tv Bloomberg Markets European Open Bloomberg August 20, 2021 2:00am-4:00am EDT
francine: good morning, everyone. come to the european market open. mark cudmore joins me in singapore to take us through the market actions this hour. the cash trade is less than an hour away, and here are your top headlines. futures slip after a coffee session in the u.s. the delta variant continues to weigh on the recovery as u.s. covid debts hit levels unseen
since february. china's regulatory curbs snap sentiment. beijing takes the next step in taming big tech with tougher personal data laws. more pain from the chip crunch. global shortages will cut auto production by as much as 7.1 million cars this year. welcome to the european market open. just gone 7:00 a.m. in london, a lot later in singapore. mark, but is on your mind? mark: the mood in the markets in asia is incredibly negative, especially in the context that during the u.s. session yesterday, we covered all the european losses, at least the s&p 500 -- about. but in china, we are just going to renew this negativity, and it feels like we are no longer -- dani: mark, that me just jumped in, because we are having a satellite issue, so we will fix that in a second to get mark's thoughts on the markets. we are just underway from the start of cash equities trading
in europe, so let's take a look at the futures. what mark was saying is interesting, because a lot of the anxiousness we saw over the last two or three days really seems to originate from china. and we have a bit of a selloff in europe. but if you look at the u.s., they may and it should -- they usually managed to buy the dip markets. mark: sorry, francine. i am not sure when i was cut off, but basically the u.s. bought the dip, got the s&p back to positive territory, and china has come in and renewed the negativity all over again. this friday feels like a short-term capitulation. i want to be clear, i do not think this is a medium-term capitulation. i do not think this is the end of the regulatory angst you are going to see over the next couple of months, but short-term it feels like traders are going, i do not want this stress going into the weekend. the policy focus on china is very targeted. there have been a number of different sectors, but it did not feel like a scattergun
approach. today it feels scattergun. it is health care, tech stocks, you name it. whatever sector is out there, it is getting hit, and chinese stocks are being weighed down heavily. it is another day of red boxes across the board. we are seeing a day of risk aversion. the dollar strengthens again after breaking its year today hi yesterday. you can see those equity markets , chinese equity down 2.6%. it is overall a negative day going into europe. can u.s. markets save the day again? i would not put it past them, but it is very depressing out of asia. francine: it certainly looks like that, but if you look at the underlying reasons -- you mentioned the chinese tech route, so that is something we clearly have been looking at closely -- are they anxious about growth? are there any new fundamental analysis that has changed on growth since the delta variant?
mark: that is a great question. i would argue not much has changed. yes, the world now has delta variant very firmly at the top of the radar when we talk markets, but it is an incrementally changing situation. it is only just this week that everyone accepts that delta is changing the birth narrative globally. but i would say that is very much a marginal step. we are all talking about it, but it is not just that we were positive growth last weekend now we are very negative growth. it is just looking more negative. yes, the fundamental story has changed, but it is not a sudden fundamental shift. this is more about a technical august, summer holidays, just bailing out of these trades. they have had enough of this pain. chinese markets have been suffering for some time. july was the worst month for more than two years, worse than the pandemic last year for
chinese stocks. this is negativity weighing on negativity, not like in the u.s. were stocks make new highs every week. francine: we spoke at length about iron ore yesterday. today the story on mliv is commodities are taking the front of the latest risk aversion. how long will the slump go, and what will be the effect on assets? mark: i think it's got further to go in line with the fact that we are recalibrating growth outlook and catching up. commodities has quite a bit to catch up. i do not think this applied -- the supply-demand has gone from positive to negative. i am not long-term bearish on commodities. i think metals will pick up a tailwind at some point in the future. it may not be in the next couple of months. i think it may be toward the end of next year that we start seeing commodities uptick for the longer-term positive story. francine: yet a thing we were
trying to figure out is what comes next in the china regulatory eye of the storm. how are traders thinking about this? mark: we knew that property was one of those things. we knew that the tech sector was in there, and education became prominently on the radar this year. health care is one we were expecting to come more into focus, and that has happened over the last 24 hours. a lot of the sectors that were to be targeted have been targeted. i do think there are extra layer's of regulation to come in from the sector. i do not think the chinese government is done with what they had wanted to do around the property sector. they are not complete with regulation in the health care sector. they are just starting. that is going to be in focus for a long time. i think they are farther down the line with laying out their vision for the education sector and perhaps the tech sector and consumer protection. there are not new sectors, but i think there is more policy regulation to come on some of those sectors that have come
into light already. francine: when we talk about china tech, we about growth and delta. we have to talk inflation as well. gas prices have pushed it higher. mark: even gas prices suffered massively, particularly in europe, because of signs the nord stream 2 pipeline might come on earlier than expected. gas prices are suddenly seeing a sharp direction. i think the inflation story as a threat is going to stay with us the rest of the year. it is not going away, but in terms of preoccupying traders, i think it has temporarily moved behind the growth narrative. i think the inflation scare will come back to being a central theme again, perhaps in september or october, but in the next few weeks, we are going to go, we are not so worried about that, we are more worried about how bad the growth story is going to get on the delta resurgence. want to see this next wave of the delta variant, the next wave
of covid kind of peak out before we resume the focus on inflation. it will come later this year, but not for a while. francine: mark, thank you. you can get up-to-date insights from mark and the rest of the team. just go to mliv on your bloomberg. angela merkel departs for what will be her last meeting with vladimir putin as chancellor. we will get the latest from berlin. plus, oil heads for a weekly loss due to concerns. that conversation is at 7:30 a.m. london time. next, we carry on the market conversation. ben gutteridge from invesco asset management joins us next. if you have questions, send them to ib+tv . ♪
francine: welcome back to the open. we are 15 minutes until the cash -- 50 minutes until the cash equities open. you can see pictures gaining 0.2%. a bit more future on the backs futures, down 0.1%. the focus is on what is happening in china, and mark cudmore brought us up-to-date with the tech rout in asia. u.s. futures fluctuating as the fast spreading delta strain raises concerns of an economic growth. both sydney and new zealand have extended lockdown measures to combat outbreaks. meanwhile, in the u.s., covid deaths and hospitalizations have reached levels not seen since february. joining us is ben gutteridge, director of model
portfolio services at invesco. it is a good to be short-lived, or is it the start of something bigger -- is it good to be short-lived, or is it the start of something bigger? ben: i think it is going to be relatively short-lived. we are, like many investors, nervous about the persistency of this delta variant, a move away from the emergency policy, so less generous policy from the fed. and this chinese regulatory tightening, the pursuit of common prosperity, those are the things that are making us nervous. but i think ultimately we can still retain a positive outlook. the federal reserve interest rate hikes are still over a year away. the vaccines seem to be working well. the evidence in vaccinated sections of the population support the vaccines still having high efficacy. of course, there is still a long
way for growth as a result of the employment market recovery. generous policy, economic recovery, i think this looks like a reasonable entry point when you have massive weakness like this. mark: good morning, ben. what is the catalyst for us resuming that positive narrative? ben: well, i think markets will continue to be troubled and pressured by the issue of the delta variant, the fed announcement on tapering, and this chinese tightening efforts on policy. those things will continue to trouble markets. i do not think that sending us into a bear market, that is far from it. as we get more information on the efficacy of vaccines in the face of the delta variant, and
you see a economies like the u.k. move past these peak case numbers, and as the fed reassures us that interest rate hikes are going to be depended on the labor market recovery, which, of course, we are not going to reach maximum numbers until very likely next year at the earliest, that combination will help markets resume their output moves. francine: mark and i have a question. we love your questions. keep sending them through. this person writes, as we talk more and more about the fed starting to taper, how do you think money markets, liquidity's are going to react to such events? ben: it has been pretty well flagged, and these things happen and still get a bit of market reaction, no matter how much we say they are priced in. but i think that will be temporary because the fed have done a good job of communicating the tapering announcement was
going to be coming in the coming months, and likely to begin early next year. yes, i think we could see some movement, but i would not expect liquidity to be extracted heavily from the market as a result of the execution of tapering. mark: following that, i know you are bearish on the dollar, i am curious when do you think the bearish dollar trend will resume itself, and what is the catalyst for that? ben: i guess we are looking a couple months ahead, really moving through next year as the federal reserve restates its commitment to negative real rates, if you like, letting inflation get ahead and keeping policy rates pin very low.
the markets are more worried about growth issues, and the dollar has that country cyclicality -- counter-cyclicality. moving into next year, the fed's commitment into generous policy, delivering negative real rates, we will see the dollar bear market resume. that would come concurrently with easing fears about the delta variant and a dramatic chinese economic slowdown. francine: how quickly are you expecting the fed to actually taper, and what does that mean for how you model european equities? ben: well, i think the federal reserve will probably want to get things done by the middle of next year, or the middle of q3 next year, to get themselves the option to then raise interest rates on the back end of next year.
that is probably the pace that we are looking at. i just think the global equities could sort of deal with that timetable. i think it will be good news on that basis, and an accelerated move beyond that would likely be a function, perhaps inflationary pressures really coming through hotter. the labor market recovery accelerating, which seems like good news. but if it gets the fed moving sooner, bringing forward interest rate hikes, than i think the market might not be able to do with that so well. i think if we stick to the timetable of the middle of next year on tapering and an interest rate hike early next year, 2023, i think global markets will perform nicely in that environment.
francine: thank you. now let's get straight to the bloomberg first word news with angel. angel: sydney's to month-long lockdown is to be extended until at least the end of september as australia's delta outbreak worsens. new zealand has extended its nationwide lockdown by four days after an outbreak spread beyond the largest city, auckland, placing pressure on the so-called zero covid strategy. central bank governor adrian or says october's policy meeting is still live and covid cases alone would not prevent it from tightening policy. >> we have to focus very much on our purpose, which is the inflation and employment mandate that we have. absolutely, this week was not the best of timing to looking to reduce interest rates, reduce the monetary stimulus, i should say.
angel: u.s. secretary of state anthony blinken and g7 format ministers have agreed during a meeting that the taliban's actions will determine its relationship with the international community. the participants underscore the imperative of safe passage for people wishing to leave afghanistan. u.s. vice president kamala harris will look to bolster economic and military cooperation in china's backyard as she visits singapore and vietnam starting this weekend. it is the biden administration's highest profile trip yet to the region. harris's trip to vietnam will be the first yet by a sitting vice president since the war ended in 1975. ben: -- global news, 24 hours a day, on-air and at bloomberg quicktake, powered by a 2700 journalists and analysts in more than 120 countries, this is bloomberg. sophie: coming up, angela merkel heads to moscow in what will be her last meeting with vladimir putin as chancellor.
francine: welcome back to the open. we are 40 minutes from the cash equities open. markets are directionless. they may be trying to find their footing after concerns about the delta variant and growth around the world. some more lockdowns in new zealand and parts of australia. we brought you that round up. the markets today may be trying to figure out what it means after two days of losses in europe. i glamour go heading to moscow today, just over a month -- angela merkel heading to moscow today, just over a month before german voters decide her replacement. she is meeting with vladimir
putin before heading to ukraine over the weekend. merkel has had a long relationship with putin, which has provided an open line of communications between the west end moscow, and that relationship may never be more timely, with russia one of the few nations to keep its embassy open in afghanistan after the taliban took control. we are joined by maria tadeo. good morning to. -- to you. this is very symbolic. it is the last time merkel will meet putin as chancellor. what is the sick can sub the summit? -- the significance of this summit? maria: yes, she has worked with putin for more than a decade. she grew up in east germany, is a fluent russian speaker, and she is regarded as the one person who can speak i to i with vladimir putin and connect the european union with the russian federation. the timing is critical because we have the situation in afghanistan. the germans are pulling out there embassy.
the russians are saying they are keeping there was on the time being. -- will be keeping theirs for the time being it. and we have the nord stream 2 very much in the picture. the germans have no said they construction will go ahead, will be completed, but they have also agreed with the united states to come up with a plan to help ukraine afford some of the penalties in terms of the transit fees that they may lose out. it is still about the energy, but also about the politics in the country. for angela merkel, the situation has proven critical. the german governor is coming under pressure because of a lack of preparedness ahead of that evacuation, and secondly because they had the second-biggest military deployment after the united states. -- after the united states, there is concern that angela merkel misjudged the situation on the ground too. mark: the greens, looking to
succeed angela merkel in the chancellorship, are calling on the government to bring more refugees from afghanistan. how does this momentum play into the polls? maria: yesterday we were on the campaign trail in why mark with the head of the green party, and she -- in why mark -- weimar with the head of the green party, and she said they have a duty to bring people to safety, even if that means speaking with the taliban. she has taken on a more socially progressive approach when it comes to refugees and migration. that is different from what merkel's party is saying, that we need to favor humanitarian aid but cannot have a repeat of the situation in 2015. let's take a look. >> we have to stand together because of the nature of troops to serve those people being a translator, being a cook, our being a journalist, so the
troops have to ensure now that these people can come to the airport, meaning also talking to the taliban, to save those people who trusted us. maria: that was the head of the german greens. they are pulling third, which is a real change from two weeks ago when they were competing directly with the cdu. it doesn't seem this is a fight between the social democrats and the christian democrats -- it does seem this is a fight between the social democrats and the christian democrats. the greens will have a big say. pulling 19% is not enough to win the election, but it is significant. francine: it certainly is. maria tadeo in berlin. coming up, oil -- we discuss that and more with the chief executive of maersk drilling. we look at futures, a little bit directionless, maybe trying to
>> welcome back to the open. you can see futures trying to find direction with the ftse 100 raining 0.3%. we are dealing with a big tech rout in china putting pressure on asian stocks. 30 minutes to go until markets open, so what is on your radar? mark: today i am going to draw attention to what everyone else is talking about, the delta variant. it has taken first place in
dominating market sentiment this week. everyone is getting concerned about this wave of the coronavirus and how bad it is going to be for growth. part of the concern is markets are dominated by u.s. investors. they have the biggest sway in terms of moving capital around and around asset markets. in terms of the delta variant in the u.s., investors are scared. alabama has run out of icu beds and other states are at 90% capacity. with that in mind, i want to bring attention to the u.s. vaccination rate. up until may, the u.s. was leading the world in vaccinations. they have effectively vaccinated 40% of their population within just four months. incredible rate of progress. in the last three months, they have only vaccinated another 10%, and it is just slowing down, not picking up. at the moment, the average vaccination rate is less than one million per day. we did vaccinate one million people yesterday, but it is less
than one million people per day. they are going super slowly. even though we are getting a resurgence of the virus, even though we are seeing a scare, there is a large cohort of americans that do not want to get vaccinated, and nothing is changing their mind. this will remain a problem for the u.s. for many months to come. for extra context, most of europe has moved way ahead of this level now after being behind. china is out of this, u.k. is out of this, germany, france, they are always ahead. it looks likely that by on this year, coronavirus is going to be a big problem in the usa than as europe moves into a new world. francine: with the u.s. daily vaccination rate, you forget that across the world certain states are struggling to get citizens vaccinated. oil with a loss with concern about energy demand, but maersk drilling is optimistic about the markets recovery. the firm has beat estimates for the first half of 2021 after raising its full-year outlook
yesterday. joining us is your madsen, maersk drilling chief executive officer. thank you for joining us right here on the european market open. when you look at dynamics in the markets today, they worry about the delta variant, they worry about growth prospects, and i am sure you worry about what that means for oil demand. do you see it getting worse from here? jorn: thank you for letting me on the show. yeah, covid is an element to take into perspective when we look at the future, but so far we have had one and a half years where we have been able to do fairly well with the operational challenges it has posed to us, and there will be challenges going forward. we do see that the markets are in recovery. that goes for the markets we are in.
so after having delivered our results for the first quarter of the year, we also believe that the last -- the first half of the year, we also believe that the next half year is going to show that we are in an emerging recovery. mark: good morning, jorn. what is your perspective on potential acquisitions? how will the drilling industry consolidate, and what role will you play in that? jorn: i think the industry is at a perfect time to stop the consolidation. we have seen a lot of our colleagues emerge out of chapter 11, now coming out with balance sheets and financials that actually allow them to -- into any meaningful consolidation conversations. the conversation is most likely going to be driven through
shared yields. there is not enough cash in the industry so that we can see acquisition going forward. as to our part in it, with the financials and the balance sheet that we have, especially -- we sold one of our rigs for close to 100 million dollars during q2, and that is going to improve our liquidity situation, our leverage. it will improve our balance sheet. i think we are well-positioned from a financial perspective to enter these kinds of negotiations and talks. on top of that, i do believe we have a very strong operational platform we have been spending time on over the last couple of years, making it even stronger. francine: if you believe your industry should consist of fewer players, how many players will it be left with? jorn: there will always be
smaller players, but we really need to see some stronger players emerge, because the scale will allow us to better control -- to run with a lower cost level, and it also will mean that, more rationally, we can see that the supply side will be much easier if we have stronger and bigger players so that we can more scrapping -- we can see more scrapping, because that is still needed in this industry. mark: tell us more about the co2 capture plan that you are involved in in north see reservoirs. jorn: press releases were at this week that phase two of the project that we are in on ccs is going ahead, and we have a role in that.
we were part of a small group that participated in phase one, where we learned more about how this is going to be done. now we are entering the phase where we are actually going to see some injection of carbon out there offshore. we have a strong belief that ccs is going to be part of getting us to a lower carbon future. we have a role to play. there are going to be drilling activities taking place, and also other activities around ccs where our activities can be utilized. francine: what do you say to those that say it is not about transitioning, but about stopping now? jorn: i thing it is quite unrealistic that the world could stop exploitation for oil and gas. we are just in a situation where there are not enough alternative sources of energy to make sure that there is heating or energy
for transportation. i do not think the world has a choice of stopping oil and gas, and we have been looking into various scenarios for the future, and even in the most dramatic scenarios, where we see a steep reduction in oil and gas demand, there is still room for the likes of us to be drilling for oil and gas. the world actually needs energy to be able to make the transition. mark: i get the point that this is too quick, you can't stop oil and gas now, but what is the role of your company in 15 years' time, when we are not drilling any further into the fossil fuel supplies, or at least an extremely limited amount? what is going to happen to your company over that horizon? jorn: we have already spent time on that.
we do believe that for at least a couple of decades or more to come, there will be a need for oil and gas drilling. we also look at that being quite profitable to be in. at the same time, we are looking into, what else can we as a company, with the expertise that we have, work in? ccs is clearly an area we can be in. we also see the kind of expertise we have in operating in high risk, high quality, high reliability areas combined with the digital knowledge we have is something that can be used in other areas. lastly, there is a fast-growing ocean economy. one of the things that is obvious that needs to be available is all the minerals that are needed to do -- to make
iphones, batteries for cars, so on. that requires people -- and a lot of those minerals can be found under the seabed. we are a prime candidate to be part of such ventures in the long run. nothing is totally decided, but we have an innovation department exploring those opportunities. dani: thank you so much -- francine: thank you so much for your time today. let's get to the bloomberg business flash. here is angel feliciano. angel: the u.s. federal trade commission has resolved its monopoly lawsuit against facebook. it alleges the social network pursued a strategy to buy a rival. the suit asks the court to unwind facebook's accusations of instagram and whatsapp. facebook says the takeovers were lawful and were cleared years
ago. see bnr has raised its offer for supermarket morrison's to 7 billion pounds. the aim is to outmaneuver fortress group in the battle for britain's fourth-largest grocer. the u.s. private equity firm has pledged to replace the existing management team, its relationship with suppliers, as well as staff pay and pension. a chinese telecom firm has the world's biggest listing so far this year that has debuted in shanghai. haynes resumed after a trading halt indicating enthusiasm for china's push to build the world's largest 5g network and monetize the high-speed technology behind it. china mobile is also seeking a secondary listing in shanghai. onlyfans is getting out of the pornography business. from october, the company will prohibit sexually explicit conduct on its website, although some nude photos and videos will still be allowed. onlyfans has attracted 130 million users, it's popularly
lockdowns we have had in asia that have been reimposed this week and what we are seeing in china, which is chinese stocks tumbling as the country's take crackdown moves into a new dimension. the administration has passed legislation sitting out tougher rules for how companies handle personal data. firms will be required to obtain user consent over data collection and provide a way to opt out. joining us from hong kong -- first of all, underlying this, how deep will they go into regulation? we have an idea of what it -- do we have an idea of what sectors they want to touch, or could it be broader than what we think now? >> it is another day, another sweeping set of regulations. as you mentioned, it is all about personal data, and the idea is to protect the limit of a company from profiling about their customers on the one hand, and the limit to what their ai apps can recommend for customers buying. there is also this ongoing
control story here with command and control at the center of the economy. this is just one change of so many on the tech front, but the back story is about the push for what is described as moderate prosperity for all of the economy, and a cheaper environment for the workforce. you've got to look at the technology change as one part of the overall jigsaw. mark: enda, it is very clear the market impact, but how much of an economic impact will there be? consensus for chinese growth is still 8.5% on bloomberg and 5.6% for next year. do those levels still need to be revised lower, or is it to do with covid and nothing to do with regulations? enda: there is a bit of eight emergence going on. on one hand, -- a bit of a divergence going on. on one hand, you have regulatory
changes, people asking how far this is going to go. let's not forget the chinese government is saying these changes will be good for the economy in the long haul. we are putting our economy on a more sustainable keel, getting a more productive workforce, ensuring population growth, and ensuring the driver for long-term growth is put in place. i think there is a divergence happening. economists say there is a bigger picture at play. in terms of the near term growth story, the indications are that the delta cases seem to be coming under control, according to data being released. that might suggest restrictions could be released over the coming weeks. that bodes well for a consumer story and for the economy itself, but if that does not happen, there will be more downward pressure on the economy, and i think we will see more downward revisions to the growth forecasts too. francine: thank you so much. let's get market reaction to all this with our juliette saly in singapore. what do you have, and good
morning. juliette: good morning, francine. it really has been this question of which sector is going to be next. we have seen a number of new targets caught in the crossfire's of this regulatory crackdown from china. you are seeing the likes of online pharmacies, liquor makers, and also cosmetic giants caught up in this, all leading to a huge selloff. we are also watching what has been happening with these huge tech behemoths, the likes of alibaba, which continues to trade at records. global institutions dumped a billion dollars worth of mainland shares via trading links today. it is coming out the selloff we have seen in chinese stocks listed in the u.s. it points to the question of, what do you do now? sean taylor of dws was saying the pivot ford sharing prosperity in society translates deliver earnings and higher risk demands, and you do not know where the bottom is. in terms of looking at a bottom,
we have seen all this wade through into the key indexes in china. the hang seng in hong kong actually looking like it could enter towards bear market territory. but as mark cranfield points out, this is not the biggest drop you have actually seen in hong kong's index over the last few years. in fact, over the last four years, we have seen losses around 27 sent, but at this stage it is looking like we are seeing a year 70% drop on the hang seng index. the worst week for asian equity stocks since february. the msci asia pacific index off for percent over the course of the week. francine: thank you so much. coming up, a look at your stocks to watch, including morrison. the british grocer is receiving a new seven pounds bid -- 7 million pound bid. ♪
francine: welcome back to the open. we are 10 minutes from the cash equities open. futures a little undecided about what to do. ftse 100 futures gaining 0.2 percent, practically unchanged for the cac and dax futures. looking at the asian technology stock rout pushing things lower, and questions about what happens to commodities in the short-term, and, of course, the delta variant. let's get your stocks to watch. we start with a great british institution. >> unexpectedly updating on trading, they do say earnings should be at the top end of their previous guidance.
helpfully, they have given comparisons versus the 2019 year, which was the unaffected year from the pandemic. they are saying that food sales are actually significant ly higher than they were pre-pandemic. most of this is coming from people using their local marks and spencers to buy their food shopping for the home, rather than the city center and m&ses, which are very low given the work from home trend persisting. in terms of clothing sales, they are still down versus pre-pandemic levels. m&s has tried to make up for those levels online, but they have not managed to fully make up them. overall, positive for m&s today. mark: and morrisons, it seems like everyone wants to buy it. what is the story?
>> m&s have had a raise bid from cdn are, the private company in a bidding war for the supermarket chain. it is slightly lower than the closing price, 285 pounds per share, a bit of a premium. we are seeing them trying to outbid each other now. morrison has now switched its presence for the latest cd&r bid. given that fortress is partially backed by softbank in asia, which obviously has some really deep pockets in terms of how much they can provide in terms of backing, we could see fortress, back. -- could see fortress come back. but this one probably not going away for a while. francine: what about distillers? >> right, it is friday, so we finish on alcohol. the latest sector to be
potentially hit by the crackdown is distillers. they company in asia fell around 5% after news that beijing would be meeting to discuss potential increasing competition, consumer regulation of the industry. we are expecting declines today for remy, one to watch in trading this morning. francine: thank you so much, joe easton finishing off on distillers. there are lots of bits of news here and there, especially in terms of m&a. mark, what macro movers are you watching as we head into the european session? mark: first, i wanted to see how chinese-hong kong stocks finished. they have slightly paired their losses. we are not finishing up the lows, which is a slightly more positive sign, but they are sending risk aversion into europe. hong kong stocks have another
francine: welcome back to the european market open, minutes to go until the start of cash equity trading. growth concerns, futures for direction. the delta variant continues to weigh on the recovery as covid deaths hit levels not seen since spring. a delayed vote on an anti-sanction bill in hong kong, shares in asia fly. more pain from the chip crunch.
global shortages will cut auto production by as much as 7.1 million cars this year. let's look at futures. we did see a selloff in asia. mark cudmore telling us those losses have pared into the market close in asia. it is filtering through a little bit, certain sectors down of the european trading session. futures were pointing to a higher start. this is what we are seeing at the open as things start moving. the ibex, the ftse 100 between 0.1% and higher and lower. they are trying to figure out what happens next. there is more concern about economic growth and china's regulatory curbs hurting things. we are also watching out for the
italian-german spread, and the french two year a little on the move. european equity markets are opening slightly higher but not huge moves as the fast spreading delta virus stokes concerns over growth. asian stocks have tumbled after curbs hurt sentiment. we are joined by william porter, head of european credit strategy, credit suisse. great to speak to you. we have had quite a week with the markets. is this a small correction or just august? william: francine, you lead with a difficult question. i will lead with the answer, which, i think it is august, but this is a nervy time of the year. you get moves exaggerated by the liquidity.
september is notoriously dangerous, and we can talk about why that is the case. on balance this is the absorption of news and markets. people are nervous, it has been a rough week, and nothing. on balance, it is volatility at the beginning of an autumn selloff. francine: what do you think markets are nervous about? it feels like the delta variant has been here for a while, and we knew certain economies would stop and start. is there anything else worrying now? william: a couple of headlines out of china have markets spooked. this is happening at a time review can put an interpretation on the fed, but it is damn the
torpedoes, full speed ahead anyway. you can interpret the minutes that they will taper regardless. you have to look at this subtly. there is a stop-start in some countries that approach covid differently. i think the u.s. is on course for continued reopening. i think the u.k., which has been a laboratory experiment, is showing the way forward in a highly vaccinated population and rapidly turning to normal with vaccines. you are disrupting the supply side of the economy, the global economy, and not the demand side . that will create issues over time. the fed is the awkward layer over the covid analysis at this point. francine: i was going to ask how you see the fed developing, what will policymakers do to deal with inflation and the talk of tapering?
william: i take a slightly irreverent view of central banks because, you know me, i tend to look at things game wise and incentive structures. we get a chance to throw up a 40 year history of u.s. yields, we see that they peak almost exactly 40 years ago. it has been a steady bull trend ever since. people have taken it on in the last year, it was the recovery trade that started, but do not have history on their side. the last third, since 2007, of that global run best illustrated in the states, that global run, the last third of it has happened with zero bound. my idea of an incentive structure is that central banks, particularly the fed, want off zero bound.
if they succeed, fixed income will look different from anything we are use to the last 13 years. that is the $64,000 question at this point. francine: thank you very much, william porter, head of european credit strategy, credit suisse. coming up, we will also speak to tom harrison, the chief executive of the england and wales cricket board. we will look at the success of that, and how they can roll it out further. this is bloomberg. ♪
>> we believe the worst has passed. >> it will run well into 2022, the chip shortage. >> the chip shortage is driven by the capacity. actions have been taken by our suppliers. >> microchips are at the center of most of this activity. we are seeing a wide range of supplier disruptions due largely to continued outbreak of covid. >> we think it will be mid-2022 until we start to see supplies rebound. >> this will go away in the
short-term? i do not think so. >> we have seen shortages of up to 20% maximum production compared to our initial plans. francine: top automakers and analysts on the chip shortage. we are 10 minutes into the european trading day. let's look at what is moving on the markets. the equity markets are broadly looking for direction. they are looking at the chip shortage, the delta variant, growth concerns, and inflation. on to individual stocks, summer exciting. raising the offer for supermarkets to 7 billion pounds in the battle for the fourth largest rozier -- groce, f morrison. the other one, this is exciting because we have encouraging news
, marks & spencer. they raised the profit forecast after strong sales and food and clothing in stores. marks & spencer gaining 9.6%. finally, something i was less familiar with, norway royal salmon, gaining 13%. an offer to buy this company with a 12% premium compared to the closing price. that sent these shares soaring. let's get back to william porter , head of european credit strategy, credit suisse. let me back up a little bit and ask what you think is the underestimate in the market now? william: that takes me back to
the central banks, and very interesting dynamic. christine lagarde has made it explicit she wants to keep it out of politics, but powell wants to be renominated, and everyone wants him. broadly the central banks have been friendly to profit growth. with downward pressure on inflation, an increasing share of the economy going to profits and less by construction to labor. i think that is changing, and the biggest single long-term ticking time bomb is the fact central banks are perceived as the market's friends, and i think that relationship will change. i think they will tolerate higher levels of wage growth.
as we exit this process, and we will, a dark side to the central banking we are used to and the 40 year trend of corporate profits we are used to, a darker side will emerge. i do not think the markets think about that at all. francine: what does that mean on how you construct a portfolio or see value in credit? william: it means for us i can sit comfortably at the moment because the central banks are going to continue, i think, until the economy, wages and inflation are running hotter than the equity markets are comfortable with. the way they will do that is to continue to buy assets. beyond, there is an active
discussion at the ecb how to effectively rename the pdpp. christine lagarde, after a misstep in march last year is seen as the boss of the italy-germany spread. she has taken on the market, taken on the hawks, and is following through on draghi, however many years ago, nine years ago, doing whatever it takes to stabilize that. that is actually good news for credit the less good news for equities. meanwhile the market has tried to take on the tail end of this bull run and is getting into trouble. you are a one hurry $20 billion hedge fund, you put your portfolio in treasuries and wait to get rich. meanwhile a neighbor down the street, the fed puts them in the same position. i think credit, high-yield credit, bank capital look
particularly attractive as risk appetite will deteriorate in equity markets. francine: what kind of bank capital? william: we took a view that the banking systems were nationalized in the early part of this crisis, jeff fecteau. -- part of this crisis, de facto . if you get paid a handsome yield and are risk-free across the capital structure of italy and its banking system, you do not get 100 basis points in the sovereign. happy days. i do not think those are near the expertly date as we go to september he nine -- september 9. francine: thank you so much,
william porter, head of european credit strategy, credit suisse. angel: the u.s. federal trade commission has refiled its monopoly lawsuit against facebook. it alleges the social network pursued a strategy to buy rivals to surpass competition. the sioux asks them to unwind the acquisition for instagram and whatsapp. facebook said it is lawful ember cleared many years ago. the aim is to outmaneuver fortress group and the battle for britain's fourth largest grocery. the u.s. private equity firm has pledged to support more for its management team, its relationship with suppliers, and staff pay and pensions. . gains resumed after a trading halt indicating enthusiasm for
china's push to build the world's largest 5g network and monetize the high-speed technology. the rival is seeking a secondary listing in shanghai. the company will prohibit sexually explicit conduct on its website. some nude photos and videos will be allowed. onlyfans has attracted one her 30 million users, its popularity increasing during the pandemic. sex workers use it to charge fans for exclusive content. francine: coming up, angela merkel goes to moscow and what will be her last meeting with vladimir putin as chancellor. we will get the latest from berlin. this is bloomberg. ♪
the ftse is holding a little bit of gains. encouraging news for m&s at morrison, but overall concern for growth and valuations. we are joined from berlin by bloomberg's maria tadeo. angela merkel is speaking as last time as chancellor with vladimir putin. what will come up is refugees from afghanistan, and there is a lot of talk on foreign affairs. maria, if you look at the crisis of refugees, how will angela merkel deal with this when talking with vladimir putin, who is a conduit between the two regions? maria: that is a good point because until now angela merkel is the person who has served as a bridge between russia and the
european union, being someone who grew up in east germany, who also speaks the language. she has had direct contact with vladimir putin. the refugee story, a lot of analysts i have been speaking to actually say we will not see a repeat of 2015, because europe will pay upfront, and a lot of services and directions have taken place to stop that from happening this time around. the second issue is what to do with the taliban. the german government is rushing to gather and get their personnel out of the country. there is no clear sense of direction as to whether they will recognize a potential regime coming out of the country. the russians say they will keep a presence in the country.
and what to do with the north stream pipeline. that will come up in that meeting. the germans will go ahead with construction, but they have pledged they will help ukraine over any potential moves from russia. also the revenue they will lose from transit as a result of the nord stream 2 pipeline, that is a issue when it comes to germany and russia. francine: how will afghanistan change the game? maria: it could to some extent, the cdu and angela merkel have said they want to avoid a repeat of the 2015 chaos. the greens yesterday on the campaign trail, they were more progressive saying we have to do it to protect the people.
the election is very much about the popularity, week after week -- when you ask germans who do you trust to be the best chancellor, 40% tell you it will be shaw. it is about the people. this is new for german elections. it is about party politics and not the person. it is very much about the candidates and the polling of each individual person. francine: thank you so much. for more on developments in afghanistan -- how is the situation evolving on the ground for women? >> women are very worried about what the future holds. women and girls are being prevented from going to school
and university. women have been told not to show for jobs. some are told they cannot leave the house without a male escort. before the taliban took control, they were enforcing strict adherence to sharia, forcing girls to stop going to school once they hit puberty. men, too, anyone who works in business that the taliban disapprove of. francine: are there any signs of resistance to the taliban? >> yes, in the past couple of days, we have seen in the eastern provinces and in kabul people have started a resistance movement. they have been climbing up the flagpoles and replacing the taliban flag. they have been chanting god is
great. they are reclaiming that phrase from the taliban. in jalalabad we saw the taliban shooting at protesters. it remains to be seen that the taliban stick to a gentler approach, but we are seeing some cracked downs on protests in the provinces in the last couple of days. francine: could we also see a humanitarian crisis? ruth: yes, right now it is very unstable. before these latest developments, nearly 250,000 afghans had been forced to flee their homes ahead of the taliban. before the end of may, 80% of those are women and children. you have tens of thousands sleeping in parks and on the
streets of kabul. there is a drought in some parts of afghanistan. all of this will lead to a worsening situation. people will run out of cash soon and not have the ability to buy food and fuel. it feels like it will only get worse from here. francine: thank you so much. coming up, policymakers plan to raise the cash rate at their next meeting, even if there are still cases of covid-19 in the community. this is bloomberg. ♪
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open, 30 minutes into the european trading day. the focus is on european stocks that we are seeing over the last couple of minutes -- stoxx 600 down 0.3%. extra pressure on the dax, and similar losses for the cac. movement into the technology stocks. let's check the groups moving the most. after we saw the tech rout in asia. we need to watch out for any
indication on the vaccine uptick around the world. if you look at auto parts, travel and leisure, chemicals, basic resources -- they are less today. the virus strain from delta, it has stoked concerns over economic growth. let's get straight to the bloomberg first word news. angel: sydney's two two month lockdown will be extended until the end of september as the outbreak worsens. new zealand has extended its nationwide lock down by four days after an outbreak spread beyond the largest city, placing pressure on the zero covid strategy. china has taken the next step to tame big tech. lawmakers passed legislation setting out of her rules for how
companies handle user data. no details were released. an earlier draft required firms to get customer consent to collect, use and share information. u.s. vice president harris will look to bolster military cooperation in china's backyard as she visits singapore and vietnam this weekend. it is the biden administration's highest profile trip to the region. harris's visit to vietnam will be the first since a vice president since 1975. the ftc alleges facebook pursued a strategy to buy rivals to suppress competition. the suit asks the court to unwind facebook acquisitions. facebook says the takeovers were lawful and cleared many years ago. 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. francine: thank you so much. the rbnz to delay an expected rate hike has rippled through markets sparking concerned that the delta variant will force other central banks to shift their own timelines. the hike may now happen in october. >> we have to focus very much on our purpose, which is the inflation, unemployment mandate that we have. absolutely this week was not the best timing to be looking to reduce interest rates given the reduced monetary stimulus and the health situation. time is on our hands. we can observe what is going on. we have significant capacity
constraints. we have supply disruptions. the underlying situation remains the same, but we thought we would observe the next few days at little cost to us. >> you brought up an interesting concept when you talked about a strategy of imminent flexibility, the need for the central bank to manage its way through a virus environment knowing it will come and go. does that mean you could potentially hike the key rate even if there are instances of outbreaks? >> i think it does. the real issue is at what extent is monetary policy being useful.
it is government fiscal policy to manage this type of crisis, it is a structural crisis, not a cyclical behavior. we are seeing governments step into bolster household balance sheets effectively. that puts monetary policy in a secondary role. we need to be true to our mandate which is to say our inflation pressures are rising, are we at or above maximum sustainable employment, and should we be back to a neutral interest rate. what would change that view? you would have to see a significant shock to demand. what we have learned is incomes remained strong, demand bounces back strongly, and these rolling lockdowns will continue for a while. flexibility, remain focused on
the medium target. >> i hope all is investors and traders who control the market expectations for rate changes are listening closely, because market expectations for an october hike had been higher, close to 100. you skipped this rate hike in the midst of that sudden lockdown in new zealand because of the surge outbreak. but also because it will not be a monetary policy statement meeting where you typically would make a rate change, it is a review meeting. you announced the end of your long term security purchases, but are you saying october is a live meeting regardless of any of this? >> of course, it is a live meeting. we retain the right but not the obligation to move policy when we think it is necessary.
we can communicate many different ways a monetary policy statement that outlines our views on what the neutral interest rate is, how we see inflation performing, and we have the official cash rate act in neutral next year, which is 2%. what would push us off that course? we would have to be very convinced the supply-side is able to respond, or the demand side the economy has had a significant turnaround. that would mean fiscal policy is not doing its job. francine: coming up, we speak to tom harrison, chief executive of the england and wales cricket board. this is bloomberg.
driven by capacity, already the action has been taken by our suppliers. >> microchips are the center of most of this activity, but we are seeing a wide range of supplier disruptions largely due to continued outbreak. >> we think we will be into mid 2022 until we start to see supplies rebound. >> whether this goes away in the short term, i do not think so. >> we have seen shortages up to 20% maximum production compared to our initial plans. francine: top automakers and analysts on the chip shortage. the chip shortage is filtering through the anxiousness we have seen in the markets in the last three days. 40 minutes into the trading day, and firmly in the red, with the stoxx 600 down 0.5%.
the ftse is a little supportive, these retail stocks, and morrison got a bid from a private equity m&s saying they are increasing their guidance because of strong revenue since the u.k. reopened. angel: the offer was raised to 7 billion pounds, the aim is to outmaneuver fortress group and the battle for britain's fourth largest grocer. they pledged to support the management team, its relationship with suppliers, as well as staff pay and pension. the new surgeon u.s. coronavirus cases have prompted apple to delay its return to offices from october to january at the earliest. the company does not expect to close offices or retail stores.
charles schwab is delaying its return to office plans to no earlier than january. the u.s. federal trade commission has refiled its monopoly lawsuit against facebook, alleging the social network pursued a strategy to buy rivals to suppress competition. the suit asks the court to unwind acquisitions of instagram and whatsapp. facebook says the takeovers were lawful and cleared many years ago. china telecom has surged above its offer price to the world's biggest listing in its debut in shanghai. enthusiasm for china's push to build the world's largest 5g network. china mobile is seeking a secondary listing in shanghai. onlyfans is getting out of the pornography business. although some nude photos and videos will still be allowed.
onlyfans has attracted 130 million users, it's popularity increasing during the pandemic. that is your bloomberg business flash. francine: british cricket launched a new franchise league to expand the fan base and monetize the sport more effectively. a million people are expected to watch the tournament final tomorrow. joining us now is tom harrison, ceo, england & wales cricket board. how will this help cricket in the future? tom: the hundred is designed to grow cricket in this country. it is something we have been working on for a long time. it is about making sure the research we have done about why more people are not involved in
cricket are coming to our grounds, those issues are being addressed. the hundred is our response to that, it is a simpler form of the game, a more condensed form of the game to pack more excitement that can take place over a seven hour game. it is a shorter time that enables families and children to come to the grounds and be excited by this wonderful sport. francine: have you been surprised by its success of far? tom: not really. we always believed cricket can galvanize people's attention, something in the past it has been accused of being complicated. we have tried to simplify it. it is 100 balls each side, so everyone can understand what is going on. it is all the excitement packed into a two hour window.
the men's and women's tournament, we have been delighted. francine: how much financial firepower and airtime on tv do you need to go to the next level? tom: this will probably be one of two tournaments that start making a profit from year one. we will make 10-13 million pounds in year one. the sky is the limit, and we have a lot of options to take this to the next level. a number of players around the world have not been able to take part, but the opportunity to look at this in a different way from a commercial perspective, that option is on the table going forward.
these are the decisions we will be taking for the next 3-6 months. francine: is there anything against you taking that decision? tom: no, ultimately the 100 ball cricket is for people to enjoy around the world. we have licensed and protected the brand, and the playing conditions that go with it. we are in discussions with various leagues and bodies around the world on how this can be taken into other territories. we are taking the hundred and creating a global asset out of that property from which english cricket can benefit for generations to come. we are reliant on the men's international game to fund cricket in the country.
this helps mitigate our reliance on that. it is something we control and have built from scratch. it is great news for stakeholders in this country, and fans all over the world. francine: how much money do you need to launch? are you speaking to investors? tom: 39 million pounds is what we budgeted for this year. we will take income of over 50 million for the competition this year. i think we can take that to new levels. we will look at whether it is the right answer for us, an investor or something we want to control from the federation perspective. that is a conversation i will be having with my board. once we have reviewed this,
obviously the final is tomorrow, we are not even over the competition yet. have a big month ahead, and at the end of the season, we will sit down and review. francine: does it widen the fan base or attract new players? tom: we hope particularly in the women's game -- we are making giant strides in the women's game. it has not been a professional sport in this country for more than two years at the domestic level. we have added a tier of cricket for women in this country to further their skills. for the men, this is in addition to the program of cricket in this country, and it is an exciting addition data enables -- an exciting addition that
enables our best players. this is ticking boxes all over on how we are trying to take cricket forward in this country for the men's and women's game. francine: thank you so much, tom harrison, ceo, england & wales cricket board. coming up, we will talk more about the market and the biggest casualties on the flight to safety. this is bloomberg. ♪
francine: welcome back to the open. 50 minutes into the trading day and equities are lower. stoxx 600 down 0.5%. joining us is ven ram. what is going on in the markets? ven: the exciting thing, the cricket that you talk about come and commodities and currencies. there is a big divide in the market. commodities and currencies have been volatile, and on the others u.s. treasuries have not done
much at all this week. there is intense selling and commodities in chinese stocks, but the key takeaway is there is no sign of any systemic global panic. the traditional havens of the yen and the swiss franc have not seen inflows in either, but the bloomberg commodity index up any 5% in the first seven months through july, there was too much money left on the table, with some invited to be taken. the china regulatory crackdown, the delta variant, those are reasons enough to do that, but the fact of the matter was there was too much money left on the table. francine: when you look at the commodities drop, you explain what it means for the markets in general.
what do you make of the decision from the new zealand central bank? ven: i think it was an unfortunate incident that new zealand reported just one case earlier this week. the markets had priced in a rate hike. holding off at the last minute draws the troubling question, if a loan case will stop the central bank in his tracks, there can be no middle-of-the-road approach in monetary policy. either you have a watertight case for a rate or none at all. that is why the markets are circumspect right now, even though it was said that october is a light meeting, but the markets are circumspect in pricing a full rate hike in october. francine: very quickly, if you
look at u.k. retail sales, what does that tell us about the strength of the u.k.? ven: a little disappointment because of the narrative of pent up spending. there was a drop in july, not so much the retail price. these data sets allow the bank of england to breathe easier on rates, and buying time to do nothing at all at least for the remainder of the year. francine: thank you so much. that is it for the european market open. "surveillance: early edition" is next. the markets tilting lower in the last 30 minutes. it started in asia. markets are focused on the
in entrepreneurs to bring what's next for sports technology to athletes, teams, and fans. that's why we created the sportstech accelerator, to invest in and develop the next generation of technology that will change the way we experience sports. we've already invested in entrepreneurs like ane swim, who develops products that provide hair protection so that everyone can enjoy the freedom of swimming. like the athletes competing in tokyo, these entrepreneurs have a fierce work ethic and drive to achieve - to change the game and inspire the team of tomorrow. >> we retain the right but not
the obligation to move policy when we think it is necessary. >> if they make a misstep, they are likely to tighten too late. >> jackson hole will be very interesting. >> this is "bloomberg surveillance: early edition" with francine lacqua. francine: good morning and welcome to "bloomberg surveillance: early edition." i'm francine lacqua in london. more pain on the chip crunch, a
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