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tv   Bloomberg Markets European Open  Bloomberg  April 13, 2021 2:00am-4:00am EDT

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get gym results at home. no expensive machines, no expensive memberships. go to to get yours now. anna: good morning. welcome to bloomberg markets "the european open." the cash trade is less than an hour away. here are your top headlines. stocks look for direction. will cpi data be the catalyst for more record highs?
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the block splits over the german chancellor ship nominee. we get the latest from berlin. president biden pledges $50 billion to help the chip industry amid a global semiconductor shortage. welcome to the european market open. mark: a quiet day in markets. traders are waiting for inflation data in the u.s.. the one thing that has been apparent is this creep higher in u.s. yields. that is helping with conversion, but it is really at the margin. it feels like we are waiting for the next thing to drag markets in a longer-term direction. anna: breaking news from the u.k. economy. u.k. gdp with other numbers coming through. this is the monthly figure. the u.k., grown by 0.4% in february, month on month.
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the estimate was for 0.5%. a million miles away from what had been anticipated, eking out growth. lockdowns are meeting in place through the month of february. high-frequency indicators have been pointing to activity picking up in february despite no change in severity of the restrictions. increasing growth on 0.4% month on month in february. also looking at for trade data as well this morning. the trade deficit at 7.1 billion pounds in february. difficult to tease out the various drivers of the trade story for the u.k. economy specifically. talks of coronavirus, the impact, but there was a lot of stockpiling ahead of the brexit deadline for the end of the transition arrangement for the end of december. difficult to find this story in there. the economy shrank 1.6% in the
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three months ending february. let us get to the futures picture for european equity markets. look at yesterday's session for u.s. and european stock markets. a little bit of sluggishness. modest drops across the board. today the futures picture looks brighter than it did yesterday. things brightening on both sides of the atlantic. europe seems to be outperforming the u.s.. the u.s. seemingly getting closer to the flat line. still in negative territory. nasdaq futures down by 0.1%. mark, what did you see on the gmm? mark: the screen shows not particularly strong themes. two things to draw your attention to. we are seeing dollar strength across the board. a number of asian currencies a little bit weaker.
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dollar strength. the korean stock market, samsung has broken a losing streak. that ties into this idea biden has made this reassurance he's going to tackle this chip problem quite aggressively. samsung has taken the news quite positively. anna: the comments we heard from the bind and ministration, looking ahead, we seem to be in limbo. there's a lot of anticipation, a lot of expectation about the inflation data and what difference that could make. >> people are very excited by the inflation, but i am not sure how the data today is going to change what people thought this morning or last week or are thinking right now. the headline expectation is for 2.5%. the core is 1.5%. if we see 2.3%, 2.7%, is it
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going to change things? it is still a big jump. it is the start of a series of high prints. the feed from the supply side is going to take time. this is the first in a sequence of high inflation and it is only the starting part of the data picture we are all watching for. i am not sure today is going to change the theme. anna: i got pretty excited about some of the comparatives we are looking at. how long back through history you have to go to find some of the same warning signs we are seeing around inflation. i was looking at this chart. this is the cost of u.s. processed goods and materials, up the most in some 47 years. you have to go back to 1974 to find an increase this big. the drop associated with the pandemic was not as big as 40
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years ago. at least you don't have to go back 40 years enough to find a drop. we found things that drop since 2020 as much as during the financial crisis. that is one of the many charts we have that tell an incredible story around inflation. why so many people are fixated. mark: this is going to stay with us the next few months. it shows the supply-side pressures coming through. our colleague wrote an excellent macro column outlining the fact that the high inflation prints are not just based effects. pointing to what you are talking about, that there are supply-side pressures, supply chain issues causing real inflation to run away. the issue today is it is the first in a sequence of higher prints. it does not reach conclusion if this is going to be a sustainable picture or if this is going to pass.
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this is going to be a theme that is with us until may or june. anna: we will see what longevity this has. let's deal with something that was breaking through the asian session. growth came in below it would have been estimated. one of our colleagues talking about this being a disappointment for the yuan. does this have any longer-term implication for you, the trade data? mark: that seems to break 40 minutes before the official data , that it would be a smaller trade talents. look, because the data is so distorted, and of course chinese new year as well, there are two problems. i think people will move on
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quite quickly. it is interesting for the china story, the yuan story. i'm not sure china traders will be interested. anna: you can stay up-to-date with insight and analysis from mark his team. . mark stays with us this hour. coming up, a leadership battle within angela merkel's conservative bloc heats up. we are live in berlin with the latest. plus, a merger after resistance from suez. ♪
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>> the change in policy is well motivated. the risk is they are not going to start to take monetary policy until inflation -- and they expect inflation to move higher. the fed is goisler to
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tighten in this regime and that does create problems for the economy. >> it is too early to talk about changing monetary policy. we want to stay with our very easy monetary policy while we are still in the pandemic tunnel. if we get to the end of the tunnel, it will be time to start assessing where we want to go next.
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anna: interesting to see central bankers making explicit links, and they did yesterday in comments around those we just played, they did make explicit links between vaccination levels, the level of vaccination of a population and the ability to exit extraordinary monetary policy. that link being drawn is an interesting one. mark: it is interesting has come from james bullard. our colleague shows the projections. powell will be likely to break the news, which means it is lined up for a potential of at least considering a taper discussion by august, which i think is interesting given he is a complete dove.
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a little bit of a scare for equity markets that should be very forward-looking. anna: something to pencil in with jackson hole. when we start, i suppose that is what we talk about. what are we going to start talking about tapering? the guidance from james bullard, someone that links the start of that conversation with the percentage of the population that is vaccinated. is that something you are watching? >> they are truly engaging in a shift in approach. central bankers will be in charge and in control of the markets over the last 10 years.
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the markets always anxiously awaiting action or hints of action. the fed is very outspoken about the fact they want to see the data points. i can understand that. situations and the economy is so uncertain. that forces market assistance to take a more proactive see themselves. that is what we have seen. that is why foreign markets have been revolting against the fed. that is why traders don't believe the fed when the fed talks about hikes happening around 2024. traders start pricing them in for 2022. mark: i agree we have seen this
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very large policy shift, particularly the fed. as somebody who learned their trading shops in the early 2000, i have decided we have gone back to trading after the data rather than forward guidance. you said it has made traders more proactive. what allocations does it influence? how does it skew your outlook on bonds and equities knowing fed policymakers will be based on reaction to hard data? >> it is a fascinating question. if you look back, you make a some plastic assessment, -- simplistic assessment, you would argue what is so deeply ingrained in the markets the past 10 years is almost a signal of central banks willing to undermine the financial markets. that is what we saw before covid hit.
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in an environment like that, they are incentivized to take on strenuous analysis. it was not so justified. why attempt to beat the market when you are so convinced the market itself is going to be so solid and built upon strong fundamentals, the fed will never let you down? the concept of just buying the index worked one the fed is in control, when the fed is taking a proactive seat. if the fed is acknowledging a more reactive point, that leaves not much choice but from market participants to start taking a more proactive seat themselves. it is shifting from a more simplistic version of buying the index to a much more complex
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version of idiosyncratic assessment. active investment. fundamental analysis behind stock. constant story of rotation of value. mark: i completely agree that it is about more idiosyncratic risks. can i clarify, are you saying the fed put is no longer there? or at least it is not as effective given the change in policy? >> that is exactly what it is. the fed put is most effective when the fed is in control. the fed is taking a proactive stance. it is becoming less and less the case. it diminishes that story, the story of by the index as it back. ironically, in the past, the past 10 years, investors who
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tried to hard were almost punished for overanalyzing idiosyncratic stories. missing the forest for the trees, which is that monetary policy is easing. don't ignore the big trends. anna: stay with us. anneja treon. we thank her for her time so far. here is laura wright. >> president biden has told more than a dozen ceos he has bipartisan support for funding to address the worldwide ship shortage. the summit included the bosses of alphabet, gm, intel, and ford. biden read the firms a letter from lawmakers supporting his $50 billion proposal for chip manufacturing and research. u.s. regulators are throwing another wrench into wall street's frenzy, cracking down on how accounting rules apply to
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blank check companies. the sec says warrants issued to early investors in the deals might not be equity instruments. president biden is calling for calm in minnesota after a police officer shot and killed a 20-year-old black man during a traffic stop on sunday. it sparked a new round of violence and protests. it comes as derek chauvin, a white police officer charged in the killing of george floyd is on trial in minneapolis. global news, 24 hours a day, on air and at quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. anna: thank you very much. coming up on the program, after a rocky start, europe's vaccination campaign is gathering momentum. we will discuss the impact on markets. ♪
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anna: still 40 minutes to go until the start of the european equity trading session. the u.k. markets seen falling at the start of the european trading day. one of the turning point has been a little bit of strengthening. pared back slightly, the dollar. maybe what that is doing or the link between that and the fact we are seeing higher treasury yields. treasury yields, 1.69%. it was not that long ago we were above 1.7%. mark: the combination of higher yields and a higher dollar, but at the margin, this is a tightening of financial conditions. we are seeing slightly weaker
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equity prices. i would not want to get too carried away. this market is lacking direction. anna: let's think about where we are on the vaccination rollout through europe. europe's vaccination campaign is finally gathering pace. germany has doubled its daily vaccinations. italy is in talks to step up vaccine production according to nicola mcgrady, the director general of italy's medicines agency. he says he can see light at the end of the tunnel when it comes to vaccinations. >> we can see clearly some light at the end of the tunnel as we often say. the increased capacity to vaccinate is a promising sign. it is all very much dependent on the quantity of vaccines available.
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vaccination capacity has increased. anna: anneka, how much do you want to allocate to european stocks in anticipation of the rollout plan? is that your thinking? >> absolutely. europe is a bizarre story. europe has had such a tough time for so many reasons. one could argue it really does not take much for european equity to recover from your. -- from here. there is our reason european equities have suffered the last decade. you take 2007, european equities -- u.s. equities more than doubled. there is a reason for it. a combination of a dearth of technology stocks.
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the u.s., the quarter of the index is six technology stocks alone. it is a fragmented political environment where there is a monetary union but not a fiscal union. a fascinating time. around this time last year, major asset allocations saw global markets run and europe stood out like a sore thumb. there was talk of 702 billion recovery fund -- 750 billion recovery fund. it has been a year on since then. there has not been any allocation of this 750 billion yet. the vaccine rollout has been cumbersome. value versus growth has been back and forth. there is a lot of cyclicality.
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value versus growth is something that keeps hopping around. there have been reasons to be subdued about europe. those reasons are so priced in. if we sit back and say the global economy is growing at the fastest rate in half a century, that is literally what is happening, the rising tide starts. asia is moving. europe will also derive benefit from that. anna: thank you for joining us. anneka treon joining us from amsterdam. coming up, angela merkel's succession in disarray. her bloc split over the chancellorship nomination.
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elections take place in germany later this year. all of that conversation next, plus analysis with a guest later on. ♪
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anna: welcome back to the european market open. half an hour until the start of the section and ftse futures
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moving to the downside. let's take a moment to take a look at something else on your radar. looking at the inflation numbers coming out of the u.s. later today. you have been thinking about how steep we will see the yield curve in the u.s. getting and i know you have been going back to 2008 until 2015. coming out of the financial crisis and looking at the steepness of the yield curve we saw there and the rates of inflation we saw there. what have? you learned? -- what have you learned? mark: tenure yields have soared so far so quickly over the last year, people think the move may be over. the tenure yields have doubled since december and more than tripled since the lows of august. we saw a fed policy at zero between 2008 and 2015, and when
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we saw headline cpi about two point 5%. we expected to see -- we expect it to be 2.5% today. as we were coming out of the crisis, we had a reflationary period just like now fueled by a rampant policy. we were seeing tenure yields back then about 3.5%. a couple of years later in 2011, we saw tenure yields in the range of 2% and 3%. this is making the point that normally, when you have fed policy anchored on the front end and you are seeing higher inflation, we would expect to see much higher tenure yields. some people say, wait a minute, the fed said we will not move rates. remember, these periods, even in 2011, that was more than four years before the fed hiked
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rates. they should be much deeper and the historical precedent is that they can be much steeper. we talked earlier about parsing the inflation data today. the exact print does not matter. the story is going to be that we will see much higher yields even if ultimately the inflation threat is transitory. anna: why have we stalled? why have u.s. tenure yields stalled at the rate we are at right now? mark: there are some technical factors that we have come in so far so fast. people have to rebalance their pro folios. and cash people have to rebalance -- people have to rebalance their portfolios fast. people are also concerned about the global economy and we have not seen the inflation prints. we are about to enter a period of this.
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anna: fascinating to watch the interplay between those. thank you for that chart. let's get a bloomberg business flash. laura: nvidia, plans to make its first microprocessors. it is taking the fight to intel hoping to attack the firm's most lucrative market. it's new chips -- nvidia says they will be available at the beginning of 2023. the ant group will revamp its business. ant will now be supervised more like a bank that has far-reaching implications for its growth and delayed ipo plans. two of the world most powerful money managers are joining
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forces on climate change. blackrock and temasek. it will take stakes in startups with the potential to reduce the world's resilience on fossil fuels. they are committing to $600 million to the efforts. that is the bloomberg business flash. anna: back to german politics. in germany, angela merkel's succession looks to be in disarray. the parties in her conservative alliance are split. the various -- bavaria's csu is backing soder and the cdu is backing laschet. joining us now for more is our german government reporter in berlin. what does the split within the conservative camp mean for the national elections in september? >> good morning.
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when angela merkel will leave office in september, it will be the end of 16 years of conservative rolling. her potential successor -- we might see the victory of a left or green government. mark: good morning. what exact role will merkel play in all of this? >> she has made clear from the very start of the process that she will keep out of the race of her succession. now though we hear she is increasingly concerned about the open power struggle between these two men. because she realizes the effect on the party's chances to win the next election are extremely negative. anna: what do we know about who
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would stand the best chances of winning the candidacy? and on what basis is that decision made? there is the division between the cdu and csu. >> it is a bit strange in german politics. the cdu leader laschet still has the best chance in the end simply because he is the leader of the much bigger party. however, soder might manage to steal a revolt from the party base against the cdu leadership thereby in the end grabbing power but i would still say that is the more unlikely scenario at this point. anna: we will watch with interest. coming up on the program, a water and waste management
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program in the making. we speak to the coo of veolia next. this is bloomberg. ♪
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anna: welcome back to the european market open. it seems the french market could outperform at the start of trading. ftse futures under pressure. cac futures up 0.2%. we are also waiting for the earning season to get into for stride. we will get to the banking sector tomorrow. the latest outlook we will also get from the corporate's around the world. mark: u.s. banks are the key this week and how much reserves they release. i think that will be more important than what we hear from
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the rest of the world on the earning side. that will set the tone. anna: let's turn our attention to some corporate news that made a big splash this week. the french m&a story. veolia and suez have ended a long battle. veolia unlocked a deal by lifting its offer price. it also pledged to sell back a bigger part of its french water rival to maintain competition. it creates a global giant. shares of both companies spiked yesterday on the news. a story long in the making. i'm pleased to say that we are joined by estelle brachlianoff, coo of veolia. good to have you with us on the market open. we heard from the coo of suez this morning that the agreement with veolia would take a year to
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complete. is that the timeline you have in mind? estelle: it is a european champion of ecological issues. there will be a few steps ahead of us still. we have antitrust issues to clear in particular. we are very confident that by the autumn, we will get there and close the deal. mark: can you confirm if any veolia shareholders threatened to sell their holdings if you did not resolve the standoff with suez? estelle: our shareholder base is super confident about the deal altogether. you just have to see how the stock market has reacted yesterday. almost plus 10% of our share
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price yesterday morning. i guess it is really a good deal for all of the stakeholders including the shareholders for both veolia and suez and it is exactly what the markets have testified and reacted yesterday. anna: were you concerned that some key shareholders might walk away if you had not brought an end to this because it has been hostile for a very long time? estelle: yes, but nothing like shareholders wanting to walk away. kind of the opposite really. we had a lot of shareholders telling us that they want to be a part of this story. this is a great project. with a lot of potential. there could not be a better moment to build such a champion with all of the stimulus package around the world. seeing a green deal in europe. together with the appetite and
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the world, there is support among populations to green economy. this is the moment to be in this industry and to offer a solution . it is really what we do as a business, to offer a solution. we already have half the solution at our disposal but we are inventing and innovating to find the other half. so really, it is a great day. mark: as you say, it is very exciting to have this european champion. what are the most exciting synergies and efficiencies you are expecting? and some might wonder what are the job cuts you envision with this merger? estelle: there are a lot of operational synergies but they do not go with job cuts at all. there are a lot of reasons why but we are a service-based company. we work for the communities as
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opposed to being a manufacturing company. there are no job cuts associated with the synergies. the operational synergies on which we can build our operational ones such as increasing the yield and efficiency around the world by bringing the know-how of the two companies together and we will be even better in delivering the services to our customers. a lot of potential and no job cuts. we have really committed to that in a clear way from the start. anna: you have made those commitments. you are clearly excited about the future. thinking for a moment about the headwinds and the hurdles, what about the antitrust? where do you expect the biggest antitrust battles? and clarify for me the timeline? on antitrust and how much of a delay that could add to the process. estelle: i guess you know from
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the start we have really made an in-depth analysis of the antitrust potential problem we could face. and to keep a long story short, we do not anticipate any problem. and we have kept a very french base separate from the new group and we don't anticipate any problem in france as well. outside of france, this is an international assets. it is almost a perfect match on a geographical basis. we are in the same countries around the world. and we are in different industries. we do not expect any antitrust problem at all although the
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process, as you can imagine, always takes a long time. but to keep -- but to give you one example, we just received the clearance from the u.s. that is one of a few. but a really good sign that we are moving on and getting those clearances. and i am super confident that given the deal we struck yesterday, that we can even speed up the clearances and the authorization compared to our initial plan which was to get them within a year and up to 18 months. i think we can get through in the autumn. mark: i love your optimism. beyond the asset sales part of the creation of the new entity, do you envision there being other asset sales as being part of the asset rotation plan? estelle: from our side, we are
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very happy that we have been able to gather around veolia all of the key assets from suez that we thought would be valuable to us. we have all of the assets we were looking for in the mix on our side. we are really -- it is really a very good achievement. on what will be left on the new suez side which will still be fierce competitor of ours, it is french based plus a few other assets which we did not have any synergies with pure nothing to expect in addition to what i have just said in terms of the merging or selling of assets. nothing more. anna: estelle, thank you for your time. estelle brachlianoff, coo of
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veolia. laura: u.s. regulators are throwing another wrench into wall street's spac frenzy cracking down on how accounting rules apply to blank check companies. the sec says the warning might not be equity instruments. japan plans to release more than a million cubic meters of treated radioactive water from the fukushima nuclear power plant. it won't start for about two years and the u.s. says the move is in line with global standards but japan's neighbors are critical with south korea expressing grave concern. resident bi -- president biden is calling for calm after police shot a 20-year-old black man during a traffic stop on sunday. it comes as derek children, a
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white -- derek chauvin stands trial in nearby minneapolis. 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. this is bloomberg. anna: laura wright here in london. let's move on looking at some of the things on our radar today. opec releases its monthly oil report this afternoon including demand forecasts and production estimates. the much anticipated u.s. march cpi data will be published at 1:30 p.m. u.k. time and is expected to show acceleration from last year's pandemic conditions. a lot of people thinking how long-lasting that acceleration will be. lvmh also reporting first-quarter sales with
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estimates suggesting the fastest rise in sales and about six years driven by demand in the u.s. and in china. and u.s. energy secretary and white house national climate advisor will speak at tonight's bnf summit bringing together leading voices in finance government. coming up on the program, more items in the baskets before checkout. deliveroo expands its partnership a week after the company's disappointing ipo. this is bloomberg. ♪
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>> we are early on in this year. we have penciled in 6% or 7% growth. in an outcome based policy, we really want to see that. >> we are bullish on the rebound. we have a long way to go before the job is complete. >> there is no textbook on this. >> i think it is too early to talk about changing monetary policy wall we are still in the pandemic tunnel. anna: welcome back to the european market open. seven minutes to go until the start of trading and futures are pointing in divergent directions. ftse futures and the downside.
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the french market pointing higher. let's get the companies to watch. dani: babcock has a new ceo that took over the helm a few months ago and he launched a review of their balance sheet. change is coming from the review. a .7 billion pound write-down of its assets and it is selling a business. jeffrey says the decisions are positive showing they are simplifying and reducing player. deliveroo trying to recover after the poor ipo debut extending its partnership with stansberry's. -- sainsbury's. the most popular items delivered are bananas, milk, and cucumbers. finally, we have to watch the semiconductors. always having various headlines impacting these stocks. nvidia has unveiled new processors competing with in
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dell -- intel. we have to watch intel suppliers appeared they are on your screen right now. possibly impacted in asia. we saw the semiconductors move on this story as well. anna: banana, milk, and cucumbers. a strange smoothie. we are five minutes from the start of the european equity trading session and futures have been on both sides of the flatline for european stocks this morning. 1.6961%. steady moves higher or slight moves higher in u.s. yields. mark: i think the u.s. yield move is starting to feed through to bond markets generally so we are seeing a slight nudge higher on the board. not feeding through to other assets. one thing to draw attention to is we have been talking non-stop about the inflation data.
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we also have u.s. retail sales. some investors need to be ready for the fact that retail sales and cpi might send different signals today and which one to pay attention to. in the short term, retail sales. anna: that gets complicated with the different signals. mark cudmore in singapore. i will be back with the market opened here for the european equity markets. futures pointing in either direction. u.s. futures looking mix to. the openness next. this is bloomberg. ♪
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anna: welcome back to the european market open. a minute to go until the start
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of trading in europe. headlines. stocks look forward direction. will crucial inflation data and a treasury auction today be a catalyst for more record highs. merkel's succession in disarray. her block splits with the german chancellor ship nominee. and eyes on the supplies. president biden pledges $50 billion to the chip industry. futures -- you can see that the ftse futures stand out for their weakness this morning. this time yesterday we had weakness in basic resources and the banking sector. that played negatively for the sector exposure we have in london. we will see we got something similar today. dax and cac futures pointing to the upside. look at the european equity markets open. the ftse 100 is fairly flat at
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its first reading. we will see if we get any moves to the downside. we are focused on the inflation story. u.s. inflation data. in limbo waiting for that to kick in, waiting to get clues from that. and the retail sales data also do later from the u.s. u.s. futures in limbo. dow futures positive. nasdaq a little negative. msci asia-pacific pacific fairly flat through the asian session. a little deterioration towards the end as we saw a move higher in u.s. yields but the big thing we are waiting for today is indeed around inflation. european equity markets opening. we are a little more positive on the stoxx 600 as a whole than anticipated. the cac is helping to lift things. and the ibex is opening in the
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green. the ftse 100, down 0.4 -- zero .1%. european equity markets opening mixed. slight move to the upside. the upcoming u.s. inflation data is in focus. it is the first covid cpi reading. here is what officials are expecting. >> this growth we are expecting in the second half of this year is going to be very strong. >> i think there will be more inflation in 2021 than in recent years. >> headline inflation will likely move above 2%. >> we know there will be a price surge this year. >> we expect most of it to be transitory and for inflation to return later this year to around 2%. >> we want inflation to average 2% over time and that is when we
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will raise interest rates. anna: important voices from the fed speaking about inflation and inflation expectations and reaction. paul markham is with us this morning to give us his thoughts. as we wait for this inflation data out of the u.s., we seem to be in limbo. what is in it for stocks? if we get a hot print on inflation, is that negative for stocks? paul: i think it is unlikely that we get a really hot print to the extent that there has to be significant change in central bank policy. however, it may be that the stocks take a little flight if inflation moves too fast, too quickly. we have already seen bond yields move up rapidly. the stock market has started to discount the idea of high
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inflation. if it looks like it is not as slow, if it looks like it is going to jolt upwards, i think that will be something that markets, equity markets, will have to take a step back and take it as a cautionary sign. anna: are you bracing for higher yields in the u.s. and the knock on impact that has for the trade-off between stocks and bonds? we had a conversation about inflation said to come in as high as it is, does it make sense for the 10 year to be higher than what it is right now? many things we see in markets are anything but normal. are you bracing for high yields? paul: we are. we expect the 10 year to go as
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high as 2.5% in an extreme scenario. i don't think that is out of kilter with market expectations. we have seen a bit of a plateau on the 10 year and we also see the potential for the dollar -- going forward, we expect to test that. we may start to see it moderate again. anna: i was looking at some comments from one of my colleagues talking about the size of inflation springing up like spring flowers. i'm looking at a chart that shows ppi numbers and inflation measures coming through from the ppi data and thinking about where cpi goes it tells an interesting story in terms of inflation. this makes me think about pricing power and the type of customers asked type of companies that you might want to have exposure to. where do you look for those
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kinds of businesses? paul: in a reflation area environment -- in a reflationary environment, it is the businesses that have less pricing power through the cycle which benefit more from cyclically driven inflation. they would be the companies in the industrial space and the commodity space. the stocks which are more secularly benefiting, for example in i.t. and social media, they benefit from a lower inflation environment. it is really the cyclical areas where the uptick of inflation may be of most benefit. anna: paul markham from newton investment management. he stays with us on the program. coming up on the program, eyes
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on the supplies. president biden will address the semiconductor shortage in a white house meeting with ceos here and we got details next. ♪ -- this is bloomberg. ♪
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>> this is an issue -- we are talking about doing something in
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a bipartisan manner. both sides of the aisle are supportive of what i am proposing and i think we can get things done for the american people. anna: that was president biden speaking about his plans to fix the chip shortage. ed ludlow has the latest from san francisco. >> president biden read from a letter signed by 23 senators and 42 house members backing his proposal to secure $50 billion specifically for the semiconductor industry. this was never going to be a landmark moment in they chip shortage story but it was more of an opportunity for the participants of the chip industry and their customers to their their grievances about the supply shortage. we know the automotive to spins and particular were hoping the biden administration would earmark some of that $50 billion
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specifically for vehicle great chips that according to sources, the white house has no plans to prioritize one industry over another. according to the intel ceo, that was the source of the debate within the virtual meeting. that there should be no special measure for one particular industry. it should be a solution that addresses shortage for all. the news was overshadowed by industry news. nvidia announcing it would enter the cpu market, a market dominated by intel for a long time and that caused a sharp drop in the shares of intel and a gain in nvidia shares and was the talking point in the industry on monday. anna: let's pick up this conversation with paul markham. listening to that and what we have heard from the u.s. administration and how they want to support the chip sector, this
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is all part of a global rebalance being attempted by some in terms of supply chains around chips and a boost to the level of chip production we are seeing globally. paul: the market has been concerned, the asian manufacturers. it worries the on ensuring of chip manufacturing as opposed to chip design. we would say that the pie as a whole is growing. some of the best executors and it comes to making semiconductors remain in asia. some of the pricing issues also changed because this will mean the cost base, the labor cost of making chips are much higher.
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that could make some margin squeezes. we would say on a whole that the demand for chips continues to rise significantly and the pie is growing. anna: car companies are big consumers of chips and some of them had to pause operations and production because they could not get a hold of the chips they needed recently. how much does this stand in the way of their pivot towards electric vehicles? paul: on the chip side certainly, the bigger manufacturers will have to get well in advance of the new designs. they are quite extensively tailored towards the individual models. there are some national champions.
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we are hearing some governments would like to encourage a variety of incentives to manufacture batteries in their home countries. and let us not forget that this is fast-moving. for a couple of years, we were worried about the flammability of batteries. now, they can go up to 500 or 600, up to 1000. fast-moving technology, the big car companies will want to be involved with those manufacturers that can give them the best access to the technology and the r&d. anna: let me talk about another sector that i know you are interested in and that is financials. we talked about cpi and higher yields in the united states and many talk about financials as a nice hedge to the inflation story. which part of the financials universe do you want to have exposure to? paul: from our point of view,
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technically, it does appear that the banks could continue to do well. it seems like there will be a danger of profit-taking because they have had a strong performance despite some issues in the last few weeks with hedge funds but on the whole, we think they continue to be where the market will go to in the first instance. insurance for example could also benefit from the point of view of investment incomes. the banks tend to be the most reactive to the higher inflation prints. in the short term, we think there will be profit-taking in the banking space. towards the end of the year, it may be that the banking sector on low valuations and those with high exposure to banking issues could do quite well.
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anna: paul markham, from newton investment management. he will continue his conversation with us at bloomberg radio at 9:00 a.m. u.k. time. we will get to that conversation in about 45 minutes' time. i want to correct something we mentioned earlier on. mark was think that we get retail sales data out of the u.s. but he has since sent me a mea culpa. it is thursday. no conflicting signals from the cpi or retail sales data today. something to watch. i will blame mark. that is the retail sales story in the united states cleared up. other breaking news. the babcock share price in london up in today's session by 18%. 17.6 percent.
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it has been up earlier than that, up as much as 34% at the start of the trading day. adcock international has announced it will write off 1.7 billion pounds after it did and asset review. a reshaping of this reddish company around its aerospace and defense business. it does outsourcing work as well. we have the results of the review and the market is responding positively to that. and the comments they made around their balance sheet as well. the company saying it plans to revive the balance sheet without raising new equity. let's get an update on some of the other corporate news we are following this morning. laura: nvidia famous for its graphic cards that power video gaming plans to make its first microprocessors for service. it is taking the fight to intel hoping to tap its lucrative market. the new chips are based on technology from a up firm it is
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trying -- from a u.k. from it is trying to purchase from softbank. jack ma's ant group plans to drastically revamp its business vowing to demand from chinese authorities that want to rein in the countries fast-growing internet companies. it will be run as more like a bank. it will have far-reaching implications. one of the biggest players and global commercial real estate says after the pandemic, some of the best locations in cities could fetch even higher prices. jll says getting there depends on the rollout of vaccines. >> this is totally connected to the vaccination and going back to the office. laura: that is the bloomberg business flash. anna: laura wright here in london. coming up on the program, after a rocky start, europe's
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vaccination campaign is finally gaining pace. we hear from a vaccination expert. this is bloomberg. ♪
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anna: welcome back to the european market open. 21 minutes into the session. the ftse 100 is lagging behind
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the rest of europe. the stoxx 600 up about 0.8%. europe's vaccination campaign is gathering momentum and germany has doubled its daily vaccinations. it is -- italy is looking to ramp up its vaccinations. >> certainly, we can see clearly some light at the end of the tunnel as we often say and the increased capacity to vaccinate is a very good and promising sign. it is all very much dependent on the quantity of vaccines available and they are much more than a month ago and we have increased in the last few weeks. the vaccination capacity has increased and europe is now more confident in getting out in the next month. >> do you believe this goal of herd immunity by september?
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>> we plan for it. the majority of the population around 70% or 75% is what we intend. we can definitely reach that and have the summer months as the mass vaccination months. >> when you look at the countries in europe, germany last week had a good week. the french had a good week last week also and the spanish also. italy seems it still needs a little more to get on that level. when will we see the numbers triple like mario draghi promised they would? >> we hope in the next two weeks to deploy more forces including general practitioners, including local pharmacies and other vaccination sites that could
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make the expected half a million a day reach about. >> half a million a day at the end of april is doable in italy? >> definitely by may, that should be the rhythm we should be able to have. >> johnson & johnson should make things easier. there are some concerns around it with the blood clots. how excited are you about the vaccine? do you see any problems related to the blood clots? >> we see the problem that you did not have in the united states. it is the perfect vaccination for the gp's. so that we will be able to speed up the vaccination path and it will very much depend on the quantities available that would make the difference. >> right now, in europe, we are
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seeing the pace of infection more than the rate of vaccination. when will we see that change? so you can reopen the economy. >> coming from a u.s. source makes me in a dialogue mode makes me in the ash makes me think about the vaccine greed. we should be more united in a global effort rather than each country thinking on its own how to secure the vaccine without any sense of solidarity. so, i think in the next few months, more vaccine will be available and they will be distributed and more people will be vaccinated. the only imitation we had was vaccine availability. anna: bloomberg's maria tadeo
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speaking exclusively to the head of italian -- italy's head. here is dani burger. dani: eric -- air france and klm shares down nearly 3.5%. new equity coming to the market. they hope to raise a euros and with that increase apply we are seeing prices drop. a lot of metal producers, another sector to keep and i on. norsk hydro is one of the biggest gainers on the stoxx 600. copper producers are also rising today. the big gainer is babcock. gaining 15%. a review of their balance sheet at jefferies says is a positive for the company simplifying things. take a look at the macro picture. all eyes on the 30 year yield
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ahead of the auction and inflation numbers. we will get the base fx. i also just want to put bitcoin up here considering we have the auction tomorrow. anna: thank you, dani burger for those macro themes in the market. coming up, back to german politics. her goals succession in disarray. we get the latest live from berlin. that conversation is next. this is bloomberg. ♪
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looking a little brighter than anticipated. stoxx 600 up 0.2%. looking at the sector perspective. the london market is underperforming down 0.1%. banks is one sector fairly flat this morning. technology is a biggest gaining sector. technology and chemicals. both up by 0.75%. the biggest losing sectors include telecoms. the u.s. futures pointing flat. nasdaq futures down by 0.1%. here is laura wright. laura: president biden has told more than a dozen ceos that he has bipartisan support for funding to address the worldwide chip shortage. the summit included the bosses of intel and ford. he read the letter for the
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proposal. the u.k. has hit its target of offering a first vaccine to all over 50 ahead of schedule. it is a boost to boris johnson's plans to unlock more of the economy. the health department says everyone over 50 as well as the vulnerable and health-care workers have all been offered a shot. president biden is calling for calm in minnesota after a police officer shot and killed a 20-year-old black man during a traffic stop on sunday sparking a new round of violent protests over the excessive use of police force. it comes as derek chauvin stands trial in nearby minneapolis. 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.
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this is bloomberg. anna: laura wright in london. chancellor angela merkel's succession looks to be in disarray. parties in her conservative alliance are split over the candidate for the top job. cdu has -- csu has supported soder versus the cdu supporting laschet. let's get some analysis. sudha david-wilp joins us. good to have your insights on this matter on the program. good morning. who do you think stance the better chance if we start with that perspective of being chancellor and maintaining the chancellorship? soder polls well. what is your thinking? sudha: usually, it is customary
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for the cdu chancellor candidate to go to the chairman and that is laschet. he has the backing of the leadership of the party, the so-called presidium. but he is not polling strong compared to soder from the csu. and that is the conundrum the cdu faces. most likely, they will go with the traditional decision because there actually has been no precedent. there never has been a chancellor from the csu and bavaria. there have been two shots at it before in 2002 and in west germany when strauss tried to take a shot at the chancellorship. it would be a risk to go with soder but the cdu is looking at
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a downward trajectory in the polls. that is the question -- go with the traditional choice or soder. anna: how does this play more broadly for the conservative bloc? germany is still very much at the forefront of dealing with the coronavirus pandemic. it could look to some as infighting within the conservative part of german politics. sudha: the political brinksmanship within the conservative bloc is not a good look because there is a raging pandemic and germany and the conservatives are really taking the heat for not being able to control the pandemic. at the outset, they were writing very high with favorability ratings at an all-time high for chancellor merkel because of the unique mix of scientific
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expertise and her ability for crisis management and her ability to communicate with the german electric. but the picture has changed because of the slow vaccination rollout, the lack of testing and the inability to have political consensus on how to mitigate the spread in germany. they are looking at furthering lockdown measures so the cdu is not in a great place right now and to have this internal fighting is not helpful five months before the election. and recently, there has been some procurement scandals. suddenly, the cdu is not taking for granted the chancellery. just a few months ago, everyone thought the cdu would coast again to take the chancellery in september. anna: i think you are ready mentioned 1998. but how much do you think there could be parallels? the cdu lost to the social democrats and gerhard schroder.
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are people making a lot of that kind of comparison? sudha: the interesting thing -- i mentioned before that merkel was very popular at the outset of the pandemic and still arguably is. i think her legacy no matter what is somewhat intact. but if we look at the cdu and how it was fearing before the pandemic, the party was in a downward trajectory even back then because they did poorly in state elections and in the eu elections and that was one of the reasons why merkel decided to step back and not run again due to merkel fatigue and because of the fate of major parties all over europe -- these parties are losing their allure. and the catch all parties are losing out to parties such as the greens. anna: that is a buildup to the election coming up later in the year. in the more immediate future, i
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wonder how much the buildup of troops on the ukraine-russian border is getting into the german narrative in 2014, this was something that merkel was very involved with. how much is this being talked about in germany? sudha: it is in the headlines. but the political intrigue about what is going on within the conservative party is dominating the news right now. but the fact that secretary blinken will be coming to brussels again and today, i think secretary austin from the pentagon will be meeting with the german defense minister -- and that will also be on the agenda for germany. the visit to brussels is to show concern from nato about the buildup of forces in the ukraine but also to talk about other relevant topics such as winding
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down the true presence in afghanistan and working to curb iran's nuclear ambitions. anna: thank you for your time, from the german marshall fund giving her take on the german political scene right now. coming up on the program, new rules for wall street's hottest trend. could we see an accounting threat to the spac wave we have seen taking wall street by storm. more on that next with dani burger. this is bloomberg. ♪
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anna: welcome back to the european market open. 41 minutes into the trading session. the london markets a laggard. broadly making modest gains on european equity markets. creating a climate focused fund two. blackrock and temasek will back startups. the pair are committing -- blackrock ceo larry fink and temasek ceo spoke exclusively to bloomberg about the plan. >> to properly address the whole
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issue of decarbonization, we are going to have to develop new technologies. we don't have many of the new technologies today or we have them but the processes, whether it is green cement or green hydrogen or so many other things that emit carbon, the cost to do it green is very expensive. and to truly get to a net zero world, that is way beyond electric vehicles, solar and wind, let's face it, hydrocarbons are very cheap. they are cheaper than a bottle of water. >> a few nuts and bolts questions so people have a sense of scale. what are each of the two partners bringing to the table here? will the joint venture have its own staff? >> we are focusing investment
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activities across a broad range of sectors where we think we can make a difference. and where they also can make a difference to reducing carbon emissions especially as we aim for a net zero world in 2050. lack rock has incredible strengths to bring to the renter. they have a strong model embedded within their system. they have the ability to source like-minded investors to join with us in this foray. but they also have access to many companies that are able to not just bring solutions we think are needed it also companies that could be testing these solutions. >> what does success look like for this venture? call it kpis --is there a targeted return? and are you willing to accept a
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low return or take on more risk in order to create -- in order to increase the impact on carbon reduction? >> the first subject we see for which success will be determined by is the evolution of innovative solutions in the decarbonization process. if these solutions can ring down carbon, we will see the implementation and that is of first sign of success for this joint venture. tied to that is the need for financial returns. in order for this to have a journey where it can go on for a significant period of time, we have to be disciplined with how we make the investments and be focused on getting the right returns so we can crowd more capital into the space and encourage others to do likewise. i would say that we are not going to look at sacrificing
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returns in this area. we believe that at the end of the day, the returns will come. we may have to wait for a longer period given the early stage element of this partnership but we do believe that the returns will come. as we have seen in other sectors that we have invested in at an early stage. >> can we put a number on the target of return? >> it is in line with most early stage which is about 20%. >> part of the plan here is to raise money from other investors . if you are successful in that endeavor, how big do you think this could get in terms of aum? >> the first poll of money should be no more than $5 billion. we are going to be testing this. we are going to be building it.
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we have proof of concept. and then we will see. and a $5 billion early-stage, late stage fund is a large pool of money. some of the investments will be quite small and some will be much larger. this is not tens of billions of dollars. it may lead to those type of large-scale investments but it does not need to be that large scale in the early beginnings of this venture. anna: blackrock ceo and the other ceo speaking exclusively to bloomberg's erik schatzker around early investments in new technology around the green agenda. the sec is cracking down on spacs. they are changing the guidance. the move threatens to disrupt new find -- new filings in a red-hot market.
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joining us is dani burger. what impact will these changes have? this is an accounting story to watch. dani: usually accounting stories sound like a snooze. warrants are an important part of raising money for spac's. basically what is going to change is usually warrants live on the balance sheets of companies as equities. in certain cases, the sec says they should be a liability which means you need to account for changes in the value of the warrant and if the value changes enough, it means companies have to reinstate their financial statements. you can imagine how much of a headache this would be for accountants and lawyers at the warrants and values are changing and you have to redo all of the work you have already done. that in itself will be
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problematic for a lot of these facts that go on to acquire a company but in the meantime, bloomberg did see a letter from a top accounting firm saying that as the sec figures this out, they are not taking on new approvals for spac's. that means the pipeline could be put on ice as the details are hammered out. anna: spac's have gone from being niche to being mainstream on wall street. dani: if you look at all of the new listings, three quarters of them are all spac's and not ipo's as the preferred way to go public. you have to ask, is this just the beginning? will the sec take scrutiny on different parts of spac's? it hinted that it would look at spac's much like they look at ipo's. they would not get special regulatory treatment. i think there is a sense that
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because this is becoming so dominant, the sec has to make sure that everyone is playing by the rules and that the rules are fair. anna: i'm sure they will get a lot of scrutiny. dani burger with the latest on the potential or the accounting threat that could see something becoming a liability. coming up on the program, buckle up for inflation with bond volatility thrown in. this is the view of laura cooper. this is bloomberg. ♪
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anna: welcome back to the european market open. 52 minutes into our trading session. it is eight minutes before 9:00 in london. modest gains across the european markets. we are waiting for inflation data out of the u.s. that is the big news anticipated for the day. let's speak with laura cooper. good morning. inflation data do later on. there has been so much said about this inflation print and how high it is going to be. what also matters is how long it remains at elevated levels. laura c.: we are expecting the
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headline i sprint to come it quite high. that reflects the fact that we did have headline prices fall a year ago owing to the base effects, the decline in energy prices. we are seeing signs of price pressures and terms of rising energy and food prices and we also have the supply-side disruptions feeding through. i think, if we do see an upside surprise, i would expect that to spark bond volatility. we have seen rate hikes be slightly priced out in the last month from the fed looking at the stoxx 600, equity futures are likely to come under pressure as well because markets do not know how to read the inflation. anna: it is interesting when you listen to those from the fed saying they don't mind inflation about 2% for a while and it is that definition that is in question.
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when we start those tapering conversations with the fed and we got some clues around that from james bullard kind of explicitly tying this to vaccination rates. last week, you wrote about hesitancy rate in different countries around the world. if central banks are going to be looking at the take-up of vaccines, and the time to taper, we need to pay attention to this. laura c.: it is incredibly interesting. we don't have a lot of clarity regarding their guidance. is it based on unemployment? inflation? they are not giving a clue about that because they want to let the economy run hot and have inflation above 2%. the fact that we are seeing signs that by late summer we could see tapering hence move in, that is notable for markets. and as well, i don't think markets are pricing that in yet. we had the bank of america fund manager survey saying bond
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market taper tantrum is the top tail risk for investors and that overcomes inflation which was the top tail risk last month. inflation is still quite high on the radar, most anticipate it to be higher over the last 12 months, it is surprising to see taper tantrum risks merging back to the surface. anna: we saw u.s. 10 yields rise. it was something of a smaller scale taper tantrum but a reminder of what the link can be between the u.s. tenure yields and stocks. the u.k. economy, we got gdp numbers. they take -- baby steps with big leaps ahead. it is kind of a bit backward looking already with the february number. everyone is focused on the reopening story today. laura c.: it is all about the reopening story. looking at the lines outside the u.k. shops. it will be a sharp rebound as
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far as the u.k. economy is concerned. we don't know what the extent will be. will consumers release pent-up demand? when we look at what is priced into markets, i would say a lot of the recovered optimism is already baked in. sterling is struggling for upside against the dollar and the euro and the ftse 100 is struggling. it will be interesting to see how markets fair. anna: we will see how those with a savings how they will spend their money. laura cooper. that is it for the european market open. surveillance early addition is up next. this is bloomberg. ♪
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>> it's all infrastructure. this is infrastructure. >> we want to re-center and reap -- and place expectations at 2%. >> the risk is the delay. >> this is "bloomberg surveillance: early edition."
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yousef: good morning. here is what's coming up on


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