tv Bloomberg Markets European Open Bloomberg January 11, 2022 3:00am-4:00am EST
francine: let us also take a look at the futures. yesterday, we had an enticing trading days in the u.s. the focus is on shifting out of what happens after the u.s. sessions. inflation tomorrow, that is the big one. i think they have eight price heights -- hikes in for the rest of the year. tom: you have the likes of jay powell coming out to say that he will not allow inflation to become entrenched here as a result of the supply chain and repriced by the markets. talking of them markets, in terms of the nasdaq, you did see a drop by almost 3% by the end of the session. part of that was that by bit
with what francine was pointing to. the european is up at least for the first few seconds of the open. they are making up the gains in the first open. the ftse 100 up by 5%. we have the spanish ibex ending 0.2%. let us have a look at what is going on in some of these asset classes futures. u.s. futures gain for points. the u.s. 10 year yields gained a little bit did we did get up to 180 briefly yesterday. i highlighted this, gaining 1.6 percent around some reduction in brazil. bitcoin just coming back a little bit, gaining about 1.3%. francine: let us also get deeper
into some of these sectors. i love my terminal because if you look at some of the move from the terminal, you see the fed moving more aggressively from this tightening cycle. that will move a lot of sectors that we are watching today. travel and leisure leading the gains. this is after we saw the selloff yesterday. at the end of the trading day, there was a bit of banks paid i am getting a lot of choked up when i'm talking about banks. they are waiting for direction. we have the cpi inflation tomorrow. tom: nokia coming out with outbreaks of guidance for the full year of 2021. some of the marginals -- margins and gains of 5.6%. commerzbank, this story around cerberus cutting its stake of 7
million euros, the state selling 21 million shares. the u.s. buyout company is deutsche bank. this is putting pressure on the german lender. man group, the biggest public hedge fund in the world. the hedge fund specifically focused on the crypto space, gaining 1%. early stages, but others are a bit more skeptical. they are discussing this with man group up. let us get the bloomberg business with leigh-ann gerrans. reporter: retail sales jumping in december. the british retail console group 4.6% last month compared with december 2019 as people flashed up on christmas.
they declined less sharply than germany, france, and italy despite growing omicron infections. singer is being acquired in a deal valued at $11 billion. the purchase is expected to make the publisher of grand theft auto the leader in a $93 billion global gain market. >> we are thrilled to be combining with the team at zynga. we are excited to join our mobile games division with zynga. reporter: and airbus has raised a warning about its outlook, pricing the spread of omicron in china.
the production has not been affected, but the forecast is still looking at the corporation. china is airbus's biggest market, accounting for 23% of its debt deliveries last year. -- jet deliveries last year. francine: there is a lot going on. i was looking at -- this would be the highest inflation numbers we would get. the highest in four decades. you're also spending a lot less because it is unlikely that you have the wage. tom: we are looking at those wages from the fomc and coming out with this opinion piece about what he sees as entrenched inflation. that is going to force the hand of the fed to step up rate hikes beyond what the market is currently pricing.
let us bring in kristine from art like markets team. let us start with what we heard from jay powell committing in his testimony to the senate banking committee is that inflation does not become entrenched. the cpi data tomorrow will be crucial. reporter: i think that really sharpens the focus on that number because it is all about inflation. it is clear what the fed is responding to. we saw the market reaction to the wage data last week, and the recent comments from the federal reserve officials focusing on the fact that they want to be responding to prices more than anything at the moment. markets are finally starting to hear that, getting on board before the rate hikes that the fed is telegraphing, but that might not even be enough with the print tomorrow. francine: traders cannot protect
themselves and expecting the higher wage growth for much longer. reporter: given the level of expectations to markets, we could potentially see that pricing ramp up even more. i would like to point out some incredible announcements from our colleagues, pointing to the model that if you base it on the fed forecast for unemployment and inflation, it would be seeing a potential for six rate hikes this year. we only have pricing for four this year, and there is room in the markets to make up for that. tom: talk about the stories in the equity markets with the bit buying. how much conviction is there behind that at this point? kristine: while there was a rally in the tech sector, which is the main focal point of the rally this year, and question surrounding sustainability,
there is a little bit of expensive quality that we saw. health care leading that gain. we are seeing that being reflected in asian markets as well. meanwhile, consumer sentiment is lagging here, and it points to the expensive quality in this rally consistent with the idea of faster heightening -- rate hiking. francine: we have these charts in terms of what is priced in chart -- rate hikes. is it optimistic about the recovery? kristine: there really is still that omicron risk of the markets. that is the reason why markets have been quite low in the fed rate hikes despite the fact we have heard that there are various messages from jay powell and the rest of the fomc seeing their big focus is inflation. they wants to get ahead of this
because they are a little bit behind the curve. markets are quite slow, and it is a rare occurrence when markets are behind what we are hearing from central banks. tom: what about the technical glitch of the lme? kristine: i lost speculation over that, but it does look to be eight technical glitch -- a technical glitch. we got some eight -- data earlier this week that the levels are trading down. that shows you a decline in activity. the prices of metals have been skyrocketing as of late. francine: it reminded me that $60 billion of contracts have changed hands. kristine aquino there with us. coming up, more on the markets.
12 minutes into european trading day. we get the cpi figure tomorrow. if you look at markets today, there is a bit of dip buying in european stocks. swaps is something we need to watch out for today. that really indicates that it will be higher by the year, and we will be building the increase with prices for equities taking place. stocks ended on a high note after a volatile session. the nasdaq ended in the green. we have calls from our next guest that there is room to run. one investor sees that continuing this year is emmanuel cau. he is the managing director at barclays. are you worried that the fed
might have to do more for inflation? emmanuel: good morning. we are seeing a hawkish repricing from the fed. we are seeing the rate markets going up in value, and there are a few things we have had in the last couple of days. we are very much above the market amid the omicron variant. getting a bit more optimistic from the sustainability of the economy from covid. we have stronger growth expectations. we have the fed dubbing down on this, and we do believe that this shift towards normalization
, that will bring a higher volatility. we are seeing the equity markets can shrug off the volatility. in the long-term, we talk about clear rates being excluded from the pricing, and from here, we still believe we have financial conditions for more in the equity markets. tom: i want to keep on the question. we are seeing fixed income, and we have a chart on this. the numbers are remarkable. the charts are pointing out that the u.s. 10 year is at its worst since 42 years. i note your effort -- i know your expertise is across the markets. as the core of the comments made
earlier suggesting that outflows are starting to peek? emmanuel: it makes sense for investors to move away from fixed income in the bout of liquidity. i do not think we are going to go from extremely hawkish. they're not trying to clear inflation at any price. at the same time, we stop them from extremely minuscule amounts of liquidity. a lot of this is good to come on the bond markets, and some longer-term inflation expectations is up to 2%. we do not see the bond market having to sell off.
volatilities remain high, but we are seeing signs that this might come back. francine: the correlation from bond markets and equities does not seem to match markets. we just have to get used to it? emmanuel: we need to get used to higher price volatility. even if you have a bit more selloff along the curve and even if inflation goes down this year, it will have to see it at the end of the year. we expect to end the year -- financial depression is not the companies. the basic financial conditions are acting.
equities need to get something in to support them. that is why we are seeing earnings will be key to liquidity was the outcomes of fixed income. the equity market was higher volatility. tom: emmanuel cau will stay with us. he is the head of european equity strategy at barclays. what does netflix and -- have in common? they are on bloomberg's a list of 50 interesting companies to watch this year. this is bloomberg. ♪
tom: welcome back to the open. we are 20 minutes into european trading day. gains across the benchmark of 1%. technology is the clear outperforming sector. yesterday, the nasdaq sold off and rebounded. technology is regaining 2.4% across the markets. the analysts at bloomberg intelligence have compiled their
list of 50 companies to watch in 2022. argan and ne-yo are pushing towards their transition to green trend -- green energy. to tell us more about the picks and why these companies were chosen, it is our analyst at bloomberg and emmanuel cau, our guest from barclays. take us through some of the top picks that you and the team have picked out. reporter: what we did to come up with this list is we surveyed our analysts around the globe looking for unique and intriguing developments that would be game changers. we started with focus ideas, which you will member are
differentiated uses with catalysts. they were oriented to this year. they do cover a number of themes that leave their way through. pandemic recovery, electric vehicles, and several that are companies that have restructuring ideas or new management that we think will bring change. francine: we want to get emmanuelle's thoughts on this. tim: this is under the category of new innovation and category change. they are pushing ahead with noncombustible's, and we think that 2022 is the year that regulatory players come to value in the u.s. tom: we are not going to ask your views on individual names,
but on what barclays is following, is there anything that stands out that you think we should be highlighting? emmanuel: first of all, there is a changing element with higher rates of certainty. it is one of liquidity. more differentiation that we are seeing, and the key earnings given the changing macros. we want earnings to go up, and these valuations -- we are seeing reopening of basic materials. we see the vaccines breaking the link between cases, so we think that leisure, energy, are going
to capture some of the sentiments of demand. with mattel, it would be the supply chain. francine: i was going to ask you about the supply chain in china. it seems like it will be more difficult to make money with equities in 2022. how do you deal with the supply chain and china's economic prowess? emmanuel: we think supply chain nominal station -- normalization will be key, but there are policy adjustments with some easing's on the supply chain crunch. reopening will resolve the supply issue and influence demand which has been struggling. there is potential for chinese growth among the any factoring
-- manufacturing. in the event that we have been talking, we support the activity. finally, we like productivity. we think the market evolves was as a way to do and pick the winner could attract investors over the 10 years. it will improve the efficiency of the business and esg which will transition quicker. we think esg will be a group to look at bold moves. tom: emmanuel cau, head of european equity strategy from barclays, thank you for your
francine: welcome back to the open. 30 minutes into european trading day. here are your top stories. traders increasingly bet on four rate hikes this year. the u.s. and russia vowed to keep talking to reduce tensions. little progress was made in geneva. elevated high risks from market valuations. we will speak with the second deputy governor of the bank of france in just a few minutes. with the cpi tomorrow, it could
be up 1.7%. tom: do they need to reprice? or will bill dudley say, you could see five or possibly six rate hikes this year. with that cpi data on wednesday, it will enforce that view. the markets will have to play catch-up. we saw the nasdaq fall almost 3% before recovering, ending the day in the green. across the benchmark, gains of 0.7%. dex is up 125 points. and the cac is up 52 points. let us have a look at how things are playing out sector by sector.
the handoff from the united states. technology gaining 2%. the real impacts across the markets and what it means to be in a higher rate environment. the u.s. 10 year and the five year, there is some differentiation today and the flattening of the yield curve. at the bottom are two sectors in the red. we focus on what is happening across these markets. we will get another update for you. that is the broader picture. francine: a warning from a high risk of market valuation. this is ahmed and uncertain time for the european this is -- this is amid a certain -- and uncertain time for the european economy. joining us now is sylvie goulard .
thank you so much for joining us on bloomberg. a number of questions on the longer-term trajectory and what we do on inflation. overall, what do you see a correlation between central banks and markets on asset prices? sylvie: good morning and thank you for giving me the floor. it is important to explain that we take a picture of the french findings every six months. the risks, we put at the top this time. it is not an exceptional one. we know we have supports in financial conditions. it is something we decided last year to make sure our economy can resist and fortify financial conditions of existing valuation markets. we do not consider that as
something that is not under control. we absorb -- observe that when there is risk, there would be a downturn that could use that leverage. the annual picture shows we also have structural issues before the crisis, and they are still at the top of our agenda. climate, cyber, high debt. tom: what are the systemic risks? how do banks around the world adjust to those as they return to restrictive policy? sylvie: we know that climates transition is going to require a huge investment. the price of some assets will be changed with all of the
transition from a carbonized economy to a greener one. this is one thing we are looking at carefully from a financial stability perspective. we organized last year, our bank was willing to organize a green senses in 2022. we will not deny that such a change will have an impact on asset prices. during the weekend, we observed this, but the conditioning is also an opportunity for business. it will also create growth and returns for company engagement. francine: can you talk us through your main concerns for asset prices? what could be done to medicate
-- mitigate the high-risk? sylvie: it is not a matter of worry that we need to see. in terms of this year, it will be important in terms of monetary policy. we will observe carefully what the fed is going to decide, but the ecb will go its own way, taking into account the situation of the euro area. tom: one concern you highlight is the leverage of investment funds. how does that fit into the historical context? how concerned are you? sylvie: try to learn from the crisis, and what we observed at the beginning of the crisis made us aware of potential risks. these are complex issues that i do not want to sum up too much,
but for people who want to look at our report that was published yesterday and is online at the banque de france, we look at all of the leverage used by investment funds. we will see what is going to happen. we do not even know how this inflationary situation will evolve. francine: when you quantify this at the crossroads, it is a tricky market for financial banks of loss over the fact -- past five years. whether over a policy mistake or a shock to the system. sylvie: one always has to be prudent in this job.
what we saw in march 2020 was a specific moment where we had no idea on how big this would be. we did our best. we worked with central banks and governments. if you look at two years back where the virus was unknown and where we are now, we managed to prove we tackled this challenge. we are not now in a moment which is worse. i would like to insist on the structural issues we mentioned. we also mentioned cyber in this paper and debt because we are looking at the print situation. you need to have some margin to maneuver when you are in charge if there were something new to come. nobody knows which kind of
crisis. you mentioned before the geopolitical situation, so we need to have the french debt under control for the next generation. tom: the need to have that resilience. one of the key things that central banks are wrestling with his inflation. are there risks that the ecb is behind on this? sylvie: we have been fighting to push inflation up for years, and it was not easy. we still have all of the structural elements. you may remember some years ago that this is what was considered an important element, so we observed the huge magnitude of inflation going up. we will take all necessary
measures for christine lagarde to respect our mandates. the target is around 2%. we will do what is necessary. i am not in charge of monetary policy. that is my governor. she will have more to say on that. francine: going back to the structural problems you mentioned, we talk about debt with climate change. is there worry that markets and bond vigilantes will latch onto this? sylvie: i will not deny that we need investment. i insist it is a change that concerns everyone from companies to households, changes in our behaviors. the good news from glasgow, the cop 26 in november is that there
is greater awareness among financing institutions, a lot of advanced initiatives of the private sector to move to net zero, so we will see private investment. public authorities will need to take their part, but i remind you that a large part of the funds created after the pandemic in europe, the next generation of eu public -- the new debt issued is dedicated for one third greening, because we do not just want to restore confidence to go back to the pre-covid situation. we want to look to the future
and this is also the amount we will see italy, france, all of the countries benefiting from decarbonizing assets. tom: you also highlight the cybersecurity risks. what are the gaps that exist now in terms of the risks and preparedness of financial institutions when it comes to private security? sylvie: we insist on this gap. we are happy and the reason i can participate in your meeting this morning, we are happy that digitalization -- we made it not only because of the pandemic, but also with the pandemic we are less reluctant to use digital for medical appointments.
we should also see the public side of all this. we know that society is digitalizing more and more, but of course it creates risk. what we have observed is that some companies and investors are aware. last year we organized for the paris financial center, a large exercise where we are trying to get used to get used to the risk and we check with public authorities that the institutions are well prepared. they are not 100%. francine: today is also the first day where we have a new bundesbank president. are you expecting to him to be more hawkish than his predisaster -- predecessor? sylvie: we should stop putting the blame on the germans. we all have the same treaties and rules, and there is a
tom: welcome back to the open. 46 minutes into european trading day. technology is the standout after that hand off of the u.s. tech sector gaining to present -- 2%. we try to assess ahead of that important cpi data. one is the corporate story. delivery hero, that stock is surging. they expect to be profitable. that is the food delivery companies in the second half of this year. let us focus on the macro with government bonds. the amount of bonds hitting the market as well in 2022, that is
the central bank's plan to start their balance sheets flooding the market. for more on the market impact, we are joined by our credit markets reporter. why are bond markets particularly at risk of debt supply this year? reporter: the bottom line is you are going to have a lot that is adjusted with private investors. the reason is that the central bank is going to be tapering there bond buyback programs. to the ecb in particular because the euro area is going to be flooded with billions of dollars worth of bonds. at the end of the day, you are going to have more bonds that private investors will have and less aggregate demand. francine: is there danger that major markets will not be able to factor these larger offerings?
reporter: investors have been complaining that central banks have been buying them instead, so the problem is that as a manager, you cannot buy a bond that will muck down. you are going to be hearing a lot of people saying that there needs to be a change, so the bonds they bite need to be less sensitive to changing yields. tom: the boj is on one side and the fed on the other. reporter: it all comes to the relative value on this one. at the start of the year, we saw a number of companies coming to the markets to raise money before yields get higher, and we have seen a lot of demand for this. we have built up cast -- cash balances over the past year. it's depends on whether the
trajectory of the yield will be going forward. if we are sure that yields will be going higher, evaluations will be decreasing. francine: thank you so much for joining us. that is a fantastic story and one of our most read stories on the bloomberg terminal. coming up, the u.s. and russia continued discussions in geneva. we will talk sanctions and russia's next move. this is bloomberg. ♪
francine: come back to the open. 52 minutes into european trading day. we see the european stoxx 600 gaining a few percentage points. the u.s. sees the nasdaq a little bit higher after dip buying. top u.s. and russian diplomats have agreed to keep talking even after the first security discussions did little to settle differences. they did not do much to resolve their differences, but it does seem like russia has mellowed a little bit. maria: to some extent, this was a classic. no one was expecting a
breakthrough, but it was not a break down either. everyone is still engaged. for the time being, there are still 100,000 troops stationed at the ukraine border. when you look at the content, it is interesting to note that russia did say the deputy foreign minister, our plan is not to invade. they are just doing military exercises, but they are concerned about others stepping into what they believe is the sphere of influence. in terms of the content, not a lot changed yesterday. tom: what are we hearing from nato? maria: nato is really the core of the tensions here. a lot of this has to do with russia being concerned that a lot of this could be a threat to russia's sovereignty. on the counter side, you could argue that this is a
manufactured crisis by vladimir putin. ukraine is not joining nato and has no plans to over the short term. the thing i would note is that yesterday, the head of nato did say, i think it is still possible to get a deal with russia. if they stay on this path, it seems to be diplomatic, so we can get a deal that avoids military escalation. francine: we also more the death of brussels and i imagine the city will take time to mourn what devens has achieved. maria: yes, very sad news. the head of parliament, david sasol he passed away last night. he was well-regarded in brussels. he was always on the lookout to make a compromise on social
issues and this was a big surprise yesterday. everyone was very shocked but also sad about the news. tom: thank you, bloomberg's maria tadeo on the ground in brussels. that is it for the european market open. surveillance early edition is up next. we are still holding on to the gains of 0.6% across the european benchmark. technology as the top of the pack and it has come off of highs. 1.7 percent after that hand off from the u.s. the yield is flattening as well and continues when you look at the tens and the fives in the u.s. we are looking at the u.s. cpi data stateside on wednesday. the market pricing in
>> the peak with omicron is probably happening within our midst. we should be in a better position. >> [indiscernible] >> my best guess is that they need to do [indiscernible] >> this is bloomberg surveillance: early edition with francine lacqua. francine: good morning, everyone and welcome to "bloomberg surveillance: early edition." fed hike
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