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tv   Bloomberg Markets European Open  Bloomberg  September 23, 2021 2:00am-4:00am EDT

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dani: good morning and welcome to "bloomberg markets: european open." i'm dani burger alongside mark cudmore from singapore. we are less than one hour from the cash equity trading. here are your top headlines. a moment of truth for china evergrande. shares search along with other developers a sentiment turns positive. the fed chair says they could
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scale back asset purchases in november. global stocks rally. the bank of england's policy puzzle, we will get decisions from the boe and central banks in norway, turkey, south africa and more. welcome to the european market open. 7:00 a.m. in london. 2:00 p.m. in singapore. the fed with a more hawkish tilt but not much of a reaction and markets. what are you looking at? mark: you are right, it was a moderate reaction for markets. a little disappointing actually. we have gotten used to the fomc boosting markets. they added clarity on tapering that might help markets, but overall it is not trading enthusiastically. people are dying to get back into risk and not buy this dip.
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everything we are watching around evergrande. if you look at the monitors, risk on day, but it needs context that hong kong stocks were closed yesterday. we expect them to open higher. the rise is subdued in context of positive sentiment overnight. even though there is a sea of green, it is disappointing price action. dani: you just want the drama in the markets, and they are not giving it to you. maybe you will get exciting action with the central bank decisions. ftse 100, 0.6% up. dax, a little more than that. it is a green session following from the u.s., even though not the fireworks some were expecting.
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you are following along that same trend, the calm asian session as well. we are still trying to digest what came out of the fed, and figure out implications from china. some outperformance from the dow jones futures versus nasdaq. what does the rest of your screen look like this morning? mark: it is not giving me the fireworks, and i am not counting on central banks on delivering later. it is generally positive. if you look at commodities, it is green. commodities are rebounding again. you must put in context the moves the last few weeks. even though equities was led by australian stocks is showing green, it is not happy or
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exuberant. one of the best measures is the kospi is only slightly down. overall this week, i do not see it as positive or terrible news, but slightly negative on the week even if in the short term we see calmness today. dani: jp morgan with interesting research, immense flows out of u.s. etf, that narrative is at risk. part of what might be putting that at risk is the concerns out of evergrande, which is a key test for them. they face a dollar bond interest payment deadline. what are we expecting come this deadline today? >> good morning. talking about context,
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evergrande is all about context. you saw the stock up 32% in hong kong after it fell from this year's peak. still a lot of nervousness on what could happen to evergrande. the deadline today for the dollar bond interest payment. any communication is expected on your time after we in hong kong go home. evergrande still has a 30 day grace period. the expectation is evergrande will negotiate that payment as it did with its bondholders announced yesterday. we do not know the terms of that deal, and there is a lot up in the air for the developer that has more than $600 million of payments this year in interest. dani: a late night for you and
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probably markets in singapore. thank you so much. the fed says it is almost taper time. rate hikes might not be far behind. today is the turn of other central banks. let's get into the decision that is closer to home in london and close to our headquarters. joining us now is lizzy burden. what can we expect from the bank of england today? lizzy: we are expecting the bank of england to keep interest rates on hold, and at least one of the policy committees dissents on asset purchases earlier. we have to see if any colleagues will join. we get an exchange of letters between the governor, andrew
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bailey, which is protocol after inflation hits the 2% target. neither economists nor markets nor the bank of england addicted that. the question is how transitory is transitory? the bank forecast peak inflation this year and would decline in 2022-2023, but some price growth could persist because of the energy cost rises we have heard about. and paying our way out of the skills mismatch will add two inflationary pressures if we do not get more output for pay rises. you said it was a puzzle, the economic backdrop since the last forecast, it will be interesting to see how the bank weighs their conflicting data to give an insight on what is really going on in the economy. dani: thank you so much, lizzy
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burden. mark, you said you did not expect fireworks from central bank decisions. maybe we are still opining for that earlier in the week. are there at least any decisions that could be interesting or consequential? mark: because i am a bit of a nerd, i am interested in all of them -- most of them, maybe. i think the bank of england will be interesting. the fed was slightly more hawkish than expectations last night to talk about finishing tapering next year, bringing more hikes into their dot plot. with the bank of england, that might disappoint people expecting guidance for imminent rate hikes. sterling might be soft i will also watch the turkish central
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bank decision were nothing is expected, but every turkish central bank decision is always interesting, and there will be movement after. if you want to punt on the day, it is the turkish central bank decision to watch. dani: certainly the lira is not known as a common currency. in terms of sterling, jane foley said they are prepared to lower their forecast for sterling depending on what comes out of the boe. i cannot help but feel more important is the direction of the dollar. the greenback seems the center of gravity, and we see positioning change over the past few months. mark: absolutely right. we are looking at cable today, talking about the bank of england decision, but the bigger direction will be driven by the dollar.
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because we have the bank of england today, if we get marginal movement, it will be driven by the bank of england. the dollar consensus is torn asunder. we were all bearish the dollar earlier in the year, recently turning bullish, and now there is confusion. we push at the boundaries. people are bullish on the dollar, but people think the dollar is set to decline because of the death trend issues. dani: the beginning of the week it seemed concerns around china would help the dollar break out, but we are back to lackluster trading. that decision for the boe comes that noon, and we will have that for you. stay up-to-date on analysis with mark and the team. coming up, more u.k. energy suppliers under the weight of natural gas and power prices.
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we will dig into those details, and as we go into the final stretch of the german campaign, we speak to john emerson and the german green party. jerome powell says we could start tapering in november, and rate hikes might not be far behind. we will get the market reaction with alberto gallo. and if you have any questions for any of our guests, you want to quiz mark on central bank decisions, send us a note. this is bloomberg. ♪
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>> we continue to expect it will be appropriate to maintain the current target range until labor
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market conditions have reached levels consistent with the assessment of maximum employment, and inflation has risen to 2% and is on track to exceed 2% for some time. if progress continues as expected, the pace of asset purchases may be warranted. participants view that as long as the recovery remains on track, the gradual tapering process that concludes around the middle of next year is likely to be appropriate. these favorable economic conditions will be fulfilled by the end of next year. the median projection for the arrow funds rate is above the lower bound in 2022. dani: it is almost taper time, and rate hikes might not be far behind. the u.s. central bank could scale back asset purchases and complete the process by
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mid-2022. tapering could start as early as november. joining mark and me is alberto gallo, partner, algebris. thank you for joining us this morning. i know you pay attention to the central banks and the language coming out. jay powell was able to say the words complete our taper around the middle of next year, and we did not see much on rates. we had a positive market reaction. how do you account for that reaction yesterday? alberto: markets do not believe central banks, and the likely outcome over the coming months and years is western central banks will continue to put some general anesthetic into the economy. tapering is coming, but it is very gradual.
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the rate, the lift off will be quite disconnected. the fed has been clear on this, it will come after tapering. this is very gradual versus the inflation we are seeing, and we do not think inflation is transitory. we have bottlenecks suggesting inflation will be at a higher level than pre-covid. you have this general anesthetic which is supposed to solve issues including minority unemployment and structural problems. we think the economy will face overheating because we will have bottlenecks in the labor force and the commodity markets that will persist. we are seeing that in the energy market and in some countries the labor market. mark: you think people do not believe central banks, and inflation is not as transitory as they claim. and the general anesthetic
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applied by monetary policy. at some point the effect of that general anesthetic wears off and it is too vibrant for the fed to control. did last night change anything for you in terms of how you view markets today as opposed to yesterday? alberto: from our discussions with the fed and ecb, there is a part of the central bank that is starting to sense that continuing emergency stimulus at the same pace as last year with economies reopening is probably wrong. you want to preserve some dry powder in case something goes wrong next year. that is true for the fed and the ecb. what happens if you do not take the anesthetic off at the right
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time, which is when the economy is recovering is that the patient gets addicted to it, so wicked harder to take it off later on. one central bank in the world is trying to do something different, which is the chinese government. instead of giving an anesthetic, they are trying to operate and reduce the asset bubbles and cure the economy in those parts which are affected by a problem. more microsoft actual policies. -- more micro structural policies. dani: hold that thought. we will dig into china in just a bit. alberto gallo, partner, algebris will stick around with us. we have been getting increasing lines from automakers about concerns on the supply chain.
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we continue to see supply chain concerns. let's get to the bloomberg first word news. >> president biden will meet emmanuel macron in person next month in an effort to amend ties, after a u.s. nuclear powered submarine deal outraged officials in paris. biden spoke with macron over the phone, and they agreed open consultations would have benefited the situation. households in britain have to switch energy suppliers as other suppliers going out of service. the u.k. business secretary said more companies would be in trouble as prices failed to
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cover costs. the u.s. food and drug administration authorized a third booster dose of the pfizer biontech vaccine for people over 65, and those at high risk for illness. global news, 24 hours a day, on air and at bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. dani: coming up, debt deadline, evergrande faces a key test today with dollar bond interest payments due. we will dig into that, next. this is bloomberg. ♪
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>> the evergrande situation seems particular to china. there is not a lot of direct
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united states exposure. >> we must monitor carefully for a spillover effect on financial markets globally. at this point i do not see this developing into a global crisis. >> there is potential for impact on the bond markets. we have to stay close to that. >> they own the lands, the companies, the banks. i do not see the lost of trust will bring the whole system down. dani: central bank leaders commenting on the evergrande situation. it is a key test for the developer today as it faces a dollar bond interest payment deadline. looking for signs on whether evergrande can navigate its $300 billion viability. still with us is alberto gallo, partner, algebris. just before the break you were
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telling us about the pboc approach is very different than the western world, perhaps smaller and more frequent action. if this is the approach of chinese authorities, how do you view the likely response we have seen when it comes to evergrande ? alberto: if you think about what the fed and ecb have been doing, it is a one-size-fits-all liquidity. lowering interest rates. it is good for stimulus, a sugar russ and a big anesthetic to the economy but it does not solve the micro structural issues, and create more inequality, which as we know from the jackson hole papers is part of the cause of secular stagnation. very wealthy companies and people tend to hoard wealth. what china is doing is more micro and specific to the problems the economy faces. the problems are not the same as
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western economies. loss of productivity overhangs the private and public sector. they are trying to deflate bubbles aggressively. the evergrande restructuring coming is a positive. once you take out the bad apple from the system, the economy can move on, investors can move on. we have seen similar micro examples of this during the spanish housing crisis, the irish housing bubble, and generally the result is once you separate the bad assets from the good ones, you have much more clarity for investors to continue. in china the government has more leeway, and policymakers have done this before. mark: very quickly, you see this
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as a positive step overall where is the opportunity to play this best? is it buying discounted stocks, or the credit markets, the chinese bond markets? where do you trade this market wise? alberto: one's that are reopening the economy, we have in the u.s. and europe, and reopening sectors for tourism and leisure a bit low the highs were they were. these bonds and equities in convertible debts are attractive. once evergrande is gone, if the pboc stimulate the rest of the economy, we might have a return of the reflation trade later this year. if china can move to stimulate,
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reflation may come back. dani: thank you so much, that is all we have time for. that is alberto gallo, partner, algebris. coming up, we will speak about germany, we have the former u.s. ambassador to the country. that is next. this is bloomberg. ♪
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dani: welcome back to the open. we are 30 minutes from the open, we are looking at a session looking higher. after largely positive day when markets did not react much to the fed, but busy equity markets . we have 30 minutes to go, and we are not looking at the most exciting session, but everyone is looking at the dots. what should be the implication in the take away from what we saw from the dot plot yesterday?
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mark: i want to draw attention to this dot plot. it is the big focus for the fed meeting when they will taper, and everyone talked about how it is a hawkish shift because we saw more hikes priced in peer-reviewed we now price in a half a hike next year after no hikes priced in in june. for 2023, we are talking about three rate hikes on top of that, where previously we were talking about two. i thought this was hawkish, but when you look at the average of where those are, the shift higher has been less. we have only seen a change for 2023, rather than there being an extra hike than what we were expecting. the average is only 19.5 basis points.
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the fed was hawkish but not materially hawkish. in that context, i am not convinced it will support the market. i'm surprised by the disappointing price action even though by the weekend we will say the fed was not hawkish after all. dani: maybe we could point to that and explain market action, but as you say it does not check out. it is a hawkish interpretation. let's move on to germany, we are counting down to the election. six parties currently in the bundestag in a televised debate tonight. we will hear from the smaller parties. they may enter into a coalition. for more, we are joined by maria tadeo who is in berlin. how significant is this debate? maria: a crisp morning in
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berlin. at this point a debate would not be that relevant. we have heard from the three main chancellor candidate. we know olaf scholz has won every debate, but this one really matters because these parties, they usually poll around 10%, not that significant, will have a big say in the next coalition government. two parties will not suffice to form a government. we are heading into a three-way government. i am looking out for christian lindner, what are his requirements, his conditions. in the previous election he blew up the talks when he said finance ministry or nothing. that is something i will pay close attention to. and then the left party, national security in the context
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of that deal with france in which the german government has sided with france and saying this negotiation from allies is not ok. i will be watching on where they stand on nato and foreign policy. this is a conversation the next german government will have to have. angela merkel has not separated policy from trading. that could really change with the next government under pressure to be assertive on china. dani: thank you for staying on top of this. joining us now is someone who knows very well about not just germany but the relation with the u.s. former u.s. ambassador to germany, john b. emerson, thank you for joining us. our reporter laid out what is expected in the debate, and
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talking about differences we could see and policy from merkel and depending on who the successor is. are you expecting a large change depending on the outcome of this election when it comes to u.s.-germany ties? john: no, absolutely not. if you look at the likely chancellor candidates, olaf scholz or armin laschet, they are pro-transatlantic, pro-european. there will not be a huge difference between them in terms of that. they both have been campaigning is the most likely successor -- or in a continuity message in succeeding angela merkel. the differences are really going to be much more on social policy and germany's domestic fiscal policy.
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from the standpoint of the eu, the question of flexibility in terms of european rescue mechanisms. those will be the differences, not so much on the relationship with the u.s. mark: on that note, what about the fact olaf scholz is not in favor of the 2% spending nato target, and with the coalition with greens, they are looking to overhaul nato completely. will that not cause action with the u.s.? john: maybe a tad, but honestly the greens are closer to the u.s. than the christian democrats or social democrats. in all likelihood, if you had a cdu coalition, the greens would likely get the foreign ministry, so that is significant. there are areas where there will
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be more attention, and other areas where there will not. in the trump area, the only things that mattered to the united states was the 2% and nor nordstream. there will be a lot of things they can work on together. mark: in terms of relations and foreign policy, one the things is what is happening in terms of the submarine contract with france. this is an eu issue, not a france -- do you have any reaction what the reaction is in germany? john: i spent much of the last month in germany, speaking at a conference in bavaria when this submarine news hit. there is a little bit of shade in they lost out to the
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australians but for the most part the germans have that reaction where there is a concern about what has changed in terms of biden's "we are b ack" message. what does pivot to asia mean? will you ignore europeans to focus on china? there is that concern. it is not a well-placed concern. we clearly understand, and i know this administration understands that the best way to stand up to china and compete with china is to work together hand-in-hand with our allies. regarding china policy and germany, germany is a little schizophrenic. many in the business community, the auto companies, their profitability is more china focused than u.s. focused.
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china is a bigger trading partner for germany for sure. there is a little bit of we do not want to buy in to the rhetoric from the united states when it comes to china. america's message is if you do not, you will find yourself in an uncomfortable position down the road. mark: it is relevant when you talk about the leading candidates for election, it is hard to be a successor to merkel. she has been incredible leading europe for a long time. does that mean europe loses power in negotiations if they do not have a clear stand on the china issue, or do not have a leader to provide that clear narrative around what they are doing in china? john: i think you are absolutely right on that. europe and maybe the west will miss angela merkel.
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we used to call her the putin whisperer. she clearly has a strong relationship with xi jinping. i do think there will be a bit of a void when you have someone that prominent on the world stage stepping off. remember what people were saying when angela merkel became chancellor -- she would not last a few months, a year at most. and they said the same thing about helmut kohl. whomever the new chancellor is will be able to step into their shoes, but there will be a leadership void that will probably not be answered until the french elections in 2022. we will all turn our attention to those elections. these coalition negotiations could take six months.
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they will certainly take to the end of the year. the election sunday is not the end of the discussion, and the winner of the election, whichever party has the most seats in the bundestag is not guaranteed to win the chancellorship. that is what happened when helmut schmidt became chancellor. mark: what happens -- dani: what happens in the meantime? what needs to be the number one priority of the newly formed government in germany? john: the number one priority will be getting on top of covid. and making a decision in terms of where they will be from the standpoint of germany's fiscal situation. will this be a post covid snap back to the austerity program? you hear some of that from
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christian lindner's party and merkel's party. or will there be flexibility and a recognition that for the health of europe and the transatlantic relationship there needs to be more flexibility in terms of pumping money into the system. also trade negotiations, trying to get on top of the post-brexit situation, trying to see whether it will be possible to have a skinny down t-tif, and also relationship with china and in particular how that pertains to the transatlantic relationship. dani: and the big economic question coming in. ambassador emerson, such a pleasure to have you in. john: thank you for having me.
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dani: thanks again to john b. emerson, former u.s. ambassodor to germany. do not miss our coverage on the german election. that will be sunday at 5:00 p.m. u.k. time. coming up, we turn to the u.k. were more energy suppliers collapsed under the weight of natural gas and power prices. that is next. this is bloomberg. ♪
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>> we have the potential for gas pushing demand higher. when we look at opec, they disappointed. iran off the table right now and the gulf of mexico disruptions.
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we stick your $80 target with potential risk on what winter weather we get. dani: goldman sachs head of commodities research speaking on the impact of rising gas prices on oil. let's stay with the energy story. the number of british households can up in the failure increases to 1.5 million. joining us is our energy reporter. we have more energy suppliers collapsing. are we expecting more at this point? >> yes, we are. we have been warned by the business minister that there will be more, and the regulator also saying to prepare for more smaller suppliers to go under. that is the talks between the government and energy suppliers have been about.
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the main option at the moment is state backed loans. we have not hand all of the details yet, but that looks like the most likely option. with seven that have gone under since the price surge began at the start of august, we're seeing things pick up, the real life impact of these high gas and power prices. industries are cutting back production, and this is hitting households. there will be disruptions to power and gas supplies for people's homes. the government wants you to not do anything, but it has to be a worry for people. dani: you have those one-off
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effects, one company not supplying frozen goods because of the lack of co2 from their supplier. that's get over to the bloomberg business flash. >> a hit to revenue for the world's carmakers estimated at $210 billion, that is the latest forecast. the industry will build 7 million fewer vehicles in 2021 due to the chip crisis. semiconductor availability is worse, and industries have no more to spare. facebook shares fell to its lowest level after warning that apple new dated collection will hurt growth. apple requires users to say they are willing to have their internet activity tagged with targeted advertising. the advertising business has
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declined, and they expect an impact in the third quarter. bank of america ceo brian moynihan says they have enough capital to retain employees and keep them from being poached by competitors. they raised their base pay from $95,000 to $100,000 in august. dani: thank you so much. coming up, we will look at stocks to watch for the open, including the french auto parts maker. this is bloomberg. ♪
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dani: welcome back to the open. we are eight minutes from the cash equity open, looking at a
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futures session pointing higher. let's look at your stocks to watch with joe easton qamar equities team. we have more auto news? joe: in france, the latest company from the auto sector cutting its guidance this morning. this is twofold, on the cost and margin side they are cutting their margin and profit. this is partly due to the chip shortage we have covered a lot, and supply issues. the other side is on the sales side. they have cut their sales guidance. that might be due to the fact that carmakers cannot cut chips to make vehicles and do not need their parts, but it could say something about demand given we have seen a spike in car demand last year when people were using public transport last, and some of their pent up savings on new
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vehicles. it is interesting they are cutting sales and margin guidance. that stock is likely to fall sharply this morning. mark: good morning, -- joe: cutting profit guidance slightly, also basically due to costs. this is coming from two main things, they are trying to modernize their infrastructure. costs around machinery and raw material areas is increasing. and temporary staffing is something the company does a lot when they have spikes in demand. they hire temp workers. the sales outlook is really strong. volume is up around 30% from pre-pandemic levels with people buying more on amazon and
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online, e-commerce is booming. but the profit and cost guidance is a worry, and that stock could fall today. dani: some moves in the spanish industrial space? joe: this is based in madrid, a spanish maker with a takeover of bid on an elevator company. otis is saying they want to buy the rest of the company. they will offer shareholders around 30% hr than the stock closed yesterday. otis could be moving up a few levels this morning. dani: thank you so much, joe easton. we are a few minutes from the open. keep your eye on any stocks that might move on the turkish central bank decision. what are you looking at? mark: the turkish central bank
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is probably the most exciting and getting real reaction and surprise. there is no rates move expected, but the communication will be important. inflation has surged above the benchmark rate at 19%, and there is an expectation that despite that, erdogan will put pressure on the next move to be a rate cut. if they are too dovish, if they prepare the market for a rate cut, the turkish lira could get hit badly. dani: thank you so much for spending the past hour with me. not a lot of excitement in markets, but maybe the turkish central bank will get things moving. we have the markets opening in five minutes with futures pointing higher, up more than 1%
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for the euro stoxx 50 futures. this is bloomberg. ♪ - [announcer] imagine having fuller, thicker,
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francine: welcome back. a minute to go until the start of cash equity trading. i'm francine lacqua in london. tom mckenzie is with me. tom: shares surge along with other chinese developers. a sentiment turns positive. the fed chair said they could start scaling back asset purchases in november. the treasury curve flattens and global stocks rally. the bank of england's policy
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puzzle. we'll get decisions from the b.o.e. francine: a central bank bonanza. the stocks are kind of deciding. they are determining what's happening with the fed and trying to decide what to do with evergrand. a bit of support out there when it comes to futures gains. tom: digesting the time frame from jay powell. you will get likely tapering in november. there was no consensus about whether or not you will indeed get a rate hike next year. that seems to be something that the bulls out there are hanging their hats on so far. the fed is pointing to potentially two hikes in 2023, less than one in 2022. you have the b.o.e. coming up.
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the policy action is coming from the people's bank of china with an additional $17 billion in liquidity pumped into the system today. pay relief for the markets. this is being reflected a third straight day of gains. if we close in the green later today. you have the cac up .8%. we're hearing president macron will be meeting with president joe bide on the discuss that controversy around submarines. the ftse, looking ahead to the b.o.e. and the con none drum. -- conference onundrum when it comes to growth. today energy get gaining .8%. goldman sachs says we could be looking at $90 a barrel.
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the auto sector is gaining .7%. let's move it onto the map. eurozone p.m.i. data out. the crucial one at 8:15 and then 8:30 to build out the economic picture in this part of the world. japan was closed today. there was optimism in china around evergrande. this is how it is looking. green on the screen in the early stages of the open. francine: looking good. opening in the green. concerns over evergrande. we heard from central bankers and business leaders on the subject. >> the evergrande situation seems particular to china. there is not a lot of direct united states exsuppose jury.
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>> we midwest must monitor for a spilloverfect. i don't see this developing into a global crisis. >> the capital markets and the bond markets. we have to stay close to that. >> they own everything. the land, the companies, the banks. i don't see this -- that brought lehman and the whole system down. francine: joining us to talk about the markets a global investment officer. thank you for jing us. joining us. let's the read on evergrande. even if it is not lehman, how much can it hurt stocks in europe and elsewhere if it dissolves? >> i think there is a contagion risk that could be quite large. we can see today that the news
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on evergrande is having an impact already. what we saw earlier this week, the dramatic selloff on the bad news. and then we started to see things like iron ore prices and the materials sector had come off strongly. it has rebounded. of course we have the news from china that is coming out about the changes in regulations and everything from your big tech companies and alibaba's and tencent write through to this wealth equalization that is affecting the luxury good section. i think the contagion effect could be quite large. tom: you're increasing your exposure to some asian equities. what are you looking at? what are the opportunities? >> we have to look through the
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short-term and the share prices. # it started last year with the failure of the analyst's financial i.p.o. we'll crack down on those things. the share prices have become low but we look at the fundamentals of these companies, a very good quality characteristics. parts of the market vary investors with perhaps shorter time horizons, we have to look over a long-term time horizon and look at the structural long-term growth stories and the likes of online gaming and see the opportunity to end these companies and evaluation. francine: we have a pretty amazing story. looking at traders spending $50
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million. is there anything in europe that look particularly attractive now? tom and i have talkedded about it extensively. we have a lot of things going on when it comes to italy, france and the u.k. where do you find the best value in europe now? >> still looking more attractive. companies like novartis have paired back on that a little bit. we can see opportunity there and consumer staples. one sector that has been left behind so far since the big global rebound after the pandemic. areas such as financials have had a big bounce on the back of reopening economies, particularly this year on the
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back of november last year. even though they are coming off a very low base, there may not be much more from there. tom: anything you heard from jay powell that changes your views on u.s. equities. we are going to get less support from the fed going forward? >> ultimately. he also said they would do what they could to support the u.s. economy in reopening and what we have to think about is while this is still ongoing, equity markets could tonight to rally and with that support, i think what they really said is they talked about tapering. it is not as extreme as some might have thought and what we have to try and prepare ourselves for as evaluations increase, then return expectations like perhaps going forward, the u.s. has a strong -- since last year.
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tom: great insight. more muted returns possible as something to bear in mind for investors out there. global equity analyst in the u.k. coming up, the chip shortage worsens for automakers with an estimated $210 billion hit to revenues this year. we assess the damage from the crisis next. this is bloomberg.
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tom: welcome back. 10 minutes into the european trading day. optimism taking hold here in europe. fran? francine: this is what is moving in markets. we have couple of stocks moving more than others. this was one of the main stories that tom pointed to. chip shortages. instead of getting better, they are getting worse. reducing their projected revenue for this year after they slashed vehicle production in the first half. it is getting worse. tom: we're far from the end when it comes to this story and the impact on the automakers and that is being felt in this
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supplier. in terms of elevator lifts. the elevator manufacturer, its spanish unit, with an offer as much as $2 billion u.s. 32% for that spanish company. francine: we have three stocks and i think they are all up today. happy thursday. royal mail, not a huge mover but still gaining 1% maintaining its guidance. anticipating upward pressure. they have been delivering. tom: amazon? francine: i'm in everything. undiscriminatory. i don't go to brick and mortars anymore. tom: god forbid. so 2019, isn't it? let's focus in on royal mail and
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royal postal delivers. the total hit to revenue this year for the world carmakers is estimated at $210 billion. that is the latest dire forecast. they will build 7.7 million fewer vehicles in 2021 due to the chip crisis. craig, where are we then in this crisis around chips? fran and i were discussing it. definitely not the end of the story. are we getting at least close to some kind of resolution? >> that was the hope late last year when we learned that the industry was starting to worry about this. there was a concern that the auto industry gave up its spot in line last year when it really had to slash production because of the initial outbreak of
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covid-19 and there was some concern that it will take some time for them to essentially get their spot back in line but they will get there. we have now sort of gone through month after month of setback where we have had issues with extreme weather, fires, more recently outbreaks in southeast asia and malaysia where there is a lot of testing and packaging that is done. this is a very structural issue. we're seeing that the auto industry's desires are outdated. the chip companies are not necessarily eager to make the investment for outdated toll. technology. this is something that'll be with us for months and perhaps years to come. francine: we're starting to look at numbers. this could actually cost or this could hit world automakers, $210
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billion in 2021. is there a danger that there is going to be too much chip production or does it change the way that automakers produce and sell cars? there is a huge second hand market where cars -- like a 30% premium. >> we mentioned the idea that some car makers are so short of cars even just to show customers that show up to the lot that they are renting doors feature and allow for people to kick the tires. just something that is unheard of in the dozen years that i have been covering this industry. i think alex's estimates are reflective of how this has snowballed. in january they were expecting this to be a $61 billion hit. that became $110 billion in may and now they have roughly doubled their estimate in the past few months. this is a situation where the industry is to your point
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absolutely going to have to change their approach to selling but also sort of their approach to their supply chain where they really need to sort of forge closer ties with the chip companies. we're hearing a lot more about that as well, just a couple of weeks ago when the industry staged its first car show in a couple of years, intel was one of the biggest keynotes. this is a situation where the auto makers are used to working with the likes of bosh and they are absolutely going to have to make the semiconductor companies more -- put more emphasis on those relationships going forward. francine: thank you so much. craig with the very latest on chip makers and autos. there is an appetite on this story from alex partners. we posted that on social media. french p.m.i. -- i don't know whether it goes back to the chip
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shortage but manufacturing was worse than expect and look at services, pretty much inin line. it is not having impact on euro-dollar. tom: is it a supply story or a demand story. not a significant miss there. well below forecasts. francine: let's turn to some of the other tech companies or stories that we're watching. the u.s. maker's stocks is roughly $750 and the target in five years is $3,000. matt, there is a lot of sthiers we want to talk about. if we start with cathiewood, is this a sales thing or is she comfortable that it could get to $3,000? >> i think it is more of an
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insight. discipline. chip shortages would seem pretty unlikely. it is trrks the average price is below $600. that is quite a difference in perspective there where analysts are and where cathie wood is. tom: just a small gap there, matt. we're seeing a departure of the c. to. what is the significance of that with facebook? >> the company, a very public figure for them. want to take a slide. people single digit time between
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work and other issues. i don't think it is too much of a concern. taking out fake news and all of that kind of stuff. it is going to be another -- employee of the company. i think the future of that part -- this is nothing too concerning. francine: matt, what's happening at apple? we have been hearing stories about leeks. the chief executive cracking down on that. maybe not all is rosy in the apple kingdom. thousand we hear they are looking at bonuses. >> up to $1,000 for people who work in stores. a recognition of what they went through during the pandemic. they need to have their stores
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and that online presence properly staffed. not just in the u.s. but in europe too. they need to make sure they have the staff there to sell the phones to hit those sales forecasts that analysts have for them. tom: the latest on facebook, apple and tesla. coming up, the b.o.e. confronts rising inflation and slower growth. that is up next. this is bloomberg.
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>> china is the number one manufacturer of renewable energy in the world and also the number one deployed in renewable energy but because it is so big and such a sizable economy now, depending on coal, it must begin sooner. we hope china can peak earlier and we hope that china can begin to reduce at some point sooner. tom: john kerry there urging china to do more to fight climate change. turning to today's central bank action now. lizzie is outside the bank of england for us.
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>> we're expecting the bank of england to keep interest rates on hold at .1% and to end asset purchases early. we'll have to see if any of his colleagues will join him this month. we'll also get an exchange of letters between the chancellor and the governor that is protocol after inflation passed the target to 3 tony 2% in august which neither economists nor the bank nor markets had predicted. the question is how transitory is transitory? the bank had forecast it would peak at 4% this year and fall in 2022 and 2023. there are science it could
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persist because of the labor shortages and the material shortages, the energy cost rises that we heard so much about and paying our way out of the mismatch will add to inflationary pressures if we don't get more output for those pay rises. it is a bit of a balancing act because at the same time the economic backdrop has dimmed somewhat since the bank's last forecast. it will be interesting to see how the bank weighs the conflicting data we have had recently. it should show what is really going on in the economy. francine: i think the bank of eng lafned has it more d.l. difficult because of labor shortages and a lot of the price hikes have to with labor shortages. >> it is not like the fed in the sense that you have the difference in the outlook for employment. in the u.k., you have the risk
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that unemployment could spike when the furlough scheme ends. that's why they don't see it until the second half of 2022. markets are pricing for it to come in the first half. the difference there is because they really are focusing on the inflation figure. francine: thank you so much. our u.k. economy reporter there. we'll continue on central banks. we'll speak to the bank governor after they announce their rate decision. discussion on inflation around the world and how smaller economies are dealing with inflation rates. tom: look like it is going to be the first g-10fx to raise banks. francine: coming up, workers return to london and other
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global financial hubs. we'll speak to a citigroup chief executive about the future of work. this is bloomberg.
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francine: welcome back to the open. here are your top stories. a moment of truth for china as shares surge along with other chinese developers. the tapering timeline the fed says there tapering back. the bank of england policies, we will get decisions from the bank of england as well as central banks. if you look at the markets, we
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saw a hawkish jay powell, but they are not as worried as they were about evergrande. tom: yes, they threw him a ball. you have two key things that came from the meeting with powell. we have a timeframe for tapering. no consensus, no majority on whether or not we get a hike in 2022. a little more hawkish on that front. pumping $17 billion of liquidity into the financial system, that is the biggest injunction in months. the calming of the view and the disconcerting of the evergrande
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brand. we are waiting for germany to come through. we have france coming through below the forecast. so comfortably in expansionary territory. 58.5, that is the latest. amiss in germany and france when it comes to manufacturing. -- a miss from germany and france when it comes to manufacturing. the dax is brushing that off, gaining over in france. the cac is also up. we note the president will meet with joe biden at some point to talk over those political tensions.
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the ftse 100 is gaining at midday. the conundrum around higher inflation and slow growth. let's switch to the sectors and see how things are going down. across the sectors, green on the board. technology is getting 1.4% followed by auto parts. we have heard the continuing constraints in supply and chip shortages. that sector is brushing off those concerns at the moment. at the bottom of the list is media. that is how things are shaping up 30 minutes into the open. francine: we have the swiss national bank coming out with interest rates unchanged, repeating their pledge. we heard from the snb saying that the franc is highly valued. it is one of the biggest concerns for the swiss right now. we have not heard any talk about intervention -- we have heard talk about intervention but
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nothing concluding on the markets. this was the national bank keeping the policy rate at record lows. talking about positively pledging. may have noticed that there are more people in the city, workers are returning to the office of cities around the world continue to reopen. here to discuss that and other challenges of the last 18 months is david livingstone, citigroup ceo. thank you for joining us. i'm excited as we see this buzz started to renew, has it been difficult to get people in the office? david: people are somewhat concerned. they are out of the habit of being in the office. we have been delighted with -- particularly in london -- the vaccines have been tremendously delivered. we are saying we are an office-based institution, people learn from each other and collaborate so much better in
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person. we are encouraged by the employees returning actively to the office. francine: how many people are in the office at any given day? is there a hybrid model and how much time do you spend thinking about it? david: they could. we have learned a lot and i am putting in place various levels of confidence building techniques around the office. at the moment, we are more than half coming into the office. we will be on the hybrid model at least three days a week. we are giving a little bit of flexibility. people do appreciate it, the flexibility to choose to work from home for some of the week. francine: do you think we will go back to the office five days a week or has the pandemic changed everything for the foreseeable future? david: i think it is likely there will be a change, we will
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have to see. the predictions that we will never be in the office again have shown to be not correct. let's not make a prediction just yet. francine: fair enough. do people who are not vaccinated, can they come into the office? this must have been a difficult decision. david: it is different in different countries. i was responsible for 55 countries in our region. very different status of vaccinations. in each individual country making a decision based on requirements. we are relying on testing. we do it three days a week as employees come into the office and that gives him extra competence. francine: i felt like every week and every day we are talking about banker burnout, pay increase, has this been -- how much more heavy thought about
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the junior bankers now? david: we think about all of this. i have been out banking, i know you mean that discussions about banking particularly in the heavy hours and workload, we have 35,000 people in this region. whole range of activities. all of those elements balance in work, also, what is attracting people to work in an institution like citigroup, how we maintain talent and compensation is an element of that. i think there are other elements that also attract people to certain institutions we are very delighted to be selected as one of the top 10 organizations and that u.k. for working families, not just financial institutions but all. francine: has not changed, do people want more flexibility,
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how has it changed from five years ago? david: with the pandemic has done is shown what is possible. if five years ago, we we wondered how hybrid working would operate, we have had a test and it is proven. now it is how it will operate that is sustainable. francine: one of the conversations we have with senior banking is, what does it come to as post brexit. has it been difficult to get some of your employees to move out of london? david: absolutely. there is no doubt about london remaining the premier, not just in european but also international financial center for many reasons. we start on a different position from any other banks. we have 13,000 people in europe today, free -- pre-brexit.
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for us it was not needing to lift and shift from london, it was augmenting what we already have heard -- have -- have. francine: how do you see it developing? we have a number of wall street banks that come here and use that u.k. is a sounding board for digital banks, how do you see europe? david: the challenge in europe [ post-brexit, is what will be the shape of european capital markets. their air -- there are some real challenges. there is an over reliance on the banking system and balance sheets for funding corporate activity. there has been significant
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issues around capital markets and the banking union, they are not progressing fast or successfully. that is going to be in issue for european policymakers to make sure that they work out how they are going to find economic activity structurally in the long term. particularly if they were put in place with sovereign restrictions. francine: we had a warning from the bank of england saying it is a political decision that could lead to more fragmentation, a lose-lose situation. david: if you look at what the last three decades have shown us in capital markets, low friction, high velocity of capital being able to move across borders and therefore find the best liquidity and pricing, that is good for economies. restrictions or interruptions on that would be an accomplice. what we need to look like for
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pension funds and asset manager, they want liquidity and they want the forums -- they want to be able to choose. francine: do see anxiousness in the banks trying to figure out exposure to evergrande? not necessarily bondholders. david: we are not exposed from that point of view. i think a markets are looking at this to see how significant the restructuring -- if that happens in china -- and what the consequence is our. francine: thank you so much. david livingstone, citigroup ceo. coming up, a televised debate ahead. we are live in berlin with all the latest. this is bloomberg. ♪
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>> at the moment, we are not in a situation that there is no stimulus invested in europe, more than 750 billion euros, a lot. i think we need to go back to normal standards. if you look at the growth rates, yes, we are doing well in austria, but most european countries are doing well at the moment.
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our unemployment rate in austria is not lower than it was before the crisis. i think the development is good, things are moving in the right direction, we should reduce the similar step-by-step. >> do you worry about a return of the north-south divide where you have tougher more dramatic economists which do not want stimulus and you have the southern countries and you end up with a political fight. >> i cannot say that competition is tough but we leave in competition. all of the european union should be competitive. there is a need to do some reforms, i think some of them did a good job during the last years, they are also developing in the right direction.
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that can never be the solution for us in europe and it will never make us more competitive. i would not describe our position as tough. i think it is very understandable position, shared by most countries in the north. tom: that was the australian chancellor speaking to bloomberg tv about fiscal stimulus. coming up, we will speak to the park -- prime minister of greece. that is on bloomberg at 1:30 p.m. london time. as we count down to sunday's elections in germany, there is a televised debate tonight between the chancellor candidates, tonight we also hear from the smaller parties. for more on the state of play in europe's largest economy, maria tadeo for us.
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what have you got? maria: this debate is very crucial. there are a number of things we are looking at. there is the potential coalitions and a specific position in terms of what that makeup of each coalition would offer german voters. to debrief all of this, i am happy to say we are joined by reinhard buetikofer a member of the european parliament. always wait to see you. come sunday, the greens on one point, you had so much momentum going into the election, polls now say you are third. what kind of roles to see for your party? reinhard: i do expect the best result by far. we are aiming at reshaping german policies in very fundamental ways.
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we want to create a new energetic focus on the transformation. i think it is completely imperative, not just in order for sustainability but also future competitiveness. then, we will focus on fighting poverty. it is still a scandal. we also want to toughened the foreign policy stance from germany to some of the authoritarian leaders around the globe. these are three dimensions in which we intend to make a difference. maria: based on everything that you just told me, it does seem to me that you will need a more
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left-leaning coalition. it is hard to see that happening with someone like christian letter. where do you see potential coalitions and a compromise emerging? reinhard: on climate policy and industrial transformation, foreign policy, i do not see that much of a difference from the candidates of conservatives and socialists. in any case, we should have a major task on our hands to not just stick to the status quo. we are not good to give any promises for a particular alliance after the election. we are going to talk to all the contenders and see how we could influence policies best. maria: in terms of foreign policy, i know that is an area you like to focus in detail, criticism with angela merkel is that she has based on trade.
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germany looks to trade deals, do think that status quo could continue with the next government or do you have to toughen up on china? reinhard: i would agree that to some degree germany had -- foreign policy. merkel started her career with courageous moves in the china relations, she has fallen behind the curve. she is out of sync with the reality and how she depicts china. i would argue that all the major democrats in the election have adopted language in their electoral platforms that it is much tougher than what they use for years ago.
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regardless of the precise composition without a tougher stance on china in a more united european stands on china supported from berlin. maria: you talk about a european united standard, do you think the deal we saw from australia and the u.s. and the furious french reaction, without force germany in the european response to go bigger on the front? reinhard: it is unfortunate for germany to see our two best allies, the united states and france at odds, and the way that it has. i think that president biden has taken a very good step in signaling some self-criticism and some willingness to accommodate the concerns. certainly in the way and which france has been treated in the
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context of the founding of the new alliance. that is unacceptable, not just from a french point of view. there is a huge deal of solidarity from the other capitals. we do not want to seek transatlantic cooperation going down the drain. maria: in 10 seconds, do you believe that eu-china deal will get ratified or is that now dead? reinhard: it is not dead but if it gets ratified, probably not in my lifetime. maria: [laughs] we hope it will be a long time. thank you for your time. that was reinhard buetikofer, a member of the green party. francine, tom. francine: thank you so much. maria will join us on sunday to
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bring us special coverage of the german elections. we start at 5:00 p.m. on sunday and we will be live for two hours. up next, we go back to the markets. this is bloomberg. ♪
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francine: welcome back to the open. looking up for the moment, it is
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green. it could change at any moment. the fed was taking it in stride, we have norway at the top. evergrande, i am unsure why people are so cool about it seeing what we saw monday. tom: there is a bit of catch-up, the stock was up today. what is there optimism around this? they made the bond payment, they have come to an agreement. yes, this company continues. this company has gone into all sorts of areas. francine: it was interesting to hear from mark cudmore. it is skating today, i don't know if we should read too much into it. i have been reading about it not, there are things i did not know. they have not sold one single electric car but they had a unit that was valued as much as ford. tom: the unstoppable gallop is
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how it is roughly translated. they have never managed to produce or sell any of them. they had on display in april at the auto show. francine: we call it april estate developer, but it is more. -- we call it a real estate developer, but it is so much more. we continue watching the markets. that is it for the european market open. "bloomberg surveillance: early edition" is up next. this is bloomberg. ♪
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>> the evergrande seems very particular to china. >> i do not see this developing into a global crisis. >> this is "bloomberg surveillance: early edition"
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