Skip to main content

tv   Bloomberg Markets European Open  Bloomberg  August 4, 2021 2:00am-4:00am EDT

2:00 am
annmarie: -- anna: good morning. the cash trade is less than an hour away. here are your top headlines. asian stocks and european futures edge higher. concerns over china's latest technology clampdown ease amidst a mostly positive global earnings story. china seems to have brought its
2:01 am
covid outbreak since the beginning of the pandemic, wanting a gdp downgrade -- prompting p downgrade. -- gdp downgrade. welcome to "the european market open." mark, good morning to you. what are the markets saying? . mark: the underlying theme we are talking about is unfortunately still the virus. that is weighing on commodities, bonds, and stocks globally. the u.s., the delta variant is starting to cause concerns with reopening. china we have less information. in the short term, china stocks are higher, hong kong stocks are
2:02 am
higher. quite a bit of volatility today. we are not exactly exuberant because of that lurking delta threat. anna: we are feeling better about the text clampdown. at the same time, concerns about the delta variant and the impact on life in china. we are just an hour from the start of cash equity trading in europe. european equity market futures point to the upside. we touched a record on the s&p at the close in the united states. underlining how the earnings season is going. the market seems to be finding enough reason to be positive. in terms of the gmm picture, what do we see? does that give us a sense of
2:03 am
these drivers, which do seem to run counter to each other. mark: short-term, the positive news flow is winning out. you see that in the equities call. all the major activity in asian equities creeping higher. most asian currencies are gaining. part of that is driven by the fact the yuan has been strengthening. the move in the short-term term is china positivity. chinese asset prices have weakened a lot. anna: breaking news out of london. that concerns the financial services business giving first-half operating profit. 1.86 billion pounds, that is above the estimate, just shy of that one billion mark.
2:04 am
they are talking about how they are set to deliver double-digit growth is an operating profit at the full year. let's speak now. in terms of the drivers that go into the business, the messaging of your outlook you are trying to get across, you are talking about double-digit growth is operating profit at the full year. are you expecting to re-guide higher expectations? >> we delivered 22% in the first half of the year, which beat consensus. we are doing incredibly well and we are very confident about the
2:05 am
future. we are an investment business. we need investment-led growth and that is what we have been doing. we have been investing during the pandemic. >> you previously said it is the most exciting time to invest since the 1850's. do you still believe that, and what areas are most exciting you today? >> i absolutely believe that. we have to become a much more scientific and technology-led country. esg and the climate initiative is huge. all sectors of the u.k. economy are under-invested in for 30 to 40 years. we can step up in all areas. other that is housing on one side, infrastructure on another side, regenerating our cities,
2:06 am
the whole area of climate implementation, there is not enough doing. as our results demonstrated, we are back on track to delivering the high-performance we have had. anna: we talked to in the past often about investing in growth and higher productivity and the like rather than investing in government bonds. i wonder what you make of the seemingly almost endless, relentless bond rally we are seeing globally. u.s. treasury yields, the japanese 10 year back below 0%. the bund. that is back down at -0.84%. i suppose you think this justifies where you have been prioritizing investments for a while.
2:07 am
>> we are only at 22% compared to half a percent on government securities. watch liquidity. we are investing in real assets. the deal yesterday was putting half a billion each effectively into a joint venture across the u.k.. that is typical of the deals we have been doing. 4 billion pounds at oxford university. lots of people want to coinvest with us. the positive trend here in the u.k., because there are so many output caps everywhere, and that is why the economy has underperformed in the u.k.. anna: what is it that drives the return on equity? which of the assets will do that for you?
2:08 am
others may or may not be able to get away from mandates in government debt, but what are the assets they get you that return? >> all the real assets we have been talking about. housing, urban regeneration, energy assets that performed well, venture capital businesses , our core investment management business. we are seeing very strong moves in h2. they are all performing pretty well. the act with synergies. the synergies we have between our businesses allow us to work collaboratively to make great things happen here in the u.k. and increasingly in the united states. mark: you talked about property
2:09 am
real assets. is there any sense what the post-covid world means for offices and those landlords? >> we are seeing a return to working in the workplace. it is going to be very different. some things changed fundamentally during the pandemic. we have not been in buildings for a very long time. the challenge is how do we get people back to working in the city? around the country there's a lot more economic activity going on in the core areas within those. i have been doing that throughout the pandemic. i was in scotland last week. there has been a lot of activity going on in cities outside of london. we have to do a really good job
2:10 am
the next few years and be focused on, how do we get people returning to the workplace? 525,000 people work in the square-mile here. anna: do we accept some people will only come in a few days a week and try to help the city reinvent itself? >> that is part of the solution. people are definitely going to change their working from home and working from workplace balance. some of our people have always worked all the time from home and just come into the office for collaborative meetings. that is certainly not going to change. we are building a more collaborative spaces here in the office.
2:11 am
it is an unusual concept we are seeing right now. that is what happens. there is a novelty. but i think across the country, we are not seeing that same trend as we are seeing in london and chicago and new york and washington where we have offices in the states. mark: you have talked about the appeal of real assets and a return on inflation. the u.s. infrastructure deal is going to boost the inflation story. what is your perception of inflation and how much of it is a positive for the investments you have, and how much of a threat it is otherwise? >> we don't see it as a threat. you need a little bit of inflation to oil the economy. there is perhaps more structural inflation around them people are
2:12 am
thinking. we would think some of this is structural. we are hoping we will see real wage increases. we have not seen that in the united states or u.k. the last 20 years. minimum wages have not gone very far. that has to be investment led. the tech industry showed the way , invest, invest, invest. we have invested, invested, invested over 10 years now in the same things. they have delivered fantastic results for us. anna: are you excited about u.s. infrastructure opportunities, given the amount of spending that's going to happen? >> i'm excited about the u.k. and the u.s. investment in
2:13 am
structural opportunities. we have the prime minister and the chancellor who are excited to see climate investments happen. i'm sure we can step up even more. in the united states, we are excited, too. the united states infrastructure has been crumbling for many years. there are exceptions. some cities are fantastic, austin, texas being one of those. but underinvestment has been the theme of too many western economies over the last 30 years. this is a wonderful opportunity to step up. why would you buy government bonds when you can get a 20% on equity? it is an unusual world where that happens. anna: thank you for speaking to us.
2:14 am
coming up on this program, we carry on with the earnings conversation. the cfo of commerzbank will be joining us. the german lenders saw business decline more than expected in the most recent period reported. we will be speaking to the ceo of the homebuilder. we will take a look at the labor shortages that could be making life difficult for the housing market. that is at 7:40 u.k. time. ♪
2:15 am
2:16 am
anna: 7:16 in london and this is
2:17 am
the picture across european equity markets. it has been a fairly quiet session through the asian market session. certainly some things have been on the move. what is driving things in new zealand? mark: a massive move higher in yields the last couple days. it was driven again by a good jobs report this morning. that has helped support the new zealand dollar. this is really interesting because the theme of the last couple weeks, the last month or so, the decline in u.s. yields. we are talking about peak growth. maybe the fed does not need to be so hawkish. this chart is showing some g10 central banks are going to hike out a full on pace. it will take a shock for them not to raise rates and they are likely to after as well. nearly three hikes priced in for this year.
2:18 am
a rapid change. are we really going to go into a world where new zealand takes two or three times on the fed stays dovish? that is almost impossible. the impulse would be to go, surely new zealand is going to follow the fed. it might be the fed that will readjust pricing. new zealand might be a small central bank, but it was the first central bank in the world to start inflation targeting. it has led the way this year being much more proactive on monetary policy. the bank of canada has talked about doing that. this is another example where new zealand is leaving -- leading the world out of the pandemic. the fed may be playing catch-up. an interesting leading signal rather than an overshoot. anna: i wonder where this story
2:19 am
meets the delta variant story. we focus our attention a lot on countries where the delta variant is on the rise. that seems logical. we talked a lot in the u.k., increasingly europe. we talk about what that does to growth trajectory. what does that do to the ability of the economy to open or remove barriers to entry in the case of china? i start to wonder what this means for countries that have cut themselves off from the rest of the world and managed covid that way. if we have a delta variant that is so much more transmissible, you have to wonder how those economies make it back into the mainstream, entered the international fold if you like. i wonder where these narratives start to rub up against each other. >> the reason i think the fed is likely to is the evidence vaccines are working.
2:20 am
as we have discussed, delta disrupts but does not derail the reopening. it may be going slower. the world's reopening, the global economy is doing ok. the fed will have to tap the brakes a little bit. one of the real ironies is new zealand is doing really well, but as you pointed out, it has no natural antibodies and it is going to be one of the hardest to reopen. maybe it is the one that is making a mistake and there are other economies which are not pricing in hikes yet but are doing an exceptional job on vaccination rates. they may be the ones tightening over the next few months. anna: interesting to think about in this latest round of the fight against covid-19.
2:21 am
you can get all the thoughts of the markets live team, mliv go is the function to use. coming up, virus researchers in china. the worst outbreak since the early days of the pandemic is fueling growth concerns. tourism sites being closed. more on that next. e on that next.
2:22 am
2:23 am
anna: 40 or so minutes to go until the start of cash equity trading. european futures point to the upside. u.s. futures muted after touching new highs on the s&p in yesterday's session stateside. let's talk about china. china is experiencing its broadest outbreak of the coronavirus since the beginning of the pandemic in late 2019. the outbreak is hampering
2:24 am
tourism and spending during the peak summer holiday. for more on the latest situation we are joined by bloomberg's health editor who is in hong kong. good to speak to you. why is china moving backwards when it comes to the pandemic? how restrictive has life become because of the delta variant? >> china has done an excellent job keeping the virus under control the past year and a half. largely through these restricted measures, masking, social distancing, and limiting people who are allowed in. now that it is seeing this outbreak of cases across all of china, more than half of its provinces now seeing coronavirus circulating there, and have high vaccination rates, so what they are doing is locking down again. and exactly what you are saying. we are seeing economic growth, closing tourist sites, flights down week over week, even trains are being closed down.
2:25 am
cinemas. it is being very widely curtailed throughout china to try to get this virus under control once again. mark: do we have any guidance at all how long this latest lockdown will last? >> we don't know how long it's going to last. the thing that is critical as we are seeing large numbers of infections happening throughout the community. that means the virus is on the loose. the vaccinations china has been using are less potent than those used other places, mrna vaccines, and we know because the delta variant can break through and we see continued transition -- transmission. we're going to have to see whether that horse is out of the barn and these are going to continue now that infections have taken hold. we know they have very strict policies, very aggressive contact tracing and testing, so that is going to be the plan. they are going to try to shut it down again but it's going to be
2:26 am
a difficult task. anna: the extent to which you can do that with the delta variant is going to be interesting to see. some economists are starting to take note of this. >> it is just the very early days we are seeing. they are predicting the biggest impact is going to beat in the third quarter because that is where we are seeing the outbreaks. that is where they need to lock things down. we are seeing about a 0.7 percent drop for the third quarter. nomura is cutting expectations down about 1.2% to about 5.1% growth in the third quarter. overall the entire economy, down to 8.2% from 8.9%. it will be a hit. anna: coming up on the program, we speak to the cfo of commerzbank as the lender swings
2:27 am
to a loss but sticks to its revenue target. lots to talk about. this is bloomberg. ♪ and there you have it -
2:28 am
wireless on the fastest, most reliable network. wow! big deal! we get unlimited for just $30 bucks. i get that too and mine has 5g included. impressive. impressive is saving four hundred bucks a year. four bucks? that's tough to beat. relax people, my wireless is crushing it. okay, that's because you all have xfinity mobile. it's wireless so good, it keeps one upping itself.
2:29 am
2:30 am
anna: welcome back to "the european market open." commerzbank saw business declined more than expected in the second quarter. revenue fell 18% from a year earlier internet income slumped to a loss of 527 million euros. both worse than analysts anticipated. the bank's chief executive launched a deep restructuring earlier this year. cutting 10,000 jobs and -- very good morning to you.
2:31 am
let me start with the topline performance of the business. revenue down by 18%. lower-than-expected. the net loss worse than expected and so is the operating profit. yet you are sticking to your guidance. what gives you the optimism to stick to that guidance? >> q1 was exceptional from the revenue side. if you take the second quarter and compare, the net commission income is up year on year. very important and very promising for the next month. we think we will continue this trend the next six months and therefore wasted toward guidance that revenues will be slightly above last year's revenues.
2:32 am
mark: it feels to me commerzbank has been doing new cost-cutting initiatives for so many years, it was a dominant theme when i worked at the bank almost a decade ago. how bloated do you think the bank still is? it takes time for headcount reductions, particularly in germany given the strength of labor unions. is this going to be an ongoing theme for years to come? or do you think we are nearing the end of the cycle of job cuts? >> it is a difficult thing to judge. there have been changes in the business model and that continues to be something that will be there all the time. restructuring is up. making very good progress.
2:33 am
we are basically -- we are halfway through the details. we have signed already thousands of employees contracts and we have launched a voluntary program for people to leave until the end of this year. it looks good. i'm confident at the end of the year we will have closed agreements with more than 5000. good progress on this side. anna: progress on the cost. you have a good take on the german economy. speaking of the midsize
2:34 am
businesses, do you think we have seen the peak in german corporate defaults as you look at the recovery of the german economy? what are you seeing in your numbers? you put out in your statement today, you said full-year loss provisions lower than one billion euros. what do you see in that provisioning? >> definitely improved the guidance of the second quarter. if you look at the second quarter for corporate clients, he did not see anything like that. we are still cautious. if you look at the first half, it was up 235 million. we have our extra buffer, the top level adjustment which we kept untouched. we still stay cautious.
2:35 am
our revenues are 3% up year on year. we still see that activity is not as high. we have the delta. . -- delta variant. we will come through the next month and then we can be more optimistic. we still stay cautious. this is why we kept the buffers as we have. mark: you made additional provisions around the tax practice. you have experienced other one-off costs including writing off a former i.t. initiative and higher contributions to
2:36 am
germany's deposit insurance. how much have these one-off costs disrupted your turnaround plan and what are you doing to offset that? >> a lot has been left out. we have positive impact from the tltro. we have a positive contribution of more than 100 million euros. in total, it has been balanced out.
2:37 am
the outsourcing project is something we can't balance out. it is a one time fact. things like that happen. we are in the middle of the transformation program. it was a tough decision but it was necessary to make sure we deliver on the target we have laid out for 2022 to 2024. anna: we have noticed quite a bit of flux or upheaval in terms of the supervisory board memberships, the key posts within the bank also seem to be bank it -- vacant. are you looking to more stability or is that a situation that is changing? >> we all know there will be always changes in management
2:38 am
because that is part of daily life. we have seen more changes then we probably would have pushed for. we are now entering a phase, that is good. one key lever we have achieved actually last week, we finalized our executive board. we have clarity. we have clarity of structure. that is important for the coming months. anna: thank you for spending time with us. coming up, one of the uk's biggest housebuilding companies swings for profit in the first half. ♪
2:39 am
2:40 am
2:41 am
anna: welcome back to the european market open. 8:40 in paris or berlin. more comfort coming through from china in terms of regulation. not necessarily on the virus, but on regulation. earnings season in full swing. let's talk about one of the uk's biggest housebuilding companies. it has posted a pretax profit of 287.5 million pounds up from a pretax loss year earlier. lockdowns forced the company to close building sites around the country. joining us now is the ceo. very nice to speak to you. a different first half than the first half of last year.
2:42 am
last year was all about coronavirus, the closure of building sites. you were saying this morning full-year u.k. joint ventures will be at the top end of the range. what is the optimism you feel about the rest of the year? >> this has been our strongest first-half performance profit wise ever. second highest volume performance ever in the first half. perhaps 99% sold for this year. the biggest challenges -- challenge is making sure we maintain consistent build progress which we are doing. our teams are in a good place. mark: you said the first-half
2:43 am
record results were due to strong cost discipline. i wonder how much you are seeing these labor shortages and how much that is feeding through to compensation costs. >> we do see it. there is pressure on building materials and people costs. we are also seeing good price inflation. we are in control of where it sits. that does not take away the fact there is the pressure on costs. anna: is that to do with labor shortage? talk about the wage pressures. we have a story talking about the scarcity of workers in some industries, particularly -- well, a variety of industries, but construction being one of them. do you want government to do something about this?
2:44 am
is this about too much isolation due to covid? is it to do with the aftermath of brexit? is it to do with the pandemic more broadly and people leaving the u.k. for other parts of europe and not returning? what is your assessment and what would you like done about it? anna: you asked if it is about people costs and it is not. the stronger inflation is on building materials. the industry supply chain recovers post-pandemic. i don't think there is anything the government can do about that. we see it improving, but it will take time. construction has taken off strongly. i think people costs, there is also a time element. we have invested strongly in apprentices and our own staff. we tend to believe the biggest
2:45 am
responsibility within the industry are those investments. government can sometimes help us. on the pandemic, i expected to be a short-lived thing. it is friction in the context of what has been a challenging 18 months in construction. the vaccines have done a great job. we came into this year in a strong place. you can see that as an the first half. while it is a challenge, we don't see it as a dramatic strategic challenge for us. mark: i certainly keep losing u.k. staff to the pandemic. you talk about investing in your staff. what accessibility are you offering workers in this post-pandemic world? >> most of our office staff are not back in office yet. they are able to go back, but we
2:46 am
are giving a lot of flexibility. our expectation is, you know, we have been talking about it the last few months, that we will maintain our flexibility in as many roles as possible once we see offices fully open into september and october. that is for most normal office space rules. if you work two days from home, three in the office, that is fine. it is up to the staff and the individual team. it is necessary, particularly for young people, to spend time with the team they are operating in. we also have people not working from home at all. we will question whether some of our own internal management is. we will give people a lot of flexibility in the middle.
2:47 am
anna: can i ask about the non-office-based staff? we talk about like stability in the context of returning to offices. for many in your workforce, it is simply not possible to work from home. are those groups of labor asking for more flexibility at a time when labor is back tighter? are you giving them more flexibility? some contractors are talking about a few hours off on fridays or sharing patterns. is there any momentum toward that? >> the two key groups for us, our site management teams and sales staff. with our sales staff, we have learned a lot about how prepared customers are to do the sales process digitally. clearly people want to see a site, but there's quite a lot of the process which is about choosing options and it is
2:48 am
convenient for customers to do it at different times, and convenient for our own staff. we think that opens up a way we can give more flexibility to our sales teams. for management teams, it is about how we give them flexibility. clearly we need somebody for health and safety on-site at all times. we can give some flexibility. it is harder to give an across-the-board rule. we can improve. contractors, flexibility is in the hands of their organizations. there is already some built in flexibility in our worksite environments. mark: the migration we are seeing from london to the suburbs, do we think the trend is played out now that covid restrictions are going to be
2:49 am
lifted? >> it is changing perspective for people but it is a little bit about timing. i mean timing in an individual's life. there is always been a tendency for people to move from the cities to the suburbs and vice versa. we are seeing the high level of it played out. we are positive about the london market long-term. we have seen real growth in markets into the southwest. that is a long-term trend. that is something that was already happening. anna: thanks very much. good to speak to you. taylor wimpey ceo pete redfern. coming up, we will look at your stocks to watch, including hugo boss. the retailer swings to a profit. more on the outlook next.
2:50 am
2:51 am
2:52 am
anna: welcome back to the market open. let's get our stocks to watch. sam unstead joins us from our equities team. one of the things you are watching is not a company that is listed in europe. you are thinking about softbank but it is what they are investing in. >> that's right. softbank has a stake in roche, the was pharma company, with a big boost from covid testing. this is much more probably a story for softbank. this is happening at the same time they are facing opposition
2:53 am
to the sale of arm to nvidia. lots of moving points with softbank -- parts with softbank. roche is larger than anything they have done in that space so far. mark: siemens energy, we had the ceo on bloomberg earlier. what is the story? >> more of a confirmation of a downgrade. the big hit that is happening is from the wind turbine company which downgraded its guidance last month. that has weighed on the stock significantly. the gas turbine business and any other renewable upside the stock may have, the headline news is they clarified the margin guidance is lower. anna: and hugo boss. numbers out from the german business. >> this is a case of a good story from a luxury good store.
2:54 am
they confirmed their guidance, continue to see improvements. maybe not as bullish as some others, but we expect shares to do ok. anna: thanks very much for joining us with the stocks that we are watching. just a few minutes to go until the start of the european trading day. european equity market futures look positive. u.s. futures entirely flat right now, but i guess coming off really high levels. mark: look, we are right by record highs. the macro backdrop is very positive. this is a month where we know we have lower liquidity. we know the delta variant has scared us. i expect a number of scarce throughout this month. buying the dip will probably be rewarded this month, it is just the dips will be slightly larger. the macro backdrop is positive. the european story is more about
2:55 am
earnings. later on we have the adp data. a precursor to non-foreign payrolls on friday. anna: the private sector job creation data, we will look for that later on today. we spent a lot of time asking whether different asset classes are telling us different things about coronavirus in the last six months. maybe bonds versus stocks. commodity markets the last few days showing some nervousness once again. i wonder if we think commodities are reflecting the delta story. mark: absolutely. oil is most important. there is middle east tension. there is also data out of the u.s. that should have been bullish, but we are seeing them quite off. wti is down on the day. this is a real reflection of what is happening on the delta variant and the threat there. anna: thanks very much for spending the past hour with us. good to have you with us as always.
2:56 am
i will be back in just a moment with the start of the equity trading session. market futures pointing to the upside. u.s. futures a little more muted. the european open his next. ♪
2:57 am
2:58 am
2:59 am
anna: welcome back to the european market open. one minute until the start of cash equity trading. asian stocks and european futures edge higher with concerns on chinese clampdown amidst a mostly positive earnings picture globally. china sees its broadest covid outbreak since the beginning of the pandemic, prompting downgrades for the world's second-largest economy. commerzbank revenue target, despite missing estimates. they are making good progress on the restructuring plan.
3:00 am
20 seconds until the start of the european equity trading session, and for this wednesday morning european equity markets are pointing to the upside. we have a lot of earnings, we have had earnings out of commerzbank, siemens energy, a lot to talk about on individual names. hugo boss, we were talking about that before the break. also u.k. house builders shape the conversation we had a moment ago. a lot to talk about on the earnings front. the bigger picture story is picking up the mood music out of china. we have the stoxx 600 up 0.3%. the ibex up 0.3%. wedding for the cac and dax to open. -- we are waiting for the cac and dax to open.
3:01 am
we are making gains across european equity markets. some news out of china is having an impact. china is experiencing the broadest outbreak of the pandemic. it is feeling growth concerns and hampering travel and tourism during the peak summer holidays. joining us now is karen chedid, director, blackrock. really nice to speak to you this morning. there is negativity around china, and positivity in the mood music around regulation of the gaming industry. perhaps that turned more positive in the last 24 hours. through all of that we are making modest gains. useful to think about where you see china at this point, whether you are seeing clients reevaluate exposure given the volatility. karen: thank you for having me. when we look at china, there are
3:02 am
signs of macro easing coming through. we saw that in the recent rrr cut. also what we are calling at a regulation level tightening with what happens with the education sector last week, or the headlines this week around gaming. taking a step back, we're seeing a couple of trends. on the fixed-income side is the buying of chinese government bonds. it remains a persistent theme. it has the potential for more macro easing with signs of growth peeking in china in the -- peaking in china in the manufacturing sector. the chances of further macro easing are definitely on the
3:03 am
table in the second half of the year. the case for chinese government bonds remain strong. macro easing, the chances of that continuing -- on the equity side, a bit more volatility in the chinese equities, although on a strategic level, we remain overweight and see room for china as a standalone allocation. anna: you remain overweight on chinese equities, and the returns more than compensate for the risk when talking about china. what is your tolerance for a slowdown in growth with that overweight position in mind? what clampdown on the delta variant spread could we see in china? would you be able to be
3:04 am
confident to make those statements? karim: that is a great statement . we need to break it up on the equity side. on a tactical horizon for the rest of the year, there is room for a bit more head of volatility in the equity market especially as we i just -- we digest what we have seen in china. the economy was the first to rebound, and now in 2021 is the first to show signs of peaking. with some localized restrictions of the resurgent delta, we could see more downside to growth. in the near term, we are neutral chinese equities, taking on board. on a strategic horizon, chinese equities remain one of the highest return potentials, and
3:05 am
so as you say, the equity risk, the valuations are already priced in and compensate for the strategic horizon. the case remains strong. things are perhaps getting a little bit more bumpy, but remain attractive. anna: thinking about signs of growth peaking, is that the story in the united states with the recovery from the worst of the coronavirus underway in the u.s.? how long do you see that carrying on for? how significant will that be? karim: it is starting to come through. we saw everything earlier this week, and in the manufacturing sector signs of peaking.
3:06 am
later this week there will be room to grow when it comes to the labor market recovery. on the manufacturing side, we are seeing growth peaking. this is the shortest recession in the past century, since the great depression. especially in the case of the u.s. economy. we contracted and rebounded quickly. a bit of plateauing is not a big problem. anna: we have seen this strong rebound. stay with us, karim chedid, head of investment strategy for ishares emea, blackrock. coming up, equities and european
3:07 am
stocks set records, encouraging earnings and a strong performance for european stocks. this is bloomberg. ♪
3:08 am
3:09 am
>> the semi conductor shortage has been impacting us. >> it has been quite a whipsaw for us. >> we are managing it week to week and day-to-day.
3:10 am
>> maybe first semester of 2022, some situation and certainty. >> it is important to have the continuous -- and how we can anticipate the supply situation. >> it is out of our control essentially. it does seem like it is getting better, but it is hard to predict. >> we have overcome chip shortages quite well. >> it is something we will have to deal with the rest of the year and potentially into 2022. >> a lot of customers would like to buy our cars, and he like to sell more. -- we would like to sell more. anna: a host of executives, interesting their insight into the chip shortages the industry is dealing with. let's look at some of the
3:11 am
movers. we have had a lot of earnings out, and they are making themselves felt across the european market space. commerzbank moving to the downside. some banks did well yesterday, french banks did well, and that is the case today. commerzbank moving lower 3.6%. revenue came in below estimates, and a net loss. that is weighing on the business. we spoke to the ceo earlier this morning, the share price up 4.4% . the full year profit guidance is more optimistic. it will be at the top end of the range. we had a interesting conversation about the extensive wage pressures and labor shortages, and difficulties in materials.
3:12 am
the pricing of materials. legal in general up 2.5%. a double-digit growth in operating profit for the full year. that is what they expect to deliver. they have delivered in the first half, a strong story. let's get back to our conversation with karim chedid, head of investment strategy for ishares emea, blackrock. this makes me think of the earnings season and the way it has been comforting for global investors when we are dealing with concerns around the delta variant, what that does to global growth. we have seen companies beating estimates and having positive narratives. are you taking away positives from the earnings story? karim: i am. we are well into the reporting, the u.s. and well as europe. even though analyst expectations were optimistic going into the
3:13 am
numbers, especially the data year on year earnings growth estimates were as much as 100%, and under that in the u.s., these are still quite strong. in the case of the s&p 500, these are at historic records. positive expectations, but numbers delivering above that. cyclicals have driving this for sure. that is an onto the economic restart and company earnings are from. anna: cyclicals have been driving things, where does that leave the lock down winners. there is concern that when they are growing, they have a lot to prove right now, and maybe have not been well received. where do you see the lock down winners heading? karim: within the lock down
3:14 am
winners, we have one that continues to come through, and that is technology. the technology sector, which held up very well in 2020 during the extended lockdown has been coming through strongly in this reporting season, even though the base effects you not work in its favor. unlike cyclicals which have been delivering from a lobar in 2020, technology has been building strength on strength. we are seeing them really come through, especially in the u.s. where technology which ranks high on the quality factor and strong balance sheets, it is coming through and shows how strong this is. anna: do you see it as a one-time boost? has this been something more structural that will remain? these tech names will lose
3:15 am
customers they acquired in lockdowns, or benefit from the structural shift and keep it? karim: when we look at the penetration rate that technology companies have increased in terms of consumers. we are running at anything between two times to three times penetration rate relative to before the pandemic. we would be hard pushed to believe that gain will decline back to pre-pandemic levels. a lot of it is structural and here to stay. that is what the earnings are telling us. even when the cycle shifts, the cyclicals still do well. it is early signs of structural that is here to stay. in july cyclicals came from outflows. we saw a comeback on the cyclical rotation we saw earlier
3:16 am
in 2021. within that, technology started to see a resurgent flow. it is the top sector now in terms of inflows. anna: can i ask you about the clues around the inflations dori from this earnings season? we spoke to a lot of executives about the pressure. they are feeling input costs. anecdotally we hear a lot of people concerned about those. they are reporting backward looking earnings and flagging that this may remain. what are you hearing about inflation and the input costs? and what does that lead you to conclude about inflation? karim: we have to look at the consumer side of things as well. when we look at household, on average as we came out of lockdown, average household savings were at historical
3:17 am
highs. when it comes to companies and the increase, companies are thinking, can i pass this on? how much can i pass on? they are not passing on the whole costs, but they are passing on some of it because of the belief that they can because the household balance sheet picture which is strong. that means there will be some pass-through to the cpi. there is pass-through to inflation rising, however it is not a problem of runaway inflation. anna: thank you very much, karim chedid, head of investment strategy for ishares emea, blackrock. karim will be speaking to us on bloomberg radio and we will continue the conversation at 8:50 a.m., u.k. time. laura: hedge fund asset manager
3:18 am
has become one of the biggest casualties from a short squeeze in the global bond market here at its trading strategy snared in bad bets on rising interest rates. the investment firm is facing losses of $1.5 billion after its hedge fund plunged in july. it has never had a down years since it started in 2006. lyft delivered its first adjusted profit after racking up losses since its founding. almost $24 million thanks to surging demand for its ride-hailing services and last year's deep cost cuts. lyft will pay incentives for drivers to return to the platform, and address a shortage. a bitcoin exchange traded fund, a move crypto enthusiasts say is crucial to take the token mainstream. in his first major speech on
3:19 am
crypto, he said and etf and strict rules could provide investors with necessary protection. the agency has shied away on transparency concerns. >> right now in this digital age, we do not have enough investment protection. at this time it is more like the wild west than some protection against fraud and manipulation in this space. this asset class is ripe with fraud and abuses in certain applications. laura: that is your bloomberg business flash. anna: thank you very much, laura wright. u.k. is considering blocking a takeover due to potential risks to national security. we get the latest on that bloomberg scoop next.
3:20 am
this is bloomberg. ♪
3:21 am
3:22 am
>> demand has significant increase, so while the u.s. is closed to europe and the u.k., u.s. citizens can travel freely. >> i am quite glad you and
3:23 am
u.k. has opened and has not demanded the u.s. reciprocate. that will take a little bit of time but i think we will get there. we expect business travel to recover but to lag in the recovery. i think there is some degree of acceptance that business travel may not recover at the same level since 2019, but i do not think it will be is impacted as some people believe as a result of technology. anna: the director general talking about the return of international air travel. bloomberg has learned the u.k. may block a takeover of the chipmaker nvidia citing potential risks to national security. nvidia is the biggest u.s. chip company by market value. it announced a $40 million deal to acquire -- it is currently being considered
3:24 am
by ministers. joining us now, what could softbank do should nvidia's deal fall apart? it would go from japanese ownership to u.s. ownership. you wonder what problem u.k. authorities would find, but what would the option be for softbank? >> the risk is the deal does fall apart. it is bad news for softbank because it it is 10 billion u.s. dollars and shares worth about $35 billion. the deal is 40 billion, but the shares have done well recently, and they would lose out their earner option of another $5 billion. it is a lot of money we are talking about. i believe it is a valuable asset
3:25 am
for softbank. there are other options. it is a matter of time. initial public offerings would take a longer time to monetize. there may be a lack of synergy if they go on their own. anna: sticking with softbank and what it is interested in, we understand it has made a $5 billion investment in roche. what should we take away from that? >> softbank is trying to diversify a way away from the heavyweights, especially china. it has a lot of exposure. the investigation is still ongoing by the chinese regulatory authority, the rumors of iva ties asian. too -- rumors of privatization. geographically diversifying into europe and latin america.
3:26 am
also just to remind the audience, investment in transportation has not done well on return in investment, so hopefully the health care sector could do better. anna: thank you for joining us. clearly a lot for european businesses to watch when it comes to softbank strategy, whether in the chip sector or the health care sector. coming up, we will talk more about the housing market. u.k. home prices slow down in july as the london exodus continues. we will discuss britain's housing market, and working toward a bank of england rate decision. we have a lot of government tax
3:27 am
incentives that have worked their way through. a lot to talk about when it comes to the u.k. regulatory picture and the demand which are as well. this is bloomberg. ♪
3:28 am
in business, it's never just another day. it's the big sale, or the big presentation. the day where everything goes right. or the one where nothing does. with comcast business you get the network that can deliver gig speeds to the most businesses and advanced cybersecurity to protect every device on it— all backed by a dedicated team, 24/7. every day in business is a big day. we'll keep you ready for what's next. comcast business powering possibilities. anna: welcome back to the
3:29 am
3:30 am
european market open. a half hour into the trading session. we are making moves to the upside, up 0.75% on the dax, outperforming in contrast to yesterday. the cac quarante is up, and the ftse 100 up 0.4%. no sectors in negative territory. the travel and leisure sector is getting the best gains, technology is also up.
3:31 am
auto parts playing well for the german markets. to the downside, food, beverage and tobacco. i see that in terms of travel and entertainment, it seems to be cruise lines and the entertainment side rallying this morning. that is what we have on the sector breakdown, all in positive territory. new signs from the ecb, this is moving the euro at the margins. we see these lines from the ecb governing council, the latvian central bank governor, he is giving us comments about how the ecb will not rush to signal the future of the pandemic program. anybody waiting for clues or a heads up from the ecb on the future of the pandemic bond buying program in the september meeting will probably be disappointed.
3:32 am
as a result, we see some movement to the downside on the euro, not unwinding gains on the day, but a little movement in the currency as a result of that story. that's get a bloomberg news update. laura: china's broadest covid-19 outbreak since the beginning of the pandemic is hampering tourism and spending during the peak holiday season. the outbreak linked to the highly infectious delta variant spreads across china's 32 provinces in two weeks. 46 cities have advised residents against all but local travel. u.k. maritime trade operations which monitor commercial shipping routes said borders -- after its early report of a potential hijack. last week a tanker was hit by a drone attack in roughly the same
3:33 am
area, killing two crewmembers. iran was blamed by the west. firefighters worked to the night to contain a blaze on the outskirts of athens, forcing thousands to flee their homes. the fire is one of 80 that broke out across the country in 24 hours. reek authorities say it is one of the worst heat waves in the last 30 years. most children who get covid-19 recover within a week, according to a u.k. study which followed a quarter million children. about 4.4% of children experienced symptoms for longer than four weeks. global news, 24 hours a day, on air and at bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. anna: thank you very much.
3:34 am
let's get to u.k. housing market stories, which is reached -- may have reached its peak. annual u.k. house price growth slowed in july, but the shift in behavior means demand for more spacious homes continues. the bank of england does not worry the boom is leading to an unsustainable buildup of debt. in the latest sustainability report, they say mortgage the income ratios had risen only marginally. joining us now is our real estate reporter. really nice to have you on the program. how important has this been? the support we have seen from the central government, how important is that for this boom, and what can we expect now that that support is coming to an end? >> we could say it has been significant and we have seen a slight slow down in activity,
3:35 am
what we could also say is the market conditions at the moment with interest rates so low -- it has boosted housing markets globally. although this has helped the savings, there have been minimal price increases, it underlines the drive in demand. anna: suddenly, a lot of real estate agents say people want gardens and office space, and others are renovating to get office space. where has the market been the hottest? we have been writing about people who want to leave central locations and get out in the countryside. >> in terms of regions of the country, the more affordable areas have seen the biggest price increases, areas such as
3:36 am
scotland and wales. houses people are looking for are more affordable. if you look at london, london buyers are buying more homes outside of london. on one hand i think people are looking for more green space, but also across the country they are looking to upgrade, and that helps if the market is more affordable. anna: what does all that mean for u.k. home prices in the medium-term if we see less government support but there are underlying structural changes in the economy, new patterns of demand? what is the outlook for u.k. house prices? >> the general consensus is we will not see the house price growth telling into next year, and it will slow down. there is enough momentum to carry through the end of the year.
3:37 am
they boosted their annual forecast for this year. it will not be as frenzied. it depends on who is putting their home on the market. anna: thank you so much. let's stick with the story around u.k. housing. taylor wimpey has posted a pretax profit of 287 million pounds, up from a pretax loss earlier, when the pandemic lockdown worst the company to close building sites a cross the country. they spoke to us earlier on this program. >> this stronger inflation and building materials is a combination of actors as the industry supply chain recovers post-pandemic.
3:38 am
we do not think there is anything the government can do about that. it is improving but it will take time. the construction has taken off strongly. there is also a time element. we have invested strongly over the last few years. we do tend to believe the biggest responsibility is within the industry. government could sometimes help. i expect it to be a short-lived thing. it is the context of what has been challenging for 18 months. we have done a great job absorbing it, and confident we will get through the other side of it as we go through the summer. we came into this year in a strong place. you can see that in the first
3:39 am
half. we do not see it as a strategic challenge for us. mark: you talk about investing in your staff. what extra flexibility are you offering workers in this post-pandemic world? pete: most of our office staff are not back in office this year. they are able to get back to the office, we are giving a lot of flexibility over the summer. our expectation is over the last few months we will maintain flexibility in as many roles as possible. once we see offices fully open in september and october. for most normal office space roles, if you want to work two days at home and three in the office, that is fine.
3:40 am
we have people who do not want to be in the office at all, that will be a question because it is necessary, particular for young people to spend time in the same place the teams are operating in. we will question whether some of our own internal management is constraining that. we are looking to manage those extremes and give people a lot of flexibility. mark: the strong migration from london to the suburbs, is this trend played out now that restrictions are being lifted, or is there more to come? pete: it has changed the perspective for people, but it is about timing. that means timing in individuals. there is always an incentive for people to move at different life stages. that accelerated that position. we are seeing the high level played out.
3:41 am
we are positive about the london market long-term. we have seen real growth in markets down in the southwest, and that is the long-term trend. the pandemic accelerated something that was already happening. anna: that was that taylor wimpey ceo speaking to us earlier. coming up, virus resurgence in china is back on the radar. the broadest outbreak since the early days of the pandemic is hampering tourism. more on that, next. this is bloomberg. ♪
3:42 am
3:43 am
3:44 am
>> it is one of these things at the parable of the elephant, people touch it from different sides and get distracted and carried away. we view it as a technological transformation. there is a fundamental breakthrough that has happened in an area of computer science that has the ability for a lot of people in software to form trust relationships. money is one application, but only one of the applications. there were many other applications and things people will be able to do. many of the smartest people in computer science are pushing this forward at a rapid rate. to us, it looks like the eighth
3:45 am
or ninth fundamental breakthrough technological transformation happening in the tech industry. we take it seriously because of that. >> the whole technology that underlies bitcoin will transform the world? >> these are new kinds of computers. bitcoin is an internet computer that is spread out across hundreds of thousands of physical computers across the world. it is a transacting process without a central location. out of that process comes this token, the bitcoin token, the coin that is a representation of value but it is a transacting system, a new financial system. >> when people invent something, they may say i did something nice, how come the inventor of bitcoin has not surfaced publicly? >> this is one of the most amazing things in my life.
3:46 am
most people who invent something this profound, they do not realize it. whoever this person, whoever invented this thing, they knew the importance from the beginning. they knew it was important to hide their identity, and it is remarkable they knew that. it is like babe ruth calling the homerun. they have been able to keep it secret all this time. anna: that was the cofounder of andreessen horowitz. you can catch that interview later tonight on "bloomberg: wealth." top corporate stories we are covering -- laura: the u.k. may block a takeover of chipmaker citing national security. nvidia is the biggest chipmaker by market value. it announced $40 billion deal to
3:47 am
acquire a deal from softbank. it is currently being considered by ministers. hedge fund alpha dine has become one of the biggest casualties from a short squeeze in the global bond market. it's $12 million macro trading strategy is snared in bad bets on rising interest rates. the investment firm is facing losses of around $1.5 billion after his hedge fund plunged in july. they have never had a down year since it started in 2006. an attempt to phase out -- blackrock and other major financial institutions are working on plans to accelerate the closure of coal-fired power plants. hsbc is among the partners. that is your bloomberg business flash. anna: thank you very much.
3:48 am
let's turn our attention to china, it is experiencing its broadest outbreak of the coronavirus since the beginning of the pandemic. at the outbreak is hampering tourism and spending during the peak summer holiday. let's talk to tom mackenzie, who was recently our china market anchor, and joins us in london. nice to see you. let's start with what is going on in china where you have come from. what is the latest state of play with this renewed push to clamp down? tom: this has happened rapidly. it is widespread. 46 cities across china have tract down people with the virus. most are deltek cases. the key part of this is it is widespread. we are only talking around 200
3:49 am
cases. within the global context, that sounds small, but china has had the virus under control strongly since march-april last year. for china, this is a big deal, and that it has spread to beijing, that is where xi jinping and his team sit, that is notable. there have been breakthrough cases. we know the vaccination program in china is successful. a significant proportion of the population is vaccinated. there are question marks over the efficacy. anna: the fact it is widespread signals there will be more cases to be found. we know how seriously the chinese authorities take this, and what the response looks like. given how well we know how they respond, we also think what this will do to the chinese recovery
3:50 am
that we have seen so strong. tom: the consumer was already slightly tepid. consumption back to pre-pandemic levels. they are keeping their hands in their pockets. this will exacerbate that and take longer for the consumer to get back to full force. we have seen measures put in place on travel restrictions. the borders are closed, so you see a lot of momentum in the tourist sector. flights have been impacted. they are changing their forecast for the third-quarter gdp, downgraded from 6.2% to 5.1%. they are pointing to those economic risks. we will look to see if we hear anything from the pboc or other officials to see what measures will be put in place to support the economy. it is starting to come off the highs we saw earlier in the year. anna: we heard a little bit from
3:51 am
the politburo on what is coming in the second half. thank you very much, tom mackenzie in studio in london. coming up, we discuss earnings season and the boost to european stocks. we have had plenty of earnings. this is bloomberg. ♪
3:52 am
3:53 am
3:54 am
anna: welcome back to the european market open. 53 minutes into the trading day this wednesday morning. european equity markets making gains. we are getting data from france, the services pmi number, 56 point eight, below the preliminary number. the italy number showed a similar theme. we had a lackluster number well above 50, and that is the important point when it comes to expansion versus contraction. on the broader risk asset story, we are joined by -- european equity markets getting on the front foot. is that what we are focused on and is it lifting us? >> definitely earnings have played a big part in stock gains
3:55 am
the past few weeks. overall we have had consistent signs in economic and profit recovery. one thing that has been a feature of the earnings season is a return of buybacks and other dividends, particularly from minors and energy companies and banks. that has propelled cyclical sectors to the top of european stocks, and is a bullish sign for equities. anna: we are getting german july services pmi number, 61.8. very much above 50 and in expansion territory but shy of estimates. we will keep an eye on the euro to see if that takes the edge off. how are the latest concerns around china playing into markets? not much today because we are higher for the european equity market. putting aside chinese regulation in the delta variant. heather: the china clampdown on
3:56 am
tech and other industries has largely played out asian equities. that being said, china and the spread of the delta are concerns that keep coming back for equity investors. we have seen more volatility in the market, and august is weak for equities. those could end up as big concerns. anna: thank you very much. that continues to have an impact on the businesses we are talking about today. it taylor wimpey spawning well to its earnings, that stock up 3.5%. hugo boss put out numbers, up 0.9%. commerzbank down 4.4% on the back of that miss on the revenue
3:57 am
side of things. legal and general moving to the upside. earnings story very much to the fore. that is it for the european market open. "bloomberg surveillance: early edition" is next. ♪
3:58 am
3:59 am
4:00 am
>> i think there is some degree of acceptance that business travel may not recover to the same levels since 2019. >> there will be a broad comprehensive approach to pandemic preparedness and response at every level. >> the key to nyc pass will be a first in the nation approach, it will require vaccination for workers and customers in indoor dining, indoor fitness facilities, indoor entertainment facilities. >> this is "bloomberg surveillance: early edition

59 Views

info Stream Only

Uploaded by TV Archive on