tv Bloomberg Markets European Close Bloomberg October 17, 2022 11:00am-12:00pm EDT
>> monday, the 17th of october, risk on across europe. bright green screen. we have sterling higher. the euro higher as well. risk-on. how long does it last? countdown to the close starts now. announcer: the countdown is on in europe. this is "bloomberg markets: european close" with guy and alix steel -- guy johnson and alix steel. guy: stocks are higher in europe. stoxx 600 close to 400.
off by 1.8%. the bond market seeing a surge. the gilt market is bouncing back strong. we are around 356 now. how much further could that move go? the bank of england is expected to hike aggressively at the next meeting. we come to what is happening in the equity market in more detail. we talked about credit suisse. the stock is trading 452. we have potentially abu dhabi investing as well. the stock has bounced on the back of the news. alix: a powerful rally. almost 100% of stocks in the green. 20th century fox down a percent. rupert murdoch is thinking about joining. investors not thrilled about the move.
it is helping the equity market moving headwinds. the 10 year yield is down. stocks get a nice boost higher. earnings from banks have not been terrible. bank of america was up 6%. the dollar is legal but i want to point out where it is not. that is when it comes to begin. at one point, we were a whisper away from 150. they are still looking at 2.8% inflation, the highest in decades but still not good enough. monetary easing will continue putting pressure on the yen. what will happen when it crosses 150? i am watching that for the future. guy: we are watching the house of commons. we will hear from the u.k. chancellor, the new chancellor, jeremy hunt. we are expecting him to speak this hour.
this morning, he laid out his plans, scrapping the tax cuts, cutting back on support for households, and doing away with the energy package, not completely, but a large part of it that liz truss put in place. >> the most important object of for our country right now is stability. governments cannot eliminate volatility in markets, but they can play their part, and we will do so because instability affects the prices of things in shops, the cost of mortgages, and the values of pensions. there will be more difficult decisions i am afraid on tax and spending as we deliver our commitment to get that following as a share of the economy over the medium-term. guy: the chancellor of the exchequer. let's go to westminster where we join lizzy burden.
the chancellor seems to have stabilized the situation for now. will he have to do more for the stability to persist? >> there is still a 40 billion pound hole in public finances he will have to plug. the analysis is this is a step in the right direction but liz truss has done much to damage -- this urgent question westminster right now. alix: we lost you for a moment. along those lines, in terms of more to be done, do we know what kind of spending cuts could be coming down the road? lizzy: [no audio] alix: it looks like we lost lizzy. i'm not going to tempt fate anymore. there is still a gap. bloomberg intelligence estimates
36 billion pounds. there will not be spending cuts. how do you do that in a cost-of-living crisis? the energy help will end in april of 2023 but has to continue for struggling households in some capacity. guy: it will be interesting to see what the opr will say about that. the u.k. government may have realized it cannot afford the expensive energy package announced. i wonder whether other governments will find the same problem in europe. it will be interesting to see how the narrative develops. we are seeing a bigger effort on the continent to preserve the gas supplies that do exist, to turn down the thermostat. nevertheless, this will be an incredibly expensive package. governments might realize quickly as interest rates rise that they cannot afford it. that will be a huge challenge for europe this winter. alix: i wonder how much more
interest rates will have to rise based on the changes from jeremy hunt. thank you for joining us. a huge rally underway in the gilt market. on the 30 year, yields are down 41 basis points. how much more can the market rally on what we have heard from hunt? >> i think the market reaction is perfectly understandable and explainable. our economists have brought down expectations for what we expect to see in the next meeting. we think we are looking for a 75 basis point hike. that means the bank of england on the back of the u-turn we have seen, but the bank of england would need to do in the immediate future is less than what was feared.
all of that perfectly makes sense. that said, we need more details for the market to stabilize at these levels. guy: do you think the bank of england can conduct qt in this environment? >> i think it is up to the markets. it is still up for debate. conditions from a week ago to now have improved. there is a fairly complex arithmetic to deal with. we are not in clear waters yet. that just means we need more details to come on the fiscal front and to be focused on what the bank of england would say in the next meeting. alix: especially when there were problems before this. you mentioned the bank of
england. how much do you think they will be able to hike? many were looking at 100 basis points. do you think they can hike less? what do you foresee? >> our economists expect 75 basis points. alix: do you think that is priced inappropriately -- in appropriately? >> i think it is much closer to being priced in at this point. guy: what lessons have you taken away from the last 10 days? what lessons have we learned from what has happened in the u.k. that we can apply to other bond markets? >> it is important when there are significant policy changes on the fiscal front, the policies need to be run in conjunction with each other. in the immediate aftermath of covid, we saw policies on fiscal and monetary were consistent
with each other guiding towards the same objective. it is important to listen to feedback from markets. i think the key lesson is when there is a significant policy diversions from different policymakers, that spells trouble and markets are quick to point out. i think it pays to listen to the feedback coming from the markets. alix: it feels like the theme over the next year will have to be central banks and governments not working together and governments will have to be putting money into the pockets of people and dealing with high energy costs versus central banks continuing to hike to fight inflation. it feels like those two things are against each other. >> that is the essential conflict in the markets and facing the global economy. policy accommodation is easier. the growing of the policy accommodation on the back of the
massive accommodation is going to be challenging. this is for the markets to figure out how much policy accommodation, and what form, all of that can play out. it is by no means an easy task ahead for the central bankers or market participants. guy: we appreciate the time. thank you, sir. coming up, more on the u.k.'s u-turn. the impact the shelved tax cuts will have on u.k. equity names. then patrick spencer joining us next. this is bloomberg. ♪
to expect. >> it is more of a slow car crash. >> if you start thinking about what is going on in the u.s. economy, we are in this vacuum that people don't know what to do with. >> the fed is trying to hike. >> this is presenting a challenge. >> it is more about the fed. >> it is the uncertainty that keeps weighing on investors. >> i think progress is taking longer than we thought. guy: some of our guests weighing in on the uncertainty looming over markets. our question of the day going to the heart of that. what is going to be the next crisis? we seem to have dealt with the u.k.'s but there will be another soon. patrick spencer, vice chair of equities, joining us now. the u.k. has been through a turbulent few days. maybe jeremy hunt is starting to stabilize that situation. as you look at what equities are going to do next, how worried should investors be? patrick: you have to remember we
had a horrible start to the year or since the beginning of the year. the u.s. is down 25%. the u.k. has been a relative harbor of safe investment. you have had a lot of damage already done in equities. you are discounting a recession, possibly worse. that does not necessarily mean that will happen. what you're seeing interesting ly in the u.s. is the fight between the macro and the micro. everybody is worried about macro and rising interest rates and inflation as a result. but if you look at the earnings numbers, they have not been bad. we just started the third quarter and are beginning to print those but the numbers have not been bad at all. alix: good point. we were talking about that earlier. i wonder if the pain trade
earnings numbers come in ok, like we have priced the bad stuff in the pain trade is for equities to go higher. patrick: funny enough, anytime the 200-week moving average, the last line of resistance and the bear market, every time that hits the 200-week moving average which we saw around 3600 on the s&p, and he was telling me that has only broken three times in the last 50 years. every time it has bounced off nicely which it is doing today. the only time it has not done that was 1974, 2001, and 2008. in 1974, inflation was running at 10%-plus. we are seeing that roll over from 8% downward.
2001, p/e multiples, they were 16. we are only 8-9 in the u.k. in 2008, we were on the verge of economic collapse. i don't compare any of those situations to today. you can see a nice move on the upside given there is so much negativity in the market at the moment. guy: do you think there was a moment when you could have put money to work in the u.k.? do you think that moment is still open? given the huge swings in sterling and the gilt market, have they opened opportunity in the u.k. or do you want to avoid the u.k. in its entirety? patrick: fantastic question. you are getting 4% yield, almost equivalent to what you're getting in gilts now.
hunt made the reversals of truss economics this morning. you're getting a 4% yield while you wait. you have eight or nine times on the ftse 100 and slightly higher on the ftse 250. if america begins to pivot on rates next year, and that is still a big if, but we are closer to the end of interest-rate hikes than the beginning, and if you start to see the same situation or get resolution in the ukraine, suddenly, the u.k. looks interesting. given a lot of the old economy and value stocks are outperforming growth, i think the u.k. looks interesting. alix: if we have higher corporation taxes, what does that mean for the ftse 250, for example?
patrick: that is a great question, too. you've got to remember these tax increases which have been rolled over by hunt or reinstituted this morning, they don't kick in until april of next year. you still have a few months. their generous capital allowances in the u.k. at the moment so there are very attractive tax loss carry forwards. that is not changing until april. a lot of the reasons interest rates were going down, yields were going down, is because of the fiscal responsibility and the difficulty it might present to an economy. if you're going to see higher rates, that means the consumer might be in better shape. yields are following this morning on the back of what hunt has been doing.
the consumer might be in the best position. also, corporate borrowing for corporates will get cheaper. i would say it is a headwind, no doubt about that. but given you have a market that trades on eight or nine times, i think a lot of that is built into the market in my mind. alix: appreciate that very much. patrick spencer, thank you for joining us. this is bloomberg. ♪
a $99 in home router. as bloomberg first reported, the service will rival t-mobile's plan that launched in march. they have been ordered to stop selling lng to assure its own supply for the winter. they have been selling lng to europe. the deficit likely spurred the move by beijing. credit suisse has agreed to pay $495 million to settle the largest remaining case related to its role in selling residential mortgage-backed securities in the u.s. that contributed to the 2008 financial crisis. the swiss bank said on monday it is fully provisioned for the payment which will resolve claims tied to more than $10 billion in securities.
that is your bloomberg business flash. guy: thank you very much. let's talk more about credit suisse. we have the story on the terminal talking about the idea we could see abu dhabi and saudi arabia investing money into credit suisse. the bank is trading on a cheap book value. it has traded on that for a while and the stock has gotten even cheaper. the danger has got to be further litigation, further downgrades, ongoing problems in terms of the ability to make the transition on the 27th. yes, it is cheap but it might be cheap for a reason. alix: a garage sale is what one analyst called it. even in the event of a garage sale, the company would still need to raise 3 billion to plug
the hole in capital. even if things go well, there is still a multibillion swiss franc hole that would need to be filled. that will not be easy. guy: you look at what regulators will want to see as well. color amongst regulators for this bank -- tolerance amongst regulators for this bank is lower. this bank will ultimately become a wealth manager. it has been the direction of travel for a while. the process has been accelerated. alix: everyone wants to be the wealth manager. look at what goldman is doing recombining businesses to capitalize on the wealth management unit. if everyone is doing it and wants to be good at it, at what point does it max out? that is why banks like goldman wanted to go down market to get
regular people like me to make deposits. who is going to be the best? there is only a certain amount of wealthy people in the world. guy: the numbers during the qe process have grown dramatically, so this is still a huge pool they are swimming in. talking of wealth, let show you european markets. today, that wealth has grown. all trading strongly to the upside. there is a translation effect that will mean the ftse 100 does not perform as well. the pound goes up. you translate the earnings story. you effectively downgrade the revenues. as a result, the ftse 100 does not perform as well. the dax is up nearly 1.7. we are north of 6000 again. very strong session for european equities. there is a long way to go. it feels we are just bouncing off the recent lows.
how much further could the rally go? morgan stanley thinks it could go away for u.s. equities. the closest coming up next. more details in a moment. this is bloomberg. ♪ millions have made the switch from the big three to the best kept secret in wireless: xfinity mobile. that means millions are saving hundreds a year with the fastest mobile service.
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guy: hey bounce for european equities as we come into the close. bright green, strong markets on the continent. you have the dax up nicely. cac up nearly 2%. the ftse nearly up by 2%. really strong markets on the equity front. let's break it down and give you an idea of what is happening with the session as it has progressed. a really nice move through much of the day. started with positive news out of the u.k. providing a catalyst. also technically, if you look at comments over the weekend and what the charts look like, it
may have been ready for a bounce after the big move last week to the downside. we basically closed the gap of friday. we've had a big move in the u.k. gilt market. 34 basis points. three point 56, 3 .57 is where we are trading now -- 3.56, 3.57 is where we are trading now. the politics of the day have not moved the needle much. the pound has rallied strongly. everything is in positive territory from a sector point of view. travel and leisure has done well. a positive update from live tons up -- lufthansa. bottom end of the market, you have groceries, energy, chemicals, health care. the defensive end of the market underperforming.
definitely a risk on market in europe today. every single sector in positive territory. earnings season is kicking off. the broadcaster potentially looking to sell a stake in the production business to take advantage of the strong demand for content. that stock rising nicely. lufthansa talking about the fact it is seeing strong demand as well. i.g. was part of this story as well. we are seeing very positive updates from european carriers. credit suisse bouncing today. a number of reasons. you potentially have the head of the eye bank stepping aside. interest from abu dhabi and riyadh. will that come to something? we will see.
alix: let's get more on that with maryam. we talked about areas of saudi arabia being interested. how many bidders might there be to put cash into credit suisse? >> it is still unclear how many the bank needs, they could do with outside investments. it has been reported they were seeking out investment to help alleviate job cuts and retain talent. that has been key for the investment bank. at the moment, it is still to be decided. we have heard of interest from investors coming from middle east nations. credit suisse already has middle eastern investors so it would not be a grand departure from the current investor base.
guy: we have to leave it there. the u.k. chancellor has got to his feet in the house of commons. let's listen to jeremy hunt. what's the needs of fema formal -- >> the needs of the most vulnerable. moves were made to protect the budget when other budgets were cut. i want to be completely frank about the scale of the economic challenge we face. we have had short-term difficulties caused by the lack of the obr forecast alongside the many budget. there are inflationary pressures around the world. russia's unforgivable invasion of ukraine has caused food and energy prices to spike.
when the government needs to change course, we will do so. that is what i have come to the house to announce today. in my first few days in the job, i held extensive discussions with the prime minister, cabinet, colleagues, the bank of england, the head of the debt office, treasury officials, and many others. the conclusion i have drawn from those conversations is we need to do more, more quickly, to give certainty to the markets about our fiscal plans and show through action and not just words that the united kingdom can and always will pay our way in the world. we have decided to make further changes to the many budget immediately rather than waiting until two weeks to reduce unhelpful speculation about those plans. i am grateful for your agreement
on the need to give early markets a brief summary this morning. i welcome the opportunity to give this house details on the decisions now. we have decided on the following changes to support confidence and stability. the prime minister and i agreed yesterday to reverse almost all the text measures announced in the growth plan three weeks ago that have not been legislated for in parliament. we will continue with the abolition of the health and social care levee, the increase in the annual investment allowed to one million pounds and the wider reforms to taxes but we will no longer be proceeding with the cuts to dividend tax rates, saving around one billion pounds a year, the reversal of the working reforms, saving around 2 billion pounds a year. the new battery shopping scheme saving a further 2 billion pounds a year or the freeze on alcohol duty rates saving around
600 million pounds a year. i will provide further details on how those rates will be upgraded. >> sorry, chancellor. carry on. >> i will provide further details on how alcohol duty rates will be upgraded shortly. the government is committed to cutting the basic rate of income tax to 19% in april of 2023. it is a deeply held conservative value that i share that people should keep more of the money they earn which is why we have continued with the abolition of the health and social care levee. at a time when markets are asking serious questions about our commitment to sound public finances, we cannot afford a permanent discretionary increase in borrowing worth 6 billion pounds a year. i have decided the basic rate of england tax will remain 20% and
do so indefinitely until economic circumstances allow it to be cut. taken together with the decision not to cut corporation tax and restoring the top rate of income tax, the measures announced today will raise around 32 billion pounds every year. the third step i am taking today is to review the energy price guarantee. that was the biggest single expense in the growth plan and one of the most generous schemes in the world. it is a landmark policy which i pay tribute to my predecessor for and will support millions of people three difficult winter reducing inflation by up to 5%. i confirm today that the support we are providing between now and april next year will not change. but beyond next april, the prime minister and i have reluctantly agreed it would not be responsible to continue exposing
the public finances to unlimited volatility in international gas prices, so i am announcing today a treasury lead review into how we support energy bills beyond april of next year. the review's objective is to design a new approach that will cost the taxpayer significantly less than planned while ensuring enough support for those in need. any support for businesses will be targeted to those most affected and a new approach will better incentivize energy efficiency. the remain, i am afraid, many difficult decisions to be announced in the medium-term fiscal plan on october 31. when i confirm we will publish a credible, transparent, fully costed plan to get debt falling as a share of the economy over the medium-term, based on the judgment and economic forecasts of the independent office of budget responsibility. i would like to thank the obr whose director i met this
morning and the bank of england whose director i have met twice. i fully support the vital, independent roles, both institutions play which give markets, the public, and the world confidence that our economic plans are credible and rightly hold us to account for delivering them. i also want more independent expert advice as i start my journey as chancellor, so i am announcing the formation of a new economic advisory council to do just that. this counsel will advise the government on economic policy with four names announced today. rupert harrison, former chief of staff to the chancellor of the exchequer. and three others. mr. speaker, mr. speaker, we
remain completely committed to our mission to go for growth but growth requires confidence and stability which is why we are taking many difficult decisions starting today. we do need realism about the challenges ahead. we must never fall into the trap of pessimism. despite all the challenge we face, there is enormous potential in this country with some of the most talented people, three of the world's top 10 universities, the most tech unicorns in europe, one of the world's great financial centers, incredible strengths in the creative industries in science, research, engineering, manufacturing, and innovation. all of that gives me genuine optimism about our long-term prospects for growth. but to achieve that, it is vital to create the stability on which future generations can build.
the reason the united kingdom has always succeeded is because in big and difficult moments we have taken tough decisions in the long-term interests of the country and in a way that is consistent with compassionate, conservative values. that is what we will do now. i commend this statement to the house. guy: you have been listening to the u.k. chancellor jeremy hunt announcing the details of policy changes he confirmed this morning. if you would like to continue to follow what is happening in the house, the concert lead duessel on your bloomberg terminal -- you can certainly do so on your bloomberg terminal. where were going to do next? we are going to take you to the paris car show. we will take a first look at the hopium car and where it goes
angel: you are looking at the principal room. the bank of american chairman and ceo brian moynihan at 2:30 in new york. this is bloomberg. keeping you up to date with news from around the world, here's the first word. the chancellor of the exchequer jeremy hunt ripped up what is left of liz truss' controversial program scrapping tax cuts and removing support for household energy bills in an effort to restore order to public finances. tori robles -- tory rebels are holding talks on how to oust the prime minister.
local authorities say four people were killed and buildings damaged. it is the second strike on the capital in week. european union foreign ministers agreed to trade around 15,000 ukrainian personnel and signed off on an additional weapons financing. 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. i am angel feliciano. this is bloomberg. guy: thank you very much. the paris auto show is back after a four-year absence. the focus now is clearly on the transition to ev's and alternative forms of propulsion. let's talk about some of those alternative forms of propulsion. the french carmaker hopium unveiling the high-end fuel-cell
car. the ceo joins us now. a lot of people are focusing on electric vehicles. you're going down the route of hydrogen. why? >> i truly believe this is the one solution. i was racing hydrogen race cars for more than seven years so i got to understand the technology and understand hydrogen is the future of mobility because of the performance in fact it is much less sustainable than ev's. alix: china has been betting on hydrogen fuel cell technology for a while. the problem is scaling up. how effectively can you scale the technology up? >> i think it is because we
started from scratch. that allows us to completely create a new generation of fuel-cell systems that is integrated into the vehicle. we build the vehicle around it so it allows us a degree of optimization much higher than before. guy: there is not a lot of hydrogen infrastructure at this point. how big of a barrier is that going to be for buyers right now? >> it is a question i am often asked about. i'm confident about the hydrogen future. there cannot be cars without a passenger in their is no need for passengers without cars. we have an ecosystem. we want the whole hydrogen ecosystem to thrive.
we are talking with different partners for distribution for heavy mobility and i think it complements the hydrogen infrastructure. alix: do you think there is the will to change infrastructure on multiple fronts? if you're changing it for ev's, you also have to change it for hydrogen. what is the political will to get both done? >> we have seen a lot of new plans and a lot of new investment plans for hydrogen. i believe that can be cohabitation of two solutions. governments understand they cannot bet on only one solution, especially with the energy crisis. we would like to have hydrogen. i believe that is why they are putting so much money on the table to develop the whole ecosystem for distribution and
the user because they believe in technology. from my perspective, i think electric is only a transition but hydrogen can be the solution. guy: one of the challenges with hydrogen is making the hydrogen green. we can produce hydrogen, but it is not green. we produce it from other sources, natural gas, etc. when do you think we will have sufficient green hydrogen to make it worthwhile driving a hydrogen car in that vehicle to be by extension green as well? >> i think what is interesting is today nobody asks about where the electricity comes from that goes into the ev's. we know for the hydrogen equation to be right, the hydrogen needs to be produced green.
every project i hear about, it is about clean hydrogen. today, it is a small percentage of the hydrogen produced in the world. i feel we already have a lot of projections for the next five to 10 years. 2% or 5% of green hydrogen will become 10% and then 20% and 30%. that is the positive point for green hydrogen. it can only grow from now. alix: we appreciate your time. thanks very much. this is bloomberg. ♪
the nasdaq 100 hitting almost 4%. not just stocks, bonds are rallying, down about six basis points. it was lower by almost nine basis points earlier. tiny moves but we do have a stock and bond rally on our hands. i want to show you the p/e ratios of the stock market. this is where you are seeing the buying incentive. so much selling pressure. ratios are justifying that you should buy which explains why today's rally is not just led by tech names by financials as well. bank of america perhaps mostly responsible for the rally in the entire sector. goldman sachs as well. amazon, microsoft a poster child not just for tech but the s&p 500 broadly. guy: great stuff. quite a rally. kriti gupta, thank you. let's talk about what is going on the next 24 hours. today, david westin's interview with brian moynihan at 2:30 your
time. -- new york time. alix: jamie dimon on friday was talking about how consumers would run out of savings by 2023 so i would love to get his take on that. we get earnings out for netflix and united airlines. you have seen a powerful rally. maybe a relief rally. we got through the u.k. crisis. how do you buy on this kind of thing? next week is the big earnings week. guy: we have a lot to get through in terms of earnings. that will be a huge focus. you wonder if the market feels technically driven rather than fundamentally driven right now. alix: i love me some technical. always the fun part. that wraps up monday. now we get to tuesday. the executive chair will be joining "balance of power." it is going to be really good. also tune in on digital radio at
>> from the world of politics to the world of business, this is balance of power with david westin. ♪ david: from bloomberg world headquarters in new york to our television and radio audiences worldwide, welcome. -- in the united kingdom it as jeremy hunt has been laying out in detail the revised budget before parliament, something he summarized earlier today. this is part of what he had to say. >> taken together with a decision not to cut corporation tax, restoring the top rate income tax.