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tv   Bloomberg Markets European Open  Bloomberg  July 1, 2021 2:00am-4:00am EDT

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>> welcome to "the european open." the s&p 500 finishes with one of its best first half's in 20 years. asian stocks slip. kaplan reiterates tapering should start sooner rather than later. opec-plus heads into a crucial meeting with russia and saudi
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arabia on supply hike. the market expects an extra half a million barrels a day from august. rishi sunak promises to sharpen london's competitive edge for years to come that's coming up later on. welcome to "the european market we will bring you more of our interview with robin kaplan next -- robert kaplan next. london listed names are giving an update. let's get to ab foods. ab foods forecast for sales has increased. encouraging sales from primark. this is a business that has food but also retail and clothing. not such an online presence for its clothing retailer primark. the reopening of stores very important for this kind of business. we have seen adjusted operating
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profit in line with last year according to primark. last year was 2020 and that was impacted by closures as well. we will keep an eye on ab foods. sticking with clothing retail, commentary coming through from h&m. they have given pretax numbers. that looks to be ahead of estimates. they are talking about the extent to which they still have stores closed. around 95 stores are still temporarily closed. they are giving us details of what they managed to achieve online. very good prospects of a cash dividend in the autumn of 2021. which for a sector beaten up by the lack of demand for new clothing and store closures, that is an interesting thing to note. 53.9% is again ahead of the estimate. keep an eye on h&m or ab foods.
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lots to talk about when it comes to u.k. and global retail. just under an hour from the start of the cash equities trading picture for europe, let's take a look at futures for you. this is what we have for european equity market futures. just warming up as the morning goes on, getting to -- becoming a bit more positive. we saw yesterday a real down day for european stocks. in the u.s., more mixed. let's focus on u.s. stocks. the s&p had one of the best first half since 1998. yesterday's session did not reflect that in europe and maybe not the u.s. either. we should not lose sight of where we have come. in europe the stoxx 600 had five straight months of gains. the futures picture for europe a little flatter over in the
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united states where nasdaq futures look lackluster. we will get into the about growth stocks and cyclicals. let's go to the gmm. where we are seeing and not seeing outside moves coming through. we are mixed on the asian session. down by 0.3%. a few more red boxes than green. chinese stocks eking out gains. not so for japan. perhaps way down by the survey of japanese business coming in below some expectations. it does suggest an upswing ahead so we will keep an eye on that. we have pmi data in india. we will get further pmi's globally. the indian numbers a little weaker. others in the region weaker. broadly we are heading toward payrolls data out on friday. the payrolls number out from the united states tomorrow. we are working toward that,
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modest gains is the expectation. markets for the second half of the year facing challenges from covid-19 variants and diminishing monetary policy support amid inflation pressure. robert kaplan says he hopes tapering will start soon but that it should be gradual. >> it will be far healthier to start soon rather than later. excess risk-taking, excesses in the housing market, imbalances in the overall economy, and i do believe if we take our foot off the accelerator gently now, we will have more flexibility down the road to avoid more abrupt action or severe actions in the future. anna: a lot of time thinking about where tapering is going to start. we always think about what the jobs market is telling us.
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what the inflation picture is telling us. that is where we see the fed is focused. there we have robert kaplan talking about excess risk-taking, imbalances. elsewhere we have heard about the housing market in the u.s. and imbalances, exuberance there. is that where we should be focused? is that with this is really all about? >> good morning. i think it is both. in terms of the inflationary expectations, we are of the view it is not transitory. it is going to be more sticky. we do see inflationary pressures continuing towards year end. kaplan -- in the broader discussion, but alongside that, the element of margin debt, levels of gdp, historical levels, are very high as well.
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the risk of fragility is there. taking a little action earlier rather than later would be very wise. anna: it would be wise except don't we have a fed that is deliberately waiting for data? a deliberately waiting for the numbers to be present rather than the expectation of a certain number to come? >> not really. the job of the fed is to manage expectations, be aware of the development, and manage expectation. this is exacting what they did with the fomc. they said listen, we are not stubborn. we are aware. we are gradually adjusting our commentary to be aware that inflationary pressures will be coming through, but we are not going to be taking any course of action. the fed may be behind the curve. it is showing to us it is pragmatic and willing to adjust.
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that reduces an element of risk of a policy mistake. this was very constructive, in our view. anna: you have taken the constructive message. you do see inflation as sticky. what is giving you that? why do you think this will not be temporary, it will stick around? >> more than half believe it is transitory. we believe a number of factors. if you compare the policy equation to the one after the global financial crisis, there was so much stimulus, but the technological advancements, demographics, meant inflation remained low. we believe this is going to be different. number one, we have more geopolitical tensions. these will remain so the price differences will not necessarily manifest.
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tensions will remain. tariff issues will remain. labor supply chains will be coming closer to home where costs are more expensive. in the eu or eastern europe, mexico, supply chains coming home, receding globalization, tensions continue come on top of that, a shift to the left of the electorate expecting wage adjustments. higher wages. the s on the esg. the more competitive stimulus and the fact it is widespread. anna: it will be interesting to see if we see that pivot to the left when we see policy move to the left from various political participants. stay with us.
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just want to bring you an interesting line with regards to the banking sector. in particular around return to office. there has been talk about the number of days everyone is expected to head back to the office. a little later in europe perhaps. the line from unicredit is they will permanently allow remote work up to two days a week. we heard similarly from ubs taking a stance that was going to allow more flexibility on work location versus what we have heard from many voices on wall street. we will see whether that becomes a transatlantic divide in the same waning be -- the same way maybe holiday allowance is already. coming up, president xi stans defiance, using the 100th anniversary of china's communist party to warn the world not to stand in the way of beijing's historic mission, he turns it, gaining control of taiwan. plus the eu's covid-19 vaccine
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goes live, key to saving summer holidays. we will speak to michael o'leary at 8:30 a.m. u.k. time. later, don't miss our conversation with the u.k.'s chancellor rishi sunak about his plans to sharpen london's competitive edge. if you have questions on your own for our guests, extend them. ib+tv is the function to use. ♪
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>> the good news is the technology is poised to be able to react. it is not as though if something really bad starts appearing it is going to take us years and years to react. we can do it in a shorter period
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of time if we all stay vigilant and coordinated. >> we are sequencing the variants to understand the prevalence. for now, extremely low, we will continue to sequence and pay a lot of attention to ensure we can respond. the best we have at the moment is to continue vaccinating. anna: the chairman of moderna and the spanish foreign minister talking about the delta variant with bloomberg. worries about the spread of the variant may be one of the biggest risks for markets at the end of the second half of the year. are you somebody who thinks concerns around the delta variant are overdone or underdone? j.p. morgan was saying by values
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in cyclicals. maybe we were worried too much about the delta variant. >> covid is no longer part of the broader discussion of the geopolitical agenda. we took it off our quarterly outlook for this quarter. it is there, but it is not going to be driving policy, not driving issues between countries or regions. in terms of the impact on the underlying factors, it is a matter of time for vaccinations to come through. we have seen the clear breakdown between those who get covid hospitalized and die. i cannot agree more in terms of vaccination. it is no longer driving thinking in geopolitics. >> we watch the race to vaccinate, see if we can get ahead of the delta variant. what would you suggest in terms
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of stock market exposure, if that is the stance? or to risk assets. if you are not overly concerned by the delta variant, what would be the strategy? >> the strategy is we are neutral in the u.s. market. because of valuations. the fundamentals are supported. the valuations are overextended. that keeps us neutral. however, because we believe in continuing global growth and reflationary story, we are positive in europe, the u.k., we have upgraded the u.k. politics and geopolitics, and we are positive on china. in terms of the broader emerging-market areas, latin america and eastern europe.
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anna: you have downgraded copper. why do you think that mental has run as far -- that metal has run as far as is going to? >> we turned positive copper back in may of last year. because we believed in the reflation china growth story and also later, the benefit of esg on copper with infrastructure spending. however, just a month or so ago, everything we were calling for was in the price. we were rating the expert -- reading the expectations we had across the papers. we cannot see anything new which would drive copper to higher levels.
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we decided to downgrade back to neutral given that our expectations have been met. but if i may just add, in terms of buying investors growth, we also believe we are going to be shifting from growth to value. we think this new environment of higher yields, higher inflation, and higher levels of growth overall, should be more supportive for value. anna: thank you very much for spending time with us. the cio at abp invest. thanks for joining us. let's get a bloomberg news update. >> chinese president xi jinping has struck a defiant tone in a speech marking the communist party's 100 year anniversary. he told thousands of party officials gathered in tiananmen square that china's opponents should avoid standing in the way
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of his government, calling for the quest to gain control of taiwan and historic mission. >> we have never bullied the people of any other country and never will. we will not allow any foreign power to bully us. anna: -- >> the u.k. chancellor is expected to outline a vision for expanding, to sharpen the u.k.'s competitive advantage with a focus on technology and green finance. bloomberg surveillance will be speaking to the u.k. chancellor in an exclusive interview at 10:30 a.m. london time. donald rumsfeld has died, aged 88, one of the main architects of the u.s. wars in iraq and afghanistan following the terrorist attacks on september 11, 2001. president george w. bush says he remembered him of a man of intelligence, integrity, and
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almost inexhaustible energy. he drew fierce criticism for his management of the middle east conflicts, two of the longest wars in u.s. history. 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: laura wright in london. coming up, the eu's covid digital passports go live today. what the new system will mean for international travel. ♪
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anna: european equity futures improving. nissan and partners to invest in
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u.k. ev production hub. the japanese carmaker will make electric crossovers in sunderland. investments into the u.k. auto industry. a rocky period since the brexit referendum, a rocky relationship between carmakers and the u.k. essentially. honda will shut a factory that employs about 3500 workers. this investment is set to create more than 900 jobs. that is something we will keep an eye on. later on we will be speaking to the nissan ceo out after 9:00 a.m. london time. the eu covid-19 vaccine certificates go live, seen as
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the key to saving summer for many. spain is hopeful tourists will soon return. let's get more now. bloomberg's maria tadeo is very lucky and she is in madrid. just how important is this season for spain? >> you know, we are in madrid. i'm happy to be on this assignment. the sun is really shining. it has been a beautiful day so i can't complain. the country is hopeful that this will be a better summer. it is coming from a difficult year last year in which tourism numbers hit a 51 year low. tourism spending which is crucial for this economy 86%. the foreign minister told me we see vaccination and the digital
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pass is the key toward numbers this year. >> we are sequencing the variant in order to understand the prevalence. for now, extremely low, but we will continue to sequence and pay a lot of attention to ensure we know and we can respond. the best cure we have is to continue vaccinating at the moment. >> that was the spanish foreign minister speaking to us exclusively yesterday in madrid. during our conversation we did speak about the u.k. market, a huge market for spain. rules have changed. you do have to bring a test that is negative to come to spain, but if cases of the delta variant go down, spain could look into relaxing restrictions. anna: you reference it slightly.
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how united is europe as covid certificates go into effect? angela merkel was complaining about a lack of unity. >> that is an interesting one. on the basis of this certificate there is consensus and they have all agreed to make it operational today. there are some countries, in particular germany, concerned about the delta variant. the sense i got in my interview with the spanish foreign minister, they believe being too cautious is equally detrimental, so we have to keep an eye on cases but reopen as much as we can. anna: bloomberg's maria tadeo live in madrid. coming up we will go to the geopolitics. the chinese communist party turns 100. xi jinping says the chinese people will not allow a foreign
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forced to bully them. we are live from beijing as the country marks its 100th anniversary. ♪
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anna: half an hour until the start of cash equity trading for european equity markets. heavy losses in yesterday's session. china celebrates the 100th anniversary of its ruling communist already. -- communist party. xi jinping highlighted progress toward a quote moderately prot society. he also sent a warning to foreign powers not to get in the way of the countries historic mission, gaining control of
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taiwan. here is what guests thought of the speech. >> xi jinping has set china on a protectable path. it is about growing wealth, growing power, economic and military power, technological power. >> extraordinarily striking line which will no doubt be every headline tomorrow. saying if you bully china, you are on a collision course with a steel wall forced by 1.4 billion chinese people. the number of applause lines that were provoked by calls to nationalism, strength, sovereignty, was really quite striking. >> looking at high-quality names across sectors, much-needed cyclical exposure. that is where china is uniquely positioned. most other regions, they are moving opposite to each other.
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anna: voices talking about the address through the asian session. for more, tom mackenzie joins us from beijing. good morning to you. what stood out from the speech? >> a number of different audiences xi jinping was addressing, the party apparatus, the domestic audience, the international audience as well. on the domestic front what he was trying to underscore was the party is best placed to ensure future prosperity for the people of china and protection of the chinese people, the chinese nation. he really underscored the fact china had reached this moderately prosperous society. that was a goal the party had been trying to reach for a number of decades. they have reached that. that gets china closer to the developed nation status. you don't have to go very far to see there have been profound successes. china closing on the u.s.. it could overtake by the end of
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this decade. gdp has gone up 50 times since the 1970's. life expectancy has gone from 35 to 77 years. he did not mention some of the darker periods of the history, the cultural revolution, the millions who died, the tiananmen square crackdown. the international side, he had a very clear message for joe biden and his allies. do not lecture us. take a listen. >> the chinese people will never allow any foreign forces to bully, coerce, and enslave us. whoever attempts to do that will break their heads on a steel wall. >> xi jinping saying china is a peaceful nation, it wants to
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cooperate, but when it comes to territorial integrity, he said the bullying of china by foreign powers, there are clear redlines. anna: strong messages and strong language for the international audience. what are the main challenges, having made it through the past 100 years? >> on the economic front you are looking at a recovery that continues post-pandemic that is unbalanced. the indebtedness is an ongoing story with china. we are seeing it very acutely now. they are having to wrestle with that. the wealth divide is extreme and the demographic challenge, last year the number of births falling for the first time at the highest pace since 1961. that is the economic front. on the international front arguably china is looking more isolated than it has been for
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decades. we had that pew survey suggesting 17 developed nations, 15 are seeing record levels of disconnect -- discontent when it comes to china and its policies. the international front and the domestic front, challenges are acute. the black swan event arguably is who follows president xi. anna: he has more time in power. what should we think about his comments around taiwan and hong kong that may have made some in the west a little nervous? >> certainly. this is a time when type a is looking to set up a trade deal with the u.s.. -- taipei is looking to set up a trade deal with the u.s.. the language did not change but the emphasis certainly was there just reiterating that or part of the communist already agenda
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going forward -- communist party addenda going forward will be the reunification, saying any group that tries to get with taiwanese independence will be defeated. he gave some rationale for that national security law in hong kong saying there was a need for stability and territorial integrity. anna: thanks for joining us. tom mackenzie joining us from beijing. let's get a bloomberg business flash. the top corporate stories we are covering. >> the office of george soros is said to have started trading bitcoin as some of the biggest names in the hedge fund industry weight into digital assets. -- wade into digital assets. sources tell us barclays is hiring junior banker pay digging
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deep to retain staff. base salaries for all u.s. analysts were increased by $15,000 to $100,000 base. u.s. associates and vice presidents get a $25,000 boost. staff outside the u.s. will get equivalent percentage raises. softbank sold debt and $3.5 billion notes wednesday in asia second-biggest offshore deal of 2021. it is the tech giant's first debt deal since 2019. that is the bloomberg business flash. anna: sticking with the corporate news flow, renault's turnaround plan is starting to pay off after the french carmaker withstood the effects
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of the pandemic and the global semiconductor shortage. that is according to the ceo, who sat down with bloomberg to discuss the company's revamp. >> i don't think the idea of turning around the company is about only job cuts. there is a lot of work that needs to be done. the work is not finished. we have announced that by 2025, we will be at the level that makes it sustainable. the company is very dynamic. the company is focusing on the right things. we will announce the 2021 result. i cannot be too transparent. i can assure you you will see already some of the work that has been done on fixed costs, variable costs, pricing, despite all of what happened in the first semester with the third
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wave of covid, you know, semiconductor prices. we have been relatively -- but we will be more specific in a few weeks. >> you also helped relaunch when you were at fiat. you are announcing you will have a new electric version of the iconic pharrell -- iconic 4l. do you think this is what customers want to? new electric versions of iconic cars? >> the idea is to combine new technology like electric with emotional concepts. memory is a strong emotional lever for a lot of people. we are taking inspiration from history to bring in the market
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cars people will immediately connect. the soul of manufacturing is in the roots. if you cannot connect with the roots, you lose. >> do you think your alliance with nissan and mitsubishi is strong enough to compete with the likes of volkswagen and peugeot on the others which are making a big push toward ev's? do you think you should partner with other companies in europe or asia? >> i think in the case of ev's, probably one of the advantages is that not only we have the scale, but we are among the first to believe in ev's. nissan with the leaf. we have an advantage when it comes specifically to electric
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cars and we have the scale. >> does renault have plans to reenter the chinese passenger car market? >> we have ideas. we don't have a concrete plan. we are in the process of understanding what could be the possibility. i personally believe not having a presence in china is like a table without a leg. anna: the future lineup of cars. coming up on this program, opec-plus ministers meet later today with production levels in focus. against the backdrop of tightening supply, we will get the latest on the world's most important commodity. ♪
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>> in crypto you have a world of young people who want their own financial systems, their own culture. it is very powerful. i am a big believer in blockchain technology. it is completely disruptive. on top of that, currency will be worth more if more people adopt it. it is likely more people will adopt it. >> that is the founder and managing partner at private equity firm thomas brava -- bravo. let's take a look at stories we are following. eu digital covid cast --
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passports come into focus. we are going to be speaking to ryanair ceo michael o'leary in the next hour of the program. maria tadeo is the host. 1:30 p.m. u.k. time, u.s. data on initial jobless claims will be released. at 3:00 p.m. u.k. time we are getting the latest on manufacturing data. opec-plus ministers are set to meet via videoconference. nuclear negotiations with iran may be a key talking point and a sticking point. let's stick with that theme, the opec-plus meeting. the cartel and its allies are holding critical talks as global demand bounces back. not for the first time, there has been division between saudi arabia and russia within that
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group on the pace of production increases. paul, nice to speak with you. what is this opec-plus meeting looking like? why is it so complicated? >> yes, as you say, this is looking like it's going to be one of the more complicated or intense meetings of opec last in a while -- opec-plus in a while. we are going to see whether or not saudi arabia and russia are going to be able to bridge the divide. prices have surged this year. wti is up more than 50%. the russians would like to increase production. they think opec-plus is getting into dangerous territory as far as oil prices are concerned and it is better for the group to turn on the taps and boost supplies for saudi arabia, which
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along with russia, effectively leaves open less, much more cautious. it is saying we are not through the crisis yet. there still could be pressures on oil demand. the saudi arabians are saying let's hold on or if we increase production, let's be careful. russia and others would like the cartel to go on faster. anna: given oil is up, why wouldn't opec-plus increase the supply, increase production, bring more supply onto the market at this point? does it just depend on whether you want these prices higher or not? >> most analysts and traders are
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expecting an increase in supply beyond july. the consensus is for an increase of roughly 500,000 or 550,000 barrels a day in august. the most obvious reason for opec not doing any more than that is the virus. oil demands are still depressed in many parts of the world because the pandemic. if iran strikes a nuclear deal with the u.s., and other world powers, that is likely to see the u.s. put sanctions on tehran and the islamic republic increase oil exports later this year. interestingly, on whether opec wants prices higher, a lot of people are saying it would much prefer them to stabilize. we had bob mcnally on bloomberg tv earlier and he said if prices get to $80 a barrel, opec is
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going to start feeling a lot of political pressure including from the u.s. to turn on the taps. anna: really good to speak to you. thank you for bringing us an update. a bit of breaking news coming through on glaxosmithkline. we are getting an update from elliott associates shareholders in glaxosmithkline. the management have been under pressure. elliott publishing a letter. they believe the share price has a 44% -- 45% upside. it has a substantial value creation opportunity. they say gsk has a poor record of operational execution. the board of management should be assessed. they believe there is upside to the share price but they are calling for some change at the
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top in terms of the names. we will keep an eye on glaxosmithkline at the open. coming up, we will get your stocks to watch. including h&m. pretax profits at the retailer be estimates as lockdowns these and consumers are shopping. ♪
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anna: welcome back to "the european market open." let's get a look at the stocks we are keeping our eye on. sam unstead joins us now. you appear to be all about shopping, all about the clothing. h&m, let's start there. >> a very retail heavy day in europe.
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h&m, very positive. sales are almost at pre-pandemic levels again. they are seeing growth and recovery from across their operation. they also gave a good indication their dividend may well return. it is something investors are watching across the board. anna: despite the name, ab foods also a clothing retail story in the shape of primark. >> very similar. primark stores mostly closed over the course the pandemic. as they reopen they are seeing a huge recovery. a great deal of pent-up demand. they are doing well across their operations and they have also raised their guidance. another very strong retail performance. anna: jd sports. >> sneakers this time. they have raised their profit guidance. a company has been on the acquisition trail, adding to
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their business. they are seeing profit much higher because people are coming back to stores. anna: let's linger on glaxosmithkline. elliott has something to say about his business, the management, it seems. they see a lot of upside for the share price. they think there is substantial value which is why they are invested in gsk, but they think gsk has a poor record of operational execution and they are asking for the board and management to be assessed. we will keep an eye on this at the start of trade. >> this comes after a very closely watched investment day for glaxosmithkline. they were looking to convince investors. they cut their dividend to do this. they mentioned -- it is mentioned a few times with glaxo, this is the world's largest vaccine maker but they have not been involved with
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one of the vaccines around the world. anna: we will watch the share price today. sam unstead with a look at the retail space, which could be on the move. and those news lines coming through from elliott and gsk, its management and future prospects. we will keep an eye on that stock as well. coming up, we will bring you the european market open. five minutes to go. futures dewpoint to the upside. -- futures do point to the upside. not so for u.s. futures, though. nasdaq futures flat. the msci asia-pacific session was dragged down by concerns about the delta variant and the responses to the spread of the delta variant we might see in certain parts of asia. the msci asia-pacific down by
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0.4%. we are back with the european market open next. ♪
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anna: welcome back to the european market open. minutes ago, we saw the start of cash equity trading for thursday morning. opec-plus has into a crucial meeting with russia and saudi arabia keen on supply hikes. markets expect an extra 500,000
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barrels a day. good morning, everybody. just minutes until the start of thursday's cash equity session. things seem to have improved a lot over the last hour, not necessarily taking that lead from the u.s. we did see heavy selling here in the u.s. yesterday. maybe we are just clawing back a little bit of what we lost, but not all of it. u.s. equity markets jumping out of the gate past the last day of the first half was not great for european equity markets, but the market in general was not bad. the s&p in the u.s. had one of its best first half since 1998, so we see european equities jumping out of the gets this
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morning. the first trading day of the second half, up .7% on the ftse 100. .7% also on the cac. markets start the second half of the year facing challenges with covid-19 variants and inflation pressures. really good to speak to you once again. as we start trading for the second half of the year, cannot quite believe we have got to the second half of the year quite so quickly. what is york expectation for the second half. we have made solid gains in risk asset classes. is that continue to the second half? >> i think broadly, yes. economic growth numbers i think will remain very strong indeed,
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and low growth in the u.s. probably peaked in the second quarter. for the second half of the year, i think it will be minor and somewhat reiterate the fed forecast for growth as a whole. in europe, despite the concerns over the delta variant of covid, i think the third quarter will see an acceleration in growth. the third quarter could be as high as 3%. japan had a slowdown in the second quarter, but i think we will have some catch-up effect. i think you will be surprised by an acceleration in japanese growth. although the chinese economy is moderating, it was still achieve this year 6%-plus growth, so that is first. good growth numbers. i think the second positive is the corporate earnings numbers will remain very strong.
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we got good guidance for corporate earnings over the next year. it will be close to 30% in the euro zone, similar number in the u.k. and so close to 20%, 25% in the u.s. and japan and likely to be under 20 percent in china. whatever investors going to do with the major market challenge at the moment, which is negative real yields in virtually all fixed income markets? fixed income markets are looking fairly unattractive relative to other asset classes. anna: thinking about negative real yields and all the drivers, all the inputs that go into that, is there anything that turns that around in the second half? >> what are central banks going to do about the rise in inflation? the guidance from central banks,
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and it is very coordinated. we have seen a similar message from the ecb and the fed and people's bank of china and the bank of japan, which is that the rise in inflation, yes, it has been more than originally expected, but they are sticking very much to the view that the rise in inflation will be temporary. i think we are going to get some weekly inflation numbers over the next two or three months. it could be greater than the five percent we saw last month. i think later in the year, we will see some early effects when there is supply chain disruption, labor market disruption, some stabilization in commodity prices. i think inflation will come down, but i think central banks may be disappointed that inflation does not come down as quickly as they are expecting. in that context, my view is unchanged, which is that we will see the dead cautiously start to
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taper in the fourth quarter of this year, starting with reducing nds forces. likely, you may be surprised by the ecb doing a similar thing. anna: that leads me nicely into my next question about bubbles and if you see any out there. i'm looking at this chart provided by a colleague, housing prices in the united states. you put that up with the fed balance sheet. just because they move at the same time does not mean one causes the other, but it does make you wonder about bubbles. are you concerned about the u.s. housing market? >> is it's not just the u.s.. in the u.k., we have a similar position. the u.k. is partly driven by tax relief, which, by the way, is ending on house purchases. the u.s. house prices, coming back to your graph, are driven by the rise in inflation. there is clearly a move by investors into real assets with
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real estate being a beneficiary of that, and, obviously, there is a correlation between central bank liquidity injections and the asset prices. a year ago, the fed balance sheet was around 4 trillion u.s. dollars. it is now over 13 trillion u.s. dollars. if we get tapering -- and my view is we will get tapering, but it will be a slow, cautious process because all central banks are desperately anxious to avoid a taper tantrum, but clearly, that takes some of the fire out of the real estate market, not just in the states but probably worldwide. anna: thinking about that tantrum and trying to avoid a taper tantrum, we know the fed thinks we will be able to avoid a 2013 taper tantrum because he says the market knows that the fed is discussing this and it is to some extent happening in public as well. does that help? does that mean that we avoid
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some kind of taper tantrum? i suppose some type of tapering positions is bound to have some effect. how will we manage that? >> the first point you make is that a number of central banks are already reducing liquidity or raising interest rates. we look at the bank of canada and the bank of england. weekly quantitative easing purchases are being reduced. we look at bank of japan, they no longer have a policy of intervening in purchasing in the japanese equity market. if you look at the balance sheets of the people's bank of china over the last five months, it is actually broadly flat. they are already we are starting to see some tightening in liquidity conditions. a number of emerging-market central banks are raising interest rates already such as brazil, russia. south africa has given very strong guidance that interest rates will rise by the end of
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the year. i think the overall picture is one of gradual tightening in monetary policy by all central banks. in this case, the fed is running $120 billion a month, and i think they could come down to potentially $90 billion to $100 billion during the fourth quarter, and during the first half of next year, i would not be at all surprised if they take it down well below $50 billion a month. if you get growth next year of 4% plus, if inflation stays close to 2.5 percent or 3% of their target, arguably the need for qe just does not exist. anna: thanks so much. we should tell you that ecb president christine lagarde is speaking and taking questions on the eu parliament committee for
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economic and monetary affairs. she is making opening remarks, as we understand, at the moment. we will keep across any comments she makes. she says retention on dividends could lapse in september. coming up on this program, the u.k. promises to sharpen the city of london's competitive edge for decades to come. we will get analysis of what messaging and what soundings he has been taking shortly.
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anna: welcome back to the european market open. european equity markets more positive than the futures picture overnight had indicated. we did see selling yesterday. we are making up for a little bit of that. let's get to some of the stocks that are on the move than this morning. we've got a b foods, that is one of them. you will see that stock by 3.25%
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. h&m also in focus right now. the second quarter ebit miss may put pressure on shares according to morgan stanley. even though the numbers of pretax levels came in better than anticipated, perhaps that is why we are seeing a bit of a downside move in that business. and said xo, -- sodexo the catering business of this morning. joining us now from our finance team who has been looking at the details, tom. very good morning to you. what do we know about the proposals that will be outlined today? >> so far, they have been pretty
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thin on details. they came out with a statement overnight saying there were going to try to sharpen the competitive edge in the city of london. what does that mean? he said words like technology, green finance, but beyond that, i think we are all waiting for the speech. anna: i will be speaking to him later on about what that really means, sharpening financial services for decades to come. it is also a curious thing being reported overnight that he is making progress, persuading other members to allow him an exemption for financial services on global tax deals. is that something we have heard about? tom: yes, this big win for so not -- for sunac who has apparently rattled the savers, saying we need to protect finance. it is interesting, there is
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definitely a sense that the u.k. is bolstering the finance sector, at least trying to present that case. anna: yes, and this is at the front of everybody's mind, and financial services did not seem to be at the front of everybody's mind, not in westminster, anyway. >> definitely. it is a complete reversal of what we had last year where you have the financial sector saying , please listen to us, but now every announcement seems to be for the finance sector. anna: thanks very much for bringing us this story. we will be speaking to the chancellor of the exchequer at 10:00 a.m. london time. the top stories we are covering this morning. >> the office of one billionaire
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is said to have started trading bitcoin. according to the street, they are also seeking to hire a head of cryptocurrency. italy's unicredit says it will allow non-branch staff to work from home two days a week. bank branch staff will be able to choose to work one day a week. the final arrangement will depend on how the pandemic evolves. source us tell us barclays is hiking junior banker pay, joining real estate rivals in digging deep to retain staff amidst high levels of burnout. we told base salary for all u.s. analysts will increase to $100,000, while u.s. associates get a $25,000 boost.
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anna: thanks very much. coming up on this program, this time will be different. the dallas fed president says the central bank will avoid a 2013-style taper tantrum. that is next. this is bloomberg. ♪
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>> crude oil, black gold. almost 100 million barrels will
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be pumped each and every day this year then shipped to refineries for processing, but then what? what exactly comes from a barrel of crude? exact amounts vary, but more than 40% of a typical u.s. barrel is refined for gasoline, far and away the largest product. next, think diesel, fuel for trucks and trains and heating oil for our homes. about 10% is turned into kerosene and jet fuel. of course, jets but also portable heaters and cooking fuel. then heavy fuel for ocean liners, power plants, and industrial boilers. that still leaves about 1/5. crude makes everything from propane, nasa, and asphalt to ingredients in chemicals. as the wood contemplates a greener future, the challenge will be doing it without the fuel that powers so much of our life today.
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and a call it a look there at what comes out of a barrel of crude on a day when we are seeing a meeting of opec-plus, and they will decide if they will increase production of oil. we are 20 minutes into the trading day. oil prices are higher. the dallas fed president, robert kaplan, says scaling back central-bank asset purchases should be done gradually and it would be prudent to begin the process sooner rather than later. >> there are parts of this price surge that will moderate -- used car prices, lumbar prices -- but also what we are seeing in our work is we are seeing a broad name of price pressures that are rippling into a broad range of items. semiconductor shortages first affected used cars. now they are starting to affect
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more broadly consumer products. having said that, our pc forecast for this year is 3.5%, but we think that will moderate somewhat to somewhere in the neighborhood of 2.4% next year, but that two .4% next year will not be impacted by an extreme number of high items. it will be price pressures on a much broader range of items. the only comment i have made is i don't want to label, but i would like to manage the risk because there is uncertainty in outside risk. >> a lot of the inflation we are seeing was predicted by members of the fed and the open market committee. how long will it take you to have actual concrete numbers that are not based on just reopening to know if you are right or wrong about inflation? >> i think this is going to be a dynamic picture. i don't actually think there is a date at each this will become all of a sudden clear. the reason i say that -- again, i'm hearing from my contacts,
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some of these pressures are due to reopening. we will see evidence for that i would guess through the fall, but some, they tell me, are more persistent, have to do with secular trends, and those may take longer to resolve. michael: you have mourned we could see and balances. we could see excesses in financial markets if you wait too long. how long is too long? if the market consensus is the end of the year, is that about when you should start tapering, or it's got to be sooner? >> i would prefer sooner. i have used deliberately -- deliberately vague words, sooner rather than later. we still have to continue to make progress, clear that we have weathered the virus, which i think we have, but i think it
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would be far healthier to start soon and sooner rather than later. why? excessive risk-taking, excesses in the housing market and imbalances in the overall economy, and i do believe if we take our foot off the accelerator gently now, they will have more flexibility down the road to avoid more abrupt or severe actions in the future. i really believe that. michael: you have said to markets, he will give them a long runway before announcing that. if you move it up, does that shorten that runway? is the fed a prisoner of the taper tantrum fear? >> i think the aftermath of this downturn is very different than the aftermath of the great mission. 2013, we learned a number of lessons. on the other hand, i think today
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-- i think our adjustment purchases is likely to go much better, and one of the reasons why i have been out there talking about adjusting purchases is i wanted to get out into the market, and i think this debate we are having at the fomc, some of it publicly, is good. people are on notice that these adjustments are coming. only question is when. but i think we will be far healthier sooner rather than later to begin. anna: that was the federal reserve bank of dallas president robert kaplan. sooner rather than later, his clear message. he says there will not be a taper tantrum because of the conversations taking place about when that taper should come. he says now it is fully expected by the market. ecb president christine lagarde is speaking and taking questions. she is taking these questions that the eu parliament committee for economic and monetary affairs. you can watch that live on your bloomberg terminal. she is speaking of course as
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chair of the european union systemic risk board. the euro area recovery faces uncertainty from mutations, and banks must fully reflect credit risks and provision early for some of these risk-based messages she is giving at the moment. let's get back to the markets than. 25 minutes into our trading session, we have a focus on airlines today. we have eu covid passports coming into focus. we are seeing some positivity for some of these stocks, the generally speaking, we saw heavy selling yesterday at the half year end. some of the beaten up names in the aviation space doing pretty well today. travel the biggest gain at the start of trade. ryanair up by 2.7%, and i will be speaking with the ryanair ceo
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about eu covid passports. that conversation coming up. this is bloomberg. ♪
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anna: welcome back to the european market open. we are just half an hour into our european equity trading session. european equity markets maintaining decent gains, rebounding from losses yesterday. the swedish bank leaving its key rate unchanged at 0%. action widely anticipated. i'm told by our friends there are questions about hinting at future plans to increase rates. we will watch out for that, comments coming through right
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now. the rate is expected to remain at zero for the forecast period, so i guess that answers that question. not during this forecast period. perhaps the central bank mindful of what was seen as mistakes post 2008 where some say easing was ended prematurely. eu covid 19 passports go live today. they aim to help people travel more easily throughout the bloc . but is it too late to save the summer season? joining us is the ryanair ceo. exciting day. eu digital covid certificates, they go live. how excited are you about that? >> good morning to you and your viewers. we are very excited. i'm here in brussels where we are holding a press conference
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announcing 4 new routes later today. 23 eu countries have been issuing these certificates for the last two weeks. there's one or two countries, most notably ireland, who still have not issued them, so there are still some problems there, but we are seeing strong recovery and booking, and we expected to continue through july, which should make for a reasonable recovery in the last two months. anna: will this enable you to tackle the intra-eu parts of your network? >> absolutely. we are currently doubling our capacity into the months of july and august. we carried about 1.7 million passengers in may, just over 5 million passengers in june and we are hope we will get probably
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somewhere between 8 million, 9 million passengers in july. the business is recovering strongly. the two markets that are lagging are clearly the u.k. and ireland where there are still covid restrictions in place and in my view, people overreacting to the delta variant, which has seen an upward spike in cases, but not any serious movement in hospitalizations or morbidity. anna: we saw recently malta adding to the quarantine-free green list. do you have any sense when we will see further countries added to that green list if we do? >> our sense is that will be more countries added around july 19. that seems to be the latest date for the u.k. government to move. final restrictions will be removed at that stage. the big concern is will european countries welcome u.k. visitors
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without any restrictions, or will they accept the nhs app, or will they have to produce other documentary evidence that they have been vaccinated? but the u.k. is a country where 60% of the adult population of the country has been fully vaccinated. we see that has enough for the u.k. to lead their families going on holiday. in our view, the best thing will be to join the digital covid certification, and therefore, you have seen this travel, but that is a political issue, not a travel issue. anna: if we did see decisions made in the u.k. that those who are double vaccinated would not have to quarantine, what kind of impact would you say that would have? >> i think we would see a very strong recovery into late july and august. i think we could see a very strong recovery in flights. we would certainly be able to put more capacity into u.k.
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markets, and as most people are taking capacity away from the u.k. and ireland, we can cater to very strong structure recovery in demand all over the rest of continental europe. anna: do you anticipate europe will remain a bit cautious? leaving the u.k. is one side of it, but being allowed into it is another. >> misses merkel's idea to ban u.k. arrivals for that u.k. arrivals have to quarantine, i think you are taking very little risk welcoming u.k. visitors, but in another month hour by the
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time we get to july, vaccinations will have rolled out a further 10%, 15%, 20%. i think vaccinations are clearly the way out of this, and what we need to do as an airline is to get people back flying again. we are seeing vince. people want to get out and spend. they want to get out and travel. they want to see friends and family again, and i think we will be the beneficiaries because we are the airline with the most pan-european connection flights in europe. anna: do you think pcr tests are going to be the solution for quite a while? do you think that is just going to be something we have to get used to? >> i'm not sure. the problem with pcr testing is it is expensive. if you are a family with three
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or four children going on holiday, getting three or four pcr tests is expensive. i think we need to have a more rational approach to families traveling with children. if the parents are vaccinated and the children are under 18, the youngsters are not going to suffer serious illness or hospitalizations, and the risk of spreading it to the adult population that will be almost fully vaccinated by the end of july is negligible. we need a more common sense approach to this. we see vaccinations as the way forward and once we get to 70%, 80% of the adult population fully vaccinated, there should be no restrictions on movement, if it's domestically in pubs or restaurants or hotels or on short flights to europe. i think longer haul flights will be a much more challenging situation, but that does not affect us because we don't fly long haul.
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anna: what is the quarantine situation at the moment? the levels of demand ebb and flow with policy changes quite abruptly, and yet, you have families trying to cover the cost of extra testing as well as the cost of the flight. >> our focus this summer is not on pricing. normally we would be 50%, 60%, 70% booked for july and august. today, we are about 50% booked for july. airlines have not got the fall bookings they would normally have at this time of year, and therefore, consumers will be the fishy areas of our policies of pilate hi, sell it cheap, restore confidence, particularly within the european union. >> tell me about staffing, if
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you've got stuff on furlough in the u.k., what the situation is, and what you are experiencing, any difficulties in hiring. do you think that is the situation for any industries in the u.k.? let's we made the decision to keep the pilot and cabin crew current. we are bringing most of our people now back online. the u.k. and ireland are lagging behind because of these restrictions in ireland and they are completely mismanaging the reopening. we are the laughingstock in europe in ireland. staff are coming back. we have kept them current, so we can recover very quickly. we see an awful lot of applications coming to us from youngsters who have lost jobs in retail, lost jobs in tourism and leisure coming to us because we are offering higher paid jobs
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for cabin crew, and there is a huge oversupply of pilots in the market, and i think that will continue for a number of years due to the collapse of a number of other airlines during the covered crisis. anna: thank you for speaking with us. >> thanks, anna. very good to speak to you. anna: coming up on this program, held back by mediocre male managers. we discussed a report that finds women in financial services are not getting ahead because of double standards. we seek to break it all down with the london school of research, who conducted the investigation. that's next. ♪
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anna: welcome back to the european market open. 43 minutes into our trading session, things looking very positive. we made it to july, and we see europe's equity market up. let's step away from the immediate market themes and think about politics for a moment. we have live pictures coming to us from hong kong. protesters are gathering for the 24th anniversary of hong kong's handover to china. as a result, you see media heavily in attendance, police
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heavily in attendance. some 10,000 police officers have been deployed to try to discourage any protest today. it is the 100th anniversary of the chinese communist party as well, so another reason you are likely seeing people gathering as well. we will keep across those pictures for you as they develop. let's turn our focus, though, to a quality. according to research, male managers are holding women back in the workplace. women are being held to a higher standard of work, the report argues, with men more likely to stay in the sector because they fit the social norm of what the worker in the industry looks like. really nice to have you with me on the program. interesting headlines, interesting equations. how on earth do you gather
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evidence or data that tells that story? >> first, thank you for having me on today. i really appreciate it. this study is part of a four-year program. we conducted a survey of 2000 men and women in financial professional services, and what was striking and what came true in that quantitative survey was the differences between the norms in how men and women are perceived within financial services. the second thing that was really striking was the differences that came through work really dependent on function. we saw a different perceptions n
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areas with high shares of men versus lower shares of men.
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anna: there were different voices at the table. has that message still not got through? >> i think the first thing to say is i think financial services are probably leading the pack compared to other industries. cronyism is not unique to financial services, and i think what is his companies that have come together to foster this research, but, yes, i think one of the things that was relayed by women over and over again was it was not sexism or hatred or discrimination. it was eventually cronyism. people were giving preference to people like them for opportunities for promotions, for pay raises.
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last week, information came through that 30% of onward referrals are people within your network, so it ultimately backed up that data, and i do think this is where the industry is losing. if we are always only hiring within our network and our networks are not defined by competence, we are not giving the industry the chance to bring in people who will break up that groupthink. anna: you found evidence that some managers had a tendency to fake empathy. what role does that play? >> i'm an economist, and we always think about where there is an incentive, people might actually gain it, and even i was surprised by this result. the women who i met spoke about managers who essentially ran on a platform of diversity and inclusion, spoke about the idea they were trying to hire people
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different from themselves, spoke about the idea that they wanted to get rid of groupthink and advance women, but when push came to shove, they did not necessarily walk the talk. this worries me because as we go into the fourth industrial revolution, all the data points to empathetic managers being the ones who will get the higher wage premiums, and if we do have individuals mimicking these traits, it does not really bode well for the future. anna: this research focus on how women view their career progression in these areas that are very male-dominated. would it be interesting to get male employees' views on all of this? i think many people would not want mediocre talent reaching the top. >> if we were to open up the research to men, i'm sure they
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would also report they are confined to mediocre managers. the first stages did include men, and we did see these differences in norm's still there between men and women within the industry, and this is also backed up by lab experiments, field experiments, correlational studies. the fact we have differences in norms in 2021 and what is holding women back is much more subtle really wants -- really makes me want to spotlight the role of the manager and the industry taking seriously the role of individuals who embrace diversity, not because it is socially responsible, but because it is good for the industry and innovation. anna: thank you very much. thanks for bringing us that report. 8:50 here in london. coming up on the program, it is all quiet on three payrolls front, we understand. what we expect before tomorrow's
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job figures out of the united states. this is bloomberg. ♪
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anna: welcome back to "european markets open." protesters still gathering on the 24th anniversary of the hong kong handover to china. also, the 100-year anniversary of the chinese communist party, so a few reasons to watch out
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for tension in hong kong today. officials warning people they risk arrest for participating in unauthorized assembly, so we will keep an eye on that. we are just 53 minutes into our european trading day, and the start of the second half of 2021 has started in very positive spirits. stocks to the upside. we saw a big pullback yesterday, european stocks, and a big game today. this all about the end of one half and the beginning of another. >> that certainly does appear to be the case. what we are seeing is cyclicals really bounced on monday, and that was retraced yesterday, and we are seeing them come back again today. what we are seeing is largely within european equities that are trading without conviction, over the past few weeks, they have been largely sideways. we did get some reports from the
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ecb, that they could potentially lift bank dividends to september, which is providing a bit of a boost to banks this morning, but ultimately, three payrolls report could be the catalyst for markets or if we will have to wait and see more conviction in earnings season drive equities out of this range bound trading. >> let's talk about where we are in oil prices. canvassing opinions on how much that could move prices. we have oil prices up by .8%. what's your thinking? >> certainly, we have seen quite a rebound in oil so far this year, and it is largely being driven by that demand recovery. we are expected to see demand continue to outstrip supply. the bloomberg intelligence expects a deficit of about one
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million barrels a day. that will put pressure on prices, so that does warrant an easing of output curves today. there was caution around that. we do have rising variant risks. there was a potential revival of that neuron nuclear deal, which could ultimately caps off prices. we could see some upward pressure on prices, but unlikely to be sustained anywhere near that $100 mark because i think opec is going to step in. anna: thank you very much. we just had some pmi numbers dropping in last 15 minutes or so, the italy number, the manufacturing pmi exactly in line with estimates. the french june manufacturing pmi came in at 59, and the german number just ahead of estimates at 65.1, all the way ahead of 50, of course, strongly into expansionary territory.
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that is it for the european market open. "surveillance" is up next. we bring you our interview with the british exchequer in a little bit. this is bloomberg. ♪
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we are remembering the horrific scenes from last year. >> for now, extremely low of the delta variant. >> technology is poised to be able to react. >> this is "bloomberg surveillance: early edition" with francine lacqua. francine: here's what's coming

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