♪ anna: good morning. welcome to bloomberg markets, the european open. i'm anna edwards live in london. mark cudmore joins me in singapore. the cash trade is less than an hour away. here are your headlights. japan's separate new leader. from minister yoshihide suga plans to resign after just a year in the job. hsbc ceo says opportunities in china are too big to miss despite the crackdown.

we'll bring you our exclusive conversation this hour. plus, it's jobs day. another better report could push the feds close to tapering. jobs claims fell to a fresh pandemic low amid a recovering economy. good morning. welcome to the european market open. busy day, 7:00 in london, markets from singapore, and mark, what are the markets saying to you? mark: good morning, anna. today, it is a busy day. and the big three stories were the ones you mentioned in the lead-in. . i'm sure it won't be great for his ego. the topics closed at its highest level since 1991. the prime minister resigns, a 30 year hike. it is not directly connected to that, but there is optimism that any successor would be more likely to play a more popular card and providing more pandemic support even if the economy doesn't necessarily need it. we had some poor china data. we also had more negative

headlines out of alibaba. overall, chinese stock markets are a little softer, but not too dramatic. and we have jobs data later today and expectation around that. anna: lots of scenes to come back to, and we will come back to those in just a moment. just under an hour away from the start of cash equity trading in europe. the picture looks fairly flat. yesterday, we made modest gains in europe, gains in united states, notching records all over the place, certainly on u.s. equities. futures again fairly flat in europe, and the european equities -- u.s. equity market futures, we can roll on and show you what we've got going on there, slightly positive, up .2% or so. coming to the gmm, mark, it does illustrate the scale of the move that we're seeing around japan

and the news around the prime minister there. mark: yeah, absolutely. it's been like that the rest of this week, markets directionless, trading more than micro themes. there wasn't anything macro there. suddenly after lunch break, japanese stocks surged. you can see the top of the equity index column, the japanese nikkei up to present. another theme -- 2%. another theme, slightly risk on tone, but a kind of sense that japanese/korean relations are at such a low, they can't be any worse and therefore the change of leadership in japan implies that they might improve. so i wouldn't expect this to have a lot of likes, but that is why the -- legs, but that is why it is in the positive column. commodities are doing well across the board today, feeding through the head of this jobs

report. that will be taking a little bit of context in the inflation theme, depending what we see from the jobs report later on. anna: interesting to see the jobs column entirely green. we're waiting on other assets. let's get back to one of our top stories, our exquisite conversation with the hsbc ceo, who says clients won't take global service from the lender and they aren't being asked to choose between growing u.s. and china tensions. he adds investment plans are changing in his interview since being named ceo. he spoke with francine lacqua. >> we've been around for 156 years. we've faced a tensions in that 156 year history. let's be honest. if you want to be an international bank, serving the world, serving 60 markets, at times it can be difficult, and

i'm not going to deny that. but our clients tell us they still want us to bank them globally, whether they're wantit elsewhere in the world their savings, or [no audio] francine: but our authorities asking you to choose between one or the other? >> no. we have to comply with the laws and the regulations which we operate in. that the complex task. i'm not going to pretend that it's easy. but no one is asking us to choose. francine: when we hear say -- china say they want a fair society, what does that mean for your pivot and for your focus on china? >> well, let me talk about wealth creation from a china concept. if you think about the cities in china that have overwhelming urban population -- there are

different statistics out there, but certainly around the 75-90 mark. now, many of those cities have gone through urbanization over the past decade to 15 years. and they're going through gdp capital growth. and we're starting to see those cities turn into strong consumption markets. and as they develop consumption appetite, typically when they get to gdp and the double-digit, $10,000, $13,000 per head, that's when they start to think about wealth products. insurance, wealth management, investment products. and that's where i think the huge opportunity is. and by the way, urbanization hasn't finished. there's still more urbanization to come. so i think we're on a long transformation program in china where the creation of wealth is not super wealth just. it's wealth for the middle class

and its wealth for the urbanization that's taking place. that's what i think everybody is interested in china as an opportunity for wealth, and doesn't just think about wealth in china as the superrich. it's also the wealth for everybody, and it can be as simple as an insurance policy. francine: with the latest crackdowns in regulation, you don't feel like it will veer you of course? >> i still feel like it's an important opportunity, import market to serve, and is not going to change our investment plans. francine: talk about sanctions. if it comes through, what does it mean for the sector? >> we've been around 156 years. one of the jobs for an international bank is to comply with complex laws andsanctions laws whenever they're implemented -- and sanctions laws whenever they're implement ed. we'll never gate that as we have

stash navigate that -- we'll navigate that. it's certainly a complex situation. anna: that was noel quinn, ceo of hsbc, speaking exclusively to francine lacqua for front row. you can watch the full interview on bloomberg.com. interesting lines coming up. i'll ask you about china then, mark. we'll leave the hsbc story there, but china was referenced briefly at the top of the program. your team has been looking at the way china's data does not drive market sentiment. it doesn't seem to be that negative data is driving overall market sentiment today. mark: yeah, that's absolutely right. the chinese economy is vital to so many markets, not just the chinese markets. but the short-term reaction to chinese data is pretty

nonexistent and pretty irrelevant going back a long periods of time. you can see the correlations are pretty low for most assets. that's because the whole china markets are a lot more nuanced. the policy is more about local policy direction. it's about what the chinese -- where the chinese wants to direct growth. it's not a straight through interpretation of good data and bad data, and what does it mean for fiscal policy on a broad sense? so i think, any short-term reactions would be misguided. it does confirm that chinese growth is slowing down a little bit -- well, a lot more sharply than we were thinking a month or two or so ago. it's slowing down quite sharply right now because of recent covid restrictions. anna: right, so that's the lens through which we should look at the data. let me get back to that japanese story because this has been driving sentiment, certainly pushed japanese stocks higher,

nikkei up 2%. i've seen a couple different strains of analysis. the market is going with the analysis you set out, which is that a new prime minister might mean for their fiscal generosity. but there is another analysis that says, might we go back to a revolving door japanese politics? and how sure can we be about how that will bring, fiscally? and that's something we need to keep an eye on, across the fact that it was seen as the abe continuity candidate. and remember how much we talked about abenomics. mark: i think that alternative angle is valid, and said that we will think about further down the line. it would be a real worry for japan if we undermine the stability that we finally achieved, under abenomics and abe, and his long regime, by japanese standards, and they go back to this world where japanese prime minister's last year and it's a complete shock

and they can't follow through with their plans. a lot of people blame that for the stagnation the japanese economy was in for so long. i'm a little bit suspicious that the political rotation made that much of a difference,. but certainly that's the narrative there. you're right to point that out. the secondary impact of little further down the line, but maybe a few weeks time, might be oh no, we lost the stability in japan. for now, everyone will be fighting to make greater promises to the economy and do covid packages, and we're going to get spending soon and that will be good to the stock market. anna: and i should give credit to the senior editor in tokyo, who made that point in mind. remember, you can get up-to-date analysis and insight from mark and all the rest of these markets live team at mliv on your terminal, so don't forget that function. coming up, we'll stick with the

japanese theme. the prime minister is to quit after just a year in the job. we'll bring you the latest on the politics and market reaction. plus, don't miss our reaction with resident of russia's second-largest lender. we'll get an update on the russian lender and various geopolitical things, no doubt, 8:30 london time for that. up next, u.s. initial jobless claims fell to a fresh pandemic low amid a recovering economy. we look ahead to today's jobs report. if you have any questions of your own for our guests, please send them to us at ib+tv on your bloomberg. this is bloomberg. ♪

anna: welcome back to the european market open. 45 minutes to go until the start of cash equity trading for the

futures, equity market futures fairly flat, u.s. futures more bullion. -- bullion. -- buoyant. let's stay stateside. 25,000 jobs in august, a more moderate pace than june and july, but stronger than early 2021. let messaging should we take from the jobs report? what should we look for? frederic, good to speak to you. i've been intrigued by a lot of the analysis i've been reading suggesting bad news could be good news and good news could be bad news when it comes to linking jobs and risk assets. because of our obsession with how it will mean, how are you approaching it? >> because it will take 30,000 jobs to be announced today, slightly less than last month,

but last month it was a seasonal band from educational jobs, which will not be repeated. so, that level would be a strong level of jobs -- it needs that in order to proceed with tapering. so whether that will be enough for it to proceed at the september meeting to announce it at the september meeting or not remains to be seen. we do think there is going to be an announcement of tapering september or in november, but a taper will start early next year. there's a lot of focus on the exact date of the announcement. we tell our investors that we have to remember that even though there is a taper, the policy will remain a commutative for a very long time. i'm not talking about an increase in interest rates until 2023. so, that will underpin stock market, in our view. mark: good morning. your estimates are in line with

our consensus, a little lower. what are your binary trigger levels, where you go whoa, this will force the announce to -- announce the fed to taper? it might not be on the cards in november. where are your two kind of limits on either side? frederique: so, we would say anything different of 200,000 jobs would be the sort of trigger limit. remember that the fed is not only looking at labor. it's also looking at inflation and a resurgence of covid will also weigh on its decision. and the way things are going, it could be a bit of a slow down later in the year if restrictions, some restrictions are inputted if customer confidence starts to wane

slightly. so i think the fed will look at the overall picture, and the bar for increasing interest rates is very, very high in its view. anna: let me ask you about the broader picture in the jobs market and the level of dysfunction we see in the u.s. jobs market, because the u.s. we're talking about today, seems to exist in other markets, as well, that dysfunction illustrated overnight in data i was looking at, 50% of small businesses in the united states have vacant positions. this is a really high-level. 41% of small businesses say they have had to increase rages -- wages. i wonder how much of that is going to be temporary. we're looking at this as a sign that inflation might be with us for longer. maybe that dysfunction is temporary and we shouldn't read too much into it. what is your stance of that brought -- sense of that broader

stance in the jobs market? frederique: temporary does not mean one month or two weeks. it could mean a number of months. does it herald wage inflation? we've seen wage inflation in the u.s. be relatively subdued. overall there are -- subdued overall. there are some pockets where it has flared up. this gives us confidence where, with time, this unemployment will continue to fall. selina: thanks --anna: thanks very much. frederique with us later on the program. coming up, we discussed the regulatory crackdown, and japan, as well. this is bloomberg. ♪

>> so i think we're on a long transformation program within china, where the creation of wealth -- and it's about definition of wealth -- it's not super wealth. it's wealth for the middle class and it's wealth for the urbanization. that's why i think everyone is interested in china as an opportunity for wealth. and don't just think about wealth in china as the superrich. it's also wealth for everybody. and it can be as simple as an insurance policy. anna: a little more there from noel quinn, ceo of hsbc speaking exclusively to bloomberg about the strategy in china, which part of the market they are aiming for. fredereique is still with us. from your perspective, when you look at china and the regulatory climbdown that has dominated so

much of the conversation recently, whether that's pop stars and fame, or whether that's gaming, or whether that's real estate or other sectors caught up in this, and online education, how cautious are you on chinese equities at the moment? frederique: we have downgraded chinese equities. the credit impulse has started to wane early in the summer. that heralded a softer period of growth going forward. in addition to that, we have had the covid resurgence and the zero-tolerance policy, which means some sectors of the economy were closed. some regions imposed strict restrictions, and you also had floods. so this combination of factors mixed for a weakening of the economy in the short term. and of course, in terms of sentiment, the new regulation to investors -- took investors by surprise, wanting to have more

common prosperity was really heralded in the five-year economic plan. but people really focused on growth going forward. but clearly, there's a shift of emphasis at the moment, and we think it's going to take some time for confidence to return. having said that, there are some secular opportunities in china that are interesting, and therefore we keep a market rate, chinese bonds, because of their inclusion in the indices leader this year. and the fiscal support that we have seen this week, for instance, these can underpin both asset classes, but certainly a bit more cautious in the short-term for china. mark: you've cut your chinese equity outlook on the basis of the flood, covid, the decline of credit impulse, so they're a little bit separate from the

latest policy statements. in that context, how are you telling investors to translate this reiteration of xi jinping's prosperity focused that's been in the news this week? and also, given the pboc has promised to fix their lack of a credit impulse, are we watching the aggregate finance numbers closely? frederique: so, with respect to the strategy in terms of equities, we are underweight technology stocks. we think it's too early. -- too early to bottom fish. we think equity services open to each other before trying to get back in, especially some sectors. some really use focus of -- lose focus of regulators. until that is alleviated, it's better, in our view, to remain cautious.

we are looking at certain data points, however it is really the big picture, the greater trend that we will look at. anna: just briefly, your thoughts on japan, big news in terms of the prime minister resigning. this is sending stocks higher in the short-term. does that last? frederique: they will be hot for a while until we see who the new prime minister is. certainly hope for a stimulus, 70 japan will embrace, a technique -- somebody japan will embrace, a technique other countries have used. the economy will benefit from being protected. anna: thanks so much. thanks for joining as. -- joining us. coming up, suga surprise, back to japan. japan's prime minister is to quit after just a year in the job. we'll bring you the latest, the

market scripted by a positive reaction here. what does this mean for post-pandemic fiscal stimulus in japan? i guess we'll wait to see who takes over, that election coming in the fall. we'll get analysis next. this is bloomberg. ♪ it's moving day.

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♪ anna: welcome back to the european market open. half an hour until the start of friday's trading session here in europe, and european equity market futures look uninspiring, fairly flat. mark cudmore on something that looks a little more interesting. this is the last -- lack of link we see in commodity markets. these two are particularly well lit. what is going on here? mark: this chart's really annoying me because i can't explain it. emerging market currencies are underperforming the rebound in commodities.

we talked about this thing a couple of months ago, one of my arguments white i think latin america might -- why i think latin america might provide emerging-market play there. you can see this chart, going back over the last decade, the jp morgan emerging-market currency index traded roughly in line. and that's because they both do well when the dollar is weakening and when yields are low and they don't -- both do badly when yields are rising. the same financial conditions, and since last year, we've seen this incredible infrastructure push. we've seen this stimulus more in the development world. it made sense commodity has got an extra ship that led the way. but ultimately, you would have thought some of that money would filter into emerging markets. it goes into investments and the secondary effect that as commodities rise, it boosts investments. we have not seen that case. some of it has bigger weightings

now for non-communities -- commodities -- not commodities. but emerging markets will play some sort of catch up. however, because of my info on this is not very informed, i've asked my global team to do some work. anna: that sounded smart enough. i wonder the change in emphasis from emerging-market to developed market info sector spending. that sounds like something that's interesting. i wonder what the link is there the. we will -- there then. we will look more into that next week. let's get a bloomberg business flash. angel? angel: the faa has grounded a plane while it investigates of flight deviation that threatened public safety. reports say it briefly flew outside the area it was clear for during its dissent.

the news sent virgin galactic shares down almost 3% at the close in new york. exxon is tapping the u.s. strategic petroleum reserves to supply vaccine supplies in louisiana after hurricane ida left much of the state's refining and oil production offline. authorization came after president biden said the u.s. would use all the tools at its disposal to ease pressure at the pumps. and apple's next-generation smartwatch is expected to push the limits on display user data. the watches will be bigger and feature a factor processor. according to bloomberg sources, watch faces will be designed to increase real estate. but the design expect -- expected to be unveiled is going to be next. and that your bloomberg business flash. anna, mark? anna: thank you. japanese stocks climbed to a 30 year high after a surprise decision by the prime minister to resign after just a year in

the job. you should he do suga told the news conference he won't -- you should he do suga told the news he won't run again. the next leader is pretty much assured. let's get the latest on the politics with bloomberg's sophie jackman in singapore. juliette, why is suga leaving now, and what do we know about who might replace him? juliette: right, so very much a shot today by this news. despite the fact that his cabinet has been getting very poor, we were expecting him to run. we had headlines just this morning saying he had communicated as such. and then you see him not to run in this election. the prime minister not saying

very much in the brief appearance he did before press, saying he needs to concentrate on obit and he could not do that and run in the election. one gets the sense senior leadership had gotten tired him -- of him, as well. as for who may pick up the mantle after him after a year in power, the only person who has thrown his hat in the ring is the former foreign minister, seen as probably a safe pair of hands who has a lot of up -- support within the party, likely to continue the fiscal policy, the abenomics suba inherited. the other dark horse in the room was the vaccine minister, may be more familiar to foreign audiences as he's been out in front of championing vaccines rollout. we will have to see if he will declare a candidacy formally. he would also face support from sections in the party that are

crucial to winning the leadership of this mammoth party that tell our here in japan for almost all the postwar period. mark: good afternoon. what will be suga's legacy? sophie: well, he has kept the seat warm for about a year. his predecessor, shinzo abe, putting an end to the revolving door per minister ship japan has endured, abe taking power in late 2012 with a steady hand, suga as his right-hand man. perhaps disappointing he left so soon. he did manage to preside over and olympics held during a pandemic, which is quite something. and he probably will be remembered as the man holding up the sign declaring the new imperial era here in japan. it could be that he continues the policies of shinzo abe and whoever picks up the mental will, as well, and that will mainly be his legacy, keeping japan out of trouble during the

most turbulent times in the pandemic. anna: keeping japan out of trouble, keeping the seat warm, keeping up abe's legacy. may be that's the assumption markets are making. let's come to you on markets reaction to this view. we have seen a positive reaction in japanese stocks. juliette: absolutely, a little bit hard to take when you're financing you're stepping down, the topics rising to the 30 year high. but what we're reading is investors are drawing a line between a tumultuous year with the covid pandemic with the olympics, which were quite unpopular in japan. so now you're suggesting whoever does take over could be a bigger fiscal stimulus package coming through, and that is going to bode well for the economy. you've seen every sector on the topics, some sectors rising, but strong buying coming through. the yen and bonds declining as mliv has been pointing out.

you put a little bit on mood here, as well. that's why we've seen a slight decline in the end. what it means for the bank of japan, must analyst we've been speaking to saying there will likely be no change in policy from the bank, which we know will be steady, bloomberg economics saying the bank of japan is largely to stay the course, that whoever leads is likely to agree with the boj reflationary policies that are acquired, not expecting a major shift there. what does this mean for the rally that you're seeing? can it continue? you might see foreign investment coming, as well. the price to earnings estimate for the prospects, that is rather lower than where it was two years ago. with this shift in policy, you could see more foreign buyers coming into this market, which is rallied incredibly high today. worth noting it was a positive session ahead of the jobs

report. anna: thanks very much. juliette saly, thanks very much. and sophie jackson, thanks for bringing us the political action, as well. coming up, more from the ceo noel quinn, discussing hybrid working models, interesting things to stay about returning to office. we'll have more on that next. this is bloomberg. ♪

>> my own view on the return to the office is it would be a waste if we didn't learn from the last 18 months. if i think about the future, do i want the future be the way it was pre-covid on working environment? and let me explain that in more detail.

over 200,000 of my colleagues, 90% of the work from home, not everyone could because i have to work and branches or work on trading floors. but a lot of work from home. now, i trusted them last year to run the bank, globally, in 60 countries. and they did a fantastic job. i'm not going to turn around to them now that covid's over and say guys, i no longer trust you to work from home. francine: what segments of banking do you see more talent wars? i feel like every day we have a story about junior bankers being paid $110,000, $120,000. noel: yeah, clearly there's a very hot market at all levels, not just junior levels. there's a hot market in global markets in the trading businesses. but, you know, they go through phases. francine: do you have to

increase your prices, your pay? noel: we've always got to adjust. we always want to make sure our pay market is competitive and that we're keeping our talent, so we monitor market pay francine: -- market pay levels. francine: do you -- noe: undoubtedly. again, it's part of the learning curve. we were flying around the world for one day trips here,. to day trips there might expect -- two day trips there. my expectation is that we will do fewer longer trips. that will translate into probably a reduction in our travel budget by around 50%. anna: that was noel quinn, ceo of hsbc speaking exclusively to bloomberg to francine lacqua. you can watch the full interview on the bloomberg terminal and bloomberg.com. the top stories we're covering with angel for the siena.

angel: at least 40 people are confirmed dead in the northeastern united states after the destructive blow delivered by hurricane ida. record rainfall caused catastrophic flooding, left transport services paralyzed and left people stranded as a state of emergency was declared. the storm triggered the tornadoes. three doses of a covered vaccine may become the standard according to chief adviser anthony fauci. he said more data will be handed to the fda. senator joe manchin is demanding a quote for a pause on president joe biden's economic agenda, potentially derailing the $3.5 trillion tax and spending package. the west virginia democrats said that rising inflation and a soaring national debt make for a

smaller plan and a coastal approach necessary. and president biden rebuked the supreme court for what he called an unprecedented assault on women's rights. the justice has voted 5-4 to allow a new abortionist to take effect. the law effectively bans abortion after six weeks of presidency. biden said ministration ordered state law. global news, 24 hours a day on air and on bloomberg quicktake, powered by more than 2,700 journalists and analysts in more than 120 countries. this is bloomberg. anna, mark? anna: angel ciano in london. we are three weeks away from an historic election and the democrats are emerging. christian listener has been speaking exquisitely to bloomberg. >> for us, it's the content that will be the focus.

there's nothing automatic about it for us to join one coalition model or another. mr. schulz will have to present the ftp with an attractive offer. anna: joining us from berlin is maria tadeo. we talked about him as a kingmaker, but he's certainly been trying to make a clear this isn't going to be just available on a plate. it's going to come with conditions attached, as you would expect anybody who's coming in with coalition talks to stay -- to say. . maria: yes, and a lot of talks. he was very clear about this where he said the traffic lights coalition with the spt and the greens is a possibility. at one of the options on the table, but there's a lot of policy issues in which the greens and the free democrats in germany would disagree on, from climate targets, from tax hikes,

which for him, is a major redline, and policies which would dampen investments in his view. what it underscores and highlights is we talk about many coalitions that can emerge from here. but the talks would be incredibly difficult. the fact we have three different parties potentially joining in the coalition makes it all the more difficult. the other issue we should really stress is that for him to go in a coalition with the spd is not as natural as it would be with the cdu. and the ce -- cdu is heading for a terrible result, but still pulling 20%. there could be many options on the table. for him, the traffic lights coalition is another base case scenario, one of the many options they could contemplate going forward after the option. anna: the role of the stp, we will certainly keep tabs on that. much more from maria tadeo and

berlin. coming up, we look at your stocks to watch, including dsm, nutrition company decides to buy first world ingredients. more on that next. this is bloomberg. ♪

anna: welcome back to the european market open. 10 minutes to go until the start of cash equities trading, u.s. picture fairly flat overall. let's get to the individual stocks we're watching. joe has a breakdown. good morning. joe: this one is all about the lockdown dogs of instagram, the german pet retailer getting a takeover bid, which was announced yesterday. this was the second bid they've had, the private equity company. it follows a bit from august.

the company's had a massive increase in sales as more people have looked for furry companions and have therefore needed more food supplies and toys and that kind of thing to go with their new pets. the bid is at around 390. that is where the latest bid was. it looks like some people in the market are expecting a bit more of a premium to come in. mark: good morning, joe. and dsm signed an agreement to buy first choice ingredients. is that the case? joe: that's right. we had to the netherlands where dsm has made a bid, around $450 million when converted to dollar amounts. first choice they make and gradients go into soups and salads and dressings, and also some plant-based foods, as well,

which is really popular at the moment. it should add around $75 million of sales to dsm's revenue immediately, though it is at 20 times earnings in terms of offer price, so perhaps a bit of a tasty premium for that one. anna: a lot of the focus on what was formerly hurricane ida, and now a devastating storm, focusing on the damage in the east coast now. but from an oil market perspective, shall getting a perspective of the damage that's been done to its infrastructure. what is the latest there? joe: shall saying there has been damage to its west facility. they have flown a drone to inspect some of the damage. they don't say how costly it will be. they say they will send people to look at it and get a better gauge of the damage. around 80% of shells production in the governor of -- in the gulf of mexico is off-line because of this hurricane, so it

had a big impact on the company. from a market perspective, we've been trying to gauge on whether this will impact the mg stocks, the companies in new york, as well. i did read an insurance report this morning that said they were estimating the hurricane could cost $18 billion for the insurance sector. as we get more gauges of the financial impact of this hurricane, it's going to be interesting to watch over the next few days. anna: we'll keep an eye on that. thank you very much. just a few minutes to go then, seven in fact, to go until the start of equity trading. we're reflecting on japan, the fact yoshihide suga is stepping down as prime minister. elections take place in the fall. and yet, stocks seemed to like the uncertainty, at least in the very short-term. that's a bit of a strange one. mark: yeah, we're expecting the

japanese election to not be a big markets story. now, we have the promise of people fighting more aggressively for more fiscal stimulus, more aggressive plans. if anything, a marginal positive. i don't think people are focusing on the longer-term potential that will return to the lack of stability in japanese politics. i'm not expected to keep on being a tailwind next week, but i think we will immediately -- i don't think we will immediately swivel to a negative perspective either. anna: we haven't spent enough time talking about the u.s. job story. a lot of the narrative turned to the narrative of the mantra that good news could be bad news, or the opposite could apply. your thoughts as we head to the payroll? mark: that's a fair interpretation. we've been soft on the dollar all week since jackson hole. and it seems that most traders are investors are erring towards

the idea that being a slightly soft number, whisper number is saying, i think there's likely to be a larger reaction to a positive surprise today. all that said, look, it's a mug's game trying to predict payroll, but i have found that following the trend of those late forecasts, more often than not, makes it slightly better than a toss of a coin of getting a right. and when adp was weak, not a great indicator, but the employment number was also we, i think we could -- also week. i think we could get a soft number. i don't expect it to be dramatic because that's what people are preparing for. anna: the drop off between u.s. consumer confidence, you wonder how that is going to weigh on the underlying economy. thank you for spending the past hour with us. more on the markets live team, plenty on the japanese elections, on the undervalued nation -- nature of japanese

stocks and what this means, this change in positive coming in front of the election in japan, what this means for japanese equities. european equity markets will open up and around for minutes time. tom mackenzie joins me next for the market open futures fairly flat. this is bloomberg. ♪

anna: welcome back to the european market open. one minute until the start of cash equity trading. i'm anna edwards in london with tom mackenzie. tom: prime minister yoshihide suga plans to resign after just one year in the job. the topix closes at the highest level in 30 years. hsbc ceo says opportunities in china are too big to miss despite the crackdown. our exclusive conversation with noel quinn. another been a report could push

the fed closer to tapering. initial job claims at a low. anna: let's look at the futures picture with those headlines in mind. the european futures picture looking lackluster compared to asia. the asian equity session pushed higher with expectations we might see further fiscal stimulus in japan. that is not translating into the european trading day. we have the jobs report later on. tom: the ftse 100 currently flat. the ibex flat as well. nothing has fed through from the positive asian session. china was down. japan strongly higher in the back of that political news, the bet there may be more fiscal support as suga steps down.

cyclical's taking over from the big tech mega cap companies. u.s. futures are pointing higher. more momentum feeding through into the market. the cac quarante slightly lower. the ibex down three points. lackluster, not much conviction at the opening of trade in europe. anna: not a lot of conviction but a lot of gray. that is reflecting the data we are waiting for. investors are waiting for u.s. jobs data that will shape views on the u.s. fed policy. the u.s. added 750,000 jobs, more moderate than june or july jobs. let's get to raj shant, porfolio strategist, jennison associates, a lot of people are pointing to the fact if we get a good jobs

report, that might be negative for risk assets because of our obsession with the taper. what are your thoughts? raj: i would completely agree with that. the stronger the earnings numbers, the stronger the jobs report, the stronger the economic data, the more likely it is the extremely accommodative policies from central bankers will have to taper or start to reverse. that would be bad for risk assets. a lot of value stocks and cyclical stocks are good through the end of last year and early this year, but that change in policy mood music would be bad for the cyclical and risk set there's. -- sectors. tom: how much runway is there? raj: i think there is very little.

we are getting to the point where if this economic data is really strong, the policymakers come under intense pressure to reduce the programs and remove the ultra low interest rates. and normalizing policy. more likely the wood be -- would be the economic data is not that strong and policymakers are not under pressure. that would make growth is not that strong. the trade seems to be at risk whichever way we go. anna: you favor growth stocks. how is it if growth is not strong, growth stocks do well? raj: [laughter] the idea a really good growth company is an innovator, a company developing, is in demand, and often times disrupting existing industries.

with that concept of what a growth stock is, you can think of these kind of companies doing well in most environments. what tends to happen as they do least well relative to the market when people get optimistic about the future growth outlook. we went through that the fourth quarter of last year, the first quarter this year, on the reopening vaccine trade. we are getting to the end of the runway for those stocks. the earnings growth is not there. if you look out to 2022-23, they re-rated already meaningfully through the end of last year into this year. we are in an environment where investors are already beginning to feel they can get more reliable visible growth. tom: is that an assumption you are making that yields will stay

relatively capped? if they yield environment changes on the back of a taper, does that add uncertainty on that call for growth? raj: that is a great question. if you look at the historical data, the jury is still out. there have been yields rising when growth stocks, which by definition the earnings are a long way out into the you chair, as the yields go up, the current value of those future cash flows diminishes, so growth stocks have done badly with bond yields rising. there were other periods when bond yields are rising because growth is strong, and as that is beginning to be choked off by rising rates, cyclicals and value stocks do less as well, and people gravitate to growth stocks.

that would add macroeconomic uncertainty into the mix as investors consider it. we do not believe bond yields will be rising strongly in the environment we are in because with record levels of interest rates around the world, in the corporate and government and consumer sectors, we do not think rates can rise much without medially having an economic impact. we are depending on that for growth stocks to do much better relative to markets. tom: raj shant, porfolio strategist, jennison associates stays with us. we will talk china and get a view on the political changes in japan. coming up, more on our exclusive interview with the hsbc ceo.

they are hiring wealth managers over the next 3-4 years. we will hear more on that next. this is bloomberg. ♪

tom: welcome back to the open. 10 minutes into the trading day and red across the board. the stoxx 600 down more than 1%. down about 0.2% -- i should

correct that. let's look at what is on the move. anna: let's start with ashmore. the stock down by 3.6%. they adjusted the number the market has focused on. the stock is trading weaker. tom: we are talking trucks and a price target cut by ubs, talking about roadblocks ahead. the stock is up 1.5%. ubs warning about the difficulties, supply chain difficulties facing the company. anna: the italian payments business, we understand the italian competition will investigate whether the acquisition of whether it could lead to a dominant position in the digital payment sector.

that italian watchdog probe is weighing on the stock today. now back to our top interview. the complexities of operating in china have increased but hsbc will continue to navigate these. that is the view of the ceo. he adds the bank is expanding in the important will be hiring wealth managers. in his first interview since being named ceo, he spoke exclusively to francine lacqua. noel: we have been around 156 years and faced political tensions. if you want to be an international, at times it can be difficult. i will not deny that. our clients tell us they want us to bank globally, whether consumers who want to invest

around the world, or businesses wanting to trade with the world. the demand we have seen even in a crisis like the one we have faced, the demand from our customers still exists. francine: are authorities asking you to choose between one or the other? noel: we have to comply with laws and regulations we operate in. that is a complex task. i will not pretend it is easy. francine: what are your expansion plans? noel: we are hiring. the plans are to higher 3000 extra wealth managers over the next 3-4 years. we have hired 600 in the first nine months of the program. we are on track for our target for hiring this year, and initiative is going well. francine: talk to me about the sanctions law.

if it comes through what does it mean for the financial sector. noel: one of the jobs of an international bank is to comply with complex laws and sanctions laws wherever they are implemented. that complexity has increased. we will navigate that as we have done so far. i will continue to do so going forward, but you have to stay close. you have to stay close with clients and regulators to understand the requirements and navigate those complexities. it is a complex situation. tom: that was noel quinn, ceo of hsbc speaking to bloomberg exclusively. raj shant, porfolio strategist, jennison associates is still with us. there seems to be a number of different dynamics, what stands out is the slowdown in the growth trajectory.

also the regulatory challenges. what is the biggest headwind? raj: i think the rolling lockdowns as a result of the outbreaks of the delta variant, it is a short-term issue. most investors should and would look through that. the policy changes are much more complex. second-guessing what communist party politicians may or may not decide are there priorities of the right level of profit for a company is not in the toolkit of most investors that i know. for me and my colleagues, we find it too hard to fathom. that is a bigger issue and i sincerely doubt it will be resolved in the next few months, the way the rolling lockdowns and supply chain issues from the

delta variant outbreaks will be. anna: what do clients talk about when it comes to china? what lens do they view this through? do they see it as a major pivot away from the notion of freer markets in china, or do they say we saw this coming, we are not moved by it? raj: i think there is a raging debate amongst investors. you summarized the camps nicely. we put it into the hard to fathom box. you cannot guess what the chinese communist party will be thinking and prioritizing year and the year after. while the debate rages, what most investors can agree upon is

it probably is less risky but everything has become more risky than it was this time last year. it is less risky and more closely aligned with what the chinese government wants more of in the next 3-5 years. examples might be the health care sector is growing strongly. and the government presumably would want more of that in the years ahead. or electric vehicles that seems high up the policy agenda. more electric vehicles and capacity for them. but more generally across the market, how could you ever be confident what the regulatory and legislative backdrop will be this time next year? i do not know what the framework for working that out would. tom: follow the policy but beware of the uncertainty. we have a red headline about

logistics. the massive e-commerce player with this backbone of logistics, they are near buying a stake in china logistics. that puts me onto the announcement by president xi jinping about the new stock exchange in beijing. do you see that as market positive? raj: it is hard to say it is market positive because it is another direct intervention. to the extent that it introduces more competition into different markets and directs more capital and savings flow toward small and medium enterprises, that is a more catalyst it than european or u.s. government policies. it is yet another control to

direct many aspects of economic to video. once again it is in the too hard to decide box, and what it is hard to work out, you should not make a big investment position. there is a pattern developing more direct intervention. i would say investors need to be quite wary and circumspect about the changing risk profile. anna: thank you, raj shant, porfolio strategist, jennison associates. let's get a bloomberg business flash. angel: the faa has grounded virgin galactic's space plane while it investigates whether a july 11 flight deviation threatened public safety. it briefly flew outside the area during its descent. the shares are down nearly 3% at the close in new york.

exxon is tapping the u.s. strategic petroleum reserve. this, after hurricane ida left much of the refining and oil production offline. president biden said the yet -- the u.s. would use all tools at its proposal to ease pressures at the pump. apple next-generation generation smart watches are expected to push the limits on user data. the watches will be bigger and feature a faster processor. new watch faces will be used. the device is expected to be unveiled this month has already faced production problems. that is your bloomberg business flash. tom: coming up, suga's surprise. he will quit after one year on the job. live from tokyo next this is

bloomberg. ♪

>> it was a real shock to see him say, i am not going to run. but he was really unpopular. he had dropped to 25% in public opinion polls. >> used to have a revolving door prime minister, and the current prime and stir is walking out

because -- the current prime minister is walking out. >> this is a shorter event. we did not think, we thought suga was on the path to getting reelected. we have a different game today. i think this is part of the ongoing transformation we are seeing in japan. >> they decided he is a liability for the upcoming elections and they need somebody else. if you are going to dump suga, it seems highly unlikely they would decide the candidate would be the one in the news recently. anna: bloomberg tv guests on the surprise resignation of japanese

prime minister yoshihide suga. he says he will not run for the leadership of the democratic party, bringing to an end his one-year stint as prime minister. joining us now is are managing at her for japan and korea. good to speak to you. this was a surprise. we heard the voices of guests expressing their surprise. what do we know about what happened? >> suga basically explained briefly in a statement to the press that he made this decision to focus on covert measures. however, there has been a lot of speculation among the local media that suga was struggling to get enough support as he was trying to reshuffle his cabinet ahead of the general election, and felt he was not going to get the nomination he needed to

become the leader of his party. tom: presumably the horse trading starts now. how is the leadership race shaping up? >> it is very unclear at the moment. the only candidate who has raised his name is the foreign minister. following the surprise news today we have had reports other members, including taro kono, one of the more popular senior members is considering running in the race. if kono runs, he would be a strong candidate given his strong public support shown in opinion polls. however, time and time again japanese politics have shown the results are not based on

popularity. there is a lot of political power balancing that needs to happen, and the candidate may not necessarily be the one the public favors. at this point it is hard to tell. anna: just as you were speaking, we got a line quoting japanese television saying kono plans to run to replace the prime minister, suga. we have this confirmation by japanese television that kono plans to run. thank you very much. coming up, the future of russia's banking industry. we will speak to the chairman of russia's vaguest lender. this -- russia's biggest lender. we will talk about the role of

sanctions and the ownership structure that they have. all of that, next. this is bloomberg. ♪

anna: welcome back to the european market open. 30 minutes into the european trading day. japan is set for a new leader. prime minister yoshihide suga plans to resign after one year on the job. the topix closes at its highest level in 30 years. hsbc ceo says opportunities in china are too much to miss. it is jobs day, another banner report could push the fed closer to tapering. initial jobless claims fell to a

low amid a recovering economy. the european equity markets caught in limbo. on any jobs day we expect to see not much movement, but we have big political movements in japan. tom: it feels like we are in a holding pattern. pointing to the japanese politics, that pushed the nikkei and the topix to 30 year highs. weakness around china on the economic data, the regulatory focus remains in the spotlight. herein europe, the stoxx 600 is down 0.1%. a slightly better picture. germany is lower by 20 points. cac quarante is in similar territory. let's see how this is breaking down. the gainers are food and

beverage at the top, followed by utilities and real estate, but that is modest. at the bottom you are seeing travel and leisure, and banks. anna: a little lackluster. awaiting the jobs report, let's get to more long-term story, the latest on the future of russia's banking sector. vtb, russia's second-largest lender had previously given up control in response to western sanctions. let's check in with the chairman and ceo, andrey l. kostin, who joins us from the eastern economic forum. very nice to have you on the program. let me ask you about the bank and your plans to take back control. what does that tell us about the

regulatory regime under which you are operating? andrey: from the beginning the structure of vtb has a if you percent plus one share, and you mentioned with sanctions, we decided to sell. at the moment we are changing the strategy. the bank should be more incorporated with the group, vtb, and sell the products that originated with vtb. that is one reason we decided to take more executive control, and we are in the process of completing this procedure over the next months. 50% plus one share. anna: does that tell us you think there will be a better

environment for russian-american relations, or are they not connected? andrey: you never know. after the summit between our presidents, there is an area of communications. we still have to see, there are different signals from the american side. on one hand they have sanctions against russian sovereigns. on the other hand the united states stops short of imposing sanctions on nord stream 2. we do not see much activity. it is a frustration to me. you never know.

it could be any reason why relations worsen again. we decided to act under the assumption the sanctions are here, but they are not stronger or weaker, so we go ahead with our plans. tom: that is the geopolitical backdrop. it has been a strong year for russian banks. do you see that continuing, or are you starting to peak now? andrey: it is very strong. our stocks grew 40%. our profits in the first seven months, $2.8 million -- $2.8 billion. it is quite strong, a good year at the moment for the whole banking sector.

in eight months it grew double from the previous year. this year is a year where we return to a pre-pandemic level, but we believe next year should be even more successful. we have plans to increase our profitability further. anna: we have seen a healthy ipo pipeline in russia. will that continue, and are you at vtb thinking of exiting any of your private equity via ip o's? andrey: we are not selling much of our own asset. we are the number one investment bank in russia, and we have

clients, bringing them to russia . we hope the good prospect for the russian industry will allow us to bring more russian companies to london, new york and the moscow stock exchanges. tom: does the focus for vtb remain domestic, or are you looking overseas? andrey: domestic herein russia. most of the banks are more inward looking, but for us, considering the geopolitical environment people ask if we will cut further our duration in london. we are not. we are happy being in london. we moved some staff from london

to frankfurt because of brexit, but otherwise london is a good platform to work in. anna: no plans to cut back in terms of the london operations. that me ask you about the role the dollar plays in the russian economy. you said russia is not anti-dollar but the russian economy is forced to cut back on the use of the dollar because of sanctions. do you see more of that ahead? do you see other areas where the russian economy has to cut back on the u.s. currency? andrey: we have figures the dollar 10% on the last 20 years.

we are concerned because america using the dollar as the means of sanctions for political reasons has created problems for russian enterprises and russian banks. we feel safer with the euro. the euro has a negative interest rate, so our companies who moved from the dollar to the euro ask why they should pay to keep euros. on the other hand, using the dollar as a political instrument is a threat to countries, maybe for china as well as others. if america continues to do it, we will have less interest in keeping our reserves in doars. it is not a political gesture on our part, just reality.

we have to protect our money. tom: i want to get your views on inflation. do you expect the central bank in russia to raise rates this year? andrey: our analysts say the interest rate will grow, will be increased probably another 0.5%. then we expect stabilization on this level for the year 2022, with inflation down from 6% this year to 5.5% next year, and then back to the target of 4% in 2023.

i expect the central bank will come back with a key interest rate around 5%. i'm telling the central bank inflation depends on the international prices. russia is a big importer. the government is trying to create incentives to bring down the exports but stabilize the prices. central banks believed by using their own instruments they will help fight inflation. international enterprises play important roles. we believe it is a slow process, going from 7% to 5% in the

next two years. tom: andrey l. kostin, chairman / president, vtb bank, we appreciate your time. coming up, germany's possible election kingmaker demands a high price to join a coalition. more on that, next. this is bloomberg. ♪

tom: welcome back to the open.

we are under 45 minutes into the european trading day. flat to modestly lower across european markets. in germany we are around three weeks from a historic election, and the free democrats are emerging as a possible kingmaker in any coalition. >> for us, it is the content that will be decisive. there is nothing automatic for it for us. they will have to present an attractive offer. tom: joining us from berlin is bloomberg's maria tadeo. the significance of this conversation and the views on how this may shape coalitions? maria: what was very striking

about that interview is he said, when i look at the many coalitions we have come the traffic lights joining forces to form a government is one of the many options we would consider. this is not our base case scenario, and it will be about the content. he did say at this point the fdp could not work with the greens. we argued that we differ on many fronts from taxation with some investments we see in the country, taking on more debt is something we will not consider. what is on the table would not be enough for us to join a government. anna: thank you very much, maria tadeo in berlin with the latest

on the race in german politics. let's get a bloomberg business flash. angel: the faa has grounded virgin galactic's space plane while it investigate if i july 11 deviation threatened public safety. report say they went briefly outside the area cleared for during its descent. the shares are down nearly 3% at the close in new york. exxon is tapping the u.s. strategic trolley him reserve -- strategic petroleum reserve. authorization came after president biden said the u.s. would use all the tools at its disposal to ease pressure on prices at the pump. for the first time, galaxy digital holdings exceeded $2 billion in assets under management.

the firm gives credit to recent appreciation of prices of cryptocurrencies like bitcoin. there had been more than $200 million of inflows from investors since the start of july. that is your bloomberg business flash. anna: let's focus on the situation in semiconductors, and the disruption. one of the world's biggest chipmakers has record earnings in the third quarter and an upbeat forecast. the ceo warns the supply of semiconductors is still constrained. we have a breakdown. >> the earnings pretty stellar, but the chip shortages continues, and it looks like it is getting worse. the chip time is surging above

20 weeks. that is above the usual 6-9 weeks. this is playing into extending into 2022. this will hit your major industries, particularly autos. they are saying they could forecast $100 billion from lost sales of vehicles they could not produce. big companies like apple have been unable to meet demand. this is a global issue, but let's focus on the u.k. market. this is one of the leading innovators in europe in the chip space. increasingly, the u.k. chip firms have been bought by foreign buyers. we sell one sold to a chinese manufacturer.

the u.k. chip industry, about $42 billion sold off. that is a big issue and is coming under more scrutiny. tom: coming up, we have an exclusive interview with the ceo . we will continue that conversation, and look at the ongoing chip shortage. investors at defensive positioning amid signs u.s. economic growth may have peaked. more on that next. this is bloomberg. ♪

anna: welcome back to the european market open. 53 minutes into the trading session, down a bit and up a bit. some data coming through from france. the august pmi number coming in, pretty much in line with the prelim number. not much movement on euro-dollar. it has been climbing in recent weeks. joining us now to talk about markets, heather burke, from a markets live team.

let's start with a jobs picture out of the united states. what should we be watching for? heather: we are going into the jobs report with a dollar a bit weaker, and stocks at a record high. while people will be watching the actual jobs number which is expected to slow down, but what will be interesting is the wage increases, whether we are seeing a big increase in pay. we are in a background with high unemployment and high labor shortages. any jump in wages, will that cause the fed to increase a taper, and how could that rattle stocks, and what help bump the dollar back up? tom: how much is playing into this move into mega cap tech stocks as a defensive play, and do expect that to be crystallized and sustained?

heather: stocks are at a record really concentrated in apple, amazon. we saw that hit a record this week, and that shows investors, while willing to put into stocks, they are concerned about the spread of the delta variant, slowing growth, and a week jobs number could crystallize that shift into growth stocks overvalued. anna: the german august pmi numbers look a little further from the estimate, but very much over 60. we will be looking to see if we get any movement in the euro. back to the equity story, it is interesting to think about the role of growth stocks and the role they are playing as defensive plays. is this a new phenomenon that

growth is expensive? heather: in terms of strictly defensive, we have seen health care do really well in europe and the u.s. in the past month, but tech also has defensive characteristics, higher earnings growth, higher visibility. also, a cyclical component. a big growth in semiconductor stocks in the past few weeks, and that plays into supply shortages and fears of inflation. growth stocks can have a cyclical and defensive tilt. we are saying that in tech. that goes to the idea of people hedging against this idea we are having a pandemic that might have peaked. tom: looking ahead to the

nonfarm payrolls of the defensive play around big tech. markets in europe are flat. futures in u.s. slightly higher. stay with us. "bloomberg surveillance: early addition ♪

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♪ >> i think we are on a low transformation program within china where the creation of wealth, and it's about definition of wealth. i cannot predict the future. is it a complex world we live in? yes. has it become more complex? certainly. it is wealth for the middle class and wealth for the urbanization has taken place. that's why i think everyone is interested in china as an opportunity for wealth. i am not going to [