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tv   Bloomberg Daybreak Europe  Bloomberg  February 17, 2021 1:00am-2:01am EST

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e er 20 exercises to choose from. get gym results at home. no expensive machines, no expensive memberships. go to aerotrainer.com to get yours now. manus: good morning from dubai. i'm manus cranny and it's "bloomberg daybreak: europe." your top stories, treasury years whole nero one your high. factoring in the impact of a big stimulus package. wti hovers at $60 a barrel,
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freezing temperatures and a power crisis take out about a third of u.s. production and after about of confidence from the market, mario draghi takes the reins in brussels. 15 basis points in three days. is it something that should send flashing red lights across our screen? one strategist says so. i like what she focuses in on, which is the selloff resulting in a tantrum. she talks about a spike in real yields. that's the issue. good morning. annmarie: good morning. the email last week said the steepening of the curve, the rising of the break even, she says the market is already trading in post pandemic when economies are open. some people might find that a little bit uncomfortable.
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where i sit, society and economy is close. is it just a spike, or is it actually going to be a new trend? if it is a trend, what does it mean for equities? and also, do we need a little bit of a reality check. is it overblown? the last time we saw by niels hurt equities it was 2010. here is the breakeven, this is what you want to talk about, the highest since 2013. manus: absolutely. there was a tweet last night, real conviction is that we have the largest sensitivity ever. a word that will be much talked about. can you imagine their surveillance fast?
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translated into equity markets. >> let's see what's going on in equity markets. yesterday during the session we did hit a fresh record, a pullback on the close. the question is what does it all mean is we have the bond yields rising. the 10 year just below 1.3%. it's not just the u.s. treasury market which is leading the way. canada nine, australia eight. wti crude, $60. astonishing what is happening there in texas. millions without power and 3.5 million barrels coming off the market. we will get an update on that in about a half-hour. let's listen to some of the key market voices reacting to the reflation trade. >> the market is headed up,
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barring anything exotic and is happening to it, which has not happened yet. >> i would discourage people from taking on that marginal bit of risk on leverage. time is your friend here and leverage is your enemy. because leverage is uncontrollable. >> market participants have a feeling that inflation has a better chance this time than in the post-global financial crisis. annmarie: joining up -- joining us is a chief economist, great to have you on the program. let's start at the top, which is whether or not this is a spike, or is a new trend when you look at what is going on in the bond market? >> some of the bond market is playing the reflation story, so
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it depends a lot on inflation. we can't [indiscernible] the pass-through to the consumer is not new, because there is a huge slight remaining in demand. it does not suggest sustaining consumer prices. muck the monetary policy is another story. -- the monetary policy is another story. manus: i'm looking at what pimco are saying, it's going to top out at around 2% by the end of
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the year. is that the kind of number you think we could get to, and it to percent, with that be enough to duplicate other assets this year ? sylvain: a bit more like two percent of inflation in the u.s. is what we had in our scenario for this year. but more than 1% in the euro zone. this would not reflect the current bond market in the sense that it's not enough to change the monetary circumstance of the fed are the ecb. the fed has said more inflation than before, and it will probably vote more or less the same way.
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the ecb already said clearly that it will continue qe until march of next year. it will not taper before the end of 2023. the fed has given no information on that. maybe in order to calm down the bond market. annmarie: the bank of america fund manager survey said the only reason to be bearish -- there is no reason to be bearish, there is literally no reason to be bearish. my concern is that the market seems to be trading on the fact that economists, societies have already open. i'm sitting in london and that is certainly not the case.
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so what does happen when economies reopen? will that be a sign to sell in this market? sylvain: when the economies restart, more or less at the same time, the upn and the u.s. economy, will see a reboot of the major economies and that can lead to some volatility and distortion of the economic process in the market. but for now, we still have less demand in europe, in the u.s. than in china. there is less demand in the u.s. than 20 months ago. and we have more liquidity, more savings.
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it does not mean -- we have a lot more savings. manus: we will come back and dig a little deeper into this in just a moment. let's just finish off with one or two other things. you are a doubter of the economy super cycle. it's good to stand out in a crowd. why do you think it is not a super cycle? sylvain: sub price of some commodities went up. china is one of the main sources of demand for some metals.
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let's recover in full, and the economy must be balanced. it would be difficult for a super cycle to reopen in this context in the years to come. manus: it's always good to take a little bit of air out of the media's hype on a super cycle. don't worry, we will get to europe in a moment. let's get the first word news. >> the deep freeze that has forced the shutdown of u.s. refineries has left millions without electricity and could continue for days. rolling power cuts are being implement. authorities are warning used in residents to stay off the road and plunging temperatures after an ice storm.
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berkshire hathaway has snapped up shares in three new companies , verizon, chevron and insurance broker marsh mclennan. the iphone maker remains its biggest single stock holding. brexit is competing as -- with new york as the world's top financial hub. according to a survey only 31 percent think the u.k. capital comes out on top. only 12% think leaving the e.u. made london stronger. global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. annmarie: coming up on the program, italy's new premier is set to present his strategy from
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the economic crisis and tackled the oncoming -- ongoing pandemic. this is bloomberg.
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annmarie: good morning, this is "bloomberg daybreak: europe." mario draghi is set to give his first speech as italy's premier today, unveiling his policy priorities before facing a confidence vote in the senate. joining us for an update on what is going on in rome is our european reporter. maria, mario draghi sure to win the senate vote, but what can we expect from the speech he is going to be giving in terms of policy? maria: good morning. there's no question as you say about the vote. mario draghi has the backing of all the major political parties
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except one. it's the only opposition he has at the stage. not a lot -- mara draghi has been very discreet and quiet on that front. it's already huge departure from the government that is about social media, tweets, and being on facebook and trending topics. it's a very different style. based on the various information we have, it's going to be a short speech by italian standards. that means about 20-30 minutes. he will focus on key points that have to do with the economy and also reforms pegged to the recovery fund, and also green policies. that is another aspect where it will be interesting to see how mario draghi politician differs from the central banker. manus: indeed, it's a very
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different job. if he ends up driving a harder bargain in the bond market with massive oversubscription. maria: it's a monster auction, already building on a record we had last year. more recognition that his trade is still very much in play. we've seen across the yield curve, that compression. also with spanish bonds, which is one i find particularly interesting. for years, it seems to be tightening. you see that reflected in stocks and italian banks. will be talking with the head of the italian taking association in the european market open to talk about where italian banks go from here with the central
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banker now as prime minister of italy. manus: thank you very much, rhea. he was king of the bond market, and here we go. will we see a continued compression in this super mario wave of the bond market? sylvain: good question. a lot of expectations are in the market. whether it can tighten further depends on two things. first, the ability of mario draghi to unify a fragmented
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parliament and to spin wisely, in a way to boost medium-term volatility which is the main problem in this country. it will also depend on maintaining the current economic condition. it will be a bit more challenging but the qe program of the ecb is not overweight in italian debt. if you look at the market expectations, it makes monetary support less likely. annmarie: unicredit is calling
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it a super mario scenario where we could see it dropping 50 basis points. what is going to be the reality check for mario draghi? sylvain: it's delivery. delivering on reforms, delivering on a unity government and agenda with a mix of reforms plus wise spending with the new grants in the country to restore growth and stability. that will be the test and what the markets will look at for the super mario trade to materialize. manus: do you think it will be a
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little more successful in economic delivery than some of the previous governments? sylvain: if you compare with 2011-2013, it was not the same thing for the government. it was under the pressure of the market, under the pressure of the e.u. now it's about mending political unity in the country and spending money wisely. it is much easier from a political point of view to spend money than to save money.
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it's an easier game for mario draghi. but we will see. manus: thank you so much. let's look into the numbers, the iconic gucci brand down in the fourth quarter, collapsing by 10.3%. the estimate was for a drop of 7.2%. that's for the whole business. total house revenue came down i over 5%. did you buy a bag? i didn't get my man bag. annmarie: matt miller asked me this during the depths of the pandemic when the numbers came out.
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i was on my way back to new york when the pandemic was hitting. i wanted to buy a bag and my mom said don't waste your money on handbags. gucci is sometimes seen as a bit too ostentatious, and right now people are not leaving their homes or not going out. this will be a big struggle for luxury brands. manus: absolutely. good to hear your mother gives you sound advice and you listen. leverage is your enemy. that's what my mother always told me. stay tuned. this is bloomberg. ♪ (announcer) do you want to reduce stress? shed pounds? do you want to flatten your stomach? do all that and more in just 10 minutes a day with aerotrainer, the total body fitness solution that uses its revolutionary ergonomic design to help you to maintain comfortable, correct form.
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manus: this is "bloomberg daybreak: europe." sounding the alarm of foreign
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investors who borrowed. will ask a billionaire investment banker what he thinks when the market corrects and if there will be illiquidity premiums. >> it will all come down to leverage. it always does. there's lots of great ways to put your money to work and be involved with this market. i would discourage people taking on that marginal bit of risk on leverage. time is your friend here and leverages your enemy. leverages uncontrollable. people want their money back usually at the exact moment you really don't want to give it back to them. annmarie: that was a great point because we're reaching record amounts of leverage and corporate america. you started your career over at drexel burnham so you know a thing or two about leverage. do you have any concerns, on
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corporate and sovereign balance sheets right now? ken: some industries have had to take on leverage during the pandemic just to get through it. the economy is going to have to come back and recalibrate and cover enough cash flow. i worry a little about that. i don't see leverage throughout the system. warren out -- warren buffett always says when the tide goes out, you see who is swimming naked. the underlying hidden risks that you -- hidden risks that you find when the tide goes out, there may leverage going on behind the scenes that is an obvious to all of us as we think. annmarie: sounding the alarm over investors who have taken risk in the stock market and warning over extra risk hidden
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in the system, saying the rebound might not be strong enough to cover that debt. yesterday was an astonishing day in the treasury market. s&p 500 futures this morning flat. a pullback from an all-time high. there it is, tenure debt, 1.3%. 15 basis points in the last 72 hours. manus: that ultimately is having global ramifications. you see kiwi, aussie bonds, but what we were able to cope with three years ago, when you talk about whether people were hedging, a whole load of tactical things to talk about. the bottom line is, smaller moves in the bond market of a greater capacity to affect the
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access we look at. annmarie: we are in a new normal of un--- unprecedented monetary stimulus. we'll talk about lng, an exclusive interview with an energy minister. this is bloomberg. ♪
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annmarie: good morning from london, this is "bloomberg daybreak: europe." here are today's top stories. stocks pause as investors factor in the impact of a big stimulus package. wti hovers at $60 a barrel as freezing temperatures and a power crisis take out about a third of u.s. production.
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after a vote of confidence from the market, mario draghi faces a vote in the senate as he takes the reins in rome. manus, good morning to you. 6:30 a.m. in london. what a 70 -- what a wild 72 hours. the question is whether or not it is a spike or a long-term trend. the next question is, what does that mean for equities? manus: what is the tipping point for equities? td securities sums it up as to whether receiving a tantrum without the taper. that is the issue. the reason the treasury market crashed is because you see stocks, property, monetary and fiscal policy adding 140% of gdp.
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talking about a rewriting in the bond space. it's about breakevens as well, spiking higher. is it long-term, short-term, or a catch-up spike? annmarie: last week we saw the steepening of the yield curve and we did start to see the rising breakeven. it was said that summer trading on the future economy post pandemic. i'm sitting here thinking economies have yet to even open. i'm sitting in london where we have economic restrictions. it's astonishing. what does it mean when economies do lift those restrictions? manus: absolutely. will we see that pent-up demand for savings? every house is talking about the pent-up savings rate in the
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united states of america. equities are coming back. u.s. equity markets up .10%. you have the euro-dollar, because the dollar in itself is just training a little bit higher. nymex crude, the energy market in the u.s. is spiking the market. joe mcmonagle was with me earlier and his view was clear, one third of u.s. production is off-line but it will smooth out. let's get to one of the conversations, an exclusive interview with the world's biggest producer of liquefied natural gas. they told bloomberg they're planning to expand their operations and to remain the top supplier for the next 20 years. >> of course the crisis today in
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texas is something that hasn't been seen before, for texas to get the temperature they have, with the snow and ice is something unheard of. i think this is a one time event , at least for a few decades we have not seen something like that. i personally didn't texas for some time, so i know they are not used to snow. and all the facilities and everything, the infrastructure is not set up in that way. maybe in the north they are, but not in the south. so it is a temporary thing and hopefully they will get things back to normal soon. but it did disrupt the oil market, especially in that region. >> you think it will go away? >> the u.s. is very resilient and i'm sure they will get over it soon. >> you are about to undertake a
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massive expansion of the countries lng capacity. explain to me, you've had this on the books for eight long time . why now, and how does this work out as an investment in the market these days? >> as far as the spansion projects, we have two projects, which we just announced sanctioning. it will take us to 110 million tons. and we will announce early next year one that will take us to 126 million tons. we've announced our strategies very clearly and it's defined as very robust projects. we just mentioned last week that the total project cost for one
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is $28.75 billion. it will produce 32 million tons per annum. it's -- it may be the most competitive project on the planet today and we are very proud of that. were moving ahead with our long-term vision. annmarie: the qatar energy ministers speaking to our colleague there and doha. let's get more on the continuing energy crisis in the united states, the deep-freeze that close refineries and oil wells and plunged movements of americans into darkness that could persist for several days. total oil production has dropped by one third, the biggest drop on record. our guests have been weighing in on what this means for the u.s. energy market. >> what is our priority for keeping the lights on?
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>> is not going away anytime soon. >> we really do have a broad mix of powergenerating sources. >> until we can reach the point where we have full-scale storage and batteries to allow us to rely on our energy 24/7 -- >> they have to coexist alongside each other but keeping a focus on improving our environment. >> it's time for a wake-up call we we absolutely need fossil fuels. annmarie: let's get more with david doherty and let's start out with what everyone in texas are some of the other 14 states affected, how long might we expect refinery outages and oil production shortages to last?
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david: it's very interesting time. th expect more power outages, at least for another day. the temperatures could be below zero by february 20, which is sunday. after that you're looking at a day or two for refineries to return to normal. they are further down the pecking order terms of priority when it comes to power being returned. residential and commercial will be first. manus: david, good morning to you. in terms of this disruption, the human cost of which is very obvious from the images we are showing to our viewers. millions of outages and freezing
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temperatures. there are gas lng holders, and receiving rampant energy markets benefit. >> it's difficult to put into perspective. you don't really think of anybody benefiting. on the downside, occidental and chevron are probably the biggest impact on the reduction site as the biggest producers in the permian. there are 20 in total that have been knocked out, about 20% of the u.s. operation, so it's pretty huge. if they can get back on quickly, they can take advantage of what has been a good performance for refining margins.
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it's a time when you're seeing a lot of unsold oil on the international market in the first place. without the -- over 3 million barrels a day being taken out, there's a little bit of slack for that. maybe some international sellers might take advantage of the u.s. being down in terms of supply. annmarie: there was immediate finger-pointing by meaning the fossil fuel world, saying it's the fault of wind turbines and renewables. others are saying it's because we are reliant on fossil fuels. other state has to do with texas's deregulated power market. how do we fix this problem so that it does not happen again? david: we will see a common thread emerge. like -- the biggest debate around the u.s. will be around
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the model in texas. they've seen as a way of attracting investment, but will have to see if it's too expensive for the texas customer now and it may need to be looked at. manus: david, thanks for your contribution this morning. we will speak to you soon. let's get the first word news with laura wright in london. >> president biden intends to recalibrate the u.s. relationship with saudi arabia. is the latest sign the new administration is reassessing most ties with the kingdom established during the trump administration. singapore stands to rein in its budget deficit digging into the governors are for new stimulus package of around $8.3 billion.
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he comes after the nation's biggest ever contraction in 2020 with gdp falling over 5%. exceed to rebalance this year but the outlook remains challenging. >> it will be our biggest budget so far. the recovery is as we expect. i think we should be able to balance our budget over this term of government. >> citigroup is struggling to recover over a half billion dollars it accidentally paid out , saying it's effectively finders keepers. the bank is appealing the decision.
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payment that ended up including principal as well. global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. annmarie: thank you so much for that. coming up, moves in europe even as economies remain shut. will speak to the managing director of sun capitals european arm. six point $4 billion under management. he is up next. this is bloomberg. ♪ ext. this is bloomberg. ♪
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manus: this is "bloomberg daybreak: europe." i'm manus cranny into by. -- in dubai. $29 billion of takeovers have been announced including european company in 2021. here's this week's money undercover. >> joining me is the managing director at sun european partners. thank you so much for joining
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us. i want to pick up work and is left off with that amazing superlative. one of the ways i find that so fascinating is despite the record deal activity, there still about $230 billion of unspent cash sitting with private equity firms. his of just an immense amount of pressure right now to spend that money? is that while we are seeing this record activity? >> i think that is partly the case. there's been a lot of dry powder around for quite a considerable time. an estimated $100 million from spac's that are increasingly charged in the european models as well as the u.s. model and it is having an impact on valuations. dani: you have people who otherwise aren't really involved in private equity doing private equity type deals.
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mark: in fairness, i think a number of pioneers of these facts -- of the spac's do have not only a track record of top deals, but the public -- they know the public equity markets pretty well also, given their track record of successfully listing a large number of their portfolio companies in the past. dani: if you combine the spac picture with the unspent cash, trying to get deals done, do you see a lot of your peers in the private equity world because of the pressure doing deals and agreeing to terms that in normal circumstances they might not have? mark: i think that's possibly the case. the volatility and uncertainty that we've got around at the moment as a result of what some people are calling brovid, a
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combination of brexit and covid at the same time. we know what the impact has been through covid. we don't have a crystal ball to know what 2021 and beyond will look like in terms of the earnings profile of these businesses. dani: i haven't heard that before. what do you do in the meantime? how do you make sure you're not overpaying, if you don't know what earnings are going to look like? mark: you have to look for relative value. in our case, we are targeting the midmarket. we are looking to buy businesses in invincible industries that have good growth prospects and where we can use our expertise at the operating level to try to take business beyond what the current management team things possible. so we are looking for those specific types of opportunities rather than simply playing the broader market and buying
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businesses that become available. dani: what about retail? you have the mattress company and scotch and soda, the clothing company. is this retail area where you want to do more deals? mark: no, i think we are starting to pivot away from the retail side and the apparel side. we were very successful in our history in those areas. i think they were clearly challenged during the course of the general financial crisis and they are disproportionally affected during covid, particularly when we are locked down and there -- the retail stores are there whole form of business. inditex software space, we've hired a managing director in the new york office to run that and
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effectively it is a new vertical for some capital. and were taking the expertise we've developed, the playbook we've developed in the north american market and health care, particularly healthcare services, looking to use that expertise in the european market. dani: that's interesting, not just a pivot away from retail but a bet on tech. is this a shift away from brick and mortar that is going to be permanent after the covid crisis? mark: i think brick-and-mortar has been challenged for some time. there are large names like j. crew and others who have experienced difficulties for some period of time. they have successfully transition to accommodation of bricks and mortar and commerce -- e-commerce and have managed to survive to some degree.
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the only winners will be those within -- a robust e-commerce platform going forward. i think brick-and-mortar is something we will talk about sadly in terms of history. dani: our tech evaluations too high right now? mark: i think we've got to continue to deploy capital. that is expected from our investors. we have to show relative performance. we just have to make the best of it as we can in the circumstances. if that means seeking relative valuation opportunities, them -- then we need to do that. that's our job. dani: is there a fear that once a pandemic is over we will see a fracture in price -- and prices? mark: i think we're peek -- people are looking around with uncertainty with the arrival of
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spac's, but as i said, we have to look specifically at those opportunities that present value. we can't sit on the sidelines and hope that things will revert back to a lower level in the future. it rarely happens that way. dani: adding value is the name of the game. thank you so much. annmarie: i think his term "brovid" is something manus and i will likely use throughout this year as we still deal with brexit and coronavirus here in united kingdom. we are over an hour away from stocks trading. this is bloomberg. ♪
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>> the market is fairly frothy
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here from a sentiment perspective. >> it will all come down to leverage. it always does. i would discourage people from taking on that marginal bit of risk on leverage. time is your friend here and leverages your enemy. >> it seems market participants have a feeling that inflation has a better chance this time than in the post-global financial crisis. manus: some of the voices on the reflation trade. these are big ftse components, and rio tinto comes out this morning. up 20% on the year, iron or, they are the world's biggest
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producer of iron or. a dividend of over $5 billion. today a special dividend of 93%, 72 percent payout. in terms of the upgrade, look at the house of caring. annmarie: gucci sales fell for a fourth quarter, ending years of growth. there struggling with e.u. lockdowns. gucci was down on the year. one thing i did find interesting is that the numbers dropped 10%. analysts were looking at 7.2%. potentially we could see the stock move higher. as you said, luxury and commodities will be key in focus at 8:00 a.m. manus: they are indeed.
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just a little bit of turnaround. we are back in the green this morning. annmarie: we certainly are. the reflation trade continues. what could go wrong, yields higher and stocks higher. this is bloomberg. ♪
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matt: welcome to "bloomberg markets: the european open." i'm matt miller here in berlin. today, the markets say take a breath. investors assess the impact of a bond selloff on other assets. the reflation trade has powered markets from copper to bitcoin. the cash trade is less than an hour away. here are your top headlines from the bloomberg terminal. reflation bets sink bonds.

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