tv Bloomberg Markets European Open Bloomberg October 12, 2021 2:00am-4:00am EDT
>> good morning. welcome to "bloomberg markets: european open." i am a anna edwards london. mark cudmore joins us here in london to take us through all of the market action this hour. the cash trading is less than one hour away. here are your top headlines. the global energy crisis sends oil surging. wti closes above $80 per barrel for the first time since 2014.
the power price crunch raises fears once again of elevated inflation. edition roxanne global futures ball as traders await u.s. cpi inflation data tomorrow. u.k. chancellor rishi sunak warrant over potential scarring of the u.k. economy. we are on the lookout for jobs data. that should be crossing the bloomberg any moment now. welcome to the european market open. 7:00 in london. i am anna edwards. mark is with me this morning. what are you watching this mine? mark: i'm getting really excited about front end rates. we are talking about when a rate hike might be priced in, whether it might be december, how much they might do. now that we have the cash market open in u.s. treasuries, they are catching up with the big futures move yesterday. a lot of them happened in our afternoon so we missed the real excitement. suddenly, the idea of rate hikes is a real concept to start trading properly again. anna: thinking about rate hikes,
let's get to some u.k. breaking data. unemployment get out from the u.k., pre-much as anticipated. we were expecting 4.5%. we have got the three months wages number. coming in in line with expectations is 6%. the estimate was for 6%. interesting to think about when the bank of england might hike because we have been talking a lot about the furlough scheme come about when that comes to an end, about when we will see a clean view of the unemployment market, the jobs market rather here in the u.k. will we see a material spike up in unemployment at the end of the furlough scheme or will we see none at all? there seems to be a whole host of view spirit on the wages front, we have huge distortions in the number because of the composition of the people in the labor market and because of the furlough scheme as well. your initial thoughts in response? it does not
necessarily add to our understanding. mark: we see the average weekly earnings at seven point 2% versus 7% expected. there is a slight marginal surprise there. i know the employment changes are a little bit lower but the idea is that this is an unemployment number which is edging down again and we are getting wages which are still incredibly strong. it backs up this idea that this is a labor market that is very tight. anna: bloomberg economics saying they think that the unemployment will peak. they don't see the rate heading higher from here so we will have to keep an eye on this one as we get more data. just under an hour away from the start of the cash equity trading session in europe. let's take a look at the futures picture appeared in terms of where we have been and are heading, the session was pretty mixed. the european sector was more mixed so perhaps we see a little bit of catch-up. european equity market futures looking pretty weak this morning. the concern was around inflation , concerns around growth, concerns around inflation and
growth and we are back to the stagflation conversation we had yesterday and that was the european futures picture. let me show you the u.s. futures picture which looks pretty negative right now, down by .5% on some of these u.s. markets. energy costs very much to the fore as we see the brent price went over $84 a barrel, 83.96, dropping back a touch. aluminum, coal prices, a whole host of commodities in the frame. let's think about the broader picture through asia and the gmm screen. what is that telling you this morning? mark: three themes. first of all, bond yields. getting very excited there. in almost every market, we are seeing yields shift higher but i think importantly, we are starting to see the front end moves happen. you can see two year yields up three basis points. that is since friday's close because the cash market was closed yesterday for columbus day. japanese two year yields up to basis points as well.
australian five year yields. that is the general theme. the bank of korea looks like a rate hike -- the rate hike might be coming there. the kospi is down and we are generally seeing that way on korean assets and then finally, the general risk aversion. we are seeing chinese stocks leading weakness, samsung leading the kospi lower. there is this focus on of course the chinese banks at the moment and we will talk more about that. anna:
asian session. the biggest debt managers for the first time in six years. that is as it seeks to root out corruption in its financial system. let's get more from juliette saly in singapore. has there been any market reaction to that and if not, what are the markets reacting to? >> whenever we hear a widening of the regulatory clampdown, there will be some nervousness but we have to put the latest news and context given it is already a down day and we are hearing guidance that these checks are kind of quite common but it will be a two-month check of the revelatory commissions. you have the index down by 1% but some of these banking players looking a little mixed. some of them moving to the upside. let's see what it means in terms of what we have heard from strategists. we have been talking at ig markets and essentially saying that if you are going to see more punitive measures potentially leading to things like fines, that is going to give a broader cloudy outlook to these markets that have already been hit so hard by a raft of clampdown from beijing. if you are looking for opportunity, cicc reckons there is buying to be had in hong kong banks because they are seeing this interest rate picture increase and you have also got the recovery of the economy in
hong kong, about a bit of buying. they are liking the bank, hong kong. the balance sheets are more sensitive to the rate changes and asset qualities. there's some kind of opportunity, too. anna: thanks very much, juliette in singapore. we are tracking the recovery of the aviation sector from the coronavirus, from the pandemic and what kind of recovery are we making versus 2019 levels is one of the questions. easyjet increasing their capacity plans up to 70% to 2019 levels, let's sharply improving their year in your headline loss in the quarter. there is still a loss but it is the kind of season and they are talking about sharply improving that number. not getting us to pay a dividend, will not be recommending payment of a dividend so that is one of the corporate's we will be focused on this morning. let's get back to the themes we were talking about this morning when it comes to the u.k. jobs
story. back to the two year yield story. is this all about commodities prices going higher? when we were looking at the gmm, we had the u.s. yields, indonesia, japan, australia. it does all seem to be at the short end so what is the dynamic? mark: this job market is looking properly tight around the world so it is about commodities but it is about price inflation finally feeding through to more sustainable inflation. there is another hammer blow to the idea of transitory and the fact that we seem to get this slight inflation spiral network. too soon to declare victory for those who say inflation is persistent but unfortunately, it will be a tough session in europe today. oil prices are higher today which is the initial driver and on this china story, even asian markets are not reacting to this crackdown into -- it's a regular think yet i found frequently, europe comes in and gets more panic about the china story. anna: a sentiment thing.
a lot of big companies in europe are doing very well largely due to trading in china and a lot of people are asking about where the next clampdown comes from. in terms of the inflation story, japanese ppi data out. you have given me some incredible stats. we all know that japanese inflation has been weak for a long time but i guess the ppi numbers -- some of your stats go back 40 years. mark: 6.3% year on year versus 5.8% expected. a massive beat in ppi, also higher since 2008 and there's only three months we have seen a higher year on your number and that was july, august, september 2008, not a great time to be buying financial assets as lehman was collapsing so that's showing the axe ordinary situation we are in for inflation around the world even as japan, the famous poster child for a deflationary kind of environment, it can never escape, is getting severe producer price inflation. we have a real problem. anna: 10 year breakevens in
japan at their highest since 2018, to hammer home that point, and we are working our way towards the inflation events of the week which is tomorrow in the united states. mark: even more so than normal. we said this. every inflation print is more important than the last but i think there is a lot of excitement about that. all that said, we are focused because of the backdrop on what is happening in the short-term. capturing the cpi print. we are extra focused on cpi because of what is happening in oil markets, in the inflation expectations, what we are seeing in the yields environment, but in fact, that will be next month cpi print that is more important than this one. anna: i have been thinking a lot about the were transitory and the word permanent because i feel like there is some sort of middle ground that we need to be reflecting here because we are caught in this debate and markets, the extent to which this will be transitory. just because it is not transitory does not mean it is permanent. we need some other language. mark: we have persistent is the
other one in there. when do you transition from transitory to persistent? it's a bit awkward, isn't it? anna: you can get up-to-date analysis. mliv is the function to use on your terminal. we will be back to the commodities story. a surge in energy and metals prices is offering investors a fresh reminder of how the market can imperil economic recovery. we get the latest for you plus the energy crisis will be in focus for european leaders as they gather for the e.u.-ukraine summit. ukraine plays such a pivotal role in the russian gas delivery system to europe. we will have all of those details. we dig into the u.k. jobs data and what it can mean for the bank of england. we will be joined by anna from ubs. she will be joining us for insights. if you have any questions for our guests, get in touch. ib+tv is the function to use on your bloomberg. this is bloomberg. ♪
anna: welcome back to the european market open. we still have 45 or so minutes to go until the start of the european trading session. perhaps some of the news lines out of china taking the edge off markets, reacting to wall street yesterday and the weakness we saw as well but european equity market features to the downside. let's focus back on the u.k. and they showed wages rising 7% year on year above an estimate of 7%. they reached a record high of 1.1 million in all of this comes as bank of england officials have big signaling and eminent rise in rates to curb inflation. let's think about when we get the rate rise from the boe. anna is with us. what caught your eyes from the sector data today? we have unemployment data but we are waiting for the data at the
end of the furlough scheme and wages data with heavy distortions so what has caught your eye this morning? guest: overall, a solid report. we did expect another strong wage growth number. we have to keep in mind that there are still some distortions in the data. however, the underlying trend is stripping out of the impact of furloughs. still, we think the wage growth remains quite solid but of course, as you mentioned, what we are particularly interested in is what actually -- the data that comes after the end of the furlough scheme and we still have to wait for some time before we get a clear indication on that front. mark: good morning. stagflation p or where do you stand? is it a valid threat or completely overhyped? caroline: in order to end up in --guest: in order to end up in the stagflation scenario, it implies the bottlenecks would also have to be, to some extent,
destroying the underlying demand. now, we do not think we are done. we still think there is solid pent-up demand supported by excess savings for households. once these temporary supply disruptions are resolved, we should see a quite solid recovery in domestic demand supported by private consumption and to a smaller degree, investment. anna: with all that said, does it sound like the bank of england is moving you towards an earlier tightening? tightening this year? in the last few trading days, the market has moved pretty quickly to increasingly price in a rate hike this year. do you think it can hike rates this year? guest: we still think hiking next year is more likely than this year. if we think about this year, we
have two meetings left, november and december. november seems to be too early because at the time of the meeting, the embassy still will not have a full data set covering the end of the furlough scheme and they emphasized that they are particularly careful in looking at that. when it comes to the december meeting, timing wise, you know, it works better. they will have all the necessary data. at the same time, we have to keep in mind that in december, we will have a new set of market ejections and we will not have a press conference at the meeting. unless we have, you know, by the time of the meeting, unless we have some upside surprises when it comes to inflation trends or inflation expectations, i think it is more likely to wait until next year before starting with the hiking cycle. mark: sorry, and i.
i thought we were going to the break. i was just going to ask, very quickly, if you think they way until next year, at what point do they start panicking that they are completely behind the curve on this issue? guest: there are two key indicators they are looking at. first is the health of the labor market. so far, you know, it has been holding up very well. secondly, inflation expectations. this is the aspect where they are getting more worried. we have seen a sharp rise in inflation expectations. more recently, we have seen a pickup in server-based inflation expectations. by the time i would get to november and december meeting, there will be two additional data points for the embassy to look at and i think if we see it -- nasty surprises on that front, that is what will make -- could potentially push them to an earlier height. anna: thank you very much for your now, we will stop talking.
, ubs european income -- anna titareva, ubs european economist. let's get a boomer first were his new -- first word news update. juliette saly. juliette: the imf board has decided to keep kristalina georgieva as managing director. the lender has been examining allegations of improper actions during her time working at the world bank. janet yellen says there was no basis for a change in imf leadership and she also won support from european nations including france and the u.k. a parliamentary inquiry has found the u.k. government made serious mistakes in its early handling of the covid pandemic. the sharply critical report says many lives would have been saved if a full lockdown had been imposed more quickly. it said the country adopted a fatalistic approach to covid early last year and failed to
learn from east asian countries that halted the spread using swift lockdown and mass testings. coal futures have surged to a record for a second day in china as another key mining region suffered flooding. two minds are reported to have been impacted by heavy rainfall. this comes after floods closed some 10% of coal mines in the country''s biggest coal producing region in recent days. global news, 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. anna. anna: juliette my thanks very much. juliette saly in singapore. we will get a further update later on. coming up, we hear from the annual meeting as central bankers faceup to rising price pressures. that is next. this is bloomberg. ♪
>> do we really think what we are seeing now is going to move the dial on the medium term inflation outlook? i don't think that's obvious. >> we see the wages and commodities and all the things like that. we are probably at an inflection point. >> they believe that those are in the may transitory. i think central banks will be able to get through them. without having to depart very significantly from the plans that they have. >> as central banks taper, rates go up. >> there is a lot of data out there. and movements in interest rates will have a big impact. >> we all depend on central
banks getting them right. anna: inflation concerns topping the agenda at the iif annual meeting as central banks faceup to rising price pressures. oysters from around the financial services industry there. let's get back to anna titareva, ubs european economist who is still with us. we are working our way to the inflation print for the u.s. tomorrow. your focus is clearly on europe. in terms of the transitory or not story, where do you find yourself sitting within that camp, if we can think about global inflation or perhaps u.s. inflation for the moment? guest: we are largely sitting in the camp of transitory inflation pressures. both in the u.s. and europe, we have seen inflationary pressures so far being focused in various components. in the u.s., it's a well-known story that we have seen a sharp spike in prices of used cars.
we can largely explain that by temporary impacts of supply bottlenecks and the reopening impact. i have seen similar pressures and of course more recently, we have seen quite strong push to energy prices as well. overall, we think that even though we are heading for high inflation print, we expect that to be largely transitory. mark: i'm always struck by the fact that the vast majority of economists are in this transitory camp. it's whether it impacts pressures for he was also talking about the medium term will not be affected but i guess the real world, they are not qualified as economists, not working with theoretical models. they just want to pay their bills next month. they want higher wage packages to change jobs, just hearing stories of constantly rising prices and i'm slightly worried that the feedback loop is being
missed by the economist industry as a whole. i'm worried about how you would defend about that --i guess that kind of assertion? guest: that is the biggest risk and that is essentially what central banks are worried about. there is a combination of all this, what we describe as transitory shocks, could have a more permanent effect, proceeding and higher inflation expectations and ultimately affecting wages, leading to a faster pickup in wage growth in sustained increase in inflation. now, the bank -- we can try and gauge the impact by looking at inflation expectations. the eurozone level. it's not the perfect gauge. essentially the best we have. anna: thank you very much. anna titareva, ubs european economist giving us her thoughts
on the inflation picture, how transitory, persistent, are the inflation impacts we see. one of the drivers for these inflation concerns is energy markets. european leaders gather in key have today for the e.u.-ukraine summit with a focus on the controversial nord stream 2 project. more coming up on that, next. this is bloomberg. ♪
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energy. mark, let's think about where we are on the tremendous e treasury story on the yield story because higher yields has been something we've been talk about for a long time as we've been tracking inflation concerns and yields. we focus too much on the tenure. you've got the yield for us. >> this two-year schwarb just magic at that time moment. this is last year. you can see two year-yields of gap higher on the trading. the cash market was closed on monday for columbus day. that is catchup of the futures move. the futures move did come in the u.s. afternoon which means u.s. european traders might be surprised about how far it's gone. what this signifies is that suddenly the concept of trading when the u.s. might -- hike rate is actually a real thing in markets again. it's been a seredical construct.
and now it's back in the market again bond holders are getting hurt at the moment. one of the best ways i find of showing this is looking at negative yielding debt so we've hat this uncreated credibly high pile of yielding net. and we have this move in commodities, all the talk about inflation spiral or stagflation. you look at negative yielding get debt. it's fallen to $1 pbts 8 trillion where commodities are going crazy. but in the last week, last week lost over $1 trillion negative yielding decline but another negative yielding debt went positive yesterday. i think this number has an awful lot lower we go. i do not see that this low are the lows of where we're going to go over the next year. i see the concept of a mass horde of negative yielding debt
that's one to watch. >> ok. certainly we'll keep an eye on then. mark, thank you very much we want to bring you breaking news coming out of china. i mentioned that xi was talking about renewable energy. xi said that they started 100 giga watts of renewable project vowing to develop renewable energy. as we head toward glasgow and what this means for heavy industry will be interesting to watch. let's get a bloomberg business flash. for that here's juliet. juliet: southwest airlines has apologizeed for canceling 3,000. a shortage of workers an an an air traffic control interruption. southwest hired about half of the 1,000 workers it wants to add before end of the the year.
singer, nta could be the world's large these year. hit a roadblock after the exchange suspended its application pending an update about earnings. bloomberg has been told about 50 other companies are faceing a delay to their i.p.o. application. a new california law will require big retailers to create gender neutral department first some toys by the start of 2024, larger retailers will have to maintain gender neutral sections for a reasonable amount of kids' items though clothing isn't including. the legislation is the first of its kind in the united states. and that is your bloomberg business flash, anna? anna: let's focus on today's big summit this big summit taking place in kiev. taking place in ukraine as ukraine tries to remain a key transit station for europe. it's throne a spotlight on russia's status as an oil and
gas exporter. for more on the politics, our correspondent joins us in berlin. maria, what's the stacey: these meetings between the e.u. and crew win a as energy prices jump, of course? >> well, you know, anna, there are two sides to them someone clearly political and it's very sim bottommic the european union wants to go to ukraine. your crane has a european perspective. ukraine has an ally in the e.u. almost a five-year proxy war with russia. the other side to this is very much about the energy. for the ukrainian it's very important to continue to book those fees from russian gas. this is not so much about crew win a securing its supply of russian gas. in fact, they're trying to cut down on that what they want to make sure is the money and the booking toffees that they ben it from you stays. this is a concern because we're waiting for that northern pipeline to go into effect.
for the jew cranians this is yesers very political and this is about send ago message to russia the ukraine does have its place in continental europe but also it's about securing the money fee from russia and the transit fee into western europe the ukrainians do feel that if that money perhaps becomes question that it it could further destabilize the country in favor of russia, of course. >> good morning, maria. the key issue is will we see russia steve:ly increase supply or whether they keep the pressure on europe and contain them by maybe make empty promises? >> well, you know, there are two sides to that story. the easy take the simple one is that vladimir putin wants to turn on the head when it comes to western countrys in the winter and it could be another very cold winter. the europeans they recognize that the energy cry says that we see is not fully russia's fault
but that do play with supply they argue that russia deaths have the capacity to increase that supply t. the issue is that europe is lagging behind and they don't want do it through ukraine because they believe it's obsolete. you see this as a catch the 22 for the european union. they want to have a working relationship with russia. they need a work relationship with russia. but at the same time they have to reassure ukraine that they stand with them and that transfer fee is not going to go away any time soon while keeping households bills in your low for the winter. >> maria, thank you very much. maria tadeo joining from us berlin. let's stick with the energy theme and goat our reporter alex with a different take. good to speak the you. they're interested in russian assets what kind of impact has this had on russian market this real focus on the higher
commodity space, higher commodity prices? >> hi, good morning. well, as you expect it, it's been a massive boost for the equity and market for russia. mole exprvetion at a record. the rts the highest since 2011. tapped ruble has been at the strongest levels since jewel of last year. j.p. morgan summed it up nicely if you're bullish, the ideal expression for that is to buy stocks higher earnings and dividends for energy stocks. they have canceled 60% of the russian deponce try index and that drives the ruble and the strong currency ripples through the other domestic names. some shelter from the kind of wiscoff sentiment. wells fargo, asset management
they've come out that they've been moving assets out of china and into russia. the bonds are a different picture here. that is the currency going stronger. >> obviously, that is boom time for russian assets. how long could this last? what are the potential risks here? are there any threat of sanctions at all? alex: we know that things can turn around very fast here and there are still lots of ricks out there, of course. for now, geo political tension first these, investors are generally shrugged off the crackdown on political rivals that is accompanied the company's recent parliamentary election. and the same goes for sanctions. the last round of u.s. penalties in april proved mutual milder than anticipated and therefore the cloud that is sort of hung over the bond and currency
market has finally lifted and investors could once again focus on russia's really good fundamentals to remind you that those 600 billion reserves and counting the petro dollars and the central bank chief is pushing hard to tame inflation. before relations with the west are abysmal and it wouldn't take much for the sanction throat return as we've seen repeatly since russia's annexation with cry mere yeah in 2014. it remains to be seen if the high energy crieses would act as a correspondent balance for a geo political threat should one emerge if you take a much longer view on oil as the world pushes on with the low carbon emissions, it leads lives it very vulnerable in the long long run. >> thanks very much. our report alex nicholson joining us from moscow. sticking with the energy theme.
♪ >> i personally think that bit coin is worthless. but i don't want to be a spokesman. er don't care. it makes no dan: me our clients are adults. they disagree that's what makes markets so if they want to have access to buy or sell bit coin, we can't custody it. but we can give them legitimate as clean as possible access -- anna: jamie dimno take on crypto from the annual i. s. meeting. he says it's worthless but he
says they're adults. some of them take a different view so they're happy to facile temperature >> my immediate take is to completely agree with him. i don't know if it's entirely worthless. it's got a floor value just before zero. >> i'm going to get inn into a lot of trouble. anna: that teas crypto story wrapped up. let's go to juliet. juliet. juliet: anna, the uk government made serious mistakes in the early handling of the covid pandemic. the sharply critical reports said many sleeves been saved before the lockdown had been imposed more quickly the country adapt add fatalistic approach to covid last year and failed to learn from east asian companies useing swift lockdowns and mass testing the i.m.f. has decided to keep belinda georgiev.
she she -- janet yellen said foltz basis for i.m.f. leadership. she won support from nance uk. social democrats met with ally first more than 10 hours. they urged debt relief. while the business-friend friendly free democrats reaffirmed the father's deadline of no increase and sticking to debt limits. four more hours of talks are planned for today as they continue their plan to success angela merkel. global news 24 hours a day power bid more than 2700 journalists and analysts in more than 120 countries. >> stoking inflation fierce for markets. short ands of natural gas and coal have boosted demand for alternative power generation
with w.t.i. holding about $80 a barrel that could just be the start. daniel juergen says $90 ahead. >> i think it certainly gould to $90. it's what -- what's happened in addition to everything else that's happening, people around the world particularly in europe and in china are switching from some natural gas to switching to oil so suddenly you've had this yup ward pressure in oil demand that wasn't a month ago. >> let's bring in martin ritchie who is in shanghai and can bring us up to date. we've watching another day of higher oil price we went above $84. just below it now. but we've touched those levels. mark, what is driving the most recent gains in oil? is it as suggested there in that -- in that clear a pi vat way to driving oil prices higher? >> jackson i think it would be
hard to describe the better -- market. but there's a global sort of bidding war for energy sources. there's been a shortage of gas action shortage of coal especially here in china where i am. and that's because people are going to oil derivative and diesel instead. and you have the prospect of the wenter in the northern hemisphere pumping up demand even more just when, you, no stockpiles were running low so the next -- the next steps we have to look at are things like whether higher prices encourages opec. the oil alliance to start ramping up supply faster than it has maybe anticipated. might even see some pressure from the white house on that front. we could also look at supply factors in the u.s. where some of the smaller refine reries may start ramping you.
bubu one thing to look at is demand destruction. gas pumpers are feeling it hard particularly in europe. we've seen more and more signs of stretch and if factories start throwing drone, that makes the demand for powerless. >> martin, cole mines are reopening after the terrible bloods in a province in china is that going bowe make a difference in shortage? is that a relief? >> yeah, so it was obviously a big spike in coal price and the back of nears the snead flooding was going cause even worst supply shortages. but that seems bout of the way. but doesn't mean the broader picture of a few shortage in china is going to get any better, any time soon. i think that was confirmed in comments last night from premier
league c cochang that emphasized the need for more supply of cole. everybody underscored the need for china to pursue economic priorities above say, it's short term climate plan. you can see how it's causing the potential banks to rethink, you know, what is their take on the economy? >> nothing. thanks very much. see a lot of records of demand section. we'll see if that becomes something of a growing theme. coming up on the program, we're looking at stocks to watch inlue cluing airbus which sold just one plane in september. i managed to deliver a few more. we'll talk about that stock and other stocks that we are focused on this morning. "this is "bloomberg."
♪ >> welcome back to the european market open. eight or so minutes until start of the cash equities trading. futures down by 1.1% this hours hour. let's think about where we are heading to today's session. thinking about things that are paris listed then some. bet -- let's get to airbus where does this leave the overall narrative around airbus? >> i think you're right, ana, the bloomberg story focused on the up with plane that fell in september. nah that doesn't look good. they will focus more on the outlooks and whether they will be able to make up those delivery numbers and increase that over the next three months in order to get their four-year guidance. likely to get a neutral reaction to this. >> we do, indeed.
big danish logicses company. as expected they're beating guidance ahead of estimates. that's to be expected in that industry at the moment. freight rates are extremely strong but we've heard from analysts this is better than expected. wouldn't expect fireworks but likely to be a positive reaction. >> what about easy jeds? we had detail about the capacity they found to operate looking at some of the lines from the c.e.o. who said we'll look to contain airports wham's the take away? >> the takeaway is that everything is moving in the right direction we're now entering into the winter season suddenly throughout the autumn season when bookings aren't so strong. the reaction has meant that they are capacity has increased. we exact good reaction from this possibly over into some other budget airlines as well but still the longer term outlook to
where they're going to go back to their prepandemic level still remains to be scene. >> we're taking you through some of the stocks. the european equity picture deteriorating. it looks quite negative but you yo stocks 50 feature this is morning. >> people are suddenly realizing this inflation problem is more than what we thought. this is this creeled's move. bondholders are getting hurry baye badly. they're losing money and because supreme to risk their portfolios, that means they're nervous. i'm not going to increase that when i'm taking a lot of losses. we're seeing higher yelled dach moment mohamed tracy: aren't coming off to much. >> it's all about the energy crisis. talking to our colleague in russia was a nice reminder that some people win out those
energies. it's not another lose, lose for everybody. so one of the theme that is we've been talk about recently or reading about is the emerges markets getting involved in russian assets instead if you're thinking another way to play the energy thyme theme, i guess 5100 does quite nicely. big energy big soil doing well. >> you see the ruble, the noki the colombian peso do whelm and we're seeing the yen suffering. as you mentioned we've had this whole theme of doing really, really well. i think there might be streaks leg the idea of that tech suffers now. we are seeing the curve slightly fatenned as the front end rise because people are going, hey, this is going to be a tough environment. >> a bit of a shift in going to. but it all ends to energy. seeing a red headline
the effort u. opens books on the daily sale of euro green bonds. this is interesting as we heard from the chinese earlier about their renowable energy plans. [enter] clearly this is going to be something of a sea. thank you for spending the hour. sal mckenzie takes us through the market open. this is bloomberg.
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anna: welcome back to the european market open. i'm anna edwards live in london with tom mackenzie. tom: the cash trade is just less than an hour away. here are your headlines. the global energy crisis sends oil surging. above $80 per barrel for the first time since 2014. the power price crunch raises fears of elevated inflation.
asia stocks and global futures fall as traders await u.s. cpi. an indication of the strength in the labor market that may push the bank of england to hike rates. anna: another day of focus on energy markets, from watching oil prices had higher. we are also focused on coal prices, aluminum, all kinds of components of that energy mix. gas prices have been front and center over recent weeks. as that continues to be a theme, inflation fears continue to be flipped to the forefront. how do we open up on these european markets? tom: currently opening down on the ftse 100 despite the more positive jobs data we had. we know that the bank of england's andrew bailey has said that the wages and employment components and some of the data are central to his and his team's decision-making at the
mpc as to the rate hike process. the money markets or processing -- are pricing in a rate hike by the end of this year. in terms of spain, you are seeing selling there. the cac 40, mccrone is in focus macro -- macron reason focus. basic resources that were stronger yesterday and held the stoxx 600 into positive territory toward the close yesterday in europe because of those stronger energy materials prices, energy currently down more than 1.2%. utilities, as well under pressure. banks down 1.5%. we have this debate, as well. banks that you want to be owning, not the technology shares. morgan stanley warning of the
divergence between the optimism and markets and the consumer sentiment that is edging off. goldman sachs and jp morgan saying, by the dip -- saying, buy the dip. anna: not one sector in positive territory as we move to the downside. european equity markets opening firmly in the red. global markets struggled to shake off worries that inflation will sap company profits and economic expansion. if this earnings season is clouded by downward guidance revisions, it could catch up with stockmarket market investors. souring consumer sentiment could translate into less spending and more saving. joining us now is our guest with us this morning to take us through these markets. really nice to speak to you. we see european equity markets to the downside. ongoing concerns around inflation and the like. you still like european
equities. you like equities generally, but european equities in particular. tell us your investment case at this point. >> good morning and thank you for having me on the show. indeed, we are still recommending. we have a preference for european equities and the more cyclical stocks and the value stocks, banks and energy. because we think that the inflation we are experiencing right now in the economy is transitory, we think that corporate earnings will be good going forward thanks to the strong economic recovery we are experiencing in europe is well-positioned to benefit from that. tom: you talk about the positive corporate earnings. is that a look at q3? q4 obviously is where a lot of the margin is going to come through. >> that is absolutely our view,
tom. it is clear that during q3 there will be probably not so good corporate earnings when compared to q2 because q3 has been disrupted by the delta variant and some disruption in the supply chain. we are not expecting a huge increase in earnings in q3, but we are quite optimistic for q4 and q1 of 2022, as we are mentioning. anna: let me ask you about energy markets. we have this ongoing focus on inflation and part of that is being driven by energy. i see the oil price just moving to the downside a little bit. we bent above $84 a barrel. where is your focus when it comes to oil markets? is that around higher and higher oil prices? or do you think demand destruction starts to come in here and that naturally puts a lid on these oil prices or the wider energy markets?
>> well, as far as oil is concerned, we are quite relaxed going forward because we know that there is a lot of spare capacity within opec and outside opec and this is not our belief [indiscernible] our expectation is probably between now and the year-end, the price of oil will stay around $80, but going into 2022, maybe by mid-2022, it will be around $70 a barrel and then maybe $60 a barrel at the end of 2022. there is an element of demand that will also reduce and the inventory will be revealed -- rebuilt and the mid-time. that is why we are not worried about the price of oil going forward and that underpins our inflation scenario. tom: that forecast of $60 to $70 a barrel by the end of 2022.
trading day. red across the screen. energy price concerns are dialed backup. let's take a look at what is on the move this morning. anna: we have anglo american to the downside. just an example of one of the stocks in the basic resources sector moving lower. the sector as a whole is the worst performing across europe. that tells you something about how far we have already, and of higher energy prices. a lot of people factoring in those higher energy prices, higher raw material prices. today, it looks a little bit different. slightly weaker oil prices and some equity market investors deciding now is the time to take some profits on that mining sector. anglo american down by two .3%. tom: airbus, supply chain constraints saw the company delivering just one aircraft in september. currently, the stock down 1.3%. citi saying they think they will
still be able to hit their full-year target. anna: there is a lot of focus on disruptions and supply chain, but people who might make money at a time when people don't mind paying up, logistics company esv is a danish logistics company. delivering good news on forwarding fundamentals. underpinning that particular sector, looking not too bad. the stock is up 1.3%. tom: from the corporate level to the macro, central bankers facing up to rising price pressures as the iif started its annual membership meeting on monday. speakers included the ecb chief economist and jp morgan ceo jamie dimon. >> do we really think what we are seeing now is going to move the dial on the medium term inflation outlook? in fact, i don't think that is
that obvious. >> i think there is a transient component and a permanent component. wages and commodities and things like that. we are probably at an inflection point. >> i think that central banks will be able to get through them without having to depart very significantly from the plans that they have. >> rates will go up. it is not terrible. inflation is not out of control. >> there is a lot of debt out there and movements in interest rates will have a big impact. >> we all depend on them getting them right. tom: ok, still with us is our guest. what gives you conviction that inflation will indeed remain transitory and what is the window you are looking at? >> the reason why we think the
inflation will be transitory [indiscernible] clearly, there has been impact to the economy and now it is picking up quickly and there are although supply chain disruptions that are happening. the way going forward we think the demand will move away from goods toward services as the economy recovers and hence inflation will be less. in the inflation numbers you see today, there is a strong element of base effects. the price of oil was at $30 a year ago, it is now at $80. the contribution to the inflation is quite important. you would have to forecast a price of dollars -- oil at $180 to have the same base case next year, so i would say there would have to be a reduction in the inflation rate going forward.
the inflation number tomorrow in the u.s. clearly in the first quarter of 2020, we think the situation should improve quite a lot in of the inflation front. anna: the first quarter of next year, then. you seem to be leaning toward some of the reopening trades, if you think money goes from goods to services. you look for those reopening trades. many people thought that last summer and we have come a long way since then and we are still focused on these reopening trades. on people feeling more and more comfortable to go out and spend money on services, essentially. >> that is absolutely correct. the difference we had during the summer that many people are not expecting was the delta variant and now with the vaccination campaign being much more ahead, we are less worried. of course, if there was a new variant coming from it could
change our outlook, but that is why we are in favor of the reopening trades. tom: i know you have a positive view longer-term on china, it seems. you are illustrating your view. you see a rebound in the fourth quarter for the chinese economy. what underpins your view that china's economy will rebound in the fourth quarter? >> well, first, there have been a lot of specific events. we have had floods in china. you have had the delta variant. and we have had some regulatory measures that have been somehow slowing things a little bit and china. we think most of those issues are behind us now in china and the chinese authority has a lot of leeway on the monetary and the fiscal front, i would say to help the economy. we are expecting a rrr rate cut coming in the coming weeks.
all these elements are positive. in terms of growth for china, we are expecting something around 8.7% for this year and a deceleration in 2022, but still at a reasonably elevated level of 5.3%, which is coming close to the long-term potential for the chinese economy. anna: let me ask you about the luxury sector in europe. this is linked to the chinese conversation because we have seen luxury names in europe under pressure as a result of that common prosperity drive in china. just now, i see that some of our colleagues are pointing toward the earnings premium in luxury having fallen away because of those concerns and maybe they look cheaper than they were. what do you think about european luxury at this point? >> european luxury is not our favorite sector at this stage. we have a strong preference for cyclical stocks or stocks that
are going to benefit from the reopening. those luxury goods, as you rightly point out, are under scrutiny in china because the current policy is more for wealth prosperity for the overall population and not too certain fringes of the population that could buy those luxury products. we are not very positive on luxury going forward. tom: ok, what about your views on the u.k.? equities performing pretty well over the last few months. do you expect that to be sustained? >> you are absolutely right, tom. the main reason why the u.k. has performed well is the sector positions. they have a lot of exposure to banks and energy, the sectors that have been doing well. we think they will receive -- [indiscernible]
it is not going to change. there might be a question at some stage, should we switch back toward continental europe? it will depend on the situation in the u.k. the u.k. has been managing quite well with its vaccination campaign and it is coming out of the covid crisis quite well. however, there is the brexit situation on top of that, which creates some supply chain issues and some labor issues. i'm not really convinced that the right policy would be to be a lot of tightening on the fiscal front and the monetary front. i don't think you solve the issues on the supply side by hiking rates or by being more orthodox in your fiscal policy, so we need to monitor what is going to happen. currently, there are three hikes that are expected in the u.k. market and we think it is a
little bit overdone, so we are monitoring the situation. anna: thanks very much. thanks very much for joining us. let's get a bloomberg business flash. here is laura wright. >> southwest airlines has apologized for canceling more than 3000 flights over just four days. the carrier says a shortage of workers overlapped with storms and an air traffic control interruption. southwest says it has hired about half of the 5000 workers it wants to add before the end of the year. jamie dimon is forecasting higher regulation for cryptocurrency. he told the institute of international finance that anxiety around stable coins and the asset class more generally is growing in washington. >> i personally think that bitcoin is worthless. i don't care. it makes no difference to me. our clients are adults. they disagree. if they want to have access to
buy or sell bitcoin, we can give them legitimate as possible access. >> a new california law will require big retailers to create gender-neutral departments for some toys and childcare items by the start of 2024. larger retailers will have to maintain gender-neutral sections for a reasonable amount of children's items. clothing is not included. the legislation is the first of its kind in the u.s. that is the bloomberg business flash. tom: thank you very much indeed. coming up, u.k. payrolls rise above pre-covid levels, an indication of the strength of the labor market that may push the bank of england to hike rates. more details on that. this is bloomberg. ♪
spreads going higher, the stock market and the economy slowing down sharply, i don't think they will be able to be tough on inflation. they will wimp out and dodge it and postpone any tapering or raising rates. anna: that was earlier on the oil price and the fed's tapering plan. welcome back to the european market open. let's check where we are across the european space right now. the cac 40 down by just over 1%. airbus in focus weighing on that market. here in london, we have some weakness, as well. basic resources losing the most. all sectors and negative territory in europe today. tom: indeed. in the u.k., better job numbers. british companies pushing workers in payroll above pre-pandemic levels. joining us for the details is
our u.k. reporter. what do the employment numbers tell us about the broader picture for jobs in the u.k.? >> strong labor market numbers in the u.k. today. payrolls climbing by a record 207,000. underlying wage growth rising to between 4.1% and 5.6% in august. that inflationary pressure will embolden the bank of england to raise rates in december as markets are pricing. the bank of england already expected inflation to tip in the fourth quarter, twice the banks target. the risk of raising rates in december is that it would choke off the recovery, but if there was a rise in unemployment post furlough, but the numbers today don't suggest that. unemployment ticks down. you could ask what will happen to the million or so workers who were the last left on furlough when the scheme ended last
month? strong hiring numbers suggest that many of them will be absorbed into jobs. we won't get the october unemployment trend until december 14, so right before the bank of england's december decision, but all this data will build the case for a december rate hike and that final print likely will rubberstamp the argument. anna: really interesting to see how that goes. as that starts to filter through into the data. the bank of england doesn't expect that we will see that pickup in the unemployment rate and that is why we are seeing this talk of a higher interest rate. let's nod to a couple of stories coming out of china. they maybe took the edge off the risk sentiment. they could do that in europe. the chinese starting in expects -- an inspection of regulators and state banks. to try to root out corruption. we had a number of news lines
out of china. tom: that one is important. the arm of the government that is pursuing this is very powerful. it is going to be looking at state owned banks and financial businesses within china. the other line we are hearing from president xi, flushing out a little bit their plans around carbon neutral by 2030. that is the overall aim. he said they will also illustrate unpublished plans to various different industries and sectors of how they are going to meet those goals. that has been something people have been waiting for. we don't have the details yet. the other announcement from president xi is that they will have a 100 gigawatts renewable energy buildout in the desert. fairly major in terms of wind and solar. anna: looking for more details from countries all over the world on their national plans and what they are going to commit to. that is something we are keenly waiting for and watching for. coming up, european leaders gather in kiev for the eu, u.k.
u.k. payrolls rise above precovid levels. it may push the bank of england to highest rates. our focus is on higher energy prices globally and the inflation narrative. when you look at the sectors, the worst performing in europe today or near the bottom, it seems we're moving on a slightly different trajectory. >> having been the best performing sector yesterday. on the back of those higher input price and higher materials and commodity prices. today it is a slightly kept story. possibly some profit saving when it comes to basic resources. stoxx 600 down .8%. germany losses of similar territory. the cac is also lower close to 1%. details from president macron
about his investment plans. as the application in france becomes more central to what is going thereon. the ftse down. additional jobs and the unemployment number moving lower here if the u.k. that case of the b.o.e.'s rate hike seems to be being supported by that data. let's teak a look at what's happening and an foaling across the sectors utilities down. basic resources as we are discussing down 1.4% followed by technology and banks as well. the investor saying banks is what you want to own. forget about technology. morgan stanley warning about the divergence between the markets. expect to see a correction of 5% or more. we'll take a look at what else
is coming up as well in terms of european pleks. anna: the european application story where that rubs up against the energy crisis. there is a summit taking place in kiev. taking place the the ukraine. it is throwing the spot looking on russia's status as an oil and gas exporter. let's speak with our correspondent who joins us from berlin. what is the significance of this meeting between the e.u. and ukraine as energy prices jump? >> yes. in fact we're actually waiting to hear from the head of the european council and the president on this press conference. we're expecting pretty much and this trip of course it has two big themes going into it. one is the political nature that it carries. the european union wants to send a clear message that ukraine is
not isolated in the state of potential russian aggression. they have been very clear they feel for the integrity of their country. that is a proxy war that has been lasting for five years. it feedes into the geoapplication. the ukraine, going into the winters, this is about securing the money that comes from the booking of transit deeds. the pipe line in the ukraine could be the biggest loser. that stand to lose 1 billion euros if contracts are not honored. it is sending a clear message, the ukraine will continue to have a source of income there and therefore not be destabilized from an economics perspective. russia could be doing more than it is at the moment. >> we have any clarity on that question?
will russia increase supply or is it going to keep the pressure on europe? >> the easy narrative on this would be to say ultimately this is a political game from the russians. they want to turn on the heat going into the weren't. they want to have europe -- very expensive for that gap. there are two things you should factor. putin has hinted that he is very much willing to step into this market and intervene in the market and that means the nordstream could be accelerated and to some extent the russians do not have an interest pushing europe to the heart of this gate. i had one diplomat telling me at this point russia and the economic circle of vladimir putin are very much with their -- if anything the russians have an interest to cooperate and hope sanctions can be lifted. >> ok.
maria in berlin with the latest on that story. we'll keep across all things energy and get out to our report to alex nicholson in moscow. how that is energy crisis impacted russia's energy markets? >> it has given a real mix, the russian equity and currency market share. the ruble denominated -- you have the record. the ruble is strongest since july last year. in terms of the recommendations out there, j.p. morgan analysts summed it up nicely the other day higher earnings. dividends for energy stocks account for a whopping 60% of the index which j.p. morgan is
focusing on which helps the ruble. also adding to the gains is another quite important trend. russia is seeing inflows as investors shelterer from the debt crisis in china. wells fargo asset management say they have been moving investments out of china into russia. bonds are an exception. russia central bank is on one of the most aggressive tightening paths. their yields are the highest since march 2020. stocks and the ruble still going strong. anna: we have seen interest in russian assets as a result of these higher energy prices. the difficult question i suppose, how long does this all last? it depends on how long gas prices remain elevated. >> that's right. in terms of markets things can turn around very fast here and there are still plenty of risks
outs there. for now, though, the geopolitical tensions have eased and investments have shrugged off. we have a crackdown around the parliamentary elections. the same for sanctions. milder than anticipated. the fog that was hang overall the currency market for months, investors -- great fundamentals, they think so like billions. a low debt burden. central banks pushing hard to contain inflation. it would not take much for the sanctions threat to come back. it really remains to be seen if the high energy crisis we have now is a counterweight should there be a new geopolitical
threat. of course if you take a much longer view on oil as the world pushes onto its transition to a low considering aon it leaves us extremely vulnerable in the long run. anna: thanks very much. let's get our bloomberg business flash. here is laura. >> easyjet -- around 20% of 2019 levels this quarter to have easing of travel restrictions in the u.k. leads to a surge in bookings. it generated positive cash flow in the peak summer months of july to september. they flew at 58% of prepandemic levels during the summer months. another key mining region suffered flooding in china. two mines are reported to have been impacted by heavy rainfall.
bloomberg understands they will get an update on plans in shanghai i.p.o. this week. it could be the world's largest this year hit a roadblock. pending an update about its rnings. -- earnings. >> we're here in london. thank you very much indeed. president macron will be envailg he is 30 million euro investment plan. this is bloomberg.
>> the fossil fuels that are down in the ground. one of the main ones is actually methane. what we refer to as natural gas is essentially a combination of gases that come up from the ground that are mostly methane with a few other gases thrown in there. it is a super powerful greenhouse gas. it has about 80 times the global warming potential of carbon
dioxide over a 20-year period. scientists think about a quarter of all of the human caused warming we have experienced is because of methane emissions by humans. we do a lots of different things to put methane in the atmosphere. raising live stock is a big contributor. growing rice is another one. landfills. sewage. all different kinds of things. then of course oil and gas. >> that was an explanation why methane is so bad for the environment. they investigated hundreds of thousands of decrepe id oil and gas leaking methane. let's get the bloomberg first word news now with laura. >> the u.k. government made serious mistakes in its early handling of the pandemic.
the sharply critical report said many lives would have been saved if a full lockdown had been imposed more quickly. instead the country developed a fatalistic approach and failed to learn from asian countries. germany's social democrats met coalition allice yesterday. the business friendly democrat reaffirmed the party's red lines, no tax increases and sticking to debt limits. four more hours are planned for today. the i.m.f. decided to keep the managing director reaffirming full confidence in her leadership. she had been examining allegations of improper actions during her time working with the world bank. janet yellen said there was no basis for a change in i.m.f.
leadership and wants support from -- won support from european nations. another key mining region in china suffered flooding. two mines are reported to have been impacted by heavy rainfall coming after flood hit 10% of coal mines. global news 24 hours a day. bloomberg quick take powered by more than 2700 journalists and analysts. this is bloomberg. tom. anna? anna: just want to bring you a headline across the bloomberg. the e.u. gets a bid for its debut green bonds. they have not been raising money that much on their own name in european debt markets if it has arrived with great force it would seem. here we have them coming through with this debut green bond.
we will hear a lot more about green bonds. in less than 20 minutes in france, president macron is set to unveil his investment plan. he is expected to set out how 30 billion euros is to be spent over the next decade. caroline joins us from paris to tell us more about this. good morning. what can we expect in this new french stimulus plan? >> clearly what macron is trying to do is show he is thinking long-term investments, strategic investments in france in order to make france more independent from technology from china and the u.s. also thinking about beyond the pandemic, emergency responses, beyond the 100 billion euro recovery plan he had presented last year. this time we expect around 30 billion euros to be spent on pat
batteries, hydrogen, small technique reactors which could be a pistons in times of energy crisis. all of these key strategic sectors that he says will be to keep france independent over the next decade. critics have said though that these 30 billion euros will be -- in the last french budget presented just a couple of weeks ago and this will add pressure on prench public finances at a time when french debt has already been skyrocketing. tom: how important are the application in this? how should we be thinking about the spending plans in the context of these french presidential elections? >> we're six months away from the french presidential elections. last time in 2017 macron struggled to win some votes in former industrial heartlands in the north of france where the
far right wing is very present. at the time that meant le pen. we are seeing a new phenomenon. present in the media, has written a new book saying france hasn't -- where he mentions that france could become an islamic rep if nothing is done. so very anti-immigration. anti-gay. also feminist ideology. you can see over the past few weeks there is a push, one poll showed him at 17% which -- decline of he peeps intentions that have gone below 20%. six months before the next presidential elections. a lot could still happen.
anna: welcome back to the european market open. 52 minutees into our trading session. bouncing off earlier session lows. just about to say getting a bit of respite from risk assets. the oil prices going up again. your focus is on bond markets and fx i spent the last hour talking about mark who was excited about two-year yields in the united states. tell us about the short-term. what's happening? >> we have seen the front end and the back end of the treasury market coming off the lows of the summer. i think there is space for -- in a measured fashion. markets are getting prepared for the fed's taper announcement that is about to come in november. now a big clue to how the market is positioned comes from the reaction to the payroll report
that we got friday. by the end of the day, yields have rebounded from six basis points from the low. that tells you they are going in after weak data if treasuries react like that it suggests theset of the markets are yields. tom: talk to us about the divergence of central banks. thing you see as a sea change now. >> we have central banks for instance the bank of new zealand considering negative interest rates actively and then suddenly they got inflation, strong inflation data and strong economic numbers and then they abruptly stopped the -- asset purchase program and then they -- the nordes bank did a
similar thing. they got a rate hike last month. now we are hearing increasing hawkishness from the b.o. in effect the past week. we should be able to roll out the -- rule out q.e., on short notice if, we can do that, we can wind down the programs on short notice. that is -- a two-way risk into the market. anna: just a quick word on green bonds. it is very much the -- that we see today, the e.u. has a record 120 billion euros for its debut green bond. they only wanted to raise 12 billion i understand. no surprise. the non-green variety, those early issuances from the even u. were very well prescribed. >> there is a plan for green
bonds. you simply need to have those bonds and the more splierks so much demand coming through the sidelines and therefor the oversubscription is not surprising in the least. tom: digging into the movements of the markets. prospects of further scrutiny on banks higher energy prices. we are looking at losses across the stoxx 600. about .5%. pairing some of the heavier loss wes saw at the start of session. a couple of sectors eking into the green including real estate and utilities. anna: a couple of sect no, sir positive territory. just a couple perspective basic resources very much to the downside. that is interesting. very much focused on higher energy prices. we talked for days about higher
worthless. i don't care. it makes no difference to me. >> upper pressure on oil demand was not in the forecast a month ago. it could go to $90. >> banks have tricky calls to make, and we depend on them getting it right. >> this is "bloomberg surveillance: early edition" with francine lacqua. francine: good morning and welcome to "bloomberg
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