and the ftse futures. one of the conversations we had with mark cudmore was what would make this rally stop or at least pause for breath? we could have volatility going to the fed next week. the other thing to watch out for, some of the cpi data out of the u.s.. than omicron. there is a belief in the market that everything will be ok because a third dose helps with infection were reducing the chances that you end up in hospital, but there are a lot of trials coming up and we don't know that data yet. the ftse opening. the ibex pretty much unchanged. i want to look at gold. with any kind of risk aversion, interesting to see some of the safe havens, brent and gas -- you can see just a little bit, a little bit trading sideways. gains of 0.3%. the big one is the pound. a lot of volatility into the

boe. we had a note from goldman sachs which was one of the most interesting ones looking at what the boe could do. they believe they can't hike until february. i don't know if we will have an indication on that or messaging from the boe. we could see a bit of volatility. then it seems that policymakers and china are not as comfortable with renminbi and we could see further support of the economy. the vix, nothing huge. the s&p futures just a little bit down, but we could see a reversal. for the moment, we are positive. let's get straight to the bloomberg business flash. angel: hong kong's financial regulator says stress tests in the wake of china's property industry debt crisis don't slow elevated systemic risks for the city's financial system. the global financial system is not as vulnerable as it turned out to be in the wake of the lehman crisis.

>> it is a significant event. you can't possibly underplay it. it is basically not that category of event for the financial system. angel: apple is on the verge of reaching a $3 trillion market value less than four years after surpassing the $1 trillion mark. shares rallied to a record high, taking its valuation be in the market cap of germany's entire stock market. that as the company wants to delay court mandated changes to its app store. gamestop has reported a wider fiscal third quarter less than analysts expected. the retailer disappointed investors waiting for more details about how it plans to reshape operations and lure gamers back. it became the poster child for the meme stock movement. and credit suisse says it is regretfully acknowledging that

the chairman breached quarantine rules recently when he left switzerland for 10 days when isolation was over. he apologized for unintentionally violating the rules after returning from the u.k. at the end of last month. that is your bloomberg business flash. francine? francine: thank you so much. european markets open higher as traders think the global recovery will be resilient to omicron. kristine aquino, thank you for joining us. let's start with you. it seems pretty quiet today. we are seeing futures in the u.s. moving sideways, shares and europe are seeing a bit of a lift off. what could stop the rally? kristine: it might be a combination. we are heading into the big central bank week where we are going to be hearing from all the major central banks next week for the last time this year. it is really going to be

interesting how this is all going to shape their outlook for the end of this year and into 2022. we could really see all of this kind of get kicked off by the u.s. cpi data starting yesterday and then continue into next week when we hear from the fed, the boj, the boe, the ecb. all the major ones next week. francine: ven, you have a great piece in today's terminal, basically the moment that traders fear may happen in slow motion. what are you worried about? >> what i'm worried about, i'm worried about the systemic risk that is not factored in by the markets yet. and how hawkish the fed proves to be eventually. we have already seen the fed go from a moderately dovish stance to one of mild hawkish and us. -- hawkishness. if they are more aggressive on the rate trajectory, treasuries

will left tire and that causes a threat to stocks, stock valuations. i do see big frothiness in the market, particularly nasdaq and s&p feeling the pinch into next year. francine: what would a policy mistake from the fed look like? ven: i know this is a much asked question. pretty healthy levels, we do not have to worry about a policy mistake from the fed. the fact of the matter is if american express said consumer spending is robust, demand is robust, so i don't see the economy being torpedoed by a couple of rate hikes. we need to remember that on the rate front, we are at extremely low levels, historically low

levels on rates, therefore i do think the economy can withstand a few rate increases. in any case, the terminal rate is not too high. i do think the economy has the sustenance to withstand this. francine: christine, where will we see most sparks given the plan for the bank of england? are they in a trickier situation than the fed? kristine: arguably, yes. i think it is interesting in the u.k. markets because this was really the market where we saw the debts ramp up to feverish levels. with all the news that has come through over the last couple of weeks, we see the biggest climbdown from those really high rate expectations in the u.k. and this is why we are seeing an outsized impact to u.k. markets to the pound, u.k. bonds, from

all, of these restrictions even if it is not as strict as what we have seen out of some of the european countries over the last week or so. because of that recalibration in rate expectations and optimism in the u.k. economy and u.k. rates, that is why we are seeing this hit. it is going to be an interesting communications challenge for the bank of england. how they are going to navigate this and what their messaging is going to be in the short term and also heading into 2022. francine: this comes on the back of some pretty confusing communication in the past from bank of england. what does that mean for gilts? ven: if you look at the front end of the two-year, they expected to move between 30 and 60 basis points. i don't think the boe is going to hike into this omicron variant and the restrictions that have been imposed in the u.k. i do think that if you look at the pricing for december, we have gone from factoring in more than 100% before the november meeting to 40% before next

week's meeting. i don't think they are going to raise rates before february. that means that gilt is not going to run away, as we saw happen in the previous month. so i think they are locked into a range by now. francine: what is the one thing when you look at commodities, we were talking about a commodity rally earlier in the week, a sense of where the risk premium is or whether commodities give us a good sense of what we do with china? kristine: absolutely, looking at the commodity complex as a whole, it is very much a good reflection of what we are seeing in terms of expectations for demand and also expectations for the broader health of the global economy. china very much plays into that. we saw earlier this week the rally really getting kicked off by the pivot to easing we are seeing out of china and some of the changes that we are looking at in terms of property curves.

that has really helped the commodity complex here. today, we are seeing even more signs of china's discomfort over the strength of the yuan, part of their pivot to easing. if that will help support demand in china, that will help support the commodity complex for sure. francine: thank you so much. going through all the market action. we are getting some other breaking news. the second headline we are seeing from fitch. now, it is doing the same with evergrande, cutting it too restricted default. a bit of technical analysis always good on a thursday morning early in the morning. restricted default indicates that the rating agency thinks that there is an uncured payment default on a bond yield or other material financial obligation that has not entered into bankruptcy filing. i don't know whether it really changes what we are expecting,

but it is just an indication of what we have been hearing also from our market sources. coming up, the powell pivot. we will discuss what next week's fed meeting has in store for investors. that is coming up shortly. this is bloomberg. ♪

francine: welcome back to the open. 12 minutes into the european

trading day. you can see i'm getting all choked up thinking about the fed and some of the policy mistakes they could do or not do. she will run us through what we should be expecting at the open, but we are off the highs. stocks are kind of trading sideways. i don't know what is hitting the sale and the volume or the wind in the sales -- save me, dani. i can't talk and i'm emotional about the fed. >> we are all choked up on these markets right now. [laughter] i can sympathize. i have a story that has choked up deutsche bank quite a bit. sources telling bloomberg that the u.s. department of justice has notified deutsche bank that they may have violated a criminal settlement. the settlement happened earlier in the year. i won't get into the details. as part of the agreement, deutsche bank had to alert the justice department of any potential allegations of misconduct.

an allegation was brought up internally, at dws, that they were overselling their commitment to esg. the justice department telling deutsche bank, sources tell us, that they may have violated this agreement, so shares down nearly 2%. another decliner, looking at edf. this follows a report from a local media outlet that the french government is looking at capping energy prices in france. energy prices surged to an all-time high yesterday. that could hurt edf and their profits. finally, wrapping it up on a positive note and combat boot related -- doc martin falling. they do expect their margins to be better, their profit to be better. investors not necessarily buying it. francine: thank you so much for a great look at some of the

stocks to watch. dr. maretns. if you keep things long enough, they come back into fashion, i would say dr. martens is one of those. the expectation is that the fed will speed up tapering. let's discuss this. let's discuss the path forward for the fed with our guest. john, think you for joining us. what does a policy mistake from the fed look like next week? >> the fed has it changed mandate. i think the market forgets about the idea that the fed has a flexible mandate, which means there is catch up to be done. there has been in undershooting in inflation for many years now, so the fed is going to let inflation run a bit, if it were to meet its ill-defined target,

because there is no time parameter around it. so, if you look at how yield curves have flattened and the market is pricing things in quite a benign fashion and this speaks to some confidence in how the fed has handled things in the communication strategy in general. if you look at longer-term inflation pricing, there is no sign of runaway inflation. i would say that market rates of inflation are pretty stable. francine: but so what does that mean? what exactly are you expecting -- how are you expecting this to pin back equities? john: equities are susceptible to any kind of dramatic move, i would say, in real yields. real yields are running at negative levels. we believe that real yields need to stay negative in order to sustain equity prices. any deviation from that or any kind of panic would have a

meaningful negative impact. that is not our base case scenario, but there is a risk of that. francine: what is your biggest conviction? what are you buying into right now? john: we are long equities. we are long u.s. equities. we are long japanese equities. we are long credits in europe. we have added to that position. we think that essentially all of the supports are there for the market. policy is super helpful. we believe that is going to stay. we have added to credit. we remain long equity. we are quite conservative and how we do this. we have tried to buy some dips. japan qualified on that basis. we are also short sterling, actually, would be one of our conviction trades.

we are also long local bonds in china and we have been long chinese currency, also. francine: i have like a million questions on sterling. is this the most interesting currency? there is a political storm i would say is brewing, but i think it is dealt with. plan b puts the bank of england in almost an impossible situation. john: that's true. we have had a short position in sterling some months now. this has been predicated on a geopolitical stance. it was a long-term structural idea that the u.k. is somewhat isolated politically globally post-brexit. this is coming to fruition now in the absence of trade deals, ongoing tensions with your closest neighbor, the eu, and apart from the vaccine and recent lockdown, the u.k. is really just joining the rest of the world.

behaviors around the vaccine have changed a lot. lockdowns are to be avoided. any sort of policy that avoids that is probably a good thing. we have seen vaccine passports in europe, these things tend to work. that is probably a reasonable move to take. francine: great. great. thank you so much. i have a million questions about whether virus-impacted economies are disinflationary. john stays with us. coming up, we will be taking a deep dive into china's latest inflation data and what it means for monetary and fiscal policy. that is coming up next and this is bloomberg. ♪

francine: welcome back to the open. 22 minutes into the european trading day. we are seeing not that much volatility. a lot of range bound. the european stoxx 600 gaining some 0.3%. consumer prices rose at their fastest pace since august last year. it could give policymakers more space to support the economy. still with us is john o'toole. there seems to be a belief in the market with china that policymakers have this under

control, that they will support the economy in the right way. are the right to see it like that or is it because they are ignoring the risks from china? john: i think chinese authorities have been very clear, they set out in 2021, they have done so for the forthcoming year, it is all about flexibility, it is all about policy supports. they have been very explicit about what they want to achieve. and spreading that growth across the economy. the pboc has been clear on its rate path. the mood music is all quite positive. we are seeing ppr moderation. you had had quite an excessive gap between ppr and cpi and very little read through to consumer prices. it all seems to be reasonably under control and the cpi levels are pretty much at their target. stability seems to be the name of the game. francine: we also have a great chart that dan curtis just sent

out that looks at the evergrande price. good to remind everyone. there are no trades reported yet since the headline, which was fitch cutting evergrande to restricted default. does this in general worry you that it could be something systemic or because we talk about it day in and day out, we are also at a point where it will be ok? john: i'm not sure that it is a game changer. the tone has been set. when the evergrande story broke, there was a shock, it was new news, but it does seem the authorities have been clear that they are going to let the market do its thing, they are going to let things correct, people are going to find a way, the market is going to find a way, with some supports, if needed. the whole aim is to avoid contagion, provide supports. it was interesting that the housing sector is open for some targeted supports.

these fires will be put out, we believe, and it is not going to turn into a systemic issue. francine: overall, if you go back to omicron, is this stagflationary light? john: it is a difficult one. we are trying to avoid situations where governments have to lockdown their populations. we have seen the impact on that. clearly, we had a massive drawdown and growth. we have had a huge snapback. our consensus view is that this does not derail growth, but there are inflationary pressures that are there now. i think we are in a world where we have to get used to having viruses in the background. it also means that we have to get use to supply bottlenecks. it probably means that there is latent pricing pressure that is always in the background. obviously, it is inflationary in the longer-term. however, against that backdrop,

if you consider how inflation fails to kick off, there is nowhere in the world that achieves the inflation target in the last 10 years. the rationale was that globalization was a great deflationary factor, technical innovation was a great disinflationary factor. those things are likely to stay with us. they are competing forces. this is a difficult job central bankers have. they have to balance between targets and mandates. it is not always finally balanced. francine: i was going to say, you are absolutely right, that is why central bankers get paid the big box -- bucks, but i stand corrected. john, thinks for joining us. john o'toole there. coming up, boris johnson tightens restrictions in england to halt the spread of omicron as he faces pushback over allegations his staff broke

lockdown rules last year. this is bloomberg. ♪

francine: welcome back to the open, everyone. here are your top stories. plan b, boris johnson calls for britons to work from home while omicron spreads. consumer prices jump. bumper quarter, jp morgan sees fees from ammon day and underwriting deals surging. this is the picture for equities across the board. there are a couple of stocks to watch, but overall the european stoxx 600 gaining some 0.2

percent. the dax also elevated a little bit, getting some 0.2%. but i would first two is pfizer and biontech saying that initial lab studies are showing a third dose of the covid-19 vaccine may be needed to neutralize the omicron variant. it is clear the markets are taking this as a positive. let's get through to the sectors on the move. we spoke to the pfizer chief executive. it was interesting to get his comments on the third booster. then i look at china, weaker than expected level against the dollar. among the industry groups moving the most, we have health care, media, and real estate on the up. boris johnson has announced new curbs in england to stop the spread of the omicron variant. he gave a press conference on the measures yesterday. >> it has become increasingly clear that omicron is growing much faster than the previous delta variant and that is why it is now the proportionate and

responsible thing to move to plan b. francine: plan b involves advising people to work from home and using vaccine passports in large venues. let's get into what this means for the u.k. economy and the prime minister politically. what does this mean for the economy? >> it is likely to knock the recovery in the short term. bloomberg economics says that the return to work from home is going to shave 2 billion pounds off gdp a month and the vaccine passports will hit entertainment directly. you will get a knock to consumer confidence, which will hit spending in city centers, but every time we have a new wave, new restrictions, people get more used to them. firms get more used to them.

you are likely to see less impact on consumer confidence this time because people are more vaccinated, they are feeling braver, and you will likely get an element of defiance after this christmas party debacle. francine: i would not say there is a lot of pressure, there is more, there is anger from a lot of people. what has been the fallout so far? >> that's right, the u.k. premier seems to have united everybody in opposition or concern. the christmas party could come back to haunt him. members of his own party are frustrated about having to deal with this. if there were at least seven parties that went on a downing street over that period last year, how is it you did not know about any of them and you were not involved in any of them?

you can continue to see the fallout from all of that. the british people are sick of saying, we are abiding by the rules and clearly those in power potentially were not, so why should we not listen to you when you are telling us we have to go back into further restrictions? it is a sort of issue that is going to resonate with voters here. francine: some of these new restrictions are probably also not going down well among parts or factions of the conservative party. rosalind: that's right. as lizzie was saying, people have adjusted to working from home and businesses and so on. it is not a full lockdown here either, so businesses will continue to operate. there are many members in the tory party who are saying, we don't want to even have to go back to plan b and the fact that you are initiating this now on top of the questions about

policy around the virus over the past few years and the fact that they are having to mop up after the christmas party that is still going, we have real questions about the consistency of boris johnson's leadership, so we are hearing a lot of rumbles from senior tory members about that. you can see that his popularity is taking a hit. is he in a position to sustain the party through to the next election? francine: this complicates matters for the bank of england. they may not be able to hike until february of next year. lizzie: goldman joining jp market -- morgan and barclays. even the most hawkish members of the monetary policy committee are saying they want to wait for clearer data on omicron before hiking, so with these new restrictions, it seems like that is the nail in the coffin. francine: it does seem like it. let's talk a lot more about the

u.k. and the fallout. johnson's former press secretary also stepped down as the government spokesperson after a video of her joking about the party. >> does anybody have any questions today? [laughter] i went home. [laughter] >> with the prime minister condone having a christmas party? >> what is the answer? >> i don't know. >>'s cheese and wine all right? it was a business meeting. [laughter] it was a business meeting. it was not socially distanced. [laughter] >> people were doing everything to obey the rules. i will regret those remarks for

the rest of my days and i send my profound apologies to all of you at how. francine: tim, this is the third time around where we have a member of government or someone in boris johnson's inner circle that breaks the rules and it angers the people. can boris johnson survive this? tim: i think boris johnson is not in immediate trouble, though as your previous correspondence suggested, the polling is not that good for him. there was a poll out last night that suggested over 60% of people thought he should resign over this matter. i think tory mp's are going to be looking at the longer-term polling. they will look to see whether this really damages the conservatives' reputations relative to the labour party, which i've had trouble coming anywhere close to the conservatives even in the midterms.

if that happens, tory mps are going to be quite worried because they picked boris johnson as an election winner. if you can't win them an election or doesn't look like he is going to, then in some ways what is the point of boris johnson? he hasn't really proved himself a particularly competent chief executive, if you like. francine: how many mps still support the prime minister at this point because of his personality? he has a personality that is quite popular. have the polls told us that will dwindle to a point that they can no longer support him? tim: to be honest, most tory mp's think he is a fantastic campaigner, whether they think he is a particularly good prime minister is another matter. i think we would have to see the labour party go into a double-digit lead before they became really concerned. this is midterm.

the government is in trouble for all sorts of other things to do with the pandemic, the economy, it is beginning to come back, but perhaps not as much as some conservative mps would hope. they are concerned about leveling up. it is the long-term concern rather than the short-term one. i expect boris johnson will be able to escape this one as he has managed to escape other things in the past. he has been in trouble before for ministers and other people breaking rules and got away with it. francine: does it weaken his policy announcement? does it weaken some of the things he was hoping to do with brexit? tim: you look at the polling on brexit and it is still the case that they still think it was a good idea. we have not changed very much on that.

if we move away from that, it begins to break down a little bit and that might harm the polling and people continue to think more about what does this government do for me on a day-to-day level rather than did he get brexit done? that i think is going to pose a problem for the conservative party if they have problems with the pandemic, which it looks like they are having once again and if there isn't much progress made on the leveling up, as some of the areas from the 2019 general election. francine: there is a lot of criticism on all fronts, but something that is clear in the newspapers is that there is not one newspaper that supports or is backing the prime minister. people watching this from abroad underestimate the power of a lot of the newspapers and tabloids here in this country and many of them saying that he is using

these covid-19 plan b to distract from the number 10 party. is that a possibility? tim: it seems to be the case that there were no plans for plan b to be introduced so quickly, but that could have something to do with news that the government got about the omicron variant. i'm not sure that introducing plan b does work and it makes people think more about restrictions and makes them think more once again about some civil servants and party people didn't pay much attention to them last year when the rest of us were sticking by the rules. that is the reason that this particular scandal is resonating with people because it does feel once again that there is one more for them and one for the rest of us. hypocrisy is something that goes

down very badly with voters whether they are labor supporters or conservative supporters. francine: tim, thank you so much for joining us. coming up, we will get you the latest on the spread of the omicron variant in the race to develop a vaccine. stay with us. this is bloomberg. ♪

francine: welcome back to the open, everyone. we are still seeing some gains, but they are not as high as they were a couple of minutes ago. getting some 0.2%. the markets not worrying so much about omicron at the moment, not worrying so much about china. maybe some worries about the fed next week. in to health care and covid. omicron is more than four times more transmissible than the delta variant in its early stages according to a japanese study. pfizer says the company will have more data on its vaccine's ability to repel omicron by the end of the year. speaking to the pfizer chief executive, he said he is optimistic about the ability of the vaccine to boost protection. >> what i think the data is telling us is three doses of the

vaccine would provide the same protection like the first two doses provided for the initial strain. francine: joining us now is a senior pharmaceuticals researcher. there is a lot of data. i don't know how correct or up-to-date the data is. what do we know about the booster rollout around the world and whether it works to fight omicron? >> yes, hi. we are seeing several countries continuing with their third shot strategy. some have started talking about forths shots. his realist talking about it and even france had spoken about it. but obviously, we have a long way to go still the u.k. is the

third or fourth or fifth among the countries rolling out and now we have some data from pfizer that shows that the booster does raise antibodies, but there are some nuances that i'm going to try to analyze in a note because it is different to what has been shown in a different and separate study. i'm trying to get my head around why that is. francine: how good was the data from pfizer? sam: there were some really interesting angles. the antibodies in terms of neutralizing ability were still not as good as against the original, ancestral viral or the variant. but there was much better, and there are aspects of each study that are different and that is something that we will be trying to see why that is.

the other element that was quite that interesting are the t cells. they seem to be potentially most active. a little table showing that if you were taking blood from people who were vaccinated with a vaccine that represented the alpha variant, it was much better than the omicron. there is a lot more to come from this group and this analysis than meets the eye. francine: are you worried that the market is too worried about what we are facing because actually health systems can be overwhelmed even if it is not more deadly, but more spreadable? sam: to be honest with you, that is why the u.k. took the steps that they did. the prime minister, the

government had really thought activating their plan b and in the end, they did it and i suspect they did that because it is possible that this thing is x fold more transmissible. even if protection is granted by vaccination and prior immunity, potentially against severe disease, you might get such a large number of infections, that is probably why they did what they have done yesterday. francine: sam, thank you so much. coming up, jp morgan set for another quarter. that is coming up next. this is bloomberg. ♪

francine: welcome back to the open. 62 minutes into the european trading day. we started off on a pretty good start, now we are seeing a bit of a reversal. jp morgan's fees from m&a, underwriting deals deals, one oe

best quarterly results ever for the bank. tom, is this a trend? good morning once again. is this a trend we are seeing once again? tom: it is definitely not just jp morgan. we see investment bankers continue to have a phenomenal year. trading is starting to normalize a bit during the pandemic. there was a lot more volume and volatility. trading still very strong. francine: what does it mean for bonuses? tom: it is going to be very good news for bankers. a lot of expectation that may be last year there was a little restraint on the bonus front because people were working through the pandemic. this year, people are getting expected to get paid really really well. tom: the question marks are still out there. they are already reporting what is happening in q1. basically saying, we are seeing a bit of caution in the market,

a little bit of left, we expect this might be the last kind of hurrah, may be. francine: we were talking a lot about people not returning back to the office because they were worried about omicron. does plan b further accelerate that or is it pretty much the same because people took their livelihood and their own hands? tom: i thick accelerate is the right word. fewer people in today and i suspect that will continue to go right through to monday. i reckon the city will bequeath the -- pretty quiet. francine: i'm ready for christmas. what do you mean it's not christmas yet? i don't know whether this affects negotiations or the standing of the u.k. in brexit or whether that is a bit far-fetched. tom: i think it is probably a bit of a stretch. the other thing we are hearing is that this will be a change, but banks are fully ready for this. it is not happening for the

first time. it should be business as usual as apart from quieter streets. francine: tom, thank you very much. let's get straight to the bloomberg first word news and there is a lot going on with omicron. south africa's excess debt doubled into the weekend from the preceding seven-day period as the new coronavirus variants spread across the country. the rise contrasts with hospitalization numbers that show most admissions have mild forms of covid. a japanese study has found the omicron variant is four times more transmissible than delta. early studies show a third dose of the pfizer biontech vaccine may be able to neutralize the omicron variant. two shots may not be sufficient, but a third dose boosts antibodies that fight the new strain 25 fold. pfizer says a new vaccine specifically targeting omicron should be ready by march.

china's factory inflation moderated from a 26-your high, a slowdown providing more room for policymakers to support the economy. beijing's efforts to tame commodity prices may be working. we also got cpi data, which increased 2.3% year on year, but still the fastest paste august of last year. u.k. employers increased starting salary set a record pace in november according to a survey by the recruitment federation. they say firms are being forced to boost compensation to tackle an unsustainable shortage of workers. starting salary inflation is at its highest since data collection began in 1997. that is it for the european market open. surveillance is up next. we will have a full check of the markets. a bit of stability head of stability and china. we do have noise overnight about the yuan. we will check some of the

renminbi levels. overall, markets are pretty confident there will not be big surprises from china. the biggest worry is the fed next week. this is bloomberg. ♪

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>> it was a business meeting. [laughter] and it was not socially distanced, >> i will regret those remarks for the rest of my days and i send my apologies to all of you at home. >> that is why it is now the proportion in and responsible thing to move to plan b. >> this is "bloomberg surveillance: early edition" with francine lacqua. francine: good morning, everyone, and welcome to surveillance early edition. here is what is coming up.