tv Bloomberg Markets European Open Bloomberg November 5, 2021 4:00am-5:00am EDT
estimates are for a 450,000 increase. let's check in on the markets as investors continue to digest the surprise decision to hold rates by andrew bailey and the boe. the spanish ibex is down 0.2%. the ftse 100 is also lower by 0.1%. asia was lower and continues to fall. no dramatic moves in europe. opec+ continues to be in focus. the implications for the oil price. opec+ pushing back on this pressure from joe biden and the white house to increase supplies. currently, the oil price wti is gaining about 0.5% currently. sterling is in focus after that drop, that sharp fall of more than 1%. the 10 year yield in terms of guilt still just below 1%. yields just edging up by a couple of points. in terms of the u.s. 10-year, 1.52 is what you are looking at, the bond demand globally being triggered by the supply by the boe and what we saw earlier in the week from the rba, where they gave up on that yield curve control. a more conservative line of communication from the federal reserve many would argue, more
sophisticated communication someone .2. let's get the first word news with laura wright. >> the white house says opec and its allies are putting the global economy at risk after the cartel rejected a u.s. call to hike production by more than planned. opec+ stuck to its original plan of raising supply by 400,000 barrels per day. france says that the latest round of talks with the u.k.'s brexit minister over fishing licenses were useful and positive. new details show britain's trade with the eu fail in the second quarter of this year compared to the same period in 2018, as businesses face additional redtape, including filling and hiring of agents. the white house has mandated covid vaccines are weekly testing for all staff at u.s. companies of 100 or more employees. companies that don't enforce the
rule or deliberately ignore it face fines. peloton shares plunged after the fitness company cut its annual revenue forecast by as much as $1 billion and lowered its projections for subscribers and profit margin on the earnings call pellet on says that underestimated the impact of economic reopening. uber has reported its first-ever adjusted profit boosted by sustained demand in its delivery business. third quarter was wiped out by other expenses, including a write-down of its stake in dd global. that is the bloomberg first word news. tom. tom: thank you very much indeed. let's get into the key drivers in markets today with our markets editor. of course, the communication from the bank of england and that surprise. it did not surprised the economists, but the economy was
put on the back foot by what some are characterizing as miscommunication from andrew bailey. how should investors be thinking about central bank communication going forward? >> i think it certainly raises a lot of questions. can you trust what they are saying? are they going to follow through with what they are indicating they're going to do? a lot of questions are being raised about the credibility of the bank. he says it is not his job to lead the markets and investors have to make their decision. >> further bond market volatility is something we should be bracing for a central banks way up the inflation prospects. >> that is something you are seeing this week. extremely big moves across the bond market. the bond market has been quite sleepy, but everything is up in the air and there is a lot of upheaval because people are trying to guess which way banks are going to go.
tom: equity markets cannot separate themselves from the bond markets, but we continue to see these sustained rallies. what are the catalysts for equities going forward? >> you are seeing good earnings come from companies and that is the driver behind the rally. you are seeing central banks turn a bit more dovish. the boe is holding back. the sense that central banks are not rushing to hike interest rates is giving people a bit of confidence that they can keep going and equities. tom: opec-plus were not compelled to listen to joe biden and others to ramp up supply. the implications for inflation going forward from when goldman sachs and other see as a grind higher in oil prices, $90 by the end of the year is the goldman call -- how do we factor that in? >> it is going to be huge for inflation. how consumers respond to rising
energy prices and whether that really starts to bite the consumer possible it will be a big issue. tom: we have nonfarm payroll, the estimates have been very hard to pin down for economists. 450,000 is the estimate we have at the moment for when they come out. how closely our markets going to be watching the wage component? >> i think very closely. it also factors into the picture we are seeing and that will determine how fast the fed ends up raising interest rates. tom: thank you very much indeed. our markets editor joining us to break down what is driving these markets as we look ahead to the days and weeks ahead. let's check in on some of the stocks that are moving, at least that are in focus. we are talking about iag. currently gaining 0.5%.
the earnings coming in better than expected. the loss was lower than the estimates. 452 million euros. passenger numbers were better than expected. they are still expecting an operating loss for the end of the year, but they are also focused on this important transatlantic route, which provided about 17% of their revenues. we think that will come back strongly. airbus, deliveries are missing. are they going to meet that full-year goal? currently share prices are down. it is a solid gain for the insurance company announcing a buyback of around $2 billion. the wealth management part of that business doing very well. it reflects the strength of the balance sheet. being rewarded up to .6%.
tom: welcome back to the open. the bond bears backed into a corner. you are looking at banks at the top of the list. at the bottom, energy prices and energy sector. opec-plus not ramping up production more than some had hoped. let's check in on pellet in. -- peleton. cutting its forecast by as much as $1 billion. the mirror side is there could be good news in terms of the reopening trend, but this has been very bad indeed. the stock took a massive hit yesterday.
premarket, it is lower again. let's switch focus now to the cop 26 climate summit that continues in glasgow. world business leaders -- and business leaders laying out their plans. maria tadeo has had a front row seat to monitor the events for us. >> we are still here at cop and there is some momentum coming into this as we wrapped the first week. i want to bring in the ceo of sure action. i know you have been playing -- paying very close attention. how optimistic does it make you? >> i have to congratulate mark carney on bringing an unbelievable number of banks and
financial institutions, asset managers, pension funds together to make pledges at the conference because we will not a -- achieve the goals of the paris climate agreement without private financing mobilizing at an incredible scale. lots of voices are challenging whether that 100 $30 trillion announcement stacks up. is there double counting? i don't think we can have the public at large feel cynical. so i do think there is a question about making sure that there is a rigorous and the standards are part of the push for net zero. pension funds seem to be counted in that group are higher than the requirements on banks, but banks have a critical role to play.
i welcome the scrutiny and the commitments. >> you make a very good point that leads me to my second question. when you look at this 140 trillion, that is a huge amount of money. i know you have to look at the details, but do you feel that this is what you are going to get in real life? that is the big concern. >> it is. the international energy agency said earlier this year there is no room at all for financing of fossil fuels, if we are going to reach the one point five degrees target. the big test is which banks out there are in fact involved in financing and underwriting new fossil fuels. there is still a lot of it going on. that has been quite
well-documented this week. journalists, bloomberg and other outlets, are poring over the recent lending decision and financing decision a big banks and bringing some scrutiny to it. that is absolutely necessary. you can't say you are green, clean, part of this movement, we are going to help the world deliver, and on the other hand be drawing profitability fro financing decisionsm that take us in the opposite direction. this is a real tough pivot. we all knew this would be a tough pivot. emissions have been growing for decades. huge amount of emissions growth since the paris agreement was signed and i we need to take emissions off a cliff. we need to reduce them 8% year on year for a whole amount of the next decade. none of it happens without the financial community, so i really applaud everyone that stepped up and made a commitment.
equally, i really applaud everyone asking the tough questions and putting scrutiny into what is being proposed. >> of course we have to because that is our job. from where you said, the question is about implementation. do you worry that there is a gap, that even if you have the funding, it is going to be very difficult to deploy it because you don't have the right projects? >> that seems to be a perennial concern. we need fantastic cooperation between public and private because we do need to deploy more renewables at a much faster place -- pace. the scale up is astonishing. we just need to maintain that pace and that will require planning authorities, it will require corporations such as energy providers, everyone to pull together. banks are saying, we are doing
loads of green bonds, so we are doing our bit, while also financing new coal, oil, and gas. the acid test for financial institutions around this is are we willing to phase out financing of the fossil fuel sector? it is not enough to do the green. >> indeed. >> it has to be companied by a very tough regime of phaseout. >> just a very final question since we are running up against time. come next week friday when the text gets released, what do you want to see? what is the one number you are watching out for? >> what we need is every country more ambitious, but i'm really watching the carbon pricing and carbon markets piece. without those price signals into the market, i think it is going to be enormously much harder to
get the progress and really move toward that 1.5. i'm watching all of the work around the negotiations on carbon pricing and carbon markets. >> indeed and we have heard that repeatedly, the global etf's. thank you so much for joining us. thanks so much. tom? tom: maria tadeo another ground in glasgow. thank you very much. coming up later today, we will be speaking to scotland's first minister, nicola sturgeon. we will also be digging deeper into the surprise bank of england. this is bloomberg. ♪
output gap opening up and that would not be what we are wanting to see. >> if we could go back to markets, it was this we will have to act. at times you seem pretty hawkish. why did you not temperate? or at the time were you not enough worried about growth? >> it is a statement that i hold to today. conditions, we will have to act. no question about that. >> did the markets misread you? is there a communication problem? >> i don't think i've been misread at all. nobody in the bank of england said therefore there will be a rise of interest rates in november. we never said that.
it was pretty evenly balanced on what he will -- they will do today. we pick up quite a lot of commentary which matched your survey. it is a very finely balanced situation. market pricing, as you could tell from the commentary we made today, right direction, a bit overdone. that would be my candid view. >> there are quite a lot of traders when you look at some of the analysts who say, if members had not spoken so much over the past month, market pricing would have been in line with the statement.
>> i do take that with a fair pinch of salt. we get comments at other times that if the mpc doesn't speak, then markets get no guide. we don't speak to guide markets. the markets must draw what conclusions they will from what we say. right take that with a fair pinch of salt. i will say we have seen a correction in markets from the pricing we saw over the summer particularly. i have to be honest with you, i'm not surprised about that. it puzzled me at the time. tom: that was the bank of england governor andrew bailey speaking with bloomberg's francine lacqua. a couple of lines breaking across the terminal. andrew bailey is speaking to the bbc radio. he is saying we are not going back to 4% to 5% interest rates,
but he is saying interest rates will need to rise at some point. multiple messages from the bank of england governor. sterling down more than 0.2% as investors continue to reprice what many would argue were mixed messages from the bank of england governor. what turned out to be a consequential day yesterday. we did not know it would fall this way necessarily. was this communication -- miscommunication ultimately by the bank of england governor? >> the bank surprised markets by keeping interest rates on hold at 0.1%. if you think of all the ramping up of expectations in the run-up to the decision, part of it was triggered by all of these hawkish hints dropped by the governor himself. as you heard in that interview, he insists that he never said the bank would act in november, only that it must act if inflation expectations got out
of control. given that pricing meant that some element of tightening would happen anyway, you have to ask whether the accusation that he is a new and reliable is actually fair. tom: what rationale for keeping rates on hold? >> the mpc says there is only so much it can do about supply disruptions. it cannot manufacture semiconductor chips. it wants to wait for clearer data own of the labor market, which is what the fed said as well this week. to its credit, those are the same reasons that bloomberg economics gave for saying before the decision that a rate hike was never a done deal. >> are u.k. economy editor reporter covering all of the action or lack of action for the bank of england certainly continuing to pass the communication from the bank of
tom: welcome back to the open. we are 30 minutes into the european trading day. here are your top stories. a sharp bank of england decision kicks off a global bond rally. andrew bailey hits back at critics and says that is not his job to steer markets. u.s. jobs data could reignite or dampen the inflation concerns policymakers tried to downplay this week. plus, crude on the move.
a u.s. response to the modest output hike from opec-plus. there has been a change in sentiment in the last 20 minutes or so across the european markets. you are now in positive territory awaiting that all-important nonfarm payrolls data. the expectations are that you will get a print of about 450,000. that number in the recent months has been all over the charts. it has been hard for economists to pin down. you are seeing gains of just about 0.1%. over in germany, the dax is flat. gains of 0.4% in france. let's switch it on and have a look at how things are playing out. the energy sector still in focus. opec-plus did not buckle to pressure from president biden to increase supply.
this is how things are breaking down on a sector by sector basis as we lead up to the nonfarm payroll. the data is ever more important given what some are arguing that misguidance from the bank of england. also from the rba walking back from its yield curve control earlier this week. talking the boe, that surprise decision to hold kicks off a global bond rally. you are seeing the u.s. 10 year about 1.51. joining us for more is eddie from our markets live team. what was your response to this decision? the economists were split 50/50. three weeks ago, andrew bailey said we must act.
then he did not. >> you know, i think there is a lot of anger among traders yesterday. it is not just the fact that the boe did not act, it was the language from bailey where he said, it is not my job to guide markets. you know, traders said that they are frustrated and they were expecting certain -- we are in an age of forward guidance and that is what markets expect. we have seen two-year rates come down substantially, but the interesting thing is that we haven't pulled back to september levels. there is a lot of space. did you take bailey at his word when he said it was a reaction
in the right direction? or do you say that we discount him completely because his job is not to guide markets? that is the conundrum traders are dealing with this morning. tom: are they in the ascendancy for the next few weeks and months? >> i think so. my colleague wrote yesterday that the scope for a surprise was always there and the action therefore was for bonds to rally on the back of it. that was far much of a greater risk going into it. bonds have been a little bit of bailey -- a momentum trade. we are now seeing the opposite of that. i do think that bonds -- there is a good chance --that they extended further. tom: what does that mean for the equity markets and how that plays out sector by sector?
presumably, that is a benefit for tech. what does that mean for financials? >> absolutely. the banking sector is where we saw the biggest downside reaction yesterday. banks would like to see yield curve normalization and higher rate and just back to business. they are not getting that at the moment. european banks have done phenomenally well this time of year. we saw a little bit of pullback. really, moving forward now into the nonfarm payroll numbers that we get later today will tell us more about how the rate space progresses. tom: particularly when it comes to wage gains. eddie, thank you very much indeed. ok, the first week of cop 26 is
coming to an end in glasgow. we have another week coming forward. world leaders have reiterated their commitments to combat climate change, but concerns remain about the implementation. maria tadeo on the ground for us. >> yes, we are still here at cop 26. we are wrapping up week one. now, it is very good to speak to you. i want to talk about highlights of the week. i wonder, the concern is always about implementation, whether what you get on paper is what you get in real life. are you concerned about information we got this week? >> it is great to see all these
financial institutions come together under this umbrella organization. historically, financial institutions have not been public about climate commitments and having to join these voluntary efforts at the rate of participation of companies in the real economy. definitely welcome these initiatives, but what we need now is clarity about the details and more specificity and move toward more standardization so there is more ability to affect the actions of financial institutions. >> you know, one of the questions i think about a lot myself is when you look at some of the big financial institutions pledging to do this and put capital to work, they still also work with the old industry. can you do the two at the same time. can you do the financial projects that some would argue
are part of greenwashing? >> i think one important metric to look at is what is the rate of finance invested in fossil fuels versus the capital flows going to climate finance. if you look now, the rate of capital flows going into fossil fuels is more than twice as large as the capital going into climate finance. we definitely need to start shifting those capital flows. >> some of the questions we have heard about implementation, you do point out that there is more need of independent experts. is that going to fix the problem or do you worry that we are making this so complicated we are adding, not streamlining the process? >> i think the main challenge
now is just getting clarity and consistency in other metrics that financial institutions are going to use to track their process and making sure there is transparency around reporting and some verification mechanisms. so financial institutions can be held accountable for these commitments since they are voluntary right now. >> a lot of the issues and i'm not sure we agree, but the fact that this is still a very fragmented market. do we need more global action in terms of the benchmarks when it comes to reporting? >> absolutely. that is where we need a global standard. that is one of the things that we are working toward right now. last week, we published a net zero standard for companies and now we are working on a net zero
standard for financial institutions. that will provide a lot more clarity on what the definition is of net zero for financial institutions and how can they achieve these targets in a credible way. >> today here at cop 26 is the activist day. we will hear from activists of climate. one of them has been greta thunberg. she says a lot of this is not a lot of action. is that a fair assessment given the fact that you do look at the action that businesses take? >> yes, there is always going to be some greenwashing going on and that is why we need policy like the voluntary initiatives can only get you so far and we are never going to solve the climate crisis without policies
from regional and national governments. >> it is good to have you on the show today. we are expecting into week two. some of the targets and pledges we have heard. thank you for joining us on bloomberg tv. tom, i'm sure you are looking forward to more cop going into next week. tom: of course we are. i'm sure you are looking forward to a bit of downtime at the weekend. maria tadeo on the ground in a chilly glascow. coming up later today, we will be speaking to scotland's first minister nicola sturgeon. coming up, we will also be speaking to belgium's finance minister about the eu economic recovery, energy prices, and the supply chain crisis. that is next. this is bloomberg. ♪
germany is down. gaining 0.3%. you had a share buyback announcement by the french insurer pushing the stock up. it is slightly and bleaker picture. down just over 2%. this is despite the fact that the airline group reported operating losses below the estimates. they are looking pretty optimistic in terms of transatlantic travel. passenger numbers coming in higher than expected. allegro seeing gains of more than 6% on the back of the line around a billion-dollar takeover from a competitor looking at this polish e-commerce platform.
ok, from the corporate's to the macro. eu finance ministers are due to meet next week to discuss pressing issues facing the bloc . here to discuss all of that with me now is belgium's finance minister. thank you for joining us this morning. we are looking at data that suggests there is fragility in the economic recovery in europe. business output for the month of october, for example, falling faster than many are had expected. inflation terms continued to be front and center. the supply chain constraints are not going away. how concerned are you about the health and outlook for the economy across the euro zone? >> after the covid crisis, we had our recovery and the recovery was good. now, due to inflation, we see a drop in these numbers and that
has an impact on the growth strategy. it also means that if we look to the future, we should really focus on investment and we should focus also on reforms, compared to for example the financial crisis, where we saw that we were really focusing on austerity. we also saw a huge drop in our investment space. we now need to focus on the growth strategy, where we focus on investments. tom: does that mean that you will be pushing back against the hawks in the euro zone? the concerns about the buildup of debt post and during the pandemic. are you going to be stressing the need to invest over tackling the debt? >> i think that is really important. we need to invest more than in the past.
if we look back to the financial crisis, we saw a huge drop in our investment rates. for belgium, we drop down to 2.4%, which was far below the european average. if we look to the future, we need to invest in these investments will be important for the transition and also important for our recovery. that does not mean that we should not look to our debt reduction and the way we are going to have a framework in which we will have healthy public finances, but it is important that we are going to invest in these investments are necessary also to finance the transition and the recovery. tom: the meetings next week you will be a part of.
do you think it is time for europe to change its measures and put in place more realistic measures? is it time to scrap that? >> i don't think that we should put our political energy into changing the rule. i don't think that is necessary. i think we should focus on the debt trajectory, the realistic debt trajectory. at the same time as i said before, we need to stimulate investments. we know that a lot of investments will be needed in the near future for the climate transition, for example, so it is important that we focus on that, as well. that some of the investments that will be done by countries and governments, that we will
treat these differently than normal expenditures and that is really important for me. tom: in to the continuing challenge of brexit, the european commission saying they could continue -- contemplate scrapping the trade deal if london goes ahead with the threat of the northern ireland protocol and activating article 16. would you be in support of that measure from the european commission? >> it is important that the negotiations continue and that we have a good relationship with the u.k. tom: but should that be an option for the commission? >> it should be an option, yes. tom: thank you for your time. we appreciate your time this morning. belgium's finance minister joining us to discuss and look ahead to the euro group meetings. the challenges around energy, inflation, and the economic outlook in europe.
as if oil is the problem. oil is not the problem. tom: that was the saudi energy minister on opec's role within the oil market. the white house says that they are pushing the global economy at risk. opec stuck with its initial plan . joining us to discuss all of this is our energy editor will kennedy. we are seeing prices rising in of the back of this decision to hold the line for opec-plus. was it a surprise? how do you see oil prices reflecting this pressure in the month ahead? >> i don't think it was a huge surprise. there was a little surprise to not even allow the u.s. to save any face at all.
it was a flat out no with very few conciliatory words. it put president biden in a difficult position. now he needs to come up with a response. the market now is trying to digest this play between the fact that there isn't going to be any extra from opec, but the prospect that joe biden might tap the u.s. strategic petroleum reserves to put more oil in the market. tom: those reserves in the white house action around that will be keenly watched in the days ahead. i guess to some extent it is not a surprise that opec-plus doesn't buckle to political pressure. what is the calculation given that demand is picking up. what are the factors that will drive their decision-making? >> the factors is that the price is above $80 a barrel and that
is good for them. more pertinently perhaps, opec believes that the market, while it is a little bit tight now, will be less tight early next year. the markets in coal, gas, oil. the world is very short of energy more broadly and that people are substituting their demand for coal or gas and that impact will pass with the winter in the northern hemisphere. as opec continues to add oil to the market, things will probably look less tight early next year, so any production faster now would be unnecessary. tom: currently brent trading at close to $81 a barrel. thanks very much indeed. bloomberg's energy editor breaking down the decision by opec+.
we need space for people to get adjustments and make changes to wages and where they work. >> we are just kicking the can down the road and we can face a conflict between fighting inflation and keeping unemployment down. >> i am an optimist on the inflation outlook over the next few years. i do not think this will be the 1970's all over again. >> this is "bloomberg surveillance -- early edition" with anna edwards, matt miller, and kailey leinz. anna: on this friday, november the fifth, our top stories, the rally pauses. a surprise bank of england decision tops central-bank news and now the focus turns to the u.s. jobs reports. today's data could reignite or dampen inflation concerns. after months of tension, the