Squawk Box Europe Express

The Dow swings from an 800-point loss back into the green before sinking into the red once more. Hayman Capital Management’s Kyle Bass tells CNBC that the Fed is a tinder box for markets, ahead of today’s crucial decision where it’s expected to signal the first rate hike in more than three years. U.S. President Joe Biden reiterates warnings to Russia against invading Ukraine, saying that any such move would “change the world”. Microsoft delivers a Q4 beat on the top and bottom lines, with a strong outlook, but shares have suffered in the recent tech sell-off – on course for its worst month in more than a decade. 

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U.S. markets ride a rollercoaster session on Monday – making their biggest intraday comeback since the GFC - with the Dow recovering more than 1,000 points. Asian equities fail to follow suit, with the Nikkei slumping to a two-year low. Credit Suisse warns fourth-quarter profit will be negatively impacted by litigation costs of around CHF500m with the lender saying it now only expects to roughly break-even. Moscow says the U.S. and NATO are ramping up tensions over Ukraine as President Biden places 8,500 troops on high alert and NATO sends warships and jets to the region. And in Italy an impasse over the presidential vote looms after more than half of lawmakers’ ballots come back blank in the first round.

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The S&P 500 and the Nasdaq both post their worst week since the start of the pandemic, with markets skittish ahead of this week’s Federal Reserve meeting. We hear from IMF managing director Kristalina Georgieva who says central bank clarity is vital for global economic recovery. Georgieva spoke to us during a Davos Agenda panel on the global economic outlook, which also featured the ECB's Christine Lagarde, the BOJ's Haruhiko Kuroda, as well as Brazil's Economy Minister and Indonesia's Finance Minister. In Italy, former Prime Minister Silvio Berlusconi drops out of the presidential race. Current prime minister Mario Draghi remains favourite to take over from Sergio Mattarella. Meanwhile, the U.S. recalls all non-essential embassy personnel from Kiev, as the UK government considers strident financial sanctions on Moscow in the event of an invasion of Ukraine. And in corporate news, Nelson Peltz’s activist hedge fund Trian snaps up a stake in Unilever on the back of shareholder frustration with CEO Alan Jope’s failed recent bid for GSK’s healthcare unit.

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Streaming giant Netflix sees shares plummet in extended trade, putting it on track for its worst day since 2012 as increased competition hits subscriber growth. The Nasdaq descends deep into correction territory as rate hike fears spook investors, but U.S. Treasury Secretary Janet Yellen tells CNBC inflation should fall back down towards 2 per cent later this year. Cryptocurrencies also take a hit, sinking to multi-month lows, with Bitcoin breaking below $40k. And U.S. Secretary of State Antony Blinken is set to meet his Russian counterpart Sergei Lavrov in Geneva, while Russia’s Ambassador to the EU tells CNBC in an exclusive interview that he hopes Washington will follow through on its security guarantees.

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Higher treasury yields continue to pile pressure onto U.S. equities with tech stocks suffering in particular. The Nasdaq enters correction territory but BofA CEO Bran Moynihan tells CNBC the prospect of rate hikes signals that the worst of the pandemic effects on the economy are largely behind us. In a bid to prop up a slowing Chinese economy, the PBOC slashes a key lending rate for the first time in two years, sending Asian markets higher. Meanwhile, UK Prime Minister Boris Johnson has once again faced calls for his resignation over Covid rule-breaking allegations as well as a defection from his own party to Labour. In geo-political news, President Biden warns Russia of disastrous consequences should Moscow decide to invade Ukraine. This as, the EU foreign service head tells CNBC exclusively that the bloc should brace for conflict.

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Ten-year Treasury yields hit a two-year high sparking a Wall Street sell-off as investors brace themselves for a possible rate hike at next week’s Fed meeting. However, BlackRock CEO Larry Fink tells CNBC he remains sanguine about any tightening at this point. We have more bank earnings from Wall St. with Goldman Sachs plunges almost 7 per cent in yesterday’s session as its Q4 costs come in higher than expected. Microsoft seals the biggest tech deal of all time, snapping up gaming company Activision Blizzard in a deal worth $67bn. And, U.S. Secretary of State Antony Blinken arrives in Kiev in a bid to quell tensions with Moscow. CNBC hears from Ukraine’s ambassador to the EU who says the bloc’s dependency on Russian gas is central to resolving the stand-off.

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Asian equities slump and U.S. futures fall, while yields climb, ahead of a big week for the Fed. In Japan, the BoJ lifts inflation forecasts and says risks are generally balanced. Newly appointed German foreign minister Annalena Baerbock arrives in Moscow following talks with her Ukrainian counterpart in Kyiv, as tensions with Russia show no signs of abating. And in Brussels, euro zone finance ministers meet in an attempt to agree a new debt reduction plan for the bloc. 

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From politics to sports to banking giants, Covid rule breaches threaten the positions of the powerful. Credit Suisse chairman António Horta-Osório is forced to resign after breaching restrictions in Switzerland on several occasions. Former UBS Group COO Axel Lehmann has been named his successor. In M&A news, Unilever’s £50bn offer for GSK’s consumer unit is slapped down. However, GSK has assured investors it remains committed to spinning off the business. Meanwhile, Chinese GDP grew by 8 per cent in 2021 but expansion has decelerated to an 18-month low. The PBOC has cut a key loan rate in an attempt to aid economic activity. And UK Prime Minister Boris Johnson faces more pressure ahead of the ‘Partygate’ investigation report. Opposition Labour leader Keir Starmer says the lockdown rule-breaking at No. 10 and other ministries means Johnson has “lost the moral authority to lead” and needs to resign.  

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Tech stocks weigh on U.S. and Asian markets with the Nasdaq breaking a three-day winning streak and the Nikkei slumping. Producer price inflation Stateside hits its highest level in 12 years, while several Fed members take a more hawkish line on rate hikes. Chinese imports come in far lower than expected but exports are propped up by global demand. In tech news, German software giant SAP issues strong guidance for 2022 and predicts a better-than-expected Q4.

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U.S. consumer inflation hits a four-decade high but President Biden says prices have peaked. U.S. futures are down ahead of an earnings season where S&P 500 companies are expected to deliver Q4 growth upwards of 20 per cent. U.K. Prime Minister Boris Johnson faces a chorus of calls to resign after admitting he did attend a Downing Street drinks party in May 2020 while the country was subject to strict lockdown measures. And NATO and Russia remain locked in a standoff over Ukraine, as both sides refuse to give ground on key demands despite hours of talks in Brussels.

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