 --> 0:03:21.880 CPI and the p p I. And maybe it's telling 0:03:22.000 --> 0:03:24.440 us what the FED has been trying to tell us 0:03:24.600 --> 0:03:28.480 that the inflation genie is still not back in the bottle. 0:03:28.520 --> 0:03:30.760 It's going to take a while to bring that down, 0:03:30.840 --> 0:03:34.080 and they need to do more for longer, raised rates 0:03:34.160 --> 0:03:37.080 higher for longer, which is something they've been saying for 0:03:37.560 --> 0:03:41.280 a long time. Uh. The real dichotomy seems to be 0:03:41.360 --> 0:03:44.920 on the growth side, where uh many of these FED officials, 0:03:44.960 --> 0:03:51.000 including Mester, uh, including Tom Barkin earlier um saying that 0:03:51.720 --> 0:03:54.480 we think there's gonna be a recession or darn close 0:03:54.560 --> 0:03:57.920 to it. Uh. Laura Mester said that business contacts in 0:03:57.920 --> 0:04:01.160 her district are preparing for one. And yet, as you mentioned, 0:04:01.240 --> 0:04:04.280 the retail sales numbers and other signs of growth have 0:04:04.440 --> 0:04:07.840 come in fairly strong. So when does that happen? Right? 0:04:07.920 --> 0:04:11.000 And you spoke to Richmond FED President Barkin just this 0:04:11.080 --> 0:04:13.800 past week and got some great insight from him. So 0:04:13.880 --> 0:04:17.560 let's listen to what he told you about FED rate hikes. Well. 0:04:17.600 --> 0:04:19.520 I try not to get to wound up in any 0:04:19.520 --> 0:04:23.680 particular data read, particularly a January data read large, seasonality factors, 0:04:23.720 --> 0:04:26.880 all that sort of stuff, um um, But I do 0:04:26.960 --> 0:04:29.760 think what we're now in a position to do is 0:04:29.800 --> 0:04:33.000 to react to multiple months of data as they come in. 0:04:33.720 --> 0:04:36.000 We may or may not choose to take rates up 0:04:36.040 --> 0:04:39.039 further if inflation continues to persist, We'll have to see 0:04:39.080 --> 0:04:42.080 what happens. All right, there's Richmond FED President Thomas Barkin 0:04:42.160 --> 0:04:45.240 there now, Michael, what other insights could you glean from 0:04:45.240 --> 0:04:49.000 your conversation with him. Well, he's basically saying that the 0:04:49.040 --> 0:04:51.560 FED is going to be data dependent, which of course 0:04:51.600 --> 0:04:53.719 we all know, which means that their horizon is shorter. 0:04:53.760 --> 0:04:58.240 They're looking between meetings what's changed, rather than where we 0:04:58.320 --> 0:05:00.920 think will be at the end of the There they're 0:05:00.960 --> 0:05:03.880 all predicting that we're going to see inflation come down further. 0:05:04.000 --> 0:05:07.200 There are differences in the opinion of opinion in terms 0:05:07.200 --> 0:05:10.240 of how fast that's going to be. The question is, 0:05:10.279 --> 0:05:13.520 in the meantime, what are they going to do? And 0:05:13.680 --> 0:05:17.600 they're looking at each meeting as a decision point based 0:05:17.640 --> 0:05:20.440 on the data that they have brought in, Whereas many 0:05:20.480 --> 0:05:23.720 in the markets had been looking out farther into two 0:05:23.800 --> 0:05:26.000 thousand twenty three and saying we're going to see us 0:05:26.000 --> 0:05:28.800 slow down, or we're gonna see a recession, or we're 0:05:28.800 --> 0:05:32.200 gonna see inflation come down. And so basically markets had 0:05:32.240 --> 0:05:34.719 been rallying on the thought that the Fed wouldn't have 0:05:34.760 --> 0:05:36.640 to do much more and we'd have lower interest rates. 0:05:36.960 --> 0:05:39.080 Now the market seem to be catching up with the 0:05:39.080 --> 0:05:40.839 Fed and the idea that this is going to take 0:05:40.880 --> 0:05:44.360 longer than expected and they're going to raise rates faster 0:05:44.720 --> 0:05:48.919 and farther than expected. Now, the benchmark lending rate is 0:05:48.960 --> 0:05:51.640 not the only arrow in the Fed's quiver. There's also 0:05:52.120 --> 0:05:56.440 other quantitative easing measures they can take their tremendous balance sheet. 0:05:57.040 --> 0:05:59.520 What else can we maybe expect to see from the Fed? 0:06:00.040 --> 0:06:03.080 Maybe not at the March meeting, but later this year, Well, 0:06:03.120 --> 0:06:05.960 that would depend on what happens in Washington. The Fed's 0:06:06.000 --> 0:06:10.200 gonna keep the balance sheet reduction going at the rate 0:06:10.320 --> 0:06:14.040 it has been sixty billion a month and there's no 0:06:14.120 --> 0:06:16.040 reason for them to change it at this point. There 0:06:16.040 --> 0:06:17.880 have been concerns of the markets that it might be 0:06:17.920 --> 0:06:20.160 disruptive to the markets, that it might lead to some 0:06:20.240 --> 0:06:23.720 liquidity issues in various markets, and we're not really seeing 0:06:23.760 --> 0:06:28.560 that yet, so they can keep going. Um, the issue 0:06:28.600 --> 0:06:31.880 becomes if we get a debt ceiling problem, if we 0:06:32.600 --> 0:06:36.039 violate the dead ceiling, then uh, do the market sees 0:06:36.120 --> 0:06:38.159 up and does the FED have to start expanding its 0:06:38.160 --> 0:06:40.440 balance sheet again? To try to get us out of 0:06:40.440 --> 0:06:42.919 the hole. That's gonna be something that's gonna worry the 0:06:42.960 --> 0:06:45.599 markets as we get closer to that X state, which 0:06:46.320 --> 0:06:49.800 the Congressional Budget Office said this week was maybe between 0:06:49.960 --> 0:06:54.560 July and September, and so you'll probably see some repricing 0:06:54.800 --> 0:06:56.800 as we get closer to that date, depending on the 0:06:56.800 --> 0:07:00.120 news out of out of Capitol Hill. Now without the 0:07:00.120 --> 0:07:03.600 thing the markets and the FED are are really focused on, 0:07:03.680 --> 0:07:07.919 and that is housing and its impact on the economy. 0:07:08.000 --> 0:07:10.840 So we're getting a report on existing home sales next week. 0:07:10.920 --> 0:07:15.760 We just had some pretty encouraging data from home builders. 0:07:15.800 --> 0:07:19.640 They see things maybe turning around. We've seen uh interest 0:07:19.720 --> 0:07:22.720 rates fluctuate a little bit, maybe giving a little boost. 0:07:23.160 --> 0:07:26.600 How important is housing right now and could we be 0:07:26.800 --> 0:07:29.720 poised for a turnaround in the spring? Well, housing is 0:07:30.000 --> 0:07:33.240 a an important part of the overall US economy, smaller 0:07:33.280 --> 0:07:35.480 than it used to be, but it is also the 0:07:35.520 --> 0:07:38.840 most interest sensitive. So as the FED raises rates, we've 0:07:38.840 --> 0:07:42.240 seen a real fall off in housing activity. Now, mortgage 0:07:42.320 --> 0:07:45.560 rates are kind of holding in. The question is do 0:07:45.640 --> 0:07:48.600 they start to come down a little bit. They've fluctuated 0:07:48.680 --> 0:07:54.720 some and does pend up demand get people to buy anyway. 0:07:54.760 --> 0:07:56.880 That seems to be happening a little bit. We're not 0:07:57.400 --> 0:07:59.920 at a a an inflection point yet, but we do 0:08:00.080 --> 0:08:02.440 seem to be getting close to the bottom in housing 0:08:02.440 --> 0:08:08.120 and we're starting to see more activity. Home housing starts 0:08:08.400 --> 0:08:11.800 were weaker than expected in the month of January, but 0:08:12.560 --> 0:08:16.080 they may rebound as we get into this spring because 0:08:17.160 --> 0:08:20.040 the builders have a lot of backlogs that they're still 0:08:20.240 --> 0:08:22.280 trying to work off. And one thing we don't know 0:08:22.480 --> 0:08:25.920 is is there a problem building because they can't find 0:08:26.000 --> 0:08:29.200 enough workers. We know there's a shortage of construction workers 0:08:29.240 --> 0:08:31.760 out there, and that just feeds into the whole stronger 0:08:31.800 --> 0:08:34.920 economy thing. So a lot is tied up in the 0:08:35.000 --> 0:08:38.959 housing market. Um, not to mention its contributions to inflation. 0:08:39.679 --> 0:08:43.400 Well boy, and three jobs essentially for every home that 0:08:43.480 --> 0:08:45.960 goes up. But if you can't find qualified workers, those 0:08:45.960 --> 0:08:47.880 homes are not going to go up. Yeah. That's been 0:08:48.000 --> 0:08:52.240 the real problem with new home construction and sales. Alright, 0:08:52.240 --> 0:08:55.280 So let's circle back to the next meeting of the FED. 0:08:55.400 --> 0:08:58.440 It's in March, just a few weeks away, and there's 0:08:58.480 --> 0:09:01.480 a lot of growing talk right now about not a 0:09:02.040 --> 0:09:06.560 basis point hike, but a fifty basis point hike, and 0:09:07.160 --> 0:09:09.840 we heard from Mester just this past week. Are there 0:09:09.880 --> 0:09:12.960 any other Hawks comments you've heard from fits that that 0:09:12.960 --> 0:09:15.160 would indicate that we're looking at a much bigger hike 0:09:15.200 --> 0:09:17.800 here and that would really disrupt things. Well, so far, 0:09:17.960 --> 0:09:21.320 it's only been a little bit of speculation in the 0:09:21.400 --> 0:09:24.280 sense that Mester said she would have raised raids fifty 0:09:24.280 --> 0:09:27.240 basis points at the last meeting. She did not say 0:09:27.240 --> 0:09:30.040 what she would do at the next meeting, and others 0:09:30.040 --> 0:09:32.200 have sort of made the case that yes, we do 0:09:32.320 --> 0:09:34.440 need to do more. But you go back to their 0:09:34.559 --> 0:09:38.520 last but dot plot that came out in December, and 0:09:38.679 --> 0:09:40.880 at that point they said we were going to go 0:09:40.960 --> 0:09:44.040 over five percent to five point one percent, and there 0:09:44.120 --> 0:09:48.520 was almost a majority for going above five point one 0:09:48.559 --> 0:09:52.960 percent to five point five. And so it is very 0:09:53.000 --> 0:09:56.880 possible that the data that are coming in stronger than 0:09:56.920 --> 0:10:00.360 expected will push them in that direction. And if you 0:10:00.400 --> 0:10:04.080 were gonna go higher than we're at four seven five, now, 0:10:04.120 --> 0:10:06.160 if you want to go to five point five, then 0:10:06.200 --> 0:10:09.040 you might as well do a fifty basis point move. Um, 0:10:09.120 --> 0:10:12.680 so it becomes a more realistic possibility. Now we have 0:10:13.000 --> 0:10:16.800 another CPI report, another pp I report, another jobs report, 0:10:17.440 --> 0:10:20.040 all those before the next FED meetings, so a lot 0:10:20.080 --> 0:10:23.120 could change in the way that all these numbers changed 0:10:23.200 --> 0:10:26.320 from December to January. A lot could change between January 0:10:26.400 --> 0:10:29.200 and February. So we'll have to see which gets us 0:10:29.200 --> 0:10:31.439 back to the old FED thing about where data dependent. 0:10:31.520 --> 0:10:34.400 And we're going meeting by meeting, all right, well about 0:10:34.440 --> 0:10:37.680 five weeks away, and Michael McKee, Bloomberg's Global Economic and 0:10:37.679 --> 0:10:40.480 Policy editor, thank you once again for all your insight. 0:10:40.640 --> 0:10:43.600 Coming up on Bloomberg Daybreak weekend, It's almost one year 0:10:43.679 --> 0:10:47.160 since Russia's invasion of Ukraine. The situation there remains tense. 0:10:47.440 --> 0:11:03.320 I'm Tom Busby, this is Bloomberg. This is Bloomberg Daybreak Weekend, 0:11:03.320 --> 0:11:05.800 our global look ahead at the top stories for investors 0:11:05.840 --> 0:11:08.240 in the coming week. I'm Tom Busby in New York. 0:11:08.640 --> 0:11:11.400 Up later in our program, a lot of political changes 0:11:11.480 --> 0:11:14.760 in Washington, all of which could make or break for 0:11:14.960 --> 0:11:18.840 Democrats or Republicans. But first, next week marks one year 0:11:18.880 --> 0:11:21.440 since the start of the full scale invasion of Ukraine. 0:11:22.040 --> 0:11:24.320 For more on what's happening now, let's head to London 0:11:24.400 --> 0:11:28.600 and bring in Bloomberg Daybreak anchor Caroline Hepger, Tom Vladimir 0:11:28.640 --> 0:11:31.960 Putin's war in Ukraine is an energy war against the 0:11:31.960 --> 0:11:34.920 whole of Europe. For more, I'm joined by Bloomberg's oil 0:11:34.960 --> 0:11:38.400 trading team leader in Europe, All Nightingale and Rachel Morrison, 0:11:38.440 --> 0:11:41.880 who is our gas power and renewables reporter. Welcome to 0:11:41.960 --> 0:11:44.840 both of you, um to talk about, you know, an 0:11:44.840 --> 0:11:48.720 immensely difficult subject. Next week we'll see the one year 0:11:49.240 --> 0:11:52.680 commemoration of the start of this invasion of Ukraine. It 0:11:52.720 --> 0:11:56.120 has had such huge implications for the whole of you 0:11:56.280 --> 0:11:59.840 of a hot war, it's really changed everything. Rachel, can 0:11:59.840 --> 0:12:03.400 I start with you though, and just talk about whether 0:12:03.559 --> 0:12:08.160 Europe has stopped using Russian energy now for good? Is 0:12:08.240 --> 0:12:12.319 that one of the big consequences of this conflict. Well, 0:12:12.520 --> 0:12:15.960 gas in particular was a really big week point for 0:12:16.080 --> 0:12:19.760 Europe when it came to dependency on Russia, and that 0:12:19.840 --> 0:12:22.680 was one of the first things that the European Union 0:12:23.120 --> 0:12:25.480 thought to do was to try to reduce that dependence. 0:12:25.960 --> 0:12:29.240 And in a lot of countries it seems to be 0:12:29.720 --> 0:12:35.280 that piped gas from Russia has been almost entirely replaced. 0:12:35.600 --> 0:12:39.120 What it's been replaced with is liquefied natural gas or 0:12:39.200 --> 0:12:41.800 l n G. And a lot of that does actually 0:12:41.840 --> 0:12:47.560 come from Russia, so we're not completely independent from from 0:12:47.640 --> 0:12:51.720 Moscow in getting those supplies, but how we received them 0:12:51.840 --> 0:12:56.160 has completely changed. Alack, how do you think about this 0:12:56.400 --> 0:13:00.400 energy security? You know, has come to the forum like 0:13:00.480 --> 0:13:03.240 it has really done before, not not for many decades 0:13:03.280 --> 0:13:06.840 in Europe. Well, in both oil and gas, there's a 0:13:06.920 --> 0:13:10.640 huge mutual dependency, or there was a huge mutual dependency 0:13:10.920 --> 0:13:17.000 between Russia and Europe, and in the oil market we've 0:13:17.040 --> 0:13:24.560 seen a ban on almost all imports from Russia. How 0:13:24.600 --> 0:13:26.720 that that's clearly going to last in the short term 0:13:26.800 --> 0:13:31.040 and may continue for a period after, because how do 0:13:31.040 --> 0:13:33.280 you walk back from that? You know, there's a lot 0:13:33.360 --> 0:13:35.720 that has to happen, both in the conflict itself and 0:13:35.760 --> 0:13:39.400 then in the repairing of relationships before Europe can never 0:13:40.559 --> 0:13:43.680 resume Russian imports, but it's a huge source of supply 0:13:43.920 --> 0:13:48.920 and something that hasn't been painless for Europe or for Russia. Rachel, 0:13:49.280 --> 0:13:52.840 how did you manage to avoid a sort of energy breakdown? 0:13:52.880 --> 0:13:56.360 That was the doomsday scenario? Wasn't it that when this 0:13:56.600 --> 0:14:00.520 sort of shock attack happened, the idea that might be 0:14:00.920 --> 0:14:06.200 rolling black house on continental Europe yes, that's right. When 0:14:06.240 --> 0:14:10.800 the Nord Stream pipeline was attacked, that did cut off 0:14:12.120 --> 0:14:15.959 a vital supply line to Europe. And ways in which 0:14:16.400 --> 0:14:20.400 we've managed that some have been fortunate, like a really 0:14:20.440 --> 0:14:23.960 mild winter helped us to use less gas, but also 0:14:24.280 --> 0:14:26.840 the message coming from the European Union and from governments 0:14:26.840 --> 0:14:32.360 to use less. The target or consumption cuts were voluntary, 0:14:32.760 --> 0:14:35.800 but we did see countries like France, like Germany taking 0:14:35.800 --> 0:14:39.600 this really seriously, so people across Europe using less. We've 0:14:39.600 --> 0:14:43.200 switched on coal fired power stations as well. That has 0:14:43.280 --> 0:14:45.720 not had you know, that's something great for the environment 0:14:45.760 --> 0:14:49.160 and for emissions, but that has helped reduce the need 0:14:49.280 --> 0:14:53.080 for gas. And yes, this winter has been mild and 0:14:53.160 --> 0:14:56.240 continues to be so, so we've still got much more 0:14:56.280 --> 0:14:58.200 gas and storage than we usually have at this time 0:14:58.240 --> 0:15:00.480 of year, which will help us going into next winter. 0:15:00.920 --> 0:15:04.760 So it's been a kind of combination of action by 0:15:04.800 --> 0:15:07.200 people kind of pulling together to try to save energy 0:15:07.440 --> 0:15:12.680 and also good fortune. What has it meant for gasoline 0:15:12.760 --> 0:15:17.040 and diesel prices for fuel across Europe, Well, I think 0:15:17.120 --> 0:15:21.760 it's been a bullish force. There's been a long period 0:15:21.800 --> 0:15:24.120 of uncertainty about what would happen with the supply of 0:15:24.200 --> 0:15:27.240 the raw crude that goes into world refineries that makes 0:15:27.280 --> 0:15:31.640 the fuels. And Russia itself is the biggest or was 0:15:31.720 --> 0:15:36.120 the biggest single supplier of diesel to the European Union 0:15:36.840 --> 0:15:42.600 until an imports band began on. So are we're still 0:15:42.640 --> 0:15:45.560 in the early phases of understanding how the various bands 0:15:45.560 --> 0:15:48.440 will play out. Um, but it has been a source 0:15:48.440 --> 0:15:52.800 of supply concern. And if we start to see a 0:15:52.920 --> 0:15:55.760 real pick up in Chinese in the Chinese economy, and 0:15:55.840 --> 0:15:58.640 that's always been the big driver of demand growth in 0:15:58.680 --> 0:16:00.800 the old market. But if if that really does come 0:16:00.840 --> 0:16:03.440 into play and we see any kind of loss of 0:16:03.520 --> 0:16:06.840 Russian supply, I think there's a concern that prices could 0:16:06.920 --> 0:16:11.240 could push higher. Rachel has Europe, then you know, to 0:16:11.320 --> 0:16:16.720 continue that the idea around energy independence. Has Europe managed 0:16:16.760 --> 0:16:20.880 to replace Russian energy? Is it kind of rebranded Russian 0:16:20.960 --> 0:16:25.040 energy or what is it being replaced by? Because again, 0:16:25.080 --> 0:16:30.520 the kind of the move towards renewables has been given 0:16:30.560 --> 0:16:34.640 a bit a big shove by by this fact. Yes, 0:16:35.040 --> 0:16:37.960 you could describe it in that way. We've really replaced 0:16:38.160 --> 0:16:41.480 Russian piped gas with l erg a lot of that's 0:16:41.520 --> 0:16:47.840 coming from the US from catar and fundamentally we are 0:16:47.960 --> 0:16:53.000 short of gas in Europe and globally until when more 0:16:53.000 --> 0:16:56.560 exboot capacity comes online in the US. So if there 0:16:56.600 --> 0:17:00.800 are factors that changed the supply balance and that energy 0:17:00.920 --> 0:17:04.040 harder to get hold of or more expensive, then that 0:17:04.200 --> 0:17:07.439 will change things. There were sort of in this quite 0:17:07.960 --> 0:17:12.720 um strange situation where prices have fallen a lot. There's 0:17:12.880 --> 0:17:16.120 lots of supply around China. The economy hasn't banked back 0:17:16.119 --> 0:17:18.960 as quickly as people thought from COVID, and so the 0:17:19.000 --> 0:17:22.679 pictures looking pretty good. But what we hear in the 0:17:22.760 --> 0:17:25.960 market is that can change very quickly. You know, we 0:17:26.080 --> 0:17:29.160 might see demand pick up from somewhere. We might see 0:17:29.640 --> 0:17:34.000 problems like the three Portum which had a huge fire 0:17:34.040 --> 0:17:37.240 in the US and stopped exports from there. You know, 0:17:37.320 --> 0:17:40.960 anything can happen. We might have cold weather next year. 0:17:41.280 --> 0:17:44.720 So although we're looking quite good at the moment for 0:17:45.280 --> 0:17:49.760 this year and restocking gas reserves, there's still quite a 0:17:49.760 --> 0:17:52.520 lot of risk, aren't there in the market. And it 0:17:52.720 --> 0:17:54.960 isn't easy to replace this huge amount of gas that 0:17:55.000 --> 0:17:58.200 we were getting from Russia, and we've managed it so far, 0:17:58.440 --> 0:18:01.240 but it's not. You know, it's not sort of plane 0:18:01.280 --> 0:18:04.720 sailing from here by any stretch. Yeah, that's interesting. The 0:18:04.840 --> 0:18:09.040 energy transition, Rachel, you mentioned, um, you know, what are 0:18:09.080 --> 0:18:11.520 we expecting to see them? There's a real kind of 0:18:11.560 --> 0:18:16.159 division about how quickly Europe is moving in terms of 0:18:16.200 --> 0:18:21.399 the energy transition. Yes, it's one of the sort of 0:18:21.440 --> 0:18:25.679 most straightboard solutions to the volatility in gas is to 0:18:25.760 --> 0:18:28.840 just use less of it, but that's difficult in the 0:18:28.880 --> 0:18:32.520 short term. Renewables projects do take time to build. One 0:18:32.560 --> 0:18:35.679 of the biggest issues that we hear from developers is 0:18:36.040 --> 0:18:40.399 about red tape surrounding kind of planning and actually getting 0:18:40.400 --> 0:18:44.600 projects built so that flows everything done and those can't 0:18:44.600 --> 0:18:46.960 really be sped up anymore than they are at the moment. 0:18:47.000 --> 0:18:49.159 The European Union is looking at ways to try to 0:18:49.200 --> 0:18:54.080 get those projects online quicker, but while that takes time, 0:18:55.000 --> 0:18:58.879 then fossil fuels are the sort of easiest replacement. And 0:18:59.320 --> 0:19:05.320 last year emissions, particularly in Germany, they didn't meet any 0:19:05.359 --> 0:19:07.520 of the reduction targets that they were supposed to do 0:19:07.520 --> 0:19:09.560 because they were using more cold to try to use 0:19:09.840 --> 0:19:13.320 less gas. If that continues, what that means for sort 0:19:13.320 --> 0:19:16.399 of interim climate targets in twenties thirty and whether we 0:19:16.440 --> 0:19:20.679 see a kind of broader backsliding on emissions reductions at 0:19:20.680 --> 0:19:23.280 a time when really we should be pushing forward and 0:19:23.400 --> 0:19:27.399 you know, getting net zero as quickly as possible. Okay, 0:19:27.440 --> 0:19:29.520 thank you so much for being with the Splinberg's All 0:19:29.560 --> 0:19:33.159 Trading team leader here in Uniting and Rachel Morrison, or 0:19:33.240 --> 0:19:36.879 Gas Power and Renewables reporter as we think around the 0:19:36.920 --> 0:19:40.679 consequences of Putin's war in Ukraine. I'm Carline Heber here 0:19:40.720 --> 0:19:42.679 in London. You can catch us every weekday morning for 0:19:42.680 --> 0:19:45.240 Bloomberg Daybreak. You're at beginning at six am in London. 0:19:45.320 --> 0:19:48.240 That's one am on Wall Street. Tom. Thank you, Caroline, 0:19:48.280 --> 0:19:51.320 and coming up on Bloomberg Daybreak weekend more on NATO 0:19:51.400 --> 0:19:54.760 efforts to repel Russia and President Biden's trip to Poland 0:19:55.000 --> 0:20:10.119 and elsewhere. I'm Tom Busby and this is Bloomber broadcasting 0:20:10.200 --> 0:20:13.920 live from the Bloomberg Interactive Broker Studio in New York. 0:20:13.960 --> 0:20:18.680 Bloomberg elmon Frio to Washington, d C, Bloomberg to Boston, 0:20:18.760 --> 0:20:22.160 Bloomberg one O six one to San Francisco, Bloomberg nine 0:20:22.760 --> 0:20:26.080 to the country. Sirius XM Channel one nineteen to London, 0:20:26.240 --> 0:20:29.000 d A B Digital Radio and around the globe the 0:20:29.000 --> 0:20:32.919 Bloomberg Business Act and Bloomberg Radio dot Com. This is 0:20:32.960 --> 0:20:42.000 Bloomberg day Break Weekend I Tom Busby in New York 0:20:42.040 --> 0:20:43.919 with your global look ahead at the top stories for 0:20:44.000 --> 0:20:46.919 investors in the coming week. President Biden heading out on 0:20:46.960 --> 0:20:49.440 a trip to Poland as we approached the one year 0:20:49.480 --> 0:20:52.800 mark of Russia's invasion of Ukraine. It's an important trip 0:20:52.840 --> 0:20:56.080 and for more let's add to our Bloomberg News room 0:20:56.080 --> 0:21:00.399 in Washington and Sound On host Joe Matthew. Joe, thank you, 0:21:00.440 --> 0:21:02.280 Tom and joining us now to talk about this trip. 0:21:02.280 --> 0:21:06.119 Bloomberg's National Security Editor Nick wadhams he runs our national 0:21:06.200 --> 0:21:08.680 security team and it's great to see Nick. White House 0:21:08.680 --> 0:21:12.160 Press Secretary Karine John Pierre says this is a critically 0:21:12.200 --> 0:21:15.320 important opportunity to speak to both the international community and 0:21:15.359 --> 0:21:17.560 Americans back at home. Here's how she put it in 0:21:17.560 --> 0:21:19.000 the briefing room. Look, this is going to be the 0:21:19.040 --> 0:21:20.800 one year. He's going there ahead of the one year 0:21:20.800 --> 0:21:25.120 anniversary and sending a strong message of solidarity and UH 0:21:25.160 --> 0:21:28.439 and the President understanding to reaffirm right our support for 0:21:28.480 --> 0:21:31.119 the Ukrainian people as they're fighting back against the boot 0:21:31.200 --> 0:21:34.280 the rude war that Russia started almost a year ago, 0:21:34.359 --> 0:21:36.000 almost a year nick. There are a lot of themes 0:21:36.040 --> 0:21:39.920 running through this support for Ukrainians, solidarity with NATO, message 0:21:39.960 --> 0:21:42.360 to the Russians that the US isn't giving up here. 0:21:43.040 --> 0:21:45.480 And I suppose a photo up for American voters to 0:21:45.560 --> 0:21:48.679 maintain some domestic support. Although we know that there's already 0:21:48.680 --> 0:21:51.320 a little bit of pushback by some House Republicans when 0:21:51.320 --> 0:21:55.479 it comes to Ukrainian funding. What's the real audience for 0:21:55.520 --> 0:21:59.480 this trip? Well, you know, I think there are multiple audiences. 0:21:59.560 --> 0:22:05.200 One is back home. Obviously Republicans have not the most 0:22:05.680 --> 0:22:08.760 Republicans who actually have power are not calling for an 0:22:08.800 --> 0:22:12.760 actual reduction and funding, but they do want more scrutiny. Uh. 0:22:12.880 --> 0:22:17.040 So he's got to keep um folks together back home 0:22:17.080 --> 0:22:20.399 to keep the money and the weapons flowing to Ukraine. Uh. 0:22:20.480 --> 0:22:24.320 It's also directed at Europe because there is a concern 0:22:24.480 --> 0:22:27.480 that now that we're a year on, you know, Ukraine 0:22:27.920 --> 0:22:32.399 is firing an awful lot of artillery shells, they're losing weaponry, 0:22:32.560 --> 0:22:36.119 they're using up all those uh long range missiles and 0:22:36.160 --> 0:22:39.360 other things. So there really needs to be a continuous 0:22:39.440 --> 0:22:44.560 flow of of financial support, uh and also military support, 0:22:44.640 --> 0:22:46.240 and that's going to have to come from the US, 0:22:46.320 --> 0:22:48.280 but it's also going to have to come from other countries. 0:22:48.400 --> 0:22:51.119 So you know, the US has been the primary backer 0:22:51.240 --> 0:22:54.480 of Ukraine's military as well as its economic lifeline. So 0:22:54.600 --> 0:22:56.800 President Biden's going over there to sort of give a 0:22:56.880 --> 0:22:59.439 shot in the arm to all these efforts and say, okay, listen, 0:22:59.440 --> 0:23:02.119 it has been in a year that's gone so fast, 0:23:02.280 --> 0:23:06.080 but we cannot let up. John Kirby spoke about this 0:23:06.119 --> 0:23:08.639 as well. He speaks for the National Security Apparatus at 0:23:08.640 --> 0:23:11.280 the White House. Wants to talk about the importance of 0:23:11.320 --> 0:23:15.480 the international community's resolve and unity in supporting Ukraine for 0:23:15.600 --> 0:23:18.600 now going on a year. Wouldn't it be great if 0:23:18.640 --> 0:23:21.159 the President didn't have to make a trip around a 0:23:21.200 --> 0:23:24.560 one yearniversary of a war that never should have started. Sadly, 0:23:24.720 --> 0:23:26.440 that's where we are, and he wants to make sure 0:23:26.480 --> 0:23:28.399 that he's sending that strong message not only of the 0:23:28.440 --> 0:23:31.000 United States resolve but the international community resolve. Well, it 0:23:31.040 --> 0:23:32.520 is where we are. We have a sense of what 0:23:32.640 --> 0:23:34.600