tv Bloomberg Markets Americas Bloomberg September 22, 2021 10:00am-11:00am EDT
with alix steel and guy johnson. guy: wednesday the 22nd, three p.m. in london, 30 minutes into the trading day in the united states. it's the equinox today. alix steel is in new york. fed day. >> it is fed day. finally here. what is going to throw the fed off of its tracks, if anything? we are really set up for some? -- questions. the fed playbook, the s&p is up 7/10 of 1%. most are leading the way. all the indices being in the
red, since march of 2020. keep that in mind as well. yields again going nowhere. the dollar again, pretty much going nowhere. still slightly elevated. it feels like we are on our toes a bit in a wait and see mode. guy: existing home sales right now, the fomc will be the later event. continuing to follow the picture, sales month over month, 2%, the market locating for -1.7. we will take that as a phase. not a big phase. the prime number revised higher as well. 5.88, the housing market is slowing down a little bit, but there does seem to be continuing momentum broadly in that sector coming off a very elevated level. alix: it's all about that supply chain issue. let's get to those in how they will impact the fed.
washington, debt showdown at a tipping point. suspending the ceiling into next year, republicans vowing to block provisions in the senate. chances for twin fiscal disasters, default as soon as next week. anne-marie, what's the lay of the land over the next 10 days? >> it doesn't even have to do with the bill back better agenda. there's a stopgap funding measure to keep the government afloat past the end of the month as well as suspension of debt ceiling. they linked the items together and we knew that going into the senate republicans said they wouldn't have the votes because they refused to put their name on raising or suspending the debt ceiling. there are a number of issues. many see a process that there could be a stopgap funding measure and alone, someone will have to capitulate on how we deal with the debt ceiling.
republicans have said they won't sign up for it. democrats have the power to do it alone and at some point they will have to blink because this is about the fiscal responsibilities of the united states. something to watch out for this afternoon, an oval office meeting between the president and members of his party and it's all about making sure they can get the reconciliation done in time. guy: we will look for that meeting a little bit later on. the story and china continues to cast a long shadow, short-term cash in the system, trying to calm the nerves over what's happening with ever grand. in the meantime they are issuing a very vaguely worded statement on how the payment has been resolved, whatever that means. done on the exchange, we know that, but we don't know the details. the dollar bond is due tomorrow.
that's a major event. our chief economic economist joins us now. tom, do we know anything about this? response so far around short-term liquidity from authorities has calmed nervous, but do we need more? the resolution of this seems to have calmed things down a bit as well, but as i say, there is a big bond coming due tomorrow. >> that's right, ever grand has already defaulted on loan interest payments to the banks. there has been a vaguely worded statement suggesting a short-term resolution of interest payments due on bonds and as you mentioned, further payments falling due in the days and weeks ahead. the big question, is this a lehman moment for china? are they on the brink of some kind of financial crisis? our answer to that is probably
not. yes, the chinese government appears willing to allow evergrande to default into debt restructuring, sending the message that moral hazard is being removed from the property sector and if you invest their, you face risks as well as coping for returns but we think the chinese government is going to ring the problem. you mentioned it, the people's bank of china acted in the market, preventing contagion. we think that that will prevent this turning into systemic shock. alix: ok, not systemic shock but how will it weigh on the may -- weigh on the minds of their dot plot? michael mckee joins us now with his super bowl. what can disrupt the paper? >> a lot of it could disrupt as they get closer but we don't think they will announce it
today. watch for the fed's statement in december of 2020 put the phrase into the market. substantial further progress on their goals in terms of the job market as inflation. have they gotten there? in july they said the economy has made progress and they will continue to assess progress. this statement, your first clue, first thing to look at is if the statement changes and they use language that suggests they are closer, closer to it or about their. they are in the neck change and announce the taper. it could come from jay powell. economic projections are the next things to look at. inflation calls, 4.2% there. 4% there.
with inflation, behind on the forecast. they are doing it to catch up. how do they explain where they go from here on that? and then of course the dot plot. everybody's favorite whipping boy. the last time that they met, seven people moved into 2022 and enough moved into 2023 that we got a forecast for two rate increases. 2022 some of the dots could move over, though that would be for like december and does that really matter so close to the end of the year? you would need for -- three to get a firm consensus and we might see this go higher in 2023, additional people expecting a rate increase or moving that higher and this is of course the long run. does it move up or down? will it get to 2.5% ever?
that's another question for the fed to. we also get the first 2024 dot plot, which means nothing because by then we could have eight new members of the committee. guy: yes, things are going to change quite a bit as we shuffle the deck through staffing. but the big question is the press conference closely guarded secret. you will be able to find out more later on, tune in to our coverage at 1:30 p.m. in new york, 6:30 p.m. right here in london. next? more on the fed decision, jp morgan, j barry. taper tantrum is not in the cards right now. he joins us next. this is bloomberg.
guy: a conversation about what we should expect from the fed to, curves are flattening right now. investors are clearly worried about the prospect of a taper tantrum. candlestick partner scott goodwin, not so much. he and his partner, jonathan lewiston, spoke exclusively earlier to erik schatzker on why it is an opportunity, may be, for their credit investing firm. ♪ >> i love it. we might lose money at the beginning, but we have the watchlist, the process, each analyst is ready and we are disappointed there hasn't been one yet and i think that would
be a great opportunity for us. what we would rather do than grind out returns in netflix getting upgraded, frankly, is purchase really over performing risk and the taper tantrum of 2013 created an opportunity like that. it was therefore maybe three weeks, four weeks, and was gone. we like those opportunities. five points, those loans were funded in two weeks. would we be excited for that opportunity? again, people have been predicting that all year and it hasn't happened. being positioned exactly right for it? no. then you have to be able to change on the low gross. which we are. it's as close to it has been. there's no grosses in velocity, like now. we are not patient people, but
this is a time for patients. >> scott's excitement jumping off the page goes to where we are different. taper tantrum means high quality bonds. alix: what i thought was interesting was that the assumption that we will get some kind of a taper tantrum that will then see assets at a discount to provide more value, i think the fed would prefer that there not be any kind of taper tantrum. guy: yeah, i think that is what they would hope for. maybe we have
minutes, a couple of days. maybe that has already happened and they can manage the process better this time. i don't know. but what i got from that conversation is that they have a team uniform and that buying the debt mentality still exists in a lot of funds. including that one. alix: over in your neck of the woods, a u.k. energy supplier collapsing and affecting households, it's a rolling list of bankruptcies and my understanding is that it's not that easy to transfer that to other suppliers because everyone is feeling the actual crunch. guy: basically the small, less capitalized and hedged supplies, there's a model here in the u.k. that is now obviously starting to condense. the government is in a position where it basically has to force the biggest suppliers to take on the smallest suppliers but many of those may not be possible in the companies that are reticent and that's where they've got to step in and help. alix: but you can understand how
in the u.s. how the idea of a high energy price could be a risk. earlier we laid out the risks that could derail the fed into what we expect them to do as tapering in december is the line of sight and you look at this surge in commodity prices. what throws the fed off course here? >> i think there are a few things that could potentially derail the fed. those projections before, we are tracking light on those and we have revised our growth estimates a few times in the last few weeks and we think it will only be temporary and if it is more persistent, that is something that could derail fed tapering if it slows the labor market. that's the important point here. substantial progress towards inflation goal, if we see
another weak employment report at the beginning of october where the growth slows and unemployment doesn't decline, that could put it at risk. it seems likely that what's been presented by the house is unlikely to pass through the senate and we think at jp morgan the debate is likely to move into october, but we think the risks of technical default are pretty low and those are the things i can identify to derail this from a november announcement. guy: substantial further progress, we are not there yet? jay: i think that's right, but we are getting there and if the unemployment rate continues to decline it should put the fed on a path in november, even with
everything we have seen in the slowing of the economy over the last month, high frequency indicators on the labor market have continued to trend lower and if we see that continue, we are on track for something in november. alix: it wouldn't take a lot to shift the hike into 2022, 2023. it wouldn't take that much. if we get that, does the market take that as hawkish? jay: it is on mark -- on margin, hawkish. if we see six projected by the end of 24, that's 50 basis points more and on margin that would be hawkish. if we are right on that.
guy: if the fed came out with the news and said substantial further progress was there, we have made it, would that be risk positive or negative? we are talking about their desire for a taper tantrum. if we were to get that announcement, would that be risk positive? we are not worried about the story. as a result, we are in good shape. will the market really be that way or will it freak out? jay: that would certainly be a positive sign, and i'm just a humble rates guy, not a risk person. the market would likely bring forward the expectation of rate hikes as well. even though they have done a good job tapering asset
purchases, the lift off date would be somewhat negative if they brought the first one forward into 2022. alix: you just said freak out, guy. i feel like i'm rubbing off on you. only two years. guy: freak out, yes. it will take two more years to save bananas. [laughter] alix: do we need to rethink the neutral rate? jay: at this point we are not sure there needs to be a change to the neutral rate. jay: there are demographics for productivity issues going lower in the projections for the better part of the last decade, but it has been stable in that could be a drag on the ongoing
basis. contrasted with what's happening cyclically, the fed is running to this point in the cycle, talking about tapering, six years ago they were on the verge of raising rates. it should bring more people back in and raise growth rates to offset the demographic weakening. without a doubt, markets are pricing in tightening and some of it is an expectation that the neutral rate may come down and some of it is that if the fed has to go early, they may not need to tighten. particularly if the concerns around covid don't part -- completely faded. guy: more than a humble rates guy to us, jay, appreciate it
alix: a look at some of the biggest business stories right now. more foreclosures in august than the prime months after the expiration of the federal pandemic measure that prevented borrowers from losing their homes and the number getting into start the repossession process grew to 7000, the largest number in eight months. netflix is buying the rolled
doll -- rohld dahl company. one of the series in the development is based on charlie and the chocolate factory while they are also working on an adaptation of the musical tilde. subject to regulatory approval. that is your latest flash. guy? guy: thank you very much indeed. u.s. equity markets are trading a bit higher. general mills is actually up around 3%, posting stronger than expected fiscal first-quarter earnings this morning, think hog and does ice cream. i'm sure that dave wilson is a fan. dave, talk me through those numbers. what do they say? dave: it's not just earnings, sales and profitability were well received. sales, they rose. analysts were anticipating
decline. in terms of profitability, the gross margin, 34.7%, down from a year ago but analysts had expected a two point drop on average. general mills looks good that gage has well. and then when you look at revenue, sure, people were not buying as many serials or whatever in the grocery stores, the retail business didn't do well, but look at two areas in particular. one, convenience stores, food service. people are going out. whether it is haagen-dazs or whatever. this is an area of the company has moved into the past couple of years. first it was blue buffalo and then in this quarter, which they just reported on, you had the purchase of tyson foods and the snack business helping things along. alix: if only they would bring back coffee chip ice cream, that
would be huge for me. it's really off the highs from back in june. what's reflected in the performance? dave: this company has had real challenges in terms of the share price. beginning a pandemic, we were all stocking up. profitability kind of holding the line relative to the past several quarters, but the shares not so much. alix: all right, dave, thanks so much. it was the 80's. chocolate chips in the coffee ice cream. now it's just espresso beans and is not the same. another thing to make fun of me for. [laughter] this is bloomberg. ♪
this is her moment in the show where we see oil inventories dropping off the screen and she's super excited about it. the u.s. economy is picking up. people driving more, consumption rising. the suggestion is that we could get a significant draw that continues the narrative of recovery but the most interesting thing happening at the moment is the line between gas and oil prices. alix: overall inventories, there was a nice draw, 3.4 -- 3.4 million barrels, half compared to what we saw the week for. you are going to see a little bit less of a draw because of hurricane i do with a touch of a build there and people going back to school, summer driving season is on hold. refineries are picking back up, over 5%. this will be a bit distorted because of hurricane ida with
offshore operations in mexico having a hard time starting, a supply mismatch that explains the inventory draws. you are laughing at me. it's an analysis. you would be the same way. guy: it's like a download. it all has to come out, this [laughter] [laughter] is what's happening. alix: oh my god, pop, cattle, black. -- pot, kettle, black. [laughter] the nigerian national oil director discussed in this on bloomberg. >> there was investment in the oil and gas industry and the implication is that coming up in a year or two, it will affect the gas supply and that is going
to show up in a number of countries where the supply has stalled or been delayed and the net effect will be clear pattern praising. guy: jeff, it's such a great pleasure to see you. thank you for being here. you heard the minister talking about $10 extra for bread. what do you see? >> it depends on the winter that you have. if you have a one standard deviation event we are somewhere around five dollars a barrel, but the big theme is the idea of btu convergence. shortages in goal -- coal, gas. drawing the inventory with an uptick in winter demand could add 600,000 barrels per day and demand with the oil demand itself at another potential million, forcing oil in line
with the rest of the energy complex. i want to emphasize here, looking at the inventory numbers, it's a continuation of everything we have seen since june of last year and the only thing that has changed in the last 12 to 18 months is the risk profile. dipping down to 65 in july and august, opec, irani and supply, u.s. shale. what's changed? it's all reversed and there is a potential now for gas pushing demand higher. looking at opec, it was disappointing. iran is probably off the table right now with the gulf of mexico disrupted. put together the risk is on the upside. we stick to the $80 target with potential risks even higher than that depending on the winter weather that we get. guy: here in the u.k. there is a growing expectation that energy and gas prices in particular are going to stay higher for longer.
i appreciate what you are saying about the weather and it looks like the weather will play a huge factor but nevertheless, the secretary was talking about this earlier in the house of commons, we need to get used to higher gas prices. is that your view as well? >> absolutely, yes. particularly outside the u.s., lng creating a tight global gas market combined with disruptions in russian supply going into europe, low inventories with strong demand coming from a substitution away from coal given the emphasis around climate change, it's with us today. the issue is that the supply chains are so severely depleted, the system cannot accommodate any type of disruption and it is those small disruptions in supply and demand that sends the prices up like we saw a week ago. alix: what's interesting is that
it is still not high enough to divert into europe. what's the shift when we see demand disruption or in where the cargo goes? >> when talking about demand destruction, i like to point out that oil is the biggest thing on your screen right now. it's hey, we need to get more gas and we will get it through using oil that we don't want to use because it creates more emissions and requires more carbon credits to do it. i think that is your first line. to get to actual destruction we are talking far higher prices. heating and gas demand is the most lasting demand out there. guy: but does this slow or accelerate the transition? >> it accelerates it but the question is what kind of backlash do you get from the
public or policymakers? bottom line, higher prices on renewables makes it look far more attractive and i think that is really, you know, one way that you have it, the eu environmental directive, cheering on the higher carbon prices, these are the consequences of the higher carbon prices, speeding up the process, making coal more expensive and consuming more gas in a tight market to reinforce this dynamic. alix: in the u.k. we saw a shutdown of two fertilizer plants. fixed a bit, but does it disrupt the fertilizer market, the steel market with these high prices? >> absolutely. looking at the cuts, it's all driven around power markets and one thing china is trying to do right now is conserve coal inventories when they go into the winter to prevent a big disruption.
we are seeing it in europe and we are seeing it in china. as you point out, fertilizers are raising the costs of agriculture. the implications are huge and we will feel it through the economy. guy: did you hear him say aluminum? >> i have been living in london too long. alix: i was just going to say. [laughter] guy: let's talk about evergrande . we were talking to one fund manager the other day that drew the line there between that and copper. draw the connection for me. how are you seeing it working in terms of the property market in china and will there be a impact in the medium-term? >> evergrande aside, the implication is they don't want contagion in the economy. the question is, how severe is
the slowdown in the property market? one of the reasons why the government is going in there and purposely slowing down new starts, the backlog of projects is a norm us. thinking about copper, it goes into the completion of a construction project, not the start. iron or is down because steel goes into the start. iron ore, steel, cement, things like that go at the beginning. nickel, stainless steel, copper, wiring, plumbing goes into the completion. the backlog is huge and we should see that demand increase into 2023, at which point the green revolution begins to take over alix:. alix:we have like 30 seconds. do you like gold? >> we like it, but how do you get investors back in. you know what i think does it? $85 crude. alix: fair enough.
johnson. alix steel, over in new york. the stock making quite a ride. boosting third-quarter outlook, we might be about to see this business turning profitable. the stock is up 15% over the last couple of days. joining us now, emily chang. >> i want to welcome our television and radio audiences and bring in the ceo of uber. great to have you back with us. i just interviewed the airbnb ceo yesterday and he thinks a revolution is happening in the way that we have -- travel, business leisure. is it happening in the businesses that you run, the way we ride, order food, or will life revert? >> there is a revolution
happening in terms of all delivery to your home. it started with food but it will continue with grocery, pharmacy, your iphone, etc.. in four years the uber eats business went from $2.5 billion to $52 billion and we think there is so much more to go. users want what they want at their home right now. now it's about next hour delivery. we are empowering local merchants to essentially get you anything you want locally to your home within hours. clearly, the users love it and we think it is a trend that will continue over the next five years to 10 years. emily: what are the levers that you can and will pull to determine whether uber makes a profit this quarter or not? dara: what's happening now is
the marketplace is becoming much more balanced. the demand in getting things to your home quickly was increasing faster than supply and we had to work to bring careers onto the platform and you are seeing the benefits of that in q3, where the margins are coming back to normal and the mobility margins are going to be equal to pre-pandemic levels, even at lower value -- volume, because of the moves that we made in automation, and uber eats is growing the top line and getting to profitability levels as well by the end of the year, so really now things are working out well were we can grow the top line profitably on a sustainable basis. emily: still, you are working on driver supply. there are price surges that we
are feeling. without that, do you see long-term profitability? will you hit the milestone, quarter after quarter dara:? absolutely, we do. prices are essentially stabilizing now. the levels of surge are coming down. eta is the best it's been since the beginning of the year. conversion rates as far as the percentage of users opening the app and getting the service they want, like food delivered to their home or whether they are going somewhere, these metrics are moving in the right direction, so we think we can be profitable delivering an amazing experience to riders, eaters, and a really strong earnings level. emily: zooming in on the u.k., wait times are particularly long. when do you see a better balance between supply and demand?
dara: what we are seeing in the u.k. is that demand is at 20% to 40% higher than pre-pandemic levels. they are really opening up and it's amazing to see the number of drivers on the platform being as high as they were pre-pandemic that it hasn't caught up to the growth in supply, so we are going out there now in the u.k. and are looking to bring on 20,000 more drivers to the platform. the earnings opportunities are better than they ever have been. as far as service goes, 60% of the time you are getting your ride within five minutes and 90% of the time you get your ride within 10 minutes. we want it to be faster but the service is now working how we want it to end there is a cunning -- a ton of earnings opportunity hopefully getting the drivers on the platform to catch up to that incredible demand. emily: the doordash market cap briefly surpassed that of uber.
a former uber executive called it a nightmare, invoking comparisons to yahoo!. how do you respond? dara: it was a point in time, you know? the fact is that if you look at our volumes, they are twice as high as doordash and we are growing faster. revenue is three times larger and we are growing faster and based on third-party data in the u.s., the each business is the fastest-growing food delivery platform in the u.s. and we are very confident as to where we are going and i think this is a point in time in terms of relative market cap that i don't think you will see again. emily: investors are betting that they would be big and grocery. you purchased corner shop earlier this year and we saw the partnership with albertson's, but when will we see that really scale up and bear fruit?
dara: it makes sense for them to follow us there. we have alcohol delivery in 20 countries, it makes sense for them to follow us there. as far as grocery goes, we have actually focused outside the u.s. first. we think we can be the winner in latin america, the home turf of corner shop, so to speak. we are aggressively expanding in countries like taiwan and in the u.s. we have a really strong tie with albertson's, costco, essentially expanding with those partners on a local basis. emily: meantime, important situation in texas, saying they will pay the legal fee of drivers sued under this new texas law banning abortions. you donated $1 billion to
planned parenthood. if other states passed similar laws, would this be done elsewhere? do they support a woman's right to choose on a national level? dara: absolutely and we think that drivers should not be sued by private clients. we think it is wrong and we will be standing behind our drivers, like we did in texas. emily: in the meantime, your cto has stepped down and you have made this decision to step in. i'm curious, how are you preparing for this new responsibility? it's a critical job. dara: it is. i was an engineer back in school, so i get to eke out now and i think we have some of the best technical capabilities in the space. my working directly with our engineers, we have an incredible
bench, i am looking forward to it. i think that we can keep innovating and shifting products faster than the other local players out there. guy: -- emily: speaking of, you went to see one of those flying taxis. you have got self-driving playing out with aurora. how are you seeing it play out? is this the real travel revolution we need to wait for? dara: i think all these technologies are happening. the pace i think actually will depend a lot on the regulatory authorities. the joby tech is extraordinary, i got to experience it myself. the certification process is going to be the most important factor in bringing this technology to bear.
with aurora, we are thrilled to be working with them on the trucking side and of the rideshare side and the technology leaps are super encouraging. these are two of the best great teams along with evite's and scooters across the world and we have strategic investments in each of these areas and we love it because we made investments in what we believe are the best, leading teams in each area. emily: all right, dara khosrowshahi, always good to have you with us, joining us live from new york at the conference focused on travel. alix: i thought it was interesting, he said the u.k. demand is quite high, 40% higher, than pre-pandemic. i can tell you here, wait times are superlong. i have to wait 15 minutes
alix: 90 minutes into trading here in the u.s. and the dollar bond yield here is at its low of the session with yields on the backend wishing its way lower, the curve keeps flattening and the 30 year keeps moving lower as well. we are half of an hour away from the close of the european session. here with more to break it down is riddick a cooped up.
>> a lot of the focus is on the fomc with basic resources here pushing high today. this is the worst performer from yesterday but now it's getting a bit of coming from commodity stories with or higher in that session above $100 now and of course i point to natural gas. this is a dutch front-end contract down for a second day. not out of the woods in that picture. flipping up the board, most sectors are in the green but those miners are really leading the way and of course, this is glencore, here up, with stocks in the u.k. off that bid, the highest in the stoxx 600 and then back to you. ♪
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with guy johnson and alix steel. guy: 30 seconds until the european close. what do you need to knows? stocks are bouncing. they are coming back from monday. domestic bonds are clearly without hope. the eu is sounding the alarm over gas prices and the impact that spreads. they are starting to spread out. fertilizer plants are drawing back production. the president macron and biden will discuss things in a call later today. florence johnson is boxing paris -- boris johnson is mocking paris. he did so in very bad french.