tv Bloomberg Markets European Open Bloomberg April 14, 2021 2:00am-4:00am EDT
[captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. visit ncicap.org] >> good morning, welcome to bloomberg markets the european open. i am anna edwards live in london. mark joins me in singapore to take us through the market action. the trade is less an hour away. here are the headlines. mixed day to stocks. investors shrug off rising inflation. jay powell jones david
reubenstein today. keeping it simple. we speak clufle to the bank of france governor and ecb possible maker as he says the central bank could simplify its 2% inflation goal. results season gets under way. jpmorgan is expected to report its strong eggs earnings growth in over 10 years. goldman sachs and wells fargo also report. welcome to the european market open. a focus on the banking sector in the u.s. later today. it has just gone to 7:00 eastern in london. mark is with us. mark, what are the markets saying to you? mark: well, good morning. it is a quietly positive day in asia. again, we have the inflation data out of the way. 29 another risk behind us. yields are lower, and that was the theme yelled. traders were waiting to get this out of the way to trade the way they wanted to. they weren't going to react to the data. one thing to keep on your radar is the fact we are seeing increasing stress in asia.
driven by the huarong six in china and what is happening in some of the chinese credit situations. but it is not feeding into equities yet. it is an overall positive day. >> let's get to the breaking news. operating profit for the retailer. 1. 2 billion ponds, above their estimates. sales numbers up by 6.3% in the full year. the estimate was 5.7%. there have been talks that at some point these businesses start to face some comparisons with the previous years and comps become tougher. maybe it is too early for that. they are going to face competition from a reopening retail space mere in the u.k. at some point this is more backward looking. they are talking about profitablity as a part of their business and give us their revenue numbers. we see retail operating profit recovering to slattery levels
at 2019-2020. just another headline coming through this morning with regards to u.k. listed corporate. easy jets, red ryan across the bloomberg. pretax loss of $690 in 730 million pounds. further guidance from easy jet as they gave us an update on what they can achieve. keep an eye on the aviation sector as we get closer to 8:00. just under an hour away from the start of tracking here in europe. let's have a look at futures. during yesterday's session we saw the u.s. broadly making games. new highs on the s&p and nasdaq. europe made some modest games. elsewhere on both sides of the atlantic we were positive. london was weighed down by some of its sectors. let's have a look at u.s. futures. european futures pointing modestly to the up side.
u.s. pretty flat on all of these marks. this as we saw the focus for investors turning from -- well, c.p.i. was in the mix. it seems on the earnings story, rob has been focusing on what could have been a scary inflation print and headlines around j and j. the mark choosing to look on the bright side. what dow see on the gmm? >> on the gmm screen it is that picture that people are looking on the bright side. we can see that across all the columns. a big sea of green. we are seeing currencies stronger against the dollar. and we are seeing yields lower. it is again green in the bonds column. and of course commodities across the board. it is a very clear picture today. it is not a particularly strong move, but these are markets looking on the bright side. they are overlooking the disruption on the vaccine roll-out. on one positive note, a very good auction out of the u.s.
yesterday. at the moment this is a very happy market. >> it is a happy market. not everything is happy in china right now. tell us about some of the tensions that seem to be bruce. i was interested to see some of the chinese tech stocks making progress despite the fact that the chinese government demands seem to be growing. probes of the tech sector are growing. add that to the tensions of the bills you mentioned, huarong and it is plunging bond story. there seems to be a few threads of the china narrative we need to pick up on? >> the china credit story is massive but not too relevant to shortstop term action. we have been worried about the china credit bubble for many years. people have been talking about it for about a decade now. actually we need to bear in mind that is is a very, very large stock of corporate debt. it is arguably a bubble in some metrics. there will be some problems at some point in the future.
but it is very hard to know whether that is going to come next week, neck month or another year's time. what we are seeing at the moment is unprecedented in the terms that we are seeing a few more defaults. we have great size and scope. we keep saying how we are getting record level of defaults and this year a record level again. we need to remember the context that none of these names were allowed to go bankrupt before. we had no defaults before. as soon as you get a few names go, of course we are getting results. we have new unprecedented size and scope without it being at a dramatic threshold yesterday. the china credit bubble is something to keep an eye on, but i wouldn't interpret it that it is about to be the big blob this time year. >> so something to watch in the short and medium terms. mark providing mark insight throughout the day. you can get updates throughout the day. go to mniv go on your terminal.
vaccine a set back. johnson & johnson pausing the roll-out of its covid-19 vaccine in europe and the united states. we bring you all of the details on that next. plus, big banks kick off earnings season. what to watch in the numbers between jpmorgan, goldman sachs and wells fargo. we will give you the data on the vaccine story shortly. but up next we are going to be talking to the bank of france governor who says the e.c.b. could simplify its inflation goal and allow prices to run hot temporarily. our conversation is next. this is bloomberg.
we will keep an eye on the pick as it develops. running it hot. the e.c.b. could simplify its inflation goal and allow prices to run hot temporarily. that is according to the bank of france governor. he says worrying about a resurgence in inflation is premature. his comments come as europe is now braving the third wave of the pandemic, and france is in the midst of a month-long national lock-down. joining us now from an exclusive conversation is is the bank of frns governor. very good to have you with us, governor. thank you very much for joining us. i was interesting -- >> please, good morning. anna: i was interested to hear you talk about the equilibrium triangle that we need to keep in mind in terms of guiding monday tearing policy. i wanted to hope in on one of those. i wondered, are you being inspired in this policy or this policy suggestion by the fed?
the suggestion that you would be happy to see inflation above target? >> let me first say what i mean by the equilibrium triangle. obviously our monetary policy should remain this way for years to come. but our combination of instruments could eye involve. the three corners are the triangle are a flexibility of capital. b, possible exit of pap by march of 2022, and c an enhanced forward guidance. let me say some words about this third corner, and well probably come back to the two first ones. about forward guidance, we should clearly confirm that our inflation objective is symmetric. it means that 2% is not a ceiling. it is a target, and we should be ready in our forward
guidance to overshoot inflation, to overshoot 2% temporarily taking into acount the past inflation. this is probably more personal, more flexible than inflation targeting fed type, which leaves many questions unanswered. this would be my suggestion for this new phase of the crisis. but again, it is associated with the current flexibility of pap and the possible exit by march of 2022. >> good morning, governor. it is suggested that we could start pairing back the pep program this year. where do you stand? kwlen do you think the pep program should be ended? >> it is very clear in our last
governoring conference that pep will run until at least march of 2022. until we judge that the coronavirus crisis phase is over. we are not yet there. we have time to judge as we say. but in our baseline scenario at present, the crisis phase could be over by march of 2022. so we could possibly exit pep by march of 2022. it would not mean an abrupt tightening of our monetary policy. re-investment under pep would go on. we could also have net asset purchases with our other program, a.p.p., possibly somewhat adapted, and we would have the full range of what i call the quartet of our
instruments. instruments. obviously asset purchases, adjustments. and forward guidance. i just mentioned it. so possible by march of 2022. >> so you have given us a date for possible exit, but you say not an bankrupt end. you mentioned yesterday and again there, perhaps switching to a.p.p. and using that. what specific aadaptations would you need to make to a.p.p. to allow it to pick up where pep leaves off? >> it is too early to tell, obviously now. we still have one year to decide. the only point i want to stress is that we shouldn't think that the end, possible end of net asset purchases under pep means the end of accommodative
monetary policy. we have several programs, and we have a quartet of instruments. >> there have been some suggestions that the e.u. does have enough fiscal stimulus coming through, given that the recovery fund has been rolled out so slowly. do you think there is going to be demand for another recovery fund after this one, or once this one gets outs it will all be ok? >> let me say one word about the american policy mix, which is very impressive. the american bounce will be very significant this year. having said that, europe and the u.r.r. reacted strongly last year. the size of our e.c.b. balance sheet is device as big as the fed's one. if you look at the stimulus, if you include automaticic stabilizers, which are very strong in europe due to our social model, the fiscal
stimulus in france last year was 9% of g.d.p., while it was 10% in the u.s. so it is not a significant difference. if you look at the future, obviously we should implement briefly to so-called next generation funds, the 750 billion package. i think speed is more important than weight to answer your question. it should come as quickly as possible. there will be also fiscal stimulus from national states. we should never forget them. the bulk of fiscal stimulus is still at national level. having selden that, if i look at the growth gap between the u.s. and the u.r.a. this year, it refers to non-fiscal causes, one of them clearly being or second toler specialization. the u.s. is ahead in digital, which is the winner, and tourism is much more important
in europe. so we have to address not only fiscal policy, but also our structural weaknesses. >> you sound impressed by the size and scale of the u.s. fiscal response. is there room for up side revisions to your forecast for europe based on the fiscal response we have seen in the u.s.? is that something you are anticipating will flow across the atlantic? >> technical in our last forecast in march, we in the e.c.w. did not incorporate the effects of the last biden stimulus. it is not that significant in europe. the most significant effect is obviously in the u.s. having said that, we expect growth in the u.a.r. of 4% this year, which is already significant. if i take the case of france, we confirmed yesterday that despite the last lock-down, we
expect growth of more than 5% this year for france, which is a most impressive one we would have in the last 50 years. >> you have advocated leaning the corporate bond purchases toward balance sheets that aren't exposed to carbon businesses, having a climate element to the corporate bond purchases. do you have the support of most of your colleagues on this, and how quickly could such a program be implemented? >> two comments perhaps on your question. first we will maintain corporate purchases. it is part of the flexibility of pep, and it is part of our commitment to main contain favorable financing conditions. let me stress that we will be very flexible on maintaining favorable financing conditions. we were not have an automatic rule or still less to yield curve control.
we have to exert informed judgment. if you look at the rise in long-term interest rates in the area, since the start of the year it is about 0.2%, while it is 0.8% in the u.s. so our monetary policy, our commitment is well understood by markets and efficient. turning to climate, it is part of our strategy review. we are discussing under the presidency of lagal, i want to welcome him to any change in strategy and to put climate among the issues, which is different from the fed's review last year. we will give the answer next fall, but i am confident that we will clearly show that in corporate climate related risk, it is part of our primary mandate. bautista claimant change has had an affect on bright stability, and will have still
more in the future. so we will have to incorporate it in our models. we will have to zhroles our own exposures, and we will have, yes, to adapt our monetary operations, mainly for corporations. >> so governor, are you concerned that the e.c.b. is stepping into territory that should be left to democratically elected governments, or do you think that has been much discussed and we are past the point of discussing that anymore, that is not an issue anymore for central banks? >> i mention the the link between climate change and our primary objective of price stability. nobody can ignore at present the economic effects of climate change. it is obvious. having selden that, we shouldn't be the only green game in town. to give an obvious example, inadequate carbon pricing is a key answer to address climate change. we are not responsible for
that. as you said, it is part of the democratic debate. i strongly hope we can make progress on a global issue. >> seems to imply a little bit of subjectivity about what things come under price stability, what junlts on behavior and you used the word mission creep. what part of the e.c.b.'s mandate really allows the clarification of this kind of paris stability. >> if i can give you an obvious example, look at the recent surge in u.r.i. inflation.
we went from minus 0.3% last december to plus 1.3%. part of that is from climate change. there was an effect from an exceptionally cold winter, and there is also the evolution of energy prices and oil. so we cannot ignore. having said that, we must be earth professional, earth credible and trance apparent for putting the effect of climate change in our models. we are taking into account economic indicators and finance indicators. it is not a militant conviction. it is not wishful thinking. it is serious economic analysis , and we still have much work to do. we contribute to that in the so will have called ngsf network for greening the financial
system, which we created in paris three years ago. it gives us about 90 central banks and supervisors, and we just published some weeks ago a report on monetary policy and climate change. it is a very professional and economic work. >> governor, thank so you much four time. we appreciate it. thanks for peg to us. bank of france governor and e.c.b. governing council member. thank you for spending time with us. another set-back for the global roll-out of covid-19 vaccines. johnson & johnson is suspending its vaccine without the j and j shot it will take until december for the e.u. to vaccinate three quarters of its population. joining us now for more is maria our reporter in brussels. this was a story that dominated the conversation in the u.s. yesterday. it is also very much part of the european narrative as we
are discussing it here. how big a part of the european narrative is this? arguably this matters more as a delay for europe than it does for the u.s. >> yes, and it is bad news, because the europeans had big hopes on this vaccine. they would say that it was an easy vaccine, one single shot. they had 55 million doses they were expecting. and that roll-out, the speed had been picking up over the past week. clearly this is a set-back. the other thing you have to factor here is that if we were to see this suspension go on for long, and we still don't know the timing of this, you would have pfizer having to make up for a short-fall, sfrazz and johnson & johnson. that would put a lot of pressure on a single vaccine that is also a double shot. it is clearly an issue. there are already reports today in the italian press suggesting that for european authorities this may be an issue. they may not renew contracts in
2022 that relate to blood clutterbucking. this is just a report burks they do worry about the health implications of this. >> good morning, maria. i am a little bit upset because europe was meant to be finalizing its vaccine certificate at the moment. will this set back interfere with those plans, or will they go ahead? >> mark, you can see the timing for this is clearly not ideal. the idea was that today european efficiency would put the final touches on that vaccine certificate, that would essentially lay lou people to travel in europe, to show they have been vitaled, tested negative, whether they had coronavirus or not. this is a reminder that the summer season again is going to be very complicated and that sense of normality is just not here yet. >> maria, thank you very much. the latest on the vaccine roll-out, the struggles it faces, the he headwinds it
faces and what implications thereby to travel. coming up, we look at what the johnson & johnson pause means for the vaccine roll-out for the rest of the world. markets seem to focus on earnings season or through look the headwinds created by the johnson & johnson delay and by the c.p.i. numbers yesterday. we saw equity markets moving to the up side. we saw stocks moving moorhead. the s&p and the nasdaq moved higher. all of that looking pretty positive for the u.s. yesterday. futures muted, fairly flat. european futures looking fairly flat. we will get to the global drivers of risk appetite shortly in conversation. later in conversation, don't miss this one, jerome powell, federal reserve chair, he is going to be peg to david rubio titan at 5:00 p.m. london time, 12 noon in new york. this is bloomberg.
>> welcome back to the european market open. half an hour to go until the start of cash equities trading. looks like we will see a divergence across the channel. the ftse 100 looks likes it may not keep up. futures up .4%. we watched luxury stocks with paris in month after results last night. mark, let's get some thoughts about what is on your mind right now? i know you have been thinking about financial conditions. we talked a lot about the inflation number and what it would take for inflation to
trying area change in stance from the fed. that is only part of the conscience conditionses conversation. what is your wider thinking on financial conditions at this point? mark: well, a big them so far has been the surge higher in yield. primarily in the u.s., but it has been a global them as well. we have had the dollar squeeze higher. both these two factors 1450 tighten financial conditions. they do everything else left alone. but unfortunately, they don't operate in eye lation, or maybe fortunately. if we look at the three metrics here, we have a bloomberg measure of financial conditions, a goldman one and one from the fed as well, the chicago fed. all these shows that financial conditions are basically at or new record lows no matter how you measure it. whether you weight more toward the survey measures, dollar weakness or real yields, whether you look at the inflation picture or the
easyness of credit. three all fare a little bit, but they are all near record lows. the back drop is stocks are going to keep on rallying until this changes. the one fly in the ointment before i finish is just to say that with them at record lows, it is easier for the next shift for them to tighten. this is a bullish environment, but it shows it is vulnerable to a correction quickly. anna: we are going to peek to investors shortly. richard will be peg to us in a little why. we will get his thoughts on this subject. let's get a greenberg with a business slash. >> bitcoin hit a you noah high yesterday ahead of a listing of a crypto currency exchange coin base. an evaluation of about $100 billion. a growing list of companies are embracing the digital tomicen even as skeptics doubt the durability of the boop. credit swiss has unloaded about
$2:00 pl worth of stock tied to the blow up of capital maggets management. it erased almost $200 billion in market value. according to analyst, jpmorgan, the downfall of the firm will result in $10 billion of losses for the banks. luxury looks to be defying the pandemic gloom. first quarter sales up. ldmh going past the levels seen in 2019. revenue jumped over 50% from a year earlier. that division is a key driver for the company, benefiting from the growth of grants like dior and viton. we know those of some of mark's favorites. anna: i can't vouch for his shopping habits in singapore. maybe he can fill us in. thanks, laura with the business slash. the u.s. has seen prices increase by the most in nearly nine years, but investors are shrugging off rising inflation and focusing on the vaccine
came campaign. johnson & johnson's vaccine has been put on hold after six women between the ages of 18 and 4 developed severe blood clots in the brain. we are joined now by richard, the portfolio manager. thanks for joining us. we sit here this week with some interesting drivers in terms of redick sentiments. on the one hand, we have evidence of inflation on the rise in the u.s., but maybe only slightly higher than people had anticipated. we have new headwinds in delays to vaccine roll-out around j and j. you might have thought that would take the edge off. yet we see new highs on certain indexes is. this also about earnings optimism and global recovery regardless? >> i think on the inflation side there is almost an element of traveling aright here. the c.p.i. number yesterday,
there was a lot of focus on that the markets shrugged it off, and markets are adjusting to the prospect of higher inflation. we have seen that in the moves this year. we saw it in january, february and march in 10-year he yields. when we think about the inflationary back drop out there, you know what that means for raw materials, tightness in certain areas, in markets such as semiconductorors. wonderful the stimulus from the infrastructure bill on top of unprecedented levels of stimulus. we think the inflation back drop is there to stay in many ways. we think marks are factoring this in. i think the key for us is direction of travel from here. it is all about vaccine roll-outs, reopening of economies, what that means in terms of pent-up consumer demand, inflation numbers that are going to be printed later this year. i think that is the element the fed are going to be looking at closely as we see economies
resume. on the vaccine front, there is no doubt that j and j news was a set back. for context here in terms of the u.s., it is a relatively sonali amount in terms of the overall vaccine roll out compared to pfizer and moderna. it is manageable. where it becomes more after dernier is other countries that are playing catch up globally that will be dependent on the j and j vaccine in terms of getting the roll-out. it is obviously a one-dose regimen, easy tore transport. it may potentially impact the roll-out in other parts of the globe. but we do think that it is managable. i think that is why you saw relatively muted pons both to the c.p.i. number and to the j and j news yesterday. >> good morning, richard. can i clarify that on your inflation view you are saying that markets know this story, we have talked about it enough.
yes we are going to get high inflation for the next couple of months, but everyone is adjusted to that, and you are basically saying for at least the next couple of months, it is not going to shock and inflation is going to take a backseat as a theme? is that what you are saying? >> the key is when you see that reopening. then as consumers return and we see that pent-up demand and how that plays out. certainly the elements are in place around commodity costs, even things like freight cost and wage cost. the back drops remain there, and that is not factoring the potential for more stimulus. we think investors need to be mindful of the prospect of higher inflation. we think the travel on the 10-year could point higher. i think how we move is going to be really important here. if we see a gradual move in inflakes, a graledwal move in 10-year yields, and that is down to economies roping and the resumption of economic growth, we think that is good
for markets. what may be harder for equity markets to stop can't is if we see really sharp moves in inflations or yields. that takes us back to the other scenarios. that is the element i think -- that is the curveball i think that could be out there for markets. if we see a gradual move higher on inflation, i dolan think that is a balt thing for equity markets. anna: richard, thank you. we have had his thoughts there on inflation and where does that leave the yield curve and the banking sector. we are bracing for big banks earning season. we have a preview necas. jpmorgan is expected to report its strongest earnings in over 10 years. we will get those numbers and then richards thoughts. this is bloomberg. ♪♪
>> we look at what needs to be done in terms of adjustment of inflation, recognizing that part of it is this area. we think inflation is going to go back lower, and we think we are adjusting rates so we have our target. when you look at the output, we see it reverse in 2022. those things are aligned. >> but you are not planning to take the neutral rate, go back to the neutral rates this year? you are still lannanning to leave some monetary stimulus for 2021? >> the question in every meeting, the first question is do we neat sometime itf conditions? the answer is yes we do. we are facing a pandemic. then the question is how is that continuing to be in remember that when we placed our interest rates at 29%, we
are envisions a scenario that never happened, talking about negative growth in on the magnitude of% or 9%. none of these things materialized. it is not adjusts inflation for what we think it should be compared to the neutral rate. we should be recognizing that the great interest rate we have now was set up for conditions that never material eyed and that we need to move rates but still be on
grounds. >> the brazilian central bank president speaking clufle to bloomberg about monetary policy. you look at brazil, and you have an example of a country there delivering an outside rate headache. we have seen from a number of emerging market countries at g-20 levels, we are seeing e.m. ahead of d.m. when it comes to turning the corner and getting into tightening? >> absolutely. that has been a theme in the last month or so. they are leading this hawkish shift. brazil is a unique case because they have such currency weakness and they have such domestic problems around the pandemic. they are worried about that path through. on that front, it is interesting. our brazil stat just says that local traders are desperate to buy back into the brazil story. they are looking for a positive reason. there just aren't many positive reasons out there in brazil at the moment. anna: certainly a lot of gloom surrounding covid in that part of the world. let's talk about the bank earnings seasons. results season kicks off for u.s. banks, jpmorgan, goldman and wells fargo report before the bell. they aring fored by city group. dani, you have been pouring over the details of what we expect. another strong quarter for profits, is that on the card? >> banner quarter.
expectations are very high at the moment. i really like how the wells fargo analyst lays it out. he calls it the five c's. you have cost control, credit quality improving, you have to have the yield curve, capital return and capital markets. capital markets the big one here. we are expecting stock underwriting to triple to a record this quarter thanks in no small part to the spax boom. look to the deal makers like goldman to lead and outshine in this earnings result. it all sounds positive. what would weigh on results? >> that could be the issue here, that expectations are so high. any wobble could really damage the type of share price reaction we see. to some free, bank shares have rallied so much this year that things like loan loss reserve being released, that is pretty much already bake the into the picture.
at the same time, yield curve and things like loan growth, that is not going to help banks until later this year, so that won't show up yet in the quarters result. anna: dani, thank you. richard is still with us. it seems that the chaos surrounding akagos may not be part of the narrow it have around u.s. banks. certainly they were involved, but it may not be key or crucial to their profitability. that may not be the case when it comes to japan and europe. do you think the hang over is going to have an impact on the banks earning season more broadly. we have heard that demura and credit swills are tightening conditions? >> we don't think it is going to have a major impact as we think about it globally. we also expect a pretty strong results season for the u.s. banks, especially on the capital markets side. we expect to report a really
strong quarter. for the banks it is really all about that yield curve. that has been the major driver of that re-rating you have seen in the sector. one element we are going to be watching in terms of the us us bank reports we will see this week is on the reserve releases relate the to loan numbers. banks were conservative last year. i think there is potential there for further release. that would be an interesting barometer to see. we think the sector is pretty well placed this year for further opening of the economy and the potential for more capital returns. when you think about dividends, u.s. banks maintained their dividends. european banks had to suspend theirs. but we think those will resume. way the sector has enjoyed a strong rerating for pricing and book perspective, we think there is more roof for up side a as we think about economies
reopening globally. >> you talked about the reserve releases from the loan loss provisions from last year. dani said they may already be baked into the price. it is the first u.s. bank earning season can i remember where this is the big focus. what are you looking for? what will you consider a beat to add to the story on what leaders take in stride? >> i think the expectations are certainly high when you think about where the bar is going into this results season. we do think the banks in general, we expect to see some decent nuptials here. i think as we said, i think they were fairly cobbs itf last year and rightly so when it came to provisions. there is a lot of uncertainty out there about how long the pandemic would last. the vaccine roll will have out is providing the key to economies reopening again. we think there should be a relatively bullish outlook for banks here. what is in the price is going to be key. we have seen that re-rating
from the price to book on the sector, but as we think about the back drop, the yeefrled curve will be career in terms of bank earnings going forward here. in general we think prospects are pretty good here. anna: u.s. banks no doubt focus on the fiscal story in the united states. other sectors also focused on the fiscal policy push,ed richard. i am thinking of infrastructure names and the impact of some of the policy announcements that president biden will have on those. what is the best way to play that, that infrastructure story? is it learning electricity, broader yults? what is the best play for you? >> one area we are really focused on is the electric theme. when you look at the infrastructure package that was announce the out of the biden administration, one area that didn't get so much attention are the incentives that there are for building out transmission lines. that is a theme as we think about net zero targets, improving economics for wind
and solar, renewable becoming an increasing element of the energy mix. at the same time, demand for charging infrastructure for electric support and electric vehicle roll-outs globally is going to need significance investment in the grid infrastructure. but we think that is an element where they can focus. there is a big value for ute names, the cable manufacturers. we think that is an interesting area to focus on as governments start to grapple with what is an ancient grid and the need to manning the increased renewables that are going into the energy mix right now. mark: richard, i have to bring you back to banks for one final get. one has been is european banks keep on plunging to new lows and from crisis to crisis while the u.s. banks are at highs. will we see european banks sustainable relative to u.s. banks again or will that
continue? >> last year we saw that divergence playing out particularly from a dividend standpoint. the u.s. banks pretty much maintained their dividends wlilet european ones had to suspend theirs. we think there will be an element of catch-up with the european banks, but we think the prospects are good there, too. the european economy is reopening as well. we think banks will resume dividends this year. that will be an important element for investors as well. i think european sentiment when you look at it from a evaluation perspective that is correct gap has been there for a considerable amount of time, but i think there is potential for some of that gap to close. when you think of it a capital perspective, we think the u.s. banks are still sitting pretty in many ways right now. anna: richard, thank you for your time. he is the portfolio manager. coming up on the program, sales of lvmh soar.
anna: welcome back to the european market open. seven minutes until the start of the equity trading session. it looks like we will see under performance by the ftse 100 , the cac futures up by .4%. let's dive into the details. i have a suspicion that dani can help us understand why the cac is higher. >> can i help you with that one. first let's start with london. , tesco had tough comparables for the year. it was still able to beat on its plating profit. they do warn about and say look with the economy reopening with covid starting to recede, it means that extra sales bump we had isn't likely to sustain
itself for the rest of the year. but that also means some of the costs associated with covid are also going to fall away. the travel space an important one to keep an eye on. easy jet releasing earnings. the good news for them is that their cash burn in their fiscal second quarter was less than they expect the, which means in the first half in general that loss rather isn't going to be as severe, but very much still operating at a limited capacity. it cease them operating at 20% of precovid levels. here is your answer as to why the cac futures look good. it is all about the luxury goods sector. it sounds like everybody with the record household sayings, they have stidham to spend it on christian dior and louis vuitton. these two brands helped them with smashing expectations for the quarter. look out for other luxury companies like caring to rally in today's session.
>> dani thank you. laura was asking earlier whether you were helping lvmh smash speck takeses this quarter. in terms of our thinking around the broader markets, we are going to keep that in mind. we will see the divergence between what is going on in london and paris. that seems to be a theme in recent days. >> that is right. i am delighted that laura thinks i have a fashion sense of some sort. i think every day we are seeing a little bit of this dwerblingens. it is not a broader theme at the moment. one other thing to put on your radar before i leave for the second hour, it is the quinn base i.p.o. coming up. it is how well crypt currencies are doing. it is not just bitcoin, but asiriam has been surging. let's see if this is an inflection point for the crypto space. anna: and important conversation. how do you value an exchange
european market open. one minute until the start of cash equity trading. a mixed trip for stocks as investors shrug off rising inflation and focus on the global vaccination campaign. jay powell joins david rubenstein today. jp morgan is expected to report its strongest earnings growth in over 10 years. goleman sachs and wells fargo set to report. bitcoin booms, a fresh high of $64,000 ahead of coinbase listing today.
welcome to the second hour of the program, 20 seconds until the start of the european equity trading session. futures, some outperformance in paris, underperformance in london. we got numbers from lvmh, smashing expectations, and the words of one broker. we see expectations are high in paris. we will see gains to the luxury sector. we saw london weighed down by the banking sector, oil and the drugs names. the sector not helping london right now. this is where we are, european equity markets, we only have london so far. it is fairly flat. paris is open by 0.5%. moving to the upside a little
more aggressively. lvmh is up by 2.5%. in london we have numbers from tesco, that is down 1.8%. easyjet up 1.9% on the back of the announcement of the profit guidance. we are keeping and i on the individual names and how the broader markets opened. the ibex and ftse opening tentatively to the upside. we are waiting for the dax. european equity markets opening slightly to the upside. the u.s. has seen prices increase at the most for nine years but investors are shrugging off inflation, focusing on the global vaccination campaign, as johnson & johnson has been put on hold in the u.s. after six women developed blood clots. joining us now is viraj patel, global macro strategist,
vanda research. i want to start with your take on risk appetite. on one hand you have inflation building in the u.s. not running away with itself and scaring people unnecessarily, but you have negatives coming through from the pause in the j&j rollout. none of that stopped u.s. stocks. what is powering ahead global risk appetite? viraj: we think we will hit the pause button, and april will be about consolidation. we are starting to see treasury yields, value investors coming back into the market and buying at these levels. we also think in the short term we will get peak inflation uncertainty. as we saw yesterday, we will get more readings in the u.s. and
europe on inflation and a next couple of months. that will give a reality check on how inflation pressures are, how central banks are from tightening in the near term. that points to good consolidation in yields. a good environment for growth stocks in the short term. anna: you do not think we will see inflation prints that will scare risk appetite or cause a selloff? we did not see that yesterday. is that your expectation? and where do you put -- if you see a pausing yields, where does that put the dollar? viraj: with the dollar, we have been on the right side of that call since the start of the year, the positioning story in the short squeeze. we do not think that narrative will go away in 2021. we will see a pause and
consolidation. it comes to the fx market, we are focusing on the strength of cyclical recovery going into 2022. and also the proximity of central banks tightening in the near term for the dollar. and for us, looking to go along dollar against the low yielding currencies. anna: you think it will be relative expectations around the fed and ecb, and the path to tightening, the number of months before tightening starts -- you think that will be the guiding force? viraj: exactly, it will be short term for the fed and ecb. we think that will be the case, and based on our estimates, the gap is around 12 months. that looks slightly aggressive on the ecb side. we see room for pushback there.
in the short-term, coming from weakness in the euro macro story, that is a slightly constructive view on the dollar against the euro. once we get consolidation, we think -- anna: thank you very much, viraj patel, global macro strategist, vanda research. he stays with us on the program. coming up, the ecb can exit from crisis measures while continuing accommodative monetary policy. we will play some of that conversation, coming up shortly. later today, a crucial conversation, jay powell speaks at the economic club of washington. he will be talking to david rubenstein. this is bloomberg. ♪
anna: welcome back to the european market open, eight minutes into the trading session, some divergence between london and paris. the paris market doing well, the london market down 0.1%. let's look at stocks on the move. dani burger will help us understand that i versions. dani: lvmh, really the entirety
of the luxury goods space after what bernstein called a smashing quarter from lvmh, beating expectations. we are seeing other stocks do well. also on the rise today is easyjet, out with their earnings figures. cash burn looking better than expected. the entirety of the first half looking better than expected, despite the fact third-quarter capacity will be at 20% of what it was pre-covid. finally, credit suisse, we learned on tuesday they had another $2 billion they put into the market of archegos. it is concerning to investors that they are getting rid of their exposure. the u.s. banks did early on but credit suisse lagging, down nearly 2%. the macro picture, we have cpi data out yesterday.
it was said that we have base affects that we will not see inflation or get any hint of it until later in the year. that shows that while u.s. 10 year yield is up a basis point, we will not get a huge reaction. higher yields. bitcoin hitting another high, up over $64,000. we have the coin based direct listing that is not moving investors away from bitcoin but only seems to be adding to the exuberance for the cryptocurrency. anna: thank you very much, dani burger. let's get a first word news update. laura: sources say president biden is set to withdraw all u.s. troops from afghanistan by september 11, the target date marks the 20th anniversary of the terrorist attacks that led
to the u.s. invasion, and the toppling of the taliban leadership. some forces will start leaving before the end of this month. u.k. let atop civil servant while he was still working for the government, it comes amid a scandal over cronyism surrounding the insolvent lender, including former prime minister david cameron. he has been cleared of breaking the rules but the government has announced an inquiry into how it won contracts. the white police officer who fatally shot a black man during at traffic stop in a minneapolis suburb has resigned. the mayor says he hopes the move will help heal the community and lead to reconciliation. it follows two nights a protest and unrest. global news, 24 hours a day, on air and at bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg.
anna: let's focus on europe. we have been speaking to the ecb governing council member about the eu recovery fund. >> if i look at the future, we should implement next-generation funds. a 700 50 billion package. speed is more important than weight to answer your question. it should come as quickly as possible. there will be fiscal stimulus from national states. we should never forget them. it is still at a national level. anna: interesting thoughts on the fiscal side. we discussed when he saw in end to the ecb pandemic bond buying program. >> the crisis could be over by march 22, so we could possibly exit by march 22.
it would not mean an abrupt tightening of our monetary policy. reinvestment would go on. anna: viraj patel, global macro strategist, vanda research is still with us. we touched on your expectations for ecb tightening versus fed tightening in our earlier conversation. interesting to hear the bank of france governor talking how policy will remain accommodative even when the program comes to an end because there will be other tools to fall back on. what are your expectations? viraj: we think ecb is the only game in town in terms of stimulus over the next 12-18 months. you want to be on the dovish side of that trade, and that march 22 date gets kicked back a bit given what we are seeing in terms of headwinds in the short-term on vaccinations and reopening. markets are misjudging a
narrative that will emerge in the second half of the year, europe's recovery will clash with what will be a busy calendar. all of that pushes us on the cautious side of things. we see the front and rates lower. we think april is a good month to be long on bunds. anna: you think because of the delays to the recovery, it will clash with politics in the latter half of the year, and that will weigh on your expectations. you are not chasing the recovery story for european assets? viraj: that is a good question, and to some extent we have to ask how much recent weakness is priced into markets. in equities, we think a lot of good news is priced in already. if you look at the first quarter
sector dispersion and performance, most of it is driven by upgrades. both of those do really well under the reopening and value theme. on european equity markets, a lot of good news, but on the fx side, we are discounting more of that. when looking at positioning, the euro-dollar positioning across bunds is extremely short, one of the most crowded positions in our models. we think that does not fully discount the bad news in europe that will emerge over the next couple of months. for us, that trade is late. anna: what is in the driver seat for the pound? we came through big uncertainties around brexit, other uncertainties could lie ahead. you cite scottish independence, and we have local
elections, scottish parliamentary elections in may. what will be in the driver seat, because the recovery from covid is also at the heart of things for the u.k. currency. viraj: at the start of the year, it looked good for u.k. reopening stocks, we had tailwinds from the vaccination progress, and the brexit trade deal. we are starting to see headwinds, so it is as if the tailwinds will clash with the headwinds ahead of local elections next month. we will hear and see more talk of scottish independence, but overall we are constructive with the tailwinds that are pretty much in motion. for us, it is more consolidation and looking for a better entry points to go along sterling and long u.k. later this year. anna: where you stand on the long u.k. stocks argument? a number of people said they
undervalued them earlier this year. we see the ftse 100 is sometimes struggling against continental peers. viraj: our favorite way to play that has been the ftse 250 on a relative basis, that outperformed really well year to date. when you think there will be profit, given the domestic headwinds in the short-term, but our reopening trade if it goes to plan should be in the second half of this year. for us, it will be a premium of monetary data in the next couple of months. there is the risk we get an upside surprise from the reopening and macro data that causes another positive provision to the u.k. outlook, and that is good for u.k. domestic stocks and sterling. anna: thank you very much, viraj patel, global macro strategist, vanda research. he will continue the conversation with us on bloomberg radio 9:00 a.m. u.k.
taking every step necessary to ensure the american people have clear and transparent information. >> we expect it to be a matter of days for this pause. >> we want to get this worked out as quickly as we can, and that is why you see the word pause. you want to hold off, and we may well go back to that with conditions or maybe not. >> the real thing that is notable is not just the cerebral thrombosis -- those can occur. it is their occurrence together that makes a pattern, and that pattern is very similar to what was seen in europe with another vaccine. anna: some of the voices of health officials, the distribution of johnson & johnson vaccine was paused.
this was not a surprise to you, i assume, because we talked about this yesterday and how it could be the case, it could eat possible because of the similarities between the johnson & johnson vaccine and the astrazeneca vaccine. how much of a setback will this proved to be? sam: yes, the regulators in the u.s. are worried the incidents of this side effect may be similar to that seen with the astrazeneca vaccine. depending on what numbers you read, you can say it is about one in 100,000, and not one in a million, which is what the u.s. authorities are seeing at the minute with the johnson & johnson vaccine. the numbers could get worse. therefore, they have done what they had to do, which is their
job, to protect the public from a risk. for the u.s., it does not mean much because they have a lot of other vaccines. it is more of an issue for europe and the rest of the world. anna: europe more reliant on this perhaps. we get a similar strategy with age-specific recommendations, maybe in parts of europe that are more reliant on johnson & johnson? sam: you will probably see that in the u.s. they will get more data potentially in the next week or two, reassess the situation to see if it is similar as astrazeneca -- it seems more prevalent in the younger age groups, and go with that recommendation. then what happens in terms of vaccine hesitancy, what happens
to people wanting the shot or not, if they have the option of another vaccine, that is a different discussion. anna: every scientist working on this -- and that is many -- all trying to understand what link there is between these vaccines and led clots. are we any closer to understanding what it is about what seems to be women of a certain age that makes them more vulnerable, even though the case rates are very low? sam: i'm not going down the road to say this is female versus male issue. the european authorities have been clear saying they do not think it is a gender difference. therefore, six cases in the u.s. happen to be in women. it could be a statistical fluke. let's wait on that, but in terms of what it is doing with these
vaccines, it is clear that it is pointing to the virus used to deliver the vaccine as opposed -- you not see it with pfizer biontech or moderna vaccine's -- we need more information to understand why these viruses are doing that. anna: you mentioned how it could be more difficult for your because there are fewer alternatives, certainly for the european union that is part of the story. how much of a setback is this for the rollout of vaccines in the eu? sam: we do not have clarity as to the timing of the expected delivery of doses, but if you look at the contracts they publish on the website, there are up to 900 million doses. that is 450 million people, that
would cover the european union population. i do not know when they are due. some are due in 2022. if the j&j vaccine is not reintroduced -- which i doubt, it will probably be the same for the older population -- you will have a slowing of rollouts as opposed to major serious roadblocks, which some of the rest of the world could see. anna: thank you very much, sam fazeli. coming up, will cryptocurrencies roof they are here to stay? and what does this do to the ability of investors to get exposure to bitcoin? does this open another opportunity? how do you value in exchange like this as opposed to typical equity exchanges? mati greenspan joins us next to
technology moving a little bit higher. sap moving higher. given what we have to say about cloud. on the downside, telecoms, construction, insurance. those are all down. looking forward luxury features, individual features moving to the upside. let's get a bloomberg business flash. laura: luxury looks to be defining the pandemic. revenue at the fashion unit jumps over 50% from a year earlier. that division is a key driver for the company. and if any from the growth of brands like louis vuitton. stocks are tied up to capital
management. it follows a frenzy of similar transactions that have raised almost $200 billion in market value. according to analyst at jp morgan, downfall of the firm will result in $10 billion of losses. a reshuffle at the top of toshiba is costing a potential buyout plan. the japanese companies executive is stepping down. it comes amid resistance to the over $20 billion buyout from the cbc capital partners. sources tell us they are exploring a bit. that is the bloomberg business class. anna: thank you. coinbase will list on the nasdaq. the direct listing could valued the exchange around $100 billion. will it be enough to convince bit going -- bitcoin skeptics? >> coinbase is going public.
it is not just another direct listing. it is a symbol of how far crypto has come in its time. it has been around since 2009. the mainstream basically always viewed it with extreme skepticism. >> it is going bad. it is nothing but a ponzi scheme. >> i could care less about how it trades, who trades it. if you are stupid enough to buy it you will pay the price. >> i think it is a scam. >> money laundering. >> fast for two now, it has done more than double. tenfold since last march. with the total cryptocurrency market worth over $2 trillion, large institutions are ready to play a role. >> bitcoin should be worth about $400,000. >> coinbase is the largest
cryptocurrency exchange. it is so big that despite being less than a decade old, the company is establishing changes. >> there are many that are standing outside the gate waiting for the moment when they can have bitcoin. >> coinbase generated revenue in the first year. numbers no live. crypto is here to stay. anna: that is the history. joining us now is mati greenspan , quantum economic ceo. someone we talk to about all things crypto. good to speak to you. do think this is a coming of age for bitcoin, cryptocurrencies as we see coinbase? ? listed on the nasdaq mati: it is a huge step forward. in the legitimacy it brings to the eyes of investors and
corporate regulators. anna: since it has added legitimacy, does it bring more investors? more risk investors who like to do fundamental analysis might do more luck valuing an exchange than a cryptocurrency using those more traditional metrics, is that something that will widen the appeal of this asset as we see this ipo? mati: yes. that is right. it is very difficult sometimes to evaluate cryptocurrencies because they do not have the usual earnings ratio and quarterly reports and things like that. the way we usually tackle it is by measuring the size of the network and measuring the rate of adoption. having, of course, an exchange of this magnitude listed publicly on the nasdaq, it
certainly gives many investors away -- new way to gain exposure to crypto market without having to go through all of that homework to try and figure out what a cryptocurrency should be worth. anna: what is the regularity -- regulatory backdrop? i understand a number of etf's are being assessed. here we have the listing of coinbase, does this signal tolerance by u.s. regulators? do you think there could still be regulatory headwinds? mati: yes. u.s. regulation on cryptocurrency is notoriously behind the curve. especially when compared to the rest of the world. they seem to be going into directions at once. on the one hand, we see coinbase is quite large.
as you mentioned, several etf's, pending approval of the new chairman. on the other hand, we see persecution of projects like xrp, and ripple labs. in both cases, my team and i fear that should that sec when the ruling, it could send a very nasty resident -- nasty president. anna: how big should be see the growth opportunity for coinbase? the ceo is putting out a blog poised saying that coinbase has an ambitious should to increase economic freedom in the world. everyone deserves financial access to help them build a better life for themselves and their families. a freedom that some four see in
others do not know they need yet. how big should our expectations be? mati: the expected valuation of $100 billion, four times the size of nasdaq itself on which it is being listed, that should give you a sense of how people are looking at this. how do we evaluate anything these days? especially when you see valuations of tesla. one of the keys is the fact that it is going public as a direct listing. there are no underwriters involved with setting price and note new shares being issued, simply shares already issued coming online. the coinbase valuation is a lot more like a cryptocurrency. we are talking about a limited
supply. basically the seller gets to choose their pricing in these situations. in the decentralized market, they are selling token sized. they have valuation closer to $140 billion. a lot of folks. what you mentioned there as far as coinbase, this is the mission of bitcoin and cryptocurrencies at large, the monetization of finance. it is very difficult, the first quarter was a blowup for coinbase. as it was in the entire space. we do not see coinbase specifically having this. there are many different risks and we do not foresee the massive rise of cryptocurrency -- we do foresee the massive rise of cryptocurrency to continue. anna: what about ese and the
investors, the environmental toll of the bitcoin and mining of bitcoin? power consumption increased by 66 fold. a lot of that powered by mining taking place in china. coal fueled mining and bitcoin. how does that fit alongside those mandates? mati: unfortunately, i am not the exploit -- expert in bitcoin. we have i.t. who deal into that. when we compare that to the u.s. dollar system, well -- let me be straight with you, it is a problem. over time, there are incentives for people to use renewable energy, cheaper energy sources.
i do believe the network really involves and has faith that by the time it gets to be a bigger problem, we will have more solid solutions as far as bitcoin mining. anna: thank you very much. thank you for coming to talk to us. mati greenspan, quantum economic ceo. coming up, after raising rates, central bank chief says they could go even higher. more from that exclusive conversation next. this is bloomberg. ♪
anna: welcome back to the european market open. u.s. futures flat this hour. head of central bank says it will intervene. a spike in play -- prices. policy makers say they could go higher. bloomberg spoke to the central bank's president. >> we look at what needs to be done. organizing and we think towards the end of year inflation will go bacrw we are adjusting rates so we have our target. when you look at the output
there, we see more than it. >> you are not planning to take that neutral rates this year, you're planning to see leap some of the stemless for 2021 -- leave some stimulus. >> the answer is yes, we still need to. we are still facing a pandemic and country that has many problem. the question is, how much do they need to be? when we put interest rates at two, we were talking about negative growth, some were saying inflation was going to be as low as 1.5%. none of these materialize. it is not just for what we think it should be compared to the new rate, it is recognizing that the
industry we had was set up by conditions that never materialized and that we need to move rates but still be on similar ground. that is part of my decision process. anna: that was brazilian central bank president speaking exclusively to bloomberg. let's get the latest in the selloff of the world's second-largest credit market. concerns about the financial health of china's asset management. a record tumble in the dollar bonds. one debt manager, let's get the details. good morning to you. why are investors panicking? is this the work, the assumption in the past would be nothing to worry about, what is the concern? >> it is a really extraordinary story of mounting stress as you
say, one of china's most important companies. concern when it delayed the release of its financials, that led to questions over the viability and visibility over the group. however, as time has gone on, there are reports of potential restructuring and a deafening silence about whether or not the state will step in to prevent investors from taking a cut or help in any way. that has prompted questions about the extent and scope of any support from the government. it is bearing in mind that this is investment grade a borrower and a because i from some. these are institutional investors. the bonds are now trading at junk levels. $.65 on the dollar. it is a dramatic change for this
company. anna: what signs are there of broader contingent in the market and are there concerns about how it could come? is this something that will have a broader reach into other assets? rebecca: we are seeing it impact other areas of credit. there has been a fairly sharp spread off. investors are moving to pair risk quite quickly. asians investment grade on a bond market is also taking a hit this morning. what is interesting i think is in the primary market, sources have also confirmed that tencent is holding off on a potential bond deal. spreads on tencent bonds are widening over three months as the search of borrowing is spilling over into the rest of china's credit market. investors are watching the primary market very closely.
if there is any sign that it might freeze up for other borrowers as well. anna: thank you very much. our china credit reporter, thank you for talking to us. really interesting story about those implications that it may have on other assets. coming up, we speak about the impact on sterling after the bank of england's chief economist walk. how they talk about stepping down. this is bloomberg. ♪
pres. biden: my message on the vaccine is i told you i made sure we had 6 million doses of the -- not of either johnson & johnson and/or astrazeneca. there is enough vaccine, basically 100% unquestionable for every single solitary american. anna: president biden speaking yesterday, reassuring americans that that u.s. has enough vaccine supply after the fda hit pause on distributing the johnson & johnson shot period
markets yesterday to back in stride. johnson & johnson are a focus. the u.s. has plenty of other options when it comes to vaccines. a little more tricky here in europe, parts of europe relied more on j&j than the u.s. the flatline, rely on paris. one of our macro strategists is with us. good to speak to you. the same pattern seems to be emerging data date week where it landed markets underperform and french market outperforms. i suppose it is that sector makeup of these very deft varies markets. >> that does appear to be the case. the fact we are seeing that luxury sector continue to perform. looking at european assets, we are seeing a bit of a pause in
terms of that broader inflation trade. i think that suggest that a lot of this good news optimism on the recovery is priced in. i think investors are not going to vocus on earnings season. if we look at estimate revision for european equities, they are quite significant. upgrades over downgrades are the highest they have been in decades. i think burning disappointments could be next. anna: we need to keep in mind earnings. we talked to the bank of france and expectations of monetary support in the eurozone. he was keen to point out that even when the program comes to an end it will not be a sudden stop. they can reinvest and use pre-existing programs instead. what you make of his commentary today? laura: in the conversation you had within this morning, the one thing that struck me was the challenge that central bankers are going to have in signaling when they are going to taper and how they are going to taper.
they may have fed come out earlier this week i into the herd immunity. we are seeing mixed messaging coming from the ecb. he is saying that march 2022 is when they anticipate that pandemic will end. we have others on the council suggesting that we could see tapering in q3. this is mixed messaging markets web watch. anna: speaking of central banking, focus how they dropped the mic. that was with one of your pieces. he will be leaving the boe. a little movement in sterling, but nothing substantial. we not read too much into him leaving the building? laura: it was a knee-jerk reaction we saw in the currency on the back of that news. as an avid central bank watcher it was disappointing, i enjoy
his colorful commentary. he has came out warning of the risk cat coming out of the bag. he is a brilliant outlier and has warned about inflationary pressures. i think from a markets perspective, markets are wondering, now that he is leaving at the end of june, could that real in those bullish undertones? that is unlikely to be the case. we are seeing a growing chorus of optimism when it comes to these elements. i do not think it will have a material impact on policy, but something to watch for. anna: one of the big things, as economies unlock seem to be the extent where people will spend their savings. that seems to be a big question the bank of england and other banks will deal with. you for joining us, laura cooper, our macro strategist. that is it for the european