tv Bloomberg Markets European Open Bloomberg September 30, 2021 2:00am-4:00am EDT
♪ francine: good morning, everyone. welcome to "bloomberg markets: european open." the cash trade is less than an hour away. here are your top headlines. one hurdle down. chuck schumer says a deal has been reached to avoid a government shutdown this friday. no need to fret. leading central bank chiefs trying to reassure markets over inflation. we get cpi readings from france
and germany today. wall street titans talk about the next big risk for investors. we will hear from cathie wood, mohamed el-erian, and scott minerd. futures holding onto gains. we did hear the bank of japan, the bank of england, the ecb and the fed saying they think inflation will still be transitory. the u.k. economy, we have gdp figures just crossing the bloomberg terminal. the u.k. economy growing 5.5% in the second quarter from the previous quarter. when you speak to a lot of analysts, they worry about the futures. may be we saw a two bit of pressure in the last two months, two weeks and that could also lead to more disruption. we had two more energy companies going down because they could not keep up with skyhigh prices in the u.k. let's have a look at some of the other things before we go to tom. if we see what's happening in
terms of gains in the european indices, futures in the u.s. also pointing to a higher start. we had some data in a china that we need to look at. overall, it seems like there is no big surprise that central banks can't deal with. tom: right. in terms of china, the bad data may be good news if you are aligned with the view that you're going to get a triple are cut -- triple-r cut in china. services, by the way, were solidly in expansionary territory. the view from bloomberg intelligence is that it is not strong enough when it comes to services. you have this big question mark around electricity and energy prices in china. in terms of the gmm, this is the picture. as you can see in the equities side of the panel. in terms of the commodities picture, we are looking at
cotton prices are much higher. we will be talking the retail sector later in the show as well. that is broadly what you are seeing in gmm. there's an assumption you will get more support out of china on this weaker data. the csi 300 brushing off the pmi. south korea in the green. there's been some breaking news at the corporate level. this is h&m, the clothing retailer, posting third-quarter pretax profits of 6.0 9 billion swedish krona. that is well above the estimates of 5.0 billion. it is a beat at the pretax level for h&m. this is for the third quarter, h&m septembers sales slightly lower year on year. about 50 stores are temporarily closed. it's a beat from h&m. we will be talking the retail sector in more detail later in the show. let's check in on how the
markets are shaping up in asia. juliette saly is in singapore for us. juliette: good morning. we saw the first factory output contraction since march 2020, since the pandemic began. the white line falling below that redline. we saw a pickup in services thanks to consumer spending picking up. it is this first sign of the power crunch weighing in on the chinese economy, along with the other headwinds, the beijing regulatory crackdown, china evergrande. it does added to that chorus that we could see some more injection from the pboc, perhaps a triple are cut -- triple r cut. still seeing weakness in those tech players amidst more crackdown -- concerns of a crackdown. japan's market has that big fall yesterday. we are looking ahead to what the new leader will mean for equities.
nickel assets sing japan going to have a good fourth quarter. you will perhaps see near-term catalysts for japan stocks over. we've got dollar-yen continuing on this trajectory, near 2021 highs and perhaps pushing toward 1.13 as well. are traders going to continue to push the dollar higher or will you see movement back into havens? we do have a bit more optimism coming through in the japanese yen today, francine, rebounding from that 18 month low. francine: juliette saly with the very latest on the markets. senate majority leader chuck schumer says lawmakers have reached an agreement to avoid a shutdown on the u.s. government but the debt ceiling issue still looms. we are joined by bloomberg's bruce einhorn. what can you tell us about the deal that has been reached in the senate? bruce: so, the u.s. fiscal year
goes from october 1, so if they don't reach a deal, then the government shuts down. looks like there is a deal. republicans have agreed. up until now, they have been filibustering this. looks like that's one item on chuck schumer and nancy pelosi's to do list. you don't get a a lot of credit for making sure the lights don't go out in the government. . there's a lot they need to do. tom: where does this leave joe biden's broader economic agenda? how much of this is down to the divisions within the democratic already itself -- democratic party itself? bruce: that's a question right now. there's a vote on the infrastructure bill, the bipartisan deal. nancy pelosi has pledged to some of the conservative democrats in her caucus that she will have a vote on the. she said that there will be a vote i think today. but the progressive caucus has said don't count us in on that unless we know that there is progress on the reconciliation
bill, which is the one that has the rest of biden's agenda. so far, we don't have progress on that, so it's really anybody's guess about what's going to happens at a. francine: bruce einhorn there with the very latest on u.s. politics. we hear from cathie wood, scott minerd and mohamed el-erian about what they see as the biggest risks to the recovery. this is bloomberg. ♪
♪ >> this inflationary spike will not lead to a new regime of ongoing higher inflation. the current inflation spike is really a consequence of supply constraints meeting very strong demand. >> we certainly have no reason to believe that this price increases that we are seeing now will not be largely transitory.
>> excluding the temporary [ indiscernible], the underlying inflation is not so weak. >> the -- will always be right because we understand the effective rate and the transmission mechanism is much better understood. that's not to prejudge what we will decide in november. francine: central bank achieves weighing in on the -- chiefs weighing in on the inflation picture. jay powell and christine lagarde say spikes in inflation are not temporary. they warn that climate change poses long-term threats. joining us now to talk about inflation, markets, and china data is tatjana puhan, tobam deputy chief investment officer. it seems like central banks are sticking with inflation is transitory. you have a lot more market concern that this is not something temporary, especially if you have broken supply chains across the world.
tatjana: this is also what you can see pretty much happening at the modern market. what we have seen over the last few days, it has been really, really amazing. you see the large wedge between performances on sectors and equity markets. [indiscernible] when it comes to the structure of the markets, market concentration -- from super high levels. investors are re-leveraging very stretched relations that they put on their big growth tendencies, if you want, that they had insert companies -- in certain companies. tom: is there a disconnect between the rhetoric of central bankers and the impact on consumers, what households are actually feeling in terms of the hit to their pockets? tatjana: yes.
i do think that what we see from central banks communicating and what we feel as consumers, there's a real disconnect. it might be related to issues of measuring inflation correctly. i think to some extent, we're underestimating the actual inflation that is arriving on our pockets, on our budget. i think there might be a surprise coming in official inflation numbers. it might make central banks act on inflation more than they do not. at the moment, they have little interest in putting a cap on inflation because of all the public debt that has been accumulating. they will try to keep going and talking down inflation until the last moment. francine: we also have this china factory activity contracting in september for the
first time since the pandemic began last year. how do you actually look at central banks? it's very unlikely i think that there's the bank of england, the ecb and of course the fed and others, the bank of japan, all saying the same thing and they are all wrong. could we be looking at a global central bank policy mistake if they are not front running inflation? tatjana: i am not saying they are wrong and i am not trying to -- central bankers. they all have an interest in sticking to one story that is potentially true. raising interest rates would have a big impact on other sides of the economy that they kind of feel like they don't want to trigger right now. they are hoping that their part of the story is going to come out as the true one. i think they are really trying to push back towards [indiscernible] rather than
getting too much concerned about the -- story. we all don't know whether one story is correct or the other is correct. tom: the rates obviously question brings us into what is happening within the 10 year space, 1.51 currently, and the impact on the technology sector, we've seen that for a third day in terms of the nasdaq closing lower on wall street yesterday. you talked about the fantasy of valuations within the tech sector. is this the moment, is this the pivot moment where the change on tech becomes ingrained? or is this just a one-off pullback? tatjana: it could be the tipping point. we see massive concentration charging up during the third quarter and the end of the second quarter. today, you know, we are at the end of a record market
concentration that has been driven by these companies. there is a -- that has been created on the back of growth hopes of investors that they put into those companies. eventually, they will come plunging. they cannot continue forever in the same way. when inflation fears turn out to be really more justified than central banks try to make it seem today, then i believe that the tipping point will be there. i'm potentially, it's now or in months. tom: prepare for that tipping point within the tech sector. tatjana puhan staying with us. let's get the first word news with the juliette saly. juliette: the eu and u.s. are so divided over tariffs on metals. the dispute going back to the trump era. eu officials told reporters on the sidelines of the u.s.-eu trade and technology council meeting the issue was discussed
but at resolution has not been found so far. trump imposed tariffs on imports of steel and aluminum in 2018. a former goldman sachs compliance analyst whose job was to help the bank prevent insider trading has been charged with insider trading by the u.s. futures -- u.s. attorneys and change commission. the sec claims he used his position in the bank's office to access confidential information to carry out trades and netting him at least $470,000 in illegal profits. a lawyer for him could not be immediately located for,. the international olympic committee says no international spectators will be allowed at beijing's 2022 winter games. it says tickets will be sold exclusively to spectators residing in china's mainland to meet virus requirements. the ioc also says that athletes who are not fully vaccinated will have to quarantine for 21 days upon arrival in beijing. 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. tom: thank you very much and did. china's factory activity contracted in september for the first time since the pandemic began last year. it's a sign of the damage that electricity crunch is having across the country. that story is next. this is bloomberg. ♪
>> i think the number one risk of that we are really vulnerable to his the sustainability of the global payments system. it would appear to me that we are extremely vulnerable to having an attack against the payments system of the financial markets. >> think of people whose jobs have now been displaced by this big step that business has taken to digitalization, who have no financial assets to begin with, so they didn't benefit from what has happened to asset prices. cathie: there are a lot of value traps populating traditional benchmarks today, and value traps are, there are going to be significant downsides to prices because of all the disruption and disintermediation. francine: scott minerd, mohamed el-erian, cathie wood on what they think is the next big risk
for the markets. china's factory activity contracted in september for the first time since the pandemic began last year, a sign of the damage the widespread electricity crunch is having. tom mackenzie fresh from china. it's difficult to understand when you are an outsider from china, because this is almost self-inflicted. tom: arguably it's another self-inflicted blow-by chinese policymakers. they put in place some changes around coal mining to make it safer and more sustainable. the knock is that coal production is low, prices have shut up, and the industrial sector that shot up -- prices have shot up, and the industrial sector has been affected. they will argue that longer-term will lead to more sustainable growth across the sectors.
francine: i've never lived in china but i always grew up with the belief, especially in the markets, that actually whatever china's problem is, it gets sorted because the government is so smart, so interventionist. is there a part of the chinese economy right now, apart from evergrande, that we should be worried about? tom: i think that last line is the crucial point, which is that it's a bit of a myth because this is an authoritarian regime, top-down, everything gets implemented as the leadership in beijing wants and hopes. there are different interest groups. that is the thing to watch around these different policies. francine: always about execution. let's get straight to tatjana puhan, tobam deputy chief investment officer. how do you look at china right now? is this china adjusting and adapting or could this be something more sinister? tatjana: i think like very clearly, the chinese communist party, they are very interested
in growth to continue in china. they are concerned about the very long-term growth perspective of china. in the short term, they are happy to sacrifice. they are happy to sacrifice also some of the problems that has been made. we should be careful about this, mindful about this. the chinese perspective from the economy is a different one from ours. they have to sacrifice something. the individual is less important over the longer run growth of the country and so i think, you know, especially western investors, they should get a bit careful about where they move into china and where they put their money. tom: i know you have been putting some thinking into this. the question is of geopolitics. we have a change in leadership in terms of a new prime minister potentially in japan.
the relationship between japan and china crucial of course when it comes to geopolitics in the region. how should investors be thinking about a changed dynamic there? tatjana: i believe that geopolitics are going to be much more tense going forward between japan and china, but also the u.s. and china. this can be something that will really be impacting global growth. during the last 15-20 years, we have seen an environment where we had very little attention overall between -- little attention overall between -- little tensio overalln between these global powers. -- might play a much bigger role on their portfolio going forward. francine: you looked at some of
the biggest concerns out there. are we missing something? i don't know whether evergrande comes back with a second or tertiary effects. whether it's a systemic and we don't know or we are going to bumble along in this inflationary environment with the growth to the downside that could lead to overall stagflation. tatjana: i think the evergrande scandal is a big problem. it is, to some extent, a manifestation of wider problems in the chinese market. that's why also the government is acting on this now. what i also think is what investors today kind of underestimate is actually the impact that we will see, not only on --, but also on environmental impacts. we have scarcity, climate change
related problems now. i think this is going to help really that have really a lot of client -- i think this is going to really have a lot of consequences that markets have not priced in so far. tom: very briefly, if you make, in terms of the changes to your portfolio as you look at the politics in d.c., are you making any adjustments around that? tatjana: if you are portfolio, it is very much driven by the quantitative model -- our models [indiscernible] market concentrations that have been coming up over the last years. our models have tried to [indiscernible] -- substantial outperformance over the last few weeks and months on the back of this chinese tech crackdown.
♪ francine: welcome back to the open. we are 30 minutes from cash equities open. you can see for the moment, we are holding onto gains. we had a lot of the major central bankers yesterday saying they still believe inflation is transitory. disappointing data out of china. we worry about the supply crunch and energy crunch across the world. tom: let's turn to fintech and the u.k.'s second most valuable startup is expanding its presence in london. checkout.com is on a hiring push as it scales up. that is after its most recent
round of fundraising tripled the payment firm's valuation. joining us now is guillaume pousaz, the checkout.com ceo. you are bulking up your c-suite team. is this you gearing up for an ipo? guillaume: good morning. thank you for having me. no, we're just trying to build the best business possible. as you highlighted, the business is a growing tremendously exponentially,. we hire about 100 people a month at this point. when you build a big business, you want to make sure your bench and management team is very strong. francine: how much more fundraising do you need? guillaume: i think right now, it is documented that we have been profitable for nearly the last six or seven years. the company is profitable. the business is growing really fast. what we are trying to focus is the size of the opportunity that is in front of us, which we believe we are still scratching the surface of.
we have 19 offices. e-commerce is still growing at massive double-digit. that's what we are focusing on right now. fundraising will happen, i think, but it's not the focus in the boardroom at the moment. tom: just to follow up on that point, how much runway do you have currently? guillaume: we have never spent the money that we have raised and we have raised a hundred $30 million. we have a lot of -- $830 million. we have a lot of runway. francine: it's impressive the growth you have done. how much will the market wrote? how much will checkout.com grow? guillaume: there is multiple arguments here. the size of the total market of e-commerce is multiple the gps of countries -- gdp's of countries. most of the revenue is sitting in the hands of the incumbents, banks. technologies like ours are capturing this opportunity from the banks but also the net new
opportunities, all the businesses that are created every day in the e-commerce sector. there's a lot of digitally native businesses. they start online and fundamentally, it's -- for companies like us. the runway is very big in front of us. tom: which of the regions, which countries stand out for you in terms of the richest opportunities? and are you looking at acquisitions? guillaume: we've done a lot of acquisitions in the last 18 months. we believe a company is only as good as the people who make the company. when you find really talented, small teams, it's important to buy them quite quickly. in terms of size, europe is extremely exciting for us and as always been. because first of all, it's our core market. that's where we are from originally. there's a lot of regulation, strong customer authentication, which creates a lot of opportunities. straddling that complexity creates value.
clearly, asia, the middle east, the u.s., this is very broad and big markets. this is the reason for the very large time i was mentioning before. francine: does it not make sense or i don't know if it makes sense but do you have big eggs circling trying to dish -- big banks circling, trying to buy you out? have you had offers? guillaume: smiling a little bit, because ultimately, we've had these discussions. there been a lot of people that have tried to approach us to bias. i very much to buy us. i very much like what i do -- try to approach us to buy us. i very much like what i do. our objective is to build a generation defining company. we have amazing people, merchants who love us. the ideas to consider executing and keeping our heads down and build the best business possible. tom: i know you, amongst others,
are advising the bank of england, andrew bailey and team, around cryptocurrencies, digital currencies. what kind of advice are you and will you be giving the boe? guillaume: this is correct. i think any company that is selling the future of finance to their merchants, then future proofing their payments, telling them we are here to support you has to dabble in blockchain and cryptocurrency. we work with some of the largest cryptocurrency fintech companies, such as coinbase. the discussions are very exploratory. they are trying to understand the value stable coins. you want to be part of the discussions. i think blockchain is too big to disappear at this point. how do we regulate it and create end value for the users? you get to shape the future. this is something we firmly believe in as a company. francine: how would you regulate it?
one of the things i keep hearing from banks and they tell you on and off the record is that actually a lot the -- a lot of the fraud comes from cryptocurrencies. it's an easy way when people think they can make money but it's not the valid companies. what does that mean for the bank of england? but what does it also mean for a company like checkout.com? guillaume: i am not a regulator, so i can certainly not give you the right answer for a question like this one. if you look at the flows that are involved today, they are so significant that the industry as a whole cannot disappear. as a matter fact, the same banks that you were mentioning before all have a blockchain strategy. i think the reality is how the future will look like, i cannot tell you. being part of that future is what is important to us. it is public that we were part of the original facebook project. it was an opportunity with spotify, shopify, uber,
yft, facebook. there is multiple ways to look at the blockchain. the negative way that you highlighted before, which needs to be cleaned it down and related, but then there is all these opportunities sitting in front of us. if we take 10 years from now, we will have a much better financial services based on blockchain and all the benefits it brings to the ecosystem. francine: thank you so much. guillaume pousaz there, checkout.com chief executive officer. it was interesting to see last week the bank of england repriced most of the markets by saying that they could be hiking pretty soon. it was one of the first ones. usually, central banks try to be at pains to say they will taper first. the money markets are pricing three bank of england rate hikes in 2022, which is more than any other central bank. tom: it's quite astonishing. it draws us back to the question of stagflation. we have the gdp print that came
in above the estimates in terms of the second quarter, 5.5% versus the survey. a lot of economists say that the data suggest that the slow down here is becoming more pronounced. we know prices are very high indeed. we are seeing that reflected again in gas prices. the conundrum for the boe. three rate hikes in 2022 is what is being priced in. francine: we have inflationary pressures around the world. this country is also dealing with brexit. it's a lack of the drivers that used to come from central europe to bring fuel to the stations. the complexity of the bank of england governors probably more than any other central bank. let's get to the bloomberg business flash. juliette: citigroup is trying to persuade an appeals court that disgruntled revlon creditors should return more than half $1 billion that the bank accidentally sent them last year. federal judges in manhattan heard arguments for both sides on whether it should reverse a lower court's decision that they
should keep the company. city group says the decision set stock was through the market. start a pellucid says production of its debut electric sedan is under a with delivers to begin at the end of next month heard the company will focus initially on a 100 69 thousand dollar limit to production dream addition of the air sedan was can run 520 miles on a single charge. >> we raised 4.4 billion with the spac merger. we had a healthy cash balance before the. and that sees us through into a healthy position right through to the end of 2022, the end of next year. clearly, we are going to have to raise more money because this is a capital-intensive business. juliette: walmart is expanding its hiring push, with plans to recruit 150,000 store employees in the u.s.. america's largest private sector
employer says most of the jobs will be permanent and full-time positions and, at a time when a tight labor market is a ready pushing companies to boost wages and benefits. that is your bloomberg business flash. prancing? francine: thank you so much. what is the next big risk that keeps the top names of wall street awake at night? cathie wood told bloomberg that while many investors are worried about inflation, she's more concerned about the opposite problem, deflation. cathie: jeff gundlach and howard marks and ray dalio, all of them i think have been very concerned about a deflationary bust. and we agree with them. in this respect. we think it's going to be balanced by a deflationary boom so that's where we differ. but where we agree is that there are companies who thought the
world would never change, and have been, again, catering to short-term shareholders who wanted that extra penny or two in earnings, and so got it by having the companies leverage up and take more debt and shrink the number of shares. and they've also been focused on dividends. they are probably saddled with products and services that will become obsolete because of the record-breaking amount of innovation taking place today. and in order to service their debts, they are going to have to cut prices, and move those goods and services that are on their way out anyway. so, i am concerned about the. -- about that. and i think there is going to be a lot of confusion around it as well.
so, that's why we keep our eye on the innovation ball, because that is going to balance these issues out to a great extent. but what it will also mean is that the traditional gdp numbers that we are going to be seeing are going to be very low. and growth will soon very scarce -- seem very scarce. i think it will proliferate over time and that some of the companies that we own, the stoxx lyons, they are not -- the stocks lyons, they are not in any -- we own, they are not in any index out there. we think there will be a lot more of those opportunities going for. francine: cathie wood speaking to sonali basak. it's amazing when you speak to all these titans, they just have different views of the world and it points the problems of the market.
tom: we had those comments trying to reassure the markets about the inflation and team transitory back in focus from lagarde and jay powell. futures pointing up in europe and the u.s.. cathie wood talking about deflation. the story of the last two decades is inflation has been stubbornly low in europe and the u.s. she is focused on technology and the ability of technology to keep prices lower. i sound like a broken record. china and the production of goods, very low value. does that change? that changing dynamic from china could change what we see in terms of inflation globally. francine: deflation, this was the buzzword in europe for the last 3, 4 years. there was a fear that we would become like japan. deflation, if you live through it, is not that bad as a consumer but an absolute nightmare for government to try to do the adequate policies. coming up, the u.k. is set to
♪ tom: welcome back to the open. we are a little under 15 minutes or from the trade in cash equities futures for europe. pointing up, as they are in the u.s. we have some lines crossing in terms of data out of france. producer prices for the month of august coming in at 1%. this is month on month. prior print was 1.3%. 1% is the number. year on year, you are looking at
producer prices up 10% versus 8.6% for the month of july. some producer prices running out the picture in terms of data out of france. switching focus to the u.k. the government here is ending two of its pandemic era safety net programs that pumped almost 80 billion pounds into the economy. over the next week, furloughs support for wages and a temporary increase in benefits, both of those are due to finish. together with a soft and -- they softened the blow of success of lockdowns. joining us now is lizzie burden. what happens now? what is the impact likely to be? >> we've had warnings for months that there could be a spike in unemployment when the furlough scheme ends. there is no sign of that in the latest jobs data and the bank of england does not expect on. the oldest workers on lower incomes will be pushed into early retirement.
you could see a rise in underemployment, people going back to their old jobs on fewer hours. some people think it is hopeful because you've got all these labor shortages. it could be difficult to transfer the newly unemployed into those vacancies if they don't have the right skills. there are some people who argue that furloughs should be extended but that looks unlikely, given that the u.k.'s budget deficit reached a peacetime high last year. the chancellor is a ready raising taxes to rein in public finances. what's more likely is a continued focus on skills. we are expecting giveaways, grants on the cost of living to the tune of 500 million pounds in the coming days. francine: we had a couple of other energy companies going under because of the high prices. they couldn't keep up. we have inflation expectations rising. we have money markets expected to increase, three increases from the bank of england for
2022. i mean, what is this economy going to become? >> the fate of the million or so left people left on furlough is really uncertain. that was clear from the bank of england's minutes on thursday. it's not just that finishing. it's also the temporary uplift in universal credit, 20 pounds a week. that benefited 6 million people. if you put those two things together, it piles pressure on household finances at a time where, as you say, inflation is rising, growth is slowing. and that means there's a real risk that the supply disruption that we have been seeing, of which the fuel shortages are only the latest symptom, could combined with lower household spending, weaker consumer confidence, and really put the recovery into reverse. at the same time, it is widening the gap between rich and poor. tom: bloomberg's lizzy burden
on the under furlough and why andrew bailey talked about the swarm of locusts potentially next on the list, the docket for the u.k. amid all those challenges. we are going to look at your stocks to watch, including swedish clothing retailer h&m. the company reporting a pretax profit in the third quarter that beat estimates. those stocks and more. this is bloomberg. -- though stocks and more are next. this is bloomberg. ♪
inflation, it's transitory. money markets believe inflation is here, certainly in the u.k., and they're expecting three interest-rate hikes from the boe in 2022. let's get to our stocks to watch. you are watching h&m? >> it looks like the pandemic impacts are using. it has reinstated its dividend, which always gets a thumb up from investors. h&m shares have struggled against rival inditex, which owns zara. this is because of its exposure to asia, where it had lockdowns and restrictions. it has this inventory backlog. it could give a boost to shares. it pre-released the q3 numbers. we could see a bit of a boost today. one thing to flag is the company mentioned higher shipping costs and supply chain disruptions. this is definitely something to watch for retailers going forward with everything going on. tom: that's h&m. boohoo in terms of retail
another one out there cutting its four-year guidance. >> this is an example where supply chain disruptions are really starting to bite, and those higher costs, or higher shipping costs, too. boohoo shares have really struggled this year. this is over lingering concerns over supply chains and labor practices there. despite the reopen exam people going out to parties, hitting the clubs and pubs, it seems the focus is going to be very much on these higher costs going forward. francine: -- got an offer. >> this is a really interesting one. a billionaire has made an offer for $3.2 billion for a satellite company. investors are going to be asking how this fits in with his portfolio with altis and
sotheby's. it is a value stock. it is cheap. it is perhaps attracting this kind of interest now. francine: thank you so much. our reporter with the stocks we need to watch at the open. tom and i will also be watching every thing that has to do with u.k. utilities, because three more u.k. energy companies actually were pushed out of business because of the skyhigh natural gas prices. it really possibly adds to pressure on the government to step in. tom: so far, the ideology of the conservative party government is to let the market play itself out. the pressure is there, given you have hundreds of household effected. there is a reluctance from other utility companies to onboard these new customers. there's an expectation that more supplies are going to go to the wall. francine: we spoke to a chief executive a couple days ago. he says we are happy to step in but we also want some kind of government support.
♪ francine: welcome back to the european market open. a minute to go until the start of cash equity trading. tom: here are your top stories. central bank chiefs tried to reassure the markets over inflation, even as a fuel prices surge and iron ore jumps more than 10% or french cpi this morning comes in at 2.1% heard the u.k. economy grows 5.5% in the second quarter, above a forecast. as the nation grapples with a volatile currency and a supply chain crisis, is it still a good for investors?
senate majority leader chuck schumer says a deal has been reached to avoid a u.s. government shutdown this friday. key risks for president biden's economic agenda remain. francine: let's take a look at the futures. a lot of focus is on the fact that the u.s. has averted a government shutdown so that's giving a nice lift to the markets. the central banks, four of them are reminding us, transitory inflation, tom, transitory. tom: the key line from jay powell, we don't know how high it's going to go and we don't know for how long. the definition of transitory remains in flux. u.k. gdp coming in above surveys. money markets pricing in three rate hikes in the u.k. by the boe in 2022. you are seeing gains on the ftse 100. it is a strong first few seconds for the cac, up 0.8%.
we had the cpi print and ppi as well coming in slightly below estimates. in terms of spain, you are looking at gains of 0.8%, 70 points on the ibex. let's have a look at what is happening across the sectors. the energy price is back in focus in terms of the record highs in the u.k. in terms of gas prices. we talked about the utility sector and more of those company's are going to the wall on the back of these high energy prices. utilities getting two points. banks, again, you are looking at the 10 year yield, 1.53. the beneficiaries of this, even as tech sells off in the u.s.. technology in europe getting come up 1%. upside for -- technology in europe gaining, up 1%. francine: european equities opening higher after a rebound
in u.s. tech stocks fizzled out to see the nasdaq closed to a third consecutive laws. investors contending with weak data out of china, skyrocketing energy costs around the globe. jay powell and others insisted that price increases would be transitory. >> this inflationary spike will not lead to a new regime of ongoing higher inflation. the current inflation spike is really a consequence of supply constraints meeting very strongly demand. >> we certainly have no reason to believe that these price increases that we are seeing now will not be largely transitory. >> excluding temporary factors, like this one, the underlying inflation is not so weak. >> the preferred tool will always be right. the effective rates in the transmission mechanism is much better understood. that's not to prejudge what we will decide in november francine: joining us now to talk
about inflation and the markets, florence barjou, chief investment officer at lyxor asset management. thank you very much for joining us. unclear what a catalyst for correction would be in the markets. is it the fed or some other central bank policy mistake or adjustment, surprise? or actually is it valuations? florence: i think you have equity markets have been confronted to kind of a wall of worries in recent weeks. you've mentioned some important factors. all of them could concur and are concurring to increasing uncertainty at the current stage. for me, the real story is really about inflation. it is interesting because we have been talking about inflation since the start of the year, but the picture has changed somewhat. at the start of the year, markets were oscillating between inflation and growth fears, meaning that inflation can be higher than expected because the economy was accelerating,
because we had significant stimulus coming from the fiscal side, from the monetary side. growth fears were more related to downside growth issues, to covid typically. what we are seeing today with all these stories, supply-side issues, energy prices, is that inflation is going to be higher than expected. temporary is going to be longer than expected. and above all, higher inflation could come hand-in-hand with lower-than-expected growth. this story is really different. it is a headache for central banks and it is a headache for markets. because obviously, higher inflation and weak growth, stagflation basically, should not be treated the same way as high inflation with strong growth. tom: i want to get your views on what cathie wood has been saying about deflationary pressures. you are talking about a
narrative change when it comes to inflation. you've outlined that very quickly. ark investments' cathie wood saying that her concern is deflation. take a listen. cathie: there are a lot of value traps populating traditional benchmarks today. and value traps are, they are going to be significant downside surprises because of all of the disruption and disintermediation we see taking place in the world today thanks to technologically enabled innovation. this is a combination of innovation call, but it's also a call on the corporate bond market, watch out. watch out. tom: i want to get your views on technology, the role that technology plays in potentially deflationary pressures. are we underestimating that as a potential catalyst? is this a longer-term story? florence: actually, i think it
is an old story that technology, progress is pushing prices down. this is what we have seen during the whole great deflation of the last 10 years. i mean, innovation, productivity gains, these tend to be deflationary. that's what we have been trying to exit with the central banks terminus. in my view, the story which is coming up today is much more that of price pressures, which are linked to supply chains. part of it is going to be temporary. we are also seeing what is happening in china, for instance. china's trying to rebalance towards cleaner energy. they have as a target to be carbon neutral by 2060, and that does imply a strong industrial change in the way you produce goods. we see this in other countries, too. potentially, there is here something which could drive prices higher and deflation for
me is not really on the cuff today. francine: what would you buy right now? is there something that looks undervalued or looks cheap? is there something that market has not quite focused on? florence: it's a good question because actually, a lot things look expensive. what we are doing in the portfolios today is much more not buying things, but cutting risks. the big trend in our portfolios today is protecting against a correlation shock. we know that episodes where rising rates and declining equities are obviously very difficult for those kind of portfolios. a good way to protect his first to reduce exposures. obviously, we are looking for what we call anti-assets. we are looking at the -- anti-[
indiscernible] assets. we are looking at the u.s. dollar if rates go up, the dollar should benefit. if there is a massive risk off, it's going to have a safe haven. we like the u.s. dollar. we also like chinese sovereign debt. the chinese state is very solid. the yuan has been very stable. we still get some positive returns on that asset class. these are the kinds of things we are looking at. tom: the u.s. dollar and chinese sovereign debt. florence barjou, cio at lyxor asset management, thank you. the u.k. government is ending two of its pandemic era safety nets. furlough support for wages and a temporary increase in benefits both are due to finish. together, they softened the blow of success of lockdowns. joining us now is lizzy burden. the two programs set to end.
what happens now? >> economists have been warning for months that we could see a spike in unemployment when the furlough scheme ends. there was no sign of that in the latest jobs data. the bank of england does not expect one. what is more likely is the older workers who were left on the furlough on lower incomes will be pushed into early retirement. you could see a rise in underemployment, with people going back to their old jobs but now on fewer hours. there has been some sign of hope in the labor shortages that the record vacancies that we have been sinking. if you look at this chart, it is hardly likely that the waitresses will overnight be able to go and be builders. there are some who argue that the furlough scheme should be extended. places like germany that already had similar schemes are going to keep on the schemes longer than the u.k. will. given that the u.k.'s budget deficit already reached a peace time high last year, given the
chancellor, rishi sunak, is already raining and public finances by raising taxes, it hardly seems likely that he's going to change his mind now. what's more likely is a focus on skills and some giveaways on the cost of living. bloomberg scoop last night, we are expecting grants on the cost of living to the tune of 500 million pounds. francine: 500 million pounds does not seem like that much. what are the risks to the u.k. economy. >> it's not just furlough ending but also this temporary uplift and universal credit. it was 20 pounds a week and benefited about 6 million people. together, ending those schemes is going to put pressure on household finances at a time when inflation is rising and growth is slowing. there is a real risk that you could see a combination of the supply disruptions, of which the fuel shortages are only the
latest symptom, combined with weaker household spending, weaker consumer confidence, and that could stick the economy into reverse and widen the gap between rich and poor. tom: bloomberg's lizzy burden on the end to furlough parents still with us is florence barjou , cio at lyxor asset management. how does that inform your views about u.k. equities? florence: actually, i tend to agree with a lot of what she has been saying. the issue in the u.k. and other countries is that consumers are confronted with rising prices. and with diminishing purchasing power. energy prices are just the latest example of that. what we are seeing is that the government is probably going to have to step in. in the u.k., the difference, and
it's difficult to understand, both of the u.k. central bank have tended to be much more hawkish than the ecb, for instance, or even the fed. assessing u.k. stocks in that kind of environment, i find it very difficult to position on the asset class. the way we see the u.k. today is it's very close to making a policy mistake. i don't think that support should be cut too soon and potentially this is going to weigh o u.k. stocksn. traders don't know in which direction they should position. francine: some even linking pound to actually and emerging-market currency. florence barjou there, chief investment officer at lyxor asset management. skyrocket guest prices push u.k. energy firms to breaking point. as three more suppliers
may be some relief at the margins because of than then we will talk about inflation on the four major central banks saying that inflation is still transitory. we look at some of these. i think one of them, the ftse, is only getting some 0.1%. let's take a look at what's on the move this monk. i am looking at h&m. this is an interesting company, a fashion company, swedish clothing retailer. it is huge. a lot of criticism on sustainability. many think they don't go far in. the company says prospects of growth will improve following a profitable quarter earlier this year because of the pandemic. tom: different picture for the online -- off-line retailer bo ohoo. more than 10% for -- share price is down more than 10% for boohoo. growth was materially below expectations for 28% growth.
9% versus the consensus of 28%. physical stores reopening. consumer uncertainty on the question marks and supply chain constraints as a. those delivery time frames being affected by the pandemic. the stock down more than 10%. francine: let's look at diageo. a lot of people during the pandemic did not drink less necessarily but drank more at home. they bought less bottles at bars because bars were closed. diageo saying operations in europe are recovering ahead of forecast. they see organic margin benefit operating margin benefit from a recovery. they are seeing a strong start to their fiscal year. diageo getting 2%. the u.k. energy crisis is deepening. three more suppliers were pushed out of business yesterday by skyhigh natural gas prices. more than 1.7 million customers have lost their energy providers since august. the latest failures are adding pressure on the government to step in. joining us now is bloomberg's energy reporter.
rachel, about 233,000 households dependent on those three energy companies. . what happens to them? rachel: yes. why all these energy companies -- while these energy companies are still the small ones, it is disruptive for their customers. the regulator advise people not to do anything, don't switch. they one night find a new supplier for those customers -- will not find a new supplier for those customers. there are a lot of customers that have been forced to switch suppliers. the balance sheets of companies that take on those new customers are being stretched mother costs they have to pay up front -- are being stretched by those costs that they have to pay up front. they say putting the money up front, that cost is stretching the. they are getting towards a breaking point where they don't want to take on any new customers. that's where the dialogue with the government's ongoing. tom: is there a tipping point
for the government where they are compelled to step in and support these businesses? rachel: there has been a lot of debate about this. at the moment, there is a measure called special administrator where the treasury and government step in and take on the role of the energy company. in that scenario, they would be the supplier to people. that's a way of almost a nationalizing companies. that would only happen if a big supplier fails or there is a millions of customers saying at the same time. they do have that tool. the business secretary has said he's prepared to use and and that's what is therefore. they are not at that point. more failures, you had town companies go under -- we've had 10 companies go under. this all adds to the pressure and takes his to the point where the government may need to step impaired tom: rachel mor
we are 22 minutes into the european trading day. the gains we saw at the start of the open are looking less convincing. still sing 0.7% gains across the stoxx 600. the u.k. is getting 0.5%. gdp coming out stronger-than-expected. in terms of investors and the boe pricing in three rate hikes in 2022. central bankers trying to reassure about inflation. let's switch focus to the data out of china, which this morning shows that factory activity contracted this month for the first time since the pandemic began. it is the latest sign that the growing power crunch is really starting to hit businesses. joining us now is our executive editor for greater china. what does a taper tell us about the outlook for china's economy? >> so, it's sort of starting to diverge. we have on one hand these heavy,
industrial companies that are really suffering from this power crunch. we have more than half the provinces starting to limit the amount of electricity that they supply to industrial users. that sector is really slowing. that sector being pointed to as being one of the main drags on the pmi in september. on the other hand, you have exporters. you have export growth in double digits, growing 20% per month. that sector is continuing to boom. it's sort of a divergent picture of two different pieces of the economy going in different directions. francine: what can you tell us about beijing telling the banks to help stabilize the housing market? john: so, one of the big worries for beijing is contagion from the evergrande saga. as evergrande is trying to raise as much money as it can, it is cutting the prices of its homes by significant amounts to offload them and turn that into cash.
the worry is that that's going to force other developers to cut their prices, and that's going to be an avalanche effect and you will see the broader market for homes take a tumble. the government is coming in and telling banks that they should continue to lend to property developers to make sure that they have the necessary capital to continue building homes that they have already sold. and also asking local governments to ensure that the property market stays stable. tom: central to the property market in china right now is the plight of evergrande. october 11, they've got more bond payments to. is that where we should be looking for the next point of tension for this company? john: there is a bond that is due this sunday. because it is sunday, the due date will be on monday. but that bond, the holders are arguing evergrande is on the hook to pay because it guaranteed the bond. we are watching out for that. that is the principle of the bond due on sunday so it's a bit
different from a coupon payment. further down the road, evergrande, as far as we understand, is yet to pay a coupon that was due september 23. there is a 30 day grace period on that. if evergrande has not paid, there's a chance of default there. francine: thank you so much. executive editor for greater china, john li we alsou. -- we also look at what's going on with coal plants as we get to cop26. there is always that worried that what we are given is not the real thing behind the façade. tom: the national bureau of statistics would argue that they are getting better at providing kind of accurate statistics. they tried to get a grip on what's happening with china. anna: h&m -- francine: h&m shares rise after
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-- iron ore surge. with the supply chain crisis, is it still a good investment? adil has been reached to avoid government shutdowns by friday. -- a deal has been reached to avoid government shutdown by friday. they do not know what to do with the inflation trend. tom: 5.5%, but is that is good as it gets? you are right to point out that utility companies, energy prices continue. we have been talking about -- with our guests about how that impacts household. sustainability for the consumer, they are key for the economic trajectory of certain countries. stoxx 600 is gaining.
gains in europe as well. in france, 40 points added to the board. gains up for that u.k. after that gdp print. markets are pricing in rate hikes here in the u.k. focus on sterling as well, currently up versus the u.s. dollar. there is suggestion that the sterling is acting with the current market. u.s. and nasdaq are closing three straight days lower. the yields continue to drive higher. the pace of increase is giving insurance that the yields are not spiking at an aggressive rate. in terms of the bottom, autos and parts is the only sector in the red at the moment. basic resources are being
flagged given that iron ore is out. -- up. francine: h&m reinstating their dividend. the swedish clothing retailer says profits have doubled in the three months through august. it is a different picture at boohoo. shares have been sinking. joining us, let's go to lisa hooker, consumer markets leader for pwc. the concern with retailers is that there is talk about the lockdown and pricing, it all boils down to whether you want to buy that product or not. who is doing well and who is not? lisa: we have to look back, lester was difficult. we saw 25% decline and we saw it around the world. people are now going out going back to work and not spending too much money on other things.
you are seeing quite a big bounce back by a lot of retailers. if you take boohoo, they grew last year. they have some harder comparisons. they are still doing well. i think it will continue as a ghost of christmas. tom: -- -- i think it will continue as it goes until christmas. tom: how do you think it will develop in the retail space? the furlough? lisa: we have labor shortages. if you talked to a lot of retailers and huss about tally -- in hospitality, given unemployment is still low, much lower than we expected a year ago, i think it is not going too bad.
i appreciate there are some headwinds coming in terms of inflation. there will be a little bit of an increase in unemployment. people want christmas to be extra special. i think there will be people looking to buy as we run up to christmas. francine: are we concerned, are you concerned about supply chains affecting some of the fashion retail? lisa: i think there will be some impact and supply chains. you are seeing people come out and saying that the stock is a lot less than last year. it is probably a better bounce back and we expected. i think there will be a level of stock in certain areas, when your sourcing from places like china. i think the retail sector has been so resilient to the pandemic, if they look to substitute products and by maybe
doing less promotional activities so they do not have the stock levels we have seen currently. tom: i want to ask about prices and the on margins. whether or not these companies are able to absorb that pressure. gold prices are up -- or whether they have to pass it onto the consumer. lisa: nbc inflation there is a slight -- when we see inflation, there is a slight lag effect. they're often driven by promotional activity. we soften inflation as price increases continue. i do think in the closing market we will see less promotional activity and more inflation pricing. francine: when are you expecting chinese tourists to come back to
the u.k. and how supportive will that be of u.k. luxury brands? lisa: i was talking to other luxury brands thinking they will be desperate for the chinese source back, a lot of them have said to me, what we have done well is engage with the chinese consumer in china and have a much better relationship as we engage on a regular basis when they come over for holiday maybe once a year. the impact has not been as great as you may have fit -- as you may think on the luxury sector. they're not as concerned. the consensus is it will take quite a while to get back to pre-pandemic levels. tom: thank you. lisa hooker, retail market leader for pwc giving some idea of the retail space. let's get the first word news. laura: the eu and u.s. are still
divided over tariffs on metals. the dispute going back to the trump era. eu officials told reporters on the sidelines of the u.s.-eu trade and technology council meeting in pittsburgh the issue was discussed but a resolution has not been found so far. trump imposed tariffs on imports of steel and aluminum in 2018. a former goldman sachs compliance analyst whose job was to help the bank prevent insider trading has been charged with insider trading by the u.s. securities and exchange commission. the sec claims jose luis casero sanchez used his position in the bank's warsaw office to access confidential information to carry out trades netting him at least $470,000 in illegal profits. a lawyer for casero sanchez could not be immediately located for comment. the international olympic committee says no international spectators will be allowed at beijing's 2022 winter games. it says tickets will be sold exclusively to spectators residing in china's mainland who meet virus requirements.
the ioc also says that athletes who are not fully vaccinated will have to quarantine for 21 days upon arrival in beijing. global news, 24 hours a day, on-air and at bloomberg quicktake, powered by more than 2,700 journalists and analysts in more than 120 countries. i am looking forward to watching the racing. francine: me too. a very good point. coming up, area banks are said to reopen for investors as the ecb bust bs dividends cap expires. -- ecb's dividends cap expires. that is next. this is bloomberg. ♪
tom: welcome back to the open. you are looking at gains across the european space. there and that u.k., gains -- here in the u.k., there are gains. we have the central bankers coming out around the question of inflation. jay powell is reassuring us that things will remain transitory, he does not know for how long or how high prices will get. they're looking at a similar message from christine lagarde and the boe.
we have the markets note pricing in free rate hikes coming 2022. we talked about the challenges. francine: inflation. a senate majority leader says lawmakers have reached an agreement to fully -- to avoid shutdown of the u.s. government. the debt issue still looms. what can you tell us about the deal that has been reached in the senate? >> it sounds like what is going to happen is that on monday, democrats try to bring forward a big deal that would fund the government through december 3. that was blocked twice by republicans because it included a debt increase. republican said they are not going to back the increase in -- even though they have been done on a bipartisan basis in the past.
this time around, they are not going to back it. as long as democrats pursue president biden's agenda. if they strip out the debt limit position and put forward a bill that would just fund the government through december 3, it looks like that will get bipartisan support in the senate. they sent it over to the house, and it may get to joe biden's desk later today. tom: quick movement there on the question of extending the ability for the u.s. to borrow money. what about biden's lo economic agenda? >> it kind of removes the simplest part of the equation, this is one of the lowest complex legislative tangles i have seen in my time covering congress. what is left on the table are the more complicated issues of raising the debt ceiling and advising -- advancing biden's
agenda. there is no clear path forward yet on how they will raise the limit. markets have maxed it out already. we know from janet yellen, the treasury secretary that october 18, the deadline is less than three weeks away. stay tuned to see how democrats will proceed to raise the debt ceiling. when it comes to the rest of the agenda, the hard infrastructure packet and the broader reconciliation package, when it comes to the infrastructure deal today is a big deal for that. whether that will come to a vote on the house, that is bringing to light a crash between progressives and moderates. there is no agreement yeah moving forward with the rest of it. this will be about to watch very closely. republicans have said that nancy
pelosi has to get the votes needed to pass it, she will have to get 218 votes before republicans vote for it. everyone in washington is watching closely to see if she does go with the vote or if she will cancel it. francine: thank you so much. kathleen hunter with the latest on d.c. politics. let's get to the bloomberg business flash. laura: citigroup is trying to persuade an appeals court that disgruntled revlon creditors should return more than half a billion dollars that the bank accidentally sent them last year. federal judges in manhattan heard arguments for both sides on whether it should reverse a lower court's decision that they can keep the money. citigroup says the decision sent shockwaves through the market. ev startup lucid says production of its debut electric sedan is underway, with deliveries to begin at the end of next month. the company will focus initially on a $169,000 limit to
production of the dream edition of the air sedan, which can run 520 miles on a single charge. >> we raised $4.4 billion with the spac merger. we had a healthy cash balance before that. and that sees us through into a healthy position right through to the end of 2022, the end of next year. clearly, we are going to have to raise more money because this is a capital-intensive business. laura: walmart is expanding its hiring push, with plans to recruit 150,000 store employees in the u.s. america's largest private sector employer says most of the jobs will be permanent and full-time positions and comes at a time when a tight labor market is already pushing companies to boost wages and benefits. that is the bloomberg business flash. tom: thank you. the ecb says europe are not
planting contribute -- significant buybacks when they expire. shareholders could be rewarded with as much as 22 billion euros of excess capital. that is according to a bloomberg forecast. we are joined by bloomberg's lucas. what will the impact before shareholders? >> there will not be a flurry of dividends announcements. what today is a freedom day for the backed dividends to understand it is best to go back to july when the bank of england did a very similar thing. that is when they lifted their guardrails for their large banks. and what followed, you had dividends make a comeback.
there were even buybacks on top. in the euro zone, most banks paid a dividend once a year. thighs frequently is that u.k. banks like deutsche bank will announce dividends. for them it will be the first since 2019. francine: widow should be read -- what else should we be watching out for? >> there are banks that have dividends. some will announce dividends in the coming weeks. they include tesla. the banks also pay multiple dividends a year and they are expected to beat the big deal theirs. that is one thing to look out for, especially as we move into earnings season. keep an eye are for commentary
on capital return policies, buybacks and dividends policies by these large banks. they are flush with cash. they have been holding back cash for dividends from 2019. cash has been accruing, they have so much of it they want to return it to shareholders. they will announce ways to do it. tom: thank you for joining us. january could beat the month when dividends start to get paid in significant order. coming up, the central bank attempts to diminish inflation concerns even as commodity prices raise further. we discuss with bloomberg's ven ram. this is bloomberg. ♪
francine: welcome back to the open. we are holding onto gains, a little bit of optimism with what is going on in the u.s. in terms of politics. we are looking at transitory inflation, if the market believes central banks that it will be so. let's take a look at the stories. european banks can reopen cash cap's to investors. the ecb lifts there cap is the economy bounces back. we are expecting the latest announcement on the eurozone unemployment rate. tom: inflation data on italy and
germany is due later. we will also have the latest u.s. jobless figures. that ties into the thinking about jobs. the fed's bond buying spree is leading to a wide gap between growth expectations and long dated real rates. this is the despite the u.s. being on track for fastest growth since 1984. as ven ram notes, the central bank is buying bonds at $1 million a minute. he joins us now. what is the significance of this and what does it tell us as we lead to taper? ven: the fed's balance sheet has fallen from the end of 2017 to 8.5 trillion. at the end of 2017, before it
began, the 10 year yield was 4%, now we are around 1%. how rich is that? if you imagine treasuries at the start, it is trading at about 67 times, you have to ask the question, why against the backdrop that is on track to grow at the fastest pace in decades? one of the key reasons in my opinion is that the fed's balance sheet -- they are not talking about reusing the balance sheet, that is on the agenda. we are going to get a taper, but a taper means a reduction in the pace of purchases. they are still adding to the balance sheet. we are not in a position to talk about a reduction of the balance sheet. that is what needs to happen for treasury yields to climb up. francine: what does that tell us
about prices in government bonds? ven: price discovery is stifled by the balance sheet. the fed is going to continue to purchase bonds, at a slower pace next year. -- through next year. when the fed announced it was ready to start tapering next month, the reaction was anemic in the markets. if this stifled price discovery means we are not going to get treasury yields lined up anywhere soon -- francine: thank you so much. ven ram there. tom: let's check back in on the
markets. we saw some gains over in france. here in that u.k., it as well. the euro-dollar is 1.16. central bank is trying to dissuade those concerns. there is disconnect between that rhetoric and the household. that is it for that european market. "bloomberg surveillance: early edition" is up next. stay with us. this is bloomberg. ♪
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>> there are a lot of value drop populating traditional benchmarks today. and the value traps will be significant downside surprises. >> think of people whose jobs have not been displaced by this big step that business has taken to digitalization, who have no financial assets to begin with so they had a -- so they then benefit from what has happened. >> we have had so many hacks, terrorist attacks, the colonial