tv Bloomberg Markets Americas Bloomberg September 15, 2021 10:00am-11:00am EDT
guy: 30 minutes into the trading day in the united states. i am guy johnson in london. alix steel in new york. welcome. the s&p up a touch. do we fade into the close? in reality, energy prices is where the story is. alix: there are two parts. energy is part of that. the oil inventory numbers, potentially bullish, brent at 75%, like you said. s&p up .2%. what is interesting is that we have not had the voracious retail buy the dip that we saw in the past 12 months. where is all the retail?
are they still in the market? that is the question. the 10-year goes nowhere, just a touch about the moving average. the five-year tipping its own 50 day moving average. a pickup in volatility as we have seen choppy trading, and quadruple bridging friday, which is fun. you can have a lot of volatility. what has set the tone in the markets is china. you had weak data and big selloffs in gaming stocks. i want to start with the macro picture. michael mckee is looking at those numbers. michael: we are not seen more of a reaction in global markets, which is interesting, because china is supposed to represent what is going on. you talk about supply and demand side problems. china has both. retail sales of only 2.5% over a
year ago. the forecast was for 7%. this is weighing on growth. the delta variant causing people to pullback, a new break in southern china to worry about. and industrial production on the supply side is also a problem. industrial production falling, construction production falling, and you can see that the steel output for china is down to a 17 month low here in august. it is crossing the global economy, all of this coming down on people, and the bad news is it is likely to continue according to the national statistics bureau. they put out a note today that said the international environment is complex and grim and the impacts of domestic outbreaks and natural disasters such as floods on the economy is showing.
that will continue. analysts are not expecting a reserve ratio cut or in benchmark interest rates, but they think china will have to do something to boost growth. guy: we will have to see what that looks like. thank you very much indeed, bloomberg's mike mckee. the other story we are tracking and china is what is happening with ever grand -- evergrande. authorities have told their lenders to not expect interest payments next week. one step closer to one of the nation's biggest debt restructurings. joining us now is a strategist. if those payments are not made, are we in default? if we are in default, do we start to understand who will take the pain? >> that answers -- the answers are maybe and not. evergrande bonds work downgraded to cc, along with moody's and
stitch. they will point to delta, the typhoon, a lot of things, but really it is that leverage in the property sector, and you are seeing retail sales coming off because chinese households have no place else to invest their wealth except the property market, so if this continues, you will see more contagion in the broader economy, and that is what we are trying to digest. another tidbit -- new home sales in china down 20% year-over-year, construction down 3.2% year-over-year. china's property sector is feeling the pinch in the economy. alix: what kind of policies may come after that? a third prong of that is what is happening in different sectors in china. the latest crackdown is casinos. when gaming stock moving a record $18 billion into
different assets after a change in regulations. abigail: extraordinary. huge declines in the asian sessions. there was one index down 23%, a record. we are seeing big declines today, and to your point on that resort, down 18% over two days, the worst two days since march of 2020. that is the degree of the selling power. you have lenders fearful that -- fearful with officials in macau saying government supervision may be needed day-to-day. coming back 50% from the february peak on the concern that the government is stepping in. it is a big risk. the shares don't fully seem to be seeing those declines on the day for tech. luxury goods, some analysts are saying this tumble we are seeing in luxury goods, the louis
vuitton owner down, big clients down for a second day, that macau is not critical in terms of sales but as a barometer of sentiment. chinese retail sales came in much weaker than expected. luxury goods tumbling along with casino operators. guy: a whole bunch of european retailers under pressure on the back of that data we saw out of china. abigail, thank you very much indeed. we are staying with china. the chinese president, xi jinping, declining an in person meeting with president biden after he floated the idea last week. to walk us through the implications of this, annmarie hordern, bloomberg's washington correspondent. what are they saying about this reporting? it has been reported widely elsewhere. how -- what are we learning about how the conversation went, or whether there actually was a
snow? anne-marie: there was no actual mention of an in person ask. some have said that characterization was not correct. we learned that president biden floated this idea for a meeting. it would be the first time the two would meet face-to-face with biden as president and xi jinping decline this. is this because xi has yet to leave since covid? he has been in china for more than 600 days, the most of any g20 leader, and we know he will not attend next week's u.n. general assembly. there is the potential of whether or not, we don't know, of whether he will show up in rome at the g20. one thing we do know, though, is that the biden administration, similar to the obama administration with regard to
foreign policy in china, have a bucket approach. with climate change, we want to make inroads at a deal -- inroads at a deal, but will be tough when it comes to human rights. china has said no. we are not doing bucket diplomacy. we need to make inroads on all of these together, so potentially a sticking point. alix: you throw in climate and that is a different thing. let's go to the d&c, budget negotiations. where are we? annmarie: president biden will meet with two democrats in the senate, joe manchin of west virginia and kyrsten sinema of arizona, two democrats he needs to drive home his economic agenda, not just the bipartisan infrastructure agreement, which has support on both sides of the aisle, but the three point $5 trillion reconciliation package.
both senators have said this is too much. senator manchin hinted that something closer to 1.5 trillion be something he could get on board with. an interesting development today to see what comes out of those meetings. all of this as we have committees today submitting their budget drafts to the relevant committees to make a bill. alix: coming up, signs of slowing growth in china and concerns with luxury and gaming stocks. emily roland joining us next. this is bloomberg. ♪
>> let's check in on the first word news. voters in california have rejected an attempt to recall gavin newsom. about two thirds of voters answered no to the question of whether he should be removed from office, a major win for democratic leaders, who characterize the recall attempt as a power grab by trump supporters. a major missile test and north korea. kim jong-un fired two missiles into the sea off the north korean coast. british prime minister boris johnson will announce additions to his cabinet today. one official said it is to ensure that he has a strong and united team. global news 24 hours a day on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in over 120 countries.
i am ritika gupta. this is bloomberg. alix: you are waiting for the cabinet reshuffle. you are hanging out for that? guy: waiting to see what happens with the foreign secretary. that could be quite interesting. no news on that front, no details. interesting to see where it goes next. i wonder if we will see the same thing again. alix: right on that 50 day moving average. look at this chart. the s&p, that has been a longer-term support, that 50 day moving average we are on the breach. we have seen in the past is buying coming in from retail guys, and other hits to that 50 day, a selloff. some buy offs on etf's but not the kind of volume you would expect based on the previous selloffs from retail. joining us, emily roland, jh investment's co-chief investment
strategist. do we hold that 50 day ema? emily: it is interesting. a 50% drawdown -- 15% drawdown in the equity market, nothing close to the normal 5% drawdowns we have seen since the pandemic began, so we are in a choppy environment for stocks in a place where bad news is good news. it feels like we are in a period now where some of the bad news that is coming in, particularly out of china overnight, is actually putting pressure on stocks here, so there is that buy the dip mantra that i continue to hear. maybe is not in that retail sales data, but listening to the strategists on bloomberg this morning, i heard volatility is an opportunity to lean into equities and we would suggest the same given the strong fundamental backdrop. guy: given that, i am wondering
what a catalyst could be for a correction. what we are seeing at the moment does not in any way qualified. the yields have been well behaved. the inflation debate is moving around. i cannot get a clear sense of direction on that one at the moment. what is the catalyst to get stocks to materially move down from here? emily: we are watching spreads closely across the high-yield bond market. we are seeing a little bit of spread widening in the triple d space, but credit conditions are remaining very healthy now. there's really a couple of things that could provide fodder for a correction in the markets. one that has not been priced in is potential reforms. we have heard policymakers in washington are proposing a 5.5% corporate tax increase, and when we look across earnings growth expectations penciled in for
2022, we are looking at 9% year-over-year earnings growth for the s&p 500. you knock 5.5% off of that and you are looking at a flatish environment for earnings growth, which could be significant, but the biggest potential problem will be a mistake by the fed. we know that the fed kills every cycle. if you hear a more hawkish response potentially from the fed next wednesday, which will be must-see tv, we will all be tuning in to that press conference from powell, that is another element that could create spill over in terms of volatility and equities -- in equities. alix: i will segue to energy. one sector that seems to have a ton of free cash flow, especially with $75 oil, is cash flow. they can handle a margin squeeze. do you like energy at these prices? i am struggling with the overall
underperformance of some of the oil majors versus the price of oil. emily: when it comes to the energy sector and oil prices in general, all roads lead to the supply side. we see a larger than expected drawdown in u.s. oil inventory, some of that hurricane related. the demand side for us, we just do not see the catalyst for a significant increase in demand. i think you saw that coming out of the pandemic. we had our first leg of the reopening trade. it is hard to see that happening all over again if we had forward here, so we think that oil prices remain range bound from here. we are looking at better opportunities in sectors that can maintain those margins. i think that discussion on margins is critical. as we move from the early part of the economic cycle and into the middle part of the cycle, it is all about finding companies and sectors that can maintain margins, withstand input cost
price pressures, and grow organically as the economic growth backdrop slows, and that is for quality, sectors like technology, communications, industrials and health care. guy: let's go back to the credit story because i'm fascinated to get a sense of what it could involve from here. you mention the fed making a policy mistake. there is a line of sight here that suggests that may be the fed is going about this wrong, that what it should be doing is hiking rates first and then cranking liquidity up later, because at the moment -- and today is a case in point -- companies are rushing to market, the availability of liquidity is still there now, but it will potentially, with the taper, tighten up. maybe what we should do is slow the demand and then tighten liquidity.
is that the mistake that could happen here? emily: that's certainly on the table. by the way, whatever the fed does or is looking to do could be wrong. the fed is in a difficult position. they want to lift rates, but it will be hard to do if the economic data does not show up in a string of better results, which is what they are looking for. what we may see next week is a more dovish outlook than markets expect. they put in two rate hikes in 2023. if the fed can continue to support this market, that is another sign of haleness. alix: if the fed pushes out more of a dovish meeting next week, have we already front run that? emily: i think the cyclical
trade is behind us at this point. we talked about that early cycle environment where fed policies are accommodative. we unreleased -- we just unleashed a fiscal bazooka in response to the onset of covid last year, and that bazooka is starting to fade. that valve is turning off. i am not saying the cyclical part of the market cannot do fine. i am saying it is harder to see growth from areas like materials and financials, which is what we have seen reflected in the market action month to date here in september, so i would say lean into quality areas, companies with good return on equity, the ability to grow organically. in fixed income, look at the corporate bond market and the intermediate part of the curve. we like that opportunity for those fallen angels to be upgraded as the economic cycle unfolds.
we are nowhere near recession yet. it is just we have to recognize that the best of times are behind us at this point. guy: emily, always a pleasure. thank you for your time today. emily roland of gh investment management. dominic raab, the former foreign secretary of the u.k., confirmed as the justice secretary and deputy prime minister. both sound like important jobs, but coming from the foreign office, one of the great jobs in the u.k. government, it kind of feels like a demotion. the reshuffle is ongoing. apparently, the prime minister has left the palace of westminster. he has gone back to downing street. we will start hearing about the hires rather than the fires in the next few hours in the u.k. government reshuffle. next, more on the $2.2 billion deal, especially of lender green
>> knitted to the consumer business. -- we are committed to the consumer business. we have made great progress the last few years. we are just getting started and this transaction shows how committed we are to growing the business and also helping customers take control of their financial lives and serve them with real goldman sachs products. guy: that was stephanie -- alix: that was stephanie cohen of goldman sachs earlier.
they are expanding into buy now, pay later with the acquisition of greensky. david: we are talking about an all stock deal. we are talking about $12 a share, which does not sound like a lot and is not considering that greenguy went public in 2018 at three dollars. it shows they have had the relationship with the company for more than three years and decided to buy it to expand that consumer banking business market. that said, goldman has a deal with apple to provide installment financing for its products, so we will see if this takeover becomes part of that. now, this is a group, when you consider greensky and the
fintech area that's really been in focus. if you look at the relative performance of these stocks, they have taken off this year. lending club the best performer in the nasdaq fintech intact -- fintech index. it has done well and they did a deal a few weeks ago with amazon.com to provide installment financing to its customers, so this is an area where we have seen interest. >> dave, thank you very much indeed. bloomberg's dave wilson. next, we talk about what's happening in the energy sector, jeanine wai joining us next. ♪
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steel in new york. this is bloomberg markets, what you are watching. we are going to see the inventory data dropping on a squeeze when it comes to the oil story out of the u.s. ida, we could see an effect there. another thing -- is delta causing people to drive less, i.e., are people staying home more? alix: here are the numbers. the inventory draw was 6.4 million barrels, a pretty big draw, double what was expected. gasoline inventory has a huge draw at almost 2 million, lighter than expectations. refining utilization sunk. you had refineries off-line and still off-line. oil prices holding onto powerful gains, but the question is how long is it taking companies to ramp up after ida, and you just
had tropical storm/hurricane nicholas, and how quickly will refinery utilization come back as well? on the flipside, you have capex decisions companies have to make. joining us now, jeanine wai, barclays oil analyst. they just had a power and energy conference. we will get to that in a second. what are oil producers struggling with right now to get oil into the markets? jeanine: thank you for having me on. always a pleasure. in terms of our coverage universe, most is coming from the lower 48. they have not really struggle that much with production getting back online. we have covered companies like occidental that have facilities in the gulf of mexico that will take time to come back, but they are not struggling to put more barrels into the market. they are actually trying to keep barrels off the market that they think demand is not required.
-- demand does not require. guy: do you think they will continue to do that? there is this new conversion of the industry, discipline the word we hear all the time from ceos, but prices continue to push ever higher. the temptation will be to increase production. how disciplined do you think they will be over the next year? jeanine: well, i mean, all indications from what we have, last week from our conference, is that the companies will remain disciplined through the end of the year even in the face of higher oil prices, and they have already done that pretty much. the question will be what happens in 2022. we think they will stay disciplined. all the companies are looking at three macro factors to give than the all clear that the market needs their incremental barrels, and we don't have all three, so
they are cautious on growth next year. alix: they might be cautious on spending money on production, but are they as cautious on things like wind, solar, carbon capture, hydrogen, alternative energy? jeanine: it depends on what kind of company you look at but i would say yes on the u.s. side. another thing i took away from our conference last week was, even though the direct participation of u.s. majors like chevron and exxon is fairly obvious, they have not been so obvious for others, because they have really to date been working on operations, retrofitting, things like that, but one of the takeaways is they will spend more on the energy transition. this was made possible by the high low prices we have had, allowing them to enhance and repair balance sheets and spend money on other things, in addition to having the low/no growth model.
they can focus on things other than adding rigs, which means looking at carbon capture. one ceo talked about looking at reducing co2, so you are seeing more attention from that from the esg side. these things are in their infancy in terms of them studying it. guy: they are, but will gather pace through the next few years. that is the next thing. does it become harder for these companies to work their way through this process, understanding the rate of return of these different new avenues they will go down, i wouldn't have thought, would be quite difficult -- i would have thought, be quite difficult. jeanine: you are right. that is what they are struggling
with. you are spending capex. what do you get? how do you compute it into the multiple? to give you a frame of reference, they talked about how they would spend $75 million over the next couple years on energy transition, and their capex budget is $1.5 billion. similar for other companies, so small, and a return to that smaller spending will not move the needle. it is a different conversation and set of behaviors, but i think you are right. a big part of understanding the economics, which we don't know yet, is what the policy and the implement will be, how much customers will be willing to pay for a price on carbon. will they be willing to pay a premium for that to make the economics work? we don't know yet. alix: right, and what the consumers will do. like consumers in europe are
doing, the insane prices. how does that affect what you cover? a lot of the guys you cover produce a ton of gas as a byproduct? how do record prices in europe impact your coverage space? jeanine: the record high prices in europe impact does the same way we just spoke about with oil impacting budgets and discipline. the companies are going to remain disciplined, so even though we have seen record oil and gas prices globally and domestically, i don't think we are necessarily going to see an increase in capex, but i think you will see a reallocation of capex on the margins from oil to gas. in our coverage universe, one company has the highest amount of gas in their portfolio at 30%, so we could see some capital reallocation, but not
incremental capex because they do want to keep the low growth story going. conoco actually highlighted their global portfolio at our conference last week, contributing to resilience in qatar and australia, saying, hey, more capex, but not at the expense of the overall budget. alix: appreciate it, jeanine wai of barclays joining us. more tomorrow at 10:00 a.m. and 1:00 p.m. guy: looking forward to that. let's talk about one of the biggest, most interesting stories in the markets now. casino stocks hammered today. the biggest drop since march of 2020. it is off its earlier lows. macau's spot gaming stocks losing $18 billion in market
value, the chinese government announcing overnight a crackdown on the sector. we are seeing a huge kind of pushback by the chinese authority, and still trying to figure out ultimately what this will mean. we still don't know, ultimately, what this picture will look like. they are putting people, changing the narrative, but we have seen a huge somatic change. let's take a look at the sector. alix: let's break it down now with a neutral -- now with an analyst with a neutral rating on several casino operators. the las vegas sands, what percent comes from macau? >> -- which is currently pending
approval, they will be 100% gaming focused. some comes from singapore, the rest from macau, so they have the most asian exposure. one reason we still have an outperform rating, though this is certainly not the time to recommend, is, through the last 20 years, no company more than the las vegas sands has invested in their community, their people, and has aligned themselves with the government, so we have been waiting for this for several years, since the midterm in 2018, how they have invested and focused on the people, but most or all of the macau business could be handed off to another company, and that's why these stocks have sold off the past few days. guy: we understand what the chinese authorities want here? >> at this point, it is not clear. what we have been focusing on is
we think the companies want local influence. that is something they have talked about for a few years. hire locally, have managers from local markets, byproducts from local companies -- buy products from local companies. the second thing would be low or no -- they have been trying to crack down on this since xi jinping came into power. they don't want any of those elements of the casino industry, particularly in macau, to stay in the market. capex -- what will these companies do to invest more in non-gaming and make it a place for families to come down to? that is the question because there are land constraints. you cannot do much with the existing land. you would have to move. alix: what i guess i do not understand is how any of these stocks with a substantial
exposure to china can be investable in any way when there's going to be some kind of dramatic change and this is completely out of the country's control, and mandates from the government not regulated in this kind of way. chad: i would say come until this year -- say come until this year, what happen with education and from the gaming industry, most companies and investors would say there's absolutely no way that the government can remove these companies just because of what they have built, the current law, which would actually allow them to still run their operations, bring in other ownership, but in terms of actually keeping the market what it was intended to do, to drive traffic, it is the only place in china where you can gamble, we think it is impossible to remove
these companies. the las vegas sands, wnn, the western operators will stick. alix: wonder if we will hear about spinning off. appreciate you joining us. coming up, covid vaccine efficacy waning over time, having an fda panel meeting friday about boosters. we will have more on this. this is bloomberg. ♪
happening with -- covid. pfizer says it's covid-19 -- says its covid-19 vaccine efficacy does erode over time. max of bloomberg opinion, that's kind of a simple view of the world. immunity fades, boosters work. i am sure it is more complicated than that, and pfizer would say this, would name? max: of course, and it is always more complicated. two questions to look at. first, what do you mean when you say immunity fades? if you are saying protection against symptomatic disease, that does decline over time. the question is whether it also declines for severe disease and
hospitalization, that most important things to protect, and what we see there so far that the divide is smaller and, for the most part, most evidence is that it only happens in older people who you expect to have higher risk and less vaccine response in the first place. and to boosters work? the data pfizer has is that the third shot raises antibody levels, so nothing surprising. the question is the durability, how much longer that benefit lasts, and whether there is any magnitude of benefit on the severe disease side. alix: who is doing it right, comparing the u.k. and u.s.? guy can get boosters next week. they take a more cautious view of kids than the u.s. we don't yet have approved
booster shots although president biden wants that to happen by september 20. which makes the most sense? terry: it is a -- >> it is a complicated question and for my part i think boosting that older population does make sense, but it would be worth waiting for younger people, for younger, healthy people, especially. i would be waiting both for more data and for that equity issue to catch up, basically, so supply catches up to demand, so you are basically not taking away shots that should be going to people that need their first vaccination, and that rate remains tragically low in much of the world. guy: max, thank you very much indeed. always interesting to get an update on what is happening here. max nice -- max nisen on pfizer. there has to be some plus to
being over 50. you got it in today finally. alix is very happy about this. i still don't actually know which shot i will be getting. very interesting. it is a mix and match story. another debate that will be coming up. also coming up, u.s. lawmakers working overnight to get the budget package moving along, albeit slowly. terry will join to discuss. this is bloomberg. ♪
we turn to terry haines of pangaea. what kind of volatility, what do we need to price in when it comes to taxes? terry: it is very likely that taxes don't go up, firstly. i think this future human -- this human infrastructure piece that has tax raises and it is only 30% likely to pass, and if it passes, it will be much smaller and take longer to get it passed, probably months. the basis of this view is very simple. nobody agrees on how much money should be spent. nobody agrees on what it should be spent for. congress is only at the beginning of trying to thrash all that stuff out. it will take a very long time. older people in the markets will remember that the affordable care act took something like six to seven months to thrash out in an all democratic congress, so
if anything is going to happen on this, it looks like it will take very much that period of time. meanwhile, you will eventually get annual spending. you will eventually get the real infrastructure bill, and you will eventually get debt limits, but the volatility will last because we do not know when that will expire. guy: hd running through the show now. alix: he called both of us old. terry: i did not. guy: happy about that. i am wondering how we can tease everything apart on what is going to happen with the debt limit and whether or not, ultimately, we are going to be able to sort that out quickly enough when all this stuff is going on. terry: let me try to give you a timeline on this. i think this takes at least the next six weeks. the estimate about when the debt
limit needs to be dealt with range from -- ranges from the beginning of october to mid november. when that happens is entirely up to a report that treasury secretary yellen will send to congress to say this is when it will run out. she hasn't done that yet, but there's other estimates that indicate that timeframe that i mentioned. nobody is going to negotiate on annual spending, what it actually looks like or anything else, until we figure out what the debt limit is. even them, the republicans -- even then, the republicans pretty much have the democrats over a barrel on the debt limit. they are insisting, senate majority -- senate minority leader mcconnell specifically is insisting, that if the democrats want to pass the tax raises and all the rest, they will have to do it on their own, so this is really going to get squeezed here in the next six weeks here. alix: at some point, president
biden will have to make a decision about who will lead the fed. what are the odds of jay powell keeping it at this point? because they will have to force trade -- to horse trade with the progressives. terry: i will say this. biden will have to disappoint the progressives on the three point $5 trillion human infrastructure piece. he always looks for other things to give them, prominently including personnel. gary gensler is there, a bunch of people at the federal trade commission are there, in large part as gives to progressives, so there is a greater than likely chance -- i think it is likely that powell gets reappointed, but i would not dismiss the idea that somebody else gets put in powell's place as a sop to progressives. guy: do you have a timeline on?
what will transpire before he makes that decision? terry: he can wait until this fall, until his term expires, so there is wiggle room for the president there, whether or not he chooses to exercise that, which is another question. guy: great as always. thank you, terry haines, pangaea policy founder. we have been hearing it may becoming eminently, maybe things will -- be coming imminently, maybe things will take longer. the foreign secretary of the u.k. confirmed. boris johnson at downing street. this is bloomberg. ♪
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europe. this is bloomberg markets: european close, with gus johnson and alix steel. ♪ guy: 30 minutes to the close. what you need to know out of europe? there was a fired shot between a key cable between english -- england and france. soaring gas prices. european utilities dropping sharply. also under pressure, beijing is putting restrictions on casino operators in macau. all down. opec and its rivals are struggling. we will break down those numbers,