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tv   Bloomberg Markets European Open  Bloomberg  July 6, 2021 2:00am-4:00am EDT

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anna: will come to "bloomberg markets the european open." mark cudmore joins us in singapore. cash trade is less than a half hour away -- less than an hour away. opec-plus in crisis. saudi arabia and the uae failed to resolve their differences, blocking a deal to boost output.
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boris johnson lays out plans to end social distancing. personal responsibility replaces legal restraint. plus the final stretch. the ecb zeros in on a compromise in its biggest strategy review in almost two decades. warm welcome to the program. market is with us from singapore -- mark is with us from singapore. mark: a very exciting day. it is not all about oil prices but we are very focused on that story. in asia, oil has been a little bit better. there are quite a few other themes going on. oil prices and the fact we have had hawkish news out of new zealand and the rba. bonds on the back foot. the dollar weaker. chinese equities suffer yet
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again. a number of different tangents going on. just now we have seen german factory orders. quite a big disappointment. hitting the kind of consensus european recovery story. there is a lot going on people were not expecting 24 hours ago. anna: the euro flat to positive. let me just give you some details, some breaking news this morning. the grocery retail sector very in focused. that has added some focus for the likes of sainsbury's. sales have been running ahead of expectations. they are reinvesting the benefits of sales growth.
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not returning that to shareholders. comparable retail sales are up by 11.3%. this has been a strong period for growth. the first half of this year has been relatively buoyant. the morrison's have identified or helped shine a light on other targets, other asset rich supermarket targets. stocks that could do well going from public to private. they focus on sainsbury's. we have had numbers out from accardo as well. seen a fall in share price.ave they posted a loss every year. a different story. the sector as a whole in focus. we are just under an hour away
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from the start of cash equity trading. we were without the u.s. yesterday which means we do not get the overnight guidance. the futures picture looks wobbly, a little to the downside. we will be keeping and i on the reopening trades because of the headline of boris johnson. futures flattened nerd -- flat to negative the european markets area -- markets. gmm? oil prices on the rise. specifics around new zealand. australia as well. quite a few assets on the move as a result. mark: futures are mixed, not moving much. these themes -- if we had gone
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through this two or three hours ago, the gmm screen was boring, but now it is interesting. oil prices feeding through to the broader commodity markets. we are seeing green boxes down the commodities column. we talked about this amazing rise in commodity prices across the whole spectrum. we are seeing bonds on the back foot. yields higher. that is partly because we are seeing oil prices. we had the rba do a mini taper. overall we are seeing bonds on the back foot. just the last hour or so we are seeing dollar weakness pick up momentum. other currencies starting to gain. that is being led by the aussie dollar.
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the final thing to point out is chinese equities near the top of the equity column for weakness, they have been trading really badly this week. there is an idea they're going to continue. chinese equities, the csi 300 benchmark index is trading at the lowest level since may 14. notable weakness. anna: what we are seeing in the oil markets is not necessarily risk off. let's get more details on the oil story. opec-plus has plunged into crisis. the alliance calls off talks. . . crude surging toward $80 a barrel. what happens next will determine whether the breakdown could escalate into an issue of destructive -- as destructive as last year's price war.
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you are in dubai. where did it all go so wrong? manus: they did not even get into a virtual meeting. that is how bad this was. the meeting never happened. my understanding, secretary-general barkindo called off talks. there is no date for a new meeting. there is no additional supply and we have a very tight market. perspectives from the markets, rbc are saying this is the most serious crisis since the oil price wars last year when russia left the meeting. the gravity of this situation, this standoff, is rising. the iraq foreign minister says we don't want another price were. -- price war. there are other things apart from the oil market. wti up 2%.
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i talked to both of you yesterday. i warned you of the tail risk for the uae. the narrative is we are not threatening anybody. the tail risk is about the willingness of the uae membership and the willingness to keep the capacity idle. this is a brewing storm in a tight market. $110 is possible. anna: thanks for the update. manus cranny joining us from dubai. interesting that we are seeing higher oil prices. and yet that is not sending us entirely risk off. maybe we don't have a full
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picture of market sentiment. we have the dollar down. i wonder how you are reading that oil price at this point. mark: people are being slow to react to this move. there is a general perception out there, may be opec-plus will reschedule another meeting. they will reach an agreement. we don't want to panic yet. the tail risk is opec-plus breaks down entirely. oil prices would completely collapse. they don't want to get to committed one way or the other the tail risk move is for -- it goes really well. anna: there is a tentative taper
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going on. the focus also on yield curve control. what is the monetary policy experiment teaching us? mark: the message from the rba, it was not any official government talk, but commentary from analysts combined with the rba meeting is sending a message to asia, recovery is going well. we need to stop having policy -- we need to withdraw. this is the message that is going to continue to spread. well this might be just for new zealand and australia, there is pressure back on the fed. fed minutes are going to be very much in focus. they are out of date if they are not sounding hawkish enough or open to be more hawkish. that is the theme we are going to be looking at. anna: you can keep up-to-date
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with mark and the markets live team. go to mliv on the terminal. coming up, england plans to fully reopen in two weeks time. cases are surging but hospitalizations and deaths remain low. plus, house prices surge in the u.k. and around the world. we talk about the outlook for property prices. up next we continue the oil conversation. this is bloomberg. ♪
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anna: 14 minutes past 7:00.
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futures looking weaker. the new zealand dollar extending its advance to 1.1% this morning. another pickup. decent data out in new zealand. that is something we will keep an eye on. back to our top story, the opec-plus crisis. brent crude holding above $77. loggerheads over oil output. the bnp paribas global head of macro research and head of g10 fx strategy, nice to speak to you. i was talking to mark about how this move higher in oil and the inability of opec to find solid ground on production levels
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could have been something that would trigger risk off moves. it has not really done so overnight. what is your expectation in terms of moving the story forward? collects each day there is no output increase crew will head higher. our target for brent is $80 a barrel. this outcome increases both the left and right and tail risk for the market which is why i think we are seeing caution in terms of the way other markets have responded to the given oil move. the reaction we have seen across currencies is quite interesting. we are seeing a big move in the australian dollar and the new zealand dollar higher. we are seeing a move in smaller magnitude with oil exporters. this is a key theme into q3 and
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the second half of this year. currencies with central banks who will get in line with the fed and who are more sensitive to commodity prices, equity prices, are likely to be the key out performers across the market. mark: how is this going to play out in u.s. yields? at some point, does it come back to give dollar strength or not? >> yields are going to head higher in the u.s.. we forecast 10 year rising at the end of this year. with respect to the dollar, we would not expect this to feedthrough to a stronger dollar. in general. the key point is
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differentiation. this will support the dollar. you have central banks that will not get prices in line with the fed. central banks keep yields well anchored. across g10, that means the swiss. i argue to a lesser extent it means the euro. this is not an outcome that is good for the dollar versus currencies across g10 emerging markets. this amplifies a theme we argued was already in place. the higher feedthrough currencies will outperform the dollar. anna: and idea that links into the aussie here. commodity driven economy largely. what is your feeling with the aussie? >> the decision we had overnight
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on yield curve control, while it was to some extent price in ahead of today's meeting, there is an interesting nuance that is worth sharing. when we think about effects -- fx. qe matters by the strength of signaling on the timing of rate hikes rather than the specific quantity of purchase. the decision which is enabling the front end of the curve in australia to selloff is quite meaningful for the currency. we are seeing a correlated move in rates in new zealand. when you add to that the move we have had in crude, it is presenting a backdrop where you are having a central banks
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across commodity exporters price to hike -- priced to hike. you have a positive global backdrop and you are adding renewed exhilaration in commodity price. it creates a cocktail we would argue is supportive than the narrative. anna: let's get a bloomberg first word news update. >> england plans to lift all covid curbs including social distancing and venue capacities. face mask will be voluntary and the government will no longer instruct people to work from home. boris johnson says people must
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learn to live with the virus. the leaders of germany and france are urging china to put up more flights from europe to strengthen economic ties. they also discussed cooperation in africa and global vaccine supply. leaders agreed there is a window of opportunity to revive the iran nuclear deal. facebook, twitter, and google have reported they have made stock offerings in hong kong if the government goes ahead with planned changes to data protection laws. the three are part of an industry group that raise concerns. they claim rules to retract dock sing -- protect doxxing could put their staff at risk. global news, 24 hours a day, on air and at quicktake by bloomberg, powered by more than
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2700 journalists and analysts in more than 120 countries. this is bloomberg. anna: the ecb zeros in on a final compromise over its biggest quality overhaul in two decades -- policy overhaul in two decades. ♪
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anna: futures in europe deteriorating the last half-hour or so. the ecb is entering the final stretch of its biggest strategy review and almost two decades. policymakers gathering today to hammer out key differences on future monetary policy. a key issue at stake is agreeing to a new formulation of the ecb inflation target.
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after years of lackluster price growth. let me ask you about what your expectations are. do you expect the ecb to end up with something more symmetrical just as the fed has? a higher tolerance for inflation that goes higher? is that what we expect? >> that is what we expect. i would also suggest the conclusion of the ecb review. it is a decidedly dovish direction. in terms of the market implication is not being priced in september. the price would come if it were to be in the forward guidance at the next meeting or the end of
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this week. we will have a statement which implies it is done. mark: there is uncertainty what they are going to announce in terms of the of flinch and -- inflation review. everyone agrees is going to be dovish. is there anything that can come out of the review that might support the euro? >> it is highly unlikely. the impact of the conclusion of the review will be divergent across asset classes. i would agree with your suggestion it consisted of a weaker euro. what we are seeing is a stronger macro recovery being met by a super dub or central bank. that diminishes the transmission mechanism. the rates market, the implications are either the
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combination of macro recovery for dovish central bank to be supported by reflation, we think being long five-year is the right to expression. for equities in turn, the impact is different. we would argue particularly supportive in europe, a factor which is underperformed's in spite of the rotation we have seen today. anna: we know you're bearish on the euro against the pound. we will talk about that. thank you for spending time with us on "the european market open." we will get back to the oil story next. opec-plus in crisis. we will get further analysis on that. the key protagonists involved in
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a weekend standoff yet to be resolved. where does the story go next? ♪ [ "me and you" by barry louis polisar ]
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♪ me and you just singing on the train ♪ ♪ me and you listening to the rain ♪ ♪ me and you we are the same ♪ ♪ me and you have all the fame we need ♪ ♪ indeed, you and me are we ♪ ♪ me and you singing in the park ♪ ♪ me and you, we're waiting for the dark ♪
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anna: half passed 7:00 in london. the u.s. rejoins later today following the fourth of july holiday. let's talk about emerging markets. we don't have a u.s. lead. emerging markets in play for a number of reasons. most immediately i suppose we are seeing on oil prices, the impact of that. mark: when you are an emfx
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trader, you leap to the obvious oil related fx trade. you by the ruble, the peso, the ringgit is another one people don't expect. some of the ones you want to short are the indian rupiah, the turkish lira. they have large current-account deficits. there are a few extra little bits our colleague has highlighted. the reaction to ruble after gaining oil prices. some the upside is left. the ruble has been one of the best performers this year. it has been playing the stronger oil theme. there is the virus threa in the background. turkey is an idiosyncratic story.
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such a domestic issue around the policy. people are loath to jump in. this oil theme is very dynamic. you don't want to get into a trade where you are worried about liquidity which lira has become. in the immediate aftermath of this follow for opec plus, we will talk more about the oil story in a moment. i wonder, the story is being written by our colleagues the last three days or so, emerging market currencies are not all about oil. the covid-19 outbreak continues to be something we are thinking about and maybe becoming something -- vaccinations against it maybe becoming something that enables us to
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cement the emerging market space. mark: two themes going on. one is the lagging on vaccination schedules. the other is increasing reports the vaccines are not as effective against some of the variance. -- the variants. the short-term dynamic is you are playing the oil story. the longer-term dynamic is a growing threat of being left behind on the vaccination story. then you have currencies like the rand that suffer both sides. the rand is a commodity currency, and energy importer. it also has a virus problem. traders that can play both angles of the oil trade may be reaching a consensus this morning. anna: a lot going on in emerging
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markets. let's return to the crisis at the heart of opec-plus. brent crude holding above $77 this morning. bringing into focus the global economic recovery. how consequential is this breakdown between long-standing opec members, the uae and saudi arabia? will this be resolved? >> thank you for having me. a great question. they are long-term members. it is significant. however, you have to step back and say this is an organization
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that has been successful over the long-term in managing prices that are comfortable for them and also for the consumer. since 2016 it has been successful bringing in other parties outside of opec. it is a couple of days delay. we go back to 1986, you have the 15 day opec meeting. there is precedent for extended meetings. the hard work they have executed will probably play out here with a resolution. at some point within the next couple of days. mark: i am aware it is a very dynamic situation. you are the expert, not me. what are your price calls for brent and wti with the base case that there will be a resolution? >> the way inventories are
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looking to us in terms of how much they will decline, we are expecting 100 million barrels in the fourth quarter. that will push us between $80 and $90 brent. there is no question that type of price is very possible in the next six months. longer-term, the resolution will come. capacity will be utilized. we are much more like a $65 to $70 price range across the medium term. anna: there was a time we used to watch u.s. rig counts almost daily, or however often the data comes out. i don't remember doing that in the months gone by.
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>> so did i. it was rig count, production, six-month time delay. the past 12 months, oil production has been flat. $11 million of -- 11 million barrels a day. we have never seen a 12 month period of such stability. we have had a huge rate of consolidation in the shale patch. one of the plays is declining. the permian is still growing, but fewer actors. also a successful push by institutional actors to change those companies, to say we want modest growth rather than super growth. we may not have to look at the rate count much longer. mark: given the restrained response on the u.s. supply-side, how it did -- how
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did this complicate the ability of opec-plus to keep discipline within its own ranks? we are seeing greater price response in oil. there is a greater incentive in this change away from fossil fuels. >> that's the two sides of the coin for them. they have to say yes, we have a recovery, we have ev send renewables, -- ev's and renewables, best case it is 15 years before they cause demand to pecan rollover -- peak and rollover. if that is what they believe they should be managing supply. and always makes sense to reduce volumes, never to do it the opposite way. they should look at the success, come to a resolution of what is
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happening, and they will benefit and so will other companies. anna: with that in mind and a longer-term transition story, how do you expect prices to respond to the energy transition we are looking at? maybe thinking about crises yet to come. a lot of people trying to work out, do we see higher energy prices? what is your thinking? >> that is the million-dollar question. one way you can tackle that is to forecast demand. it could pecan decline -- peak and decline, we would say 2030. you must match supply against
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that. the lines cross against that. what that generates for us is $55 oil. oil prices have been $55 to $60 in real terms. there will be volatility, but 55 is not a number that seems implausible to us. other people talk about $25 oil. something between $40 and $60 is still a plausible oil price scenario. anna: that is really interesting. thanks for joining us. thanks for bringing us your thoughts as we continue to monitor the oil saga and the higher prices this morning. let's get a bloomberg business flash. >> ocado has developed a deal to
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develop in spain. the companies will build a center to serve the madrid region starting in 2024. separately ocado has reported epic. ahead of analyst estimates -- admitted. -- ebitda ahead of analyst estimates. a share sale as soon as this year with paris as a possible listing venue. final decisions are yet to be made. credit suisse says it is planning to introduce a work model that gives employees maximum flexibilit with staff able to decide how much time they want to spend outside and inside the office. policy for the rest of its global employees will be decided
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by local guidelines. anna: boris johnson plans to end all social distancing and make face masks voluntary thing people must live with the virus. >> allow people to make their own informed decisions about how to manage the virus. anna: we bring you the latest on the u.k. reopening story. the u.k. reopening experiment perhaps. a rising wave of infections. more on the covid fight next. ♪
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anna: 15 or so minutes to go until the start of the cash equity session.
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u.s. futures look flat this hour. boris johnson has announced plans to stop social distancing in england. face masks will be made voluntary and the government will no longer extract -- instruct people to work from home. >> we must be honest that if we can't reopen our society in the next few weeks, when we will be helped by the arrival of summer and the school holidays, we must ask ourselves, when will we be ready to return to normal? anna: thanks so much for joining us. my understanding is the u.k. broadly is the only nation
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looking into a rising wave of covid infections. we were guided we might see 50,000 cases a day. it is better to do that now then to do that into the winter. we seem to have not broken but reduced the link between infections and deaths and hospitalizations. how did that sit with you? >> good morning. i have been thinking on this all night since the press release or press event yesterday. there are a lot of things to say here. i wish we were a zero covid country. i wish we had better vaccine coverage. there are a lot of things i wish we had done differently and better but we are where we are. look at spain with the massive cases rising, etc.
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given the hand we dealt ourselves, i think i have sympathy for the decision to eventually remove restrictions. i do not agree they should all be removed at the same time. i do not understand the unmasking issue especially in crowded spaces. i have reservations. this is the best way forward given that hand we were dealt. mark: i'm looking for some positive news about reopening this morning. given i may not get that i'm going to tee up a question. how concerned are you about the lambda variant? it appears some mrna vaccinations are less effective. countries like the u.k. that have focused on astrazeneca may
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require booster shots other countries will need. -- won't need. do you think that is likely? >> someone was talking to me about epsilon. it is a fact of our lives, this virus changes. mutations keep occurring. especially when case counts are high. by definition that means the virus is having more opportunities to mutate. that is a fact of life. . we have to deal with whether they occur in the u.k. or brazil or wherever is beside the point. every time you hear about one of these variants, you have to wait for detailed analysis. in terms of your second question, can you repeat it again? mark: astrazeneca shots -- >> we have data out of canada
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that does not support the view the astrazeneca shot is less effective in terms of disease prevention which does not fit very well with the u.k. data. let's not forget -- i don't think this is going to be necessarily just an issue for the non-mrna vaccine. anna: sam fazeli with the latest on the vaccine. the vaccine rollout, the virus fight. coming up on this program, looking at stocks to watch. sainsbury guiding higher for its profit outlook once again. this is bloomberg.
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anna: eight minutes to go until the start of cash equities trading. a quiet session. let's think about focus. a lot of stories from the retail space. let's start with online retail commodities. >> ocado, online groceries, have had a very strong last couple years structurally moving toward more online grocery sales. as has been the case for a few years, higher investments in their warehouses they use anna: -- they use is going to wear on profits. anna: --
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mark: speaking of groceries. we have sainsbury earnings. >> online grocery sales very strong. in-store, two. there has been a huge attention on this because of the takeover from morrison's. sainsbury indicates that is continuing. we expect shares to jump. anna: thinking about asset rich supermarkets. let me ask you about another retailing story. >> this is the german online pharmacy chain similar to ocado. they have had a strong period over the pandemic. structurally, things are exhilarated for them. meeting their guidance this year
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is going to be challenging. it may be a case of being slightly overheated with optimism around them. we expect them to fall. keep an eye on their swiss rival. there could be strong read across. anna: sam unstead from our stoxx team. thank you for that. we started the second half of the year. we were without the u.s. for the monday trading session. we don't have that dynamic in europe. thinking where we go for the second half of the year, expecting it to still go further, is that your view? mark: we are going to have a nasty correction. i think the overall backdrop is essentially positive for equities.
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we have low yields, even if they rise a bit, if we have tapering, it does not change the fact the recovery is very strong. we generally get the idea vaccines are working pretty well against the virus. anna: he brought us good news. mark: i think the u.k. is an important test case. something we talked about yesterday, stocks are getting cheaper. compared to the forward earnings projection, forward-looking ratios -- there is a good outlook out there. anna: in terms of monetary policy support, tighter is not necessarily tight monetary policy. thanks for spending the past hour with us. we will be back for the european market open next. european equity market futures have been pointing to the downside. we will wait for the u.s. market
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to get back into their stride. futures are flat mixed this morning. ♪
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anna: welcome back to the european market open. here are your headlines. opec-plus in crisis. saudi arabia and the uae failed to resolve their differences, blocking a deal to boost output. boris johnson lays out plans to end social distancing in england from july 19. personal responsibility replaces legal restraint and work from home instructions. the final stretch. the ecb 07 on a compromise in
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its biggest strategy review in almost two decades. officials begin their meeting today. good morning and welcome back to the second hour of the european market open. 12 seconds to go until the start of tuesday's trading session and equity futures point to the downside, down by .2% or so. a bit of nervousness in the market. some of the developments in the oil space. we have a higher oil price and we had a higher oil price yesterday and we continue to see one. we saw the dollar on the back foot, down by .2% so it is not as if the market is rushing to that particular safe haven. the thought of higher oil prices and you sometimes see those two things moving in opposite directions so perhaps that makes some sense but adds something to that relationship. we have the stoxx 600 down by .1%. the cac iran's down by around
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.25% in the early moments of tuesday's session. the asian equity session was fairly mixed, up by .2% on the msci asia pacific certainly, oil and the movements of oil very much in focus today when we think about these stories for european equity markets. equity markets are opening to the downside but very modestly so. opec-plus has been plunged into crisis. the alliance called off talks after a bitter fight between saudi arabia and the uae blocked a supply increase and it sent crude surging towards $80 a barrel. what happens next will determine whether the breakdown can escalate into an issue as destructive as last year's price war. joining us now is the international at that are ceo. very nice to speak to you. are you in the camp that says we are nearly at 80, heading to 100 soon, oil prices are going steadily higher from here? or are you more conscious about
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how high this takes us? >> i am a little bit more cautious. the key is the reduced capex spend on oil last year's putter cap on how much we have in supply returns and inventories. the demand is picking up but has not yet picked up completely. this is all looking forward to the future as covid restrictions slowly ease. you would expect oil supplies to be taken up and that, i think, is the story. does it push it up to three figure numbers? who knows. does it push it up a little bit more? yes, probably. i see it going up but not perhaps as viciously as others would. anna: what difference does this make? we are a bit concerned about where inflation goes. the story has been around supply constraints and a mismatch between supply and demand in certain sectors and certainly the push out prices in some
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sectors. a big shift in consumer spending patterns that have been difficult for economists to get their head around. a lot we don't understand about where inflation goes but this is something that has pushed inflation higher in the past. what contribution will this higher oil price be making, do you think? >> it is an indication of some more cause for higher inflation and supply prices. economists are slightly behind the curve in trying to understand how inflation will unfold this time around. it does look, as things unfold, as we come out of covid, as spending goes up, we have supply fortresses in the manufacturing industry. we have the consumer changing the way they spend and with high savings per it all of that, to my mind, points to some inflationary push and against that, of course, the central banks are worried because they are trying to keep monetary conditions as easy as possible
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for the time being to try to encourage a recovery like a little fire and that is what the central banks are trying to do at this stage but to my mind, the oil price adds to the probability that we will see a rise in inflation and ultimately, that means you will see an end to the abnormally low interest rate deals over time. anna: if this is being driven by things that are not to dubai the broader supply chain difficulties, blockages at ports, the oil story is different and operates with its own dynamic. could it mean inflation is stickier? it is not just a case of how high inflation gets. it is how sticky it is when it gets to those levels. >> the difference with this one is a disagreement about trying to meet the demand in the market between opec and opec-plus. i think it is an indication that
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the world economic engine is moving faster and that is why you are beginning to see this. the chips shortage which we all know about, the higher demand for production of electronics, which we all know about, what you talked about about the supply chain, of course. all of these, the assumption that they smooth out assumes we go back to normality but there is an indication that in fact what happens is demand continues to increase into my mind, this feeds into it. now, how much it feeds into it depends on whether they come to an agreement between the united states of america and saudi arabia. if they disagree and you have oil prices boosting to beyond three figures, then you have something more of an inflationary short. even if they do agree, the fact that capex was not as much over the last year puts a limit to how much they can bring to the market or whatever happens, the supplies are going to be
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slightly less than people realize and that pushes up inflation, in my mind. anna: thank you very much. the ceo, stay with us on this program. coming up on the european market open, china is allowing it $12 trillion credit market to undergo a wave of defaults despite historically striving for stability in that market. how destabilizing could it be? we will discuss that, next. this is bloomberg. ♪
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anna: welcome back to the european market open, coming up to nine minutes in our trading day and european equity markets on the back foot, down .25 percent. there are some decent sized moves on these markets this morning and keeping an eye on the french industrial business, down by 7.5%, the ceo saying he expects costly months ahead, turning around bombardier. they sealed the deal in january and have taken on problematic legacy contracts. over into the german market, the german shopping market, and particularly drugstores and the shop falling by nearly 12% after the company said its full year
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2021 guidance is going to be challenging to meet. the market adjusting to lower expectations so that's go to the ftse 100 and british land, this an example of the most we are seeing today in that particular space in the real estate are cap british land in focus, down by 3.8%, cut by directories -- jeffries to hold. oddly speaking, the market down by .8%. the ftse down by .1%. china's $12 trillion corporate credit market is the world's largest after the u.s. and until recently, one of the most stable, but as beijing forces accountability on its weakest companies, a wave of defaults is ripping through the markets. the ceo is still with us. how concerned are you about this? we have this number china credit tracker and it says the strains in the credit market are put at
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mid range at the moment in the corporate credit market despite the fact that we have seen -- the fallout seems fairly limited but the direction of travel according to our colleague seems to be clear that the chinese government is allowing further defaults. is that something that alarms you in a china context? >> not necessarily. they are trying to control increased liquidity and to try to have better accountability and this has been part of the chinese communist party's essential tenant that you bring in accountability to officials. you have to balance the defaults being allowed with something happening on the other side, which is the people's bank of china essentially signaling very strongly that there is an easing of interest rates and more liquidity into the system so the two are balancing each other. the central bank is saying very clearly that it will keep interest rates low. they passed rules that would allow them to use them even
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further and the central bank essentially is allowing for us to inject more liquidity and at the same time, they are allowing companies to default. they are trying to pivot from being an export led market to being a consumer led market. they want to encourage new ways of raising liquidity but that must mean in their mind and ability to allow defaults because that is a healthy way of weeding out people who do not meet the criteria of success as they see them so to my mind, this is a reasonable way of progressing. within china. anna: checking with the china theme, we have an interesting big take story which is asking the question, when will china rule the world? the simple question you tried to answer here is when will china be the largest economy in the world? you can get to a date that is not all that far off from now but if you put certain constraints on china or -- he can also craft a scenario where china may be does not get there.
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but either way, it raises questions about the extent to which the u.s. wants to or might be forced to share global power in some way. how do you look ahead to that important element? >> it is an interesting one. the chinese coming's party celebrated 100 years, as you know, and it is clear to me that they are still yearning after power in the chinese historical sort of memory, the century of humiliation, which we, the brits , were primarily responsible, in which they gave to foreign powers. the lesson they learned from 1992 is to be a strong military power, you have to be a strong economic power. the americans will not be comfortable with that because china remains a communist country. they behave in a way that allows capitalist growth for the economy but they remain
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fundamentally different. they have a different set of values and they are challenging and the u.s. military realizes they are challenging and the united states realizes its economic power and military power are tied together so there will be some tension between the two and i think the u.s., in general, the foreign department realizes that china will try to at least slow the growth because i think that the recent changes in china, ascendancy of president xi is more communist centric views has outlined that there will be no conversions of values. when you and i started talking years ago, some people said that china is becoming more like the west and eventually becomes more open, liberal, democratic, but that is clearly not the case and china has been building its overseas influence by using economics. notably, in africa, and acquiring a lot of assets that are necessary for technology in africa. anna: how does europe chart a
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course through that tension between these two powers? we have headlines talking about the meeting that took place yesterday between angela merkel, emmanuel macron, and xi jinping. this was a video summit. the headlines coming out of it talk about flights and helping to establish more flights coming through between the two locations, sort of tinkering at the edges of that relationship perhaps rather than dealing with the fundamentals. how does europe chart a course through this tricky time? >> the of what happened in this virtual summit is that europe realizes, in terms of international affairs, it has to have a slightly stronger position. generally, europe is cautious in its foreign policy, trying to build economic relations and at least be on a footing of negotiations with the chinese at this stage and the reason is, whatever happens, the share of
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china's economy in the world economy is going to grow and that is important for european export markets. there is a dependency on a lot of technology production coming out of either china or chinese companies. the europeans have long believed that the ability to negotiate gives you an ability to perhaps influence economics but you are right. in reality, you still have two blocks, major militaries, and that will be the standoff and that possibly might argue for more instability than perhaps most investors are used to in the coming years as this rises to the four. anna: thank you very much. international at federated hermes ceo. he will be continuing his conversation with us on bloomberg radio. i will be heading there at 9:00 a.m. u.k. time. here is laura wright. laura: bridge point group confirmed it is going ahead with a london ipo.
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it filed its intention to float documents after announcing last week it aims to list at least one quarter of its shares to raise around 300 million pounds. the u.k. private equity company invests in middle-market funds across europe and it has stakes in burger king franchises and the asian inspired food company. an agreement to develop the retailers online business in spain. companies will initially build a fulfillment system to serve the madrid reason in 2024. separately, they reported ebitda ahead of the average analyst estimate. china's antitrust regulator is said to be about to formally block tencent's proposal to merge with two top video streaming sites. mortars reported the company has not figured out how to meet government requirements on giving up exclusive rights to the content. officials announced the review of the $6 billion transaction in december of last year.
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that is your bloomberg business flash. anna. anna: coming up on this program, boris johnson plans to end all social distancing and make masks voluntary from july 19, saying people must learn to live with the virus. we will bring you the latest, next in bloomberg. ♪
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anna: -- >> president macron
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said he would not -- in a country because of covid or whatever. >> when i was an mp 20 years ago for a previous reform, we had proposed a system those who started working very early. at 14 or 15 years old. they cannot go until the end the same way because they are worn out by a lifetime of labor. without justice, reforms cannot pass. >> and the president is on the path of continuing the reform and i think he is right because even though the political agenda -- the elections may be short-term, what we need is structural reform anyway so if we don't do it now, when they are required and needed, when are we going to have them? >> it is not balanced, not financed. that means that the younger ones pay for the older one but they
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don't have the insurance at home that they will benefit from the pension scheme at the level of the older ones and this is absolutely unacceptable. >> i will present my retirement reform. i will present my own and there will be justice in it. anna: french governments and business leaders on president macron's plan to revive a controversial pension reform he had to abandon during the pandemic. he will be meeting with labor representatives today so that puts those comments very much in focus and a french diary. let's think about the global picture, the global diary, and some of the events we are watching in global markets. at 10:00 a.m., eurozone retail sales recorded for the month of may and the data is expected to show an increase of more than 4% over the previous months. germany's survey will also be out at the same time and it will report the latest outlook for the german economy. ecb policymakers will hold a special meeting in a bid to
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strategy review. the expectation of more dovish policy, and finally, the annual sun valley conference is set to return after being canceled during the pandemic. jeff bezos, they are all expected to attend at what is known as the summer camp for moguls. boris johnson has announced plans to end social distancing in england from july 19. final decisions are due on july 12 but this is the direction of travel. face masks will be made voluntary and the government will low -- no longer instruct people to work from home despite a surge in infections. joining us now for more is david maritz. we were warned yesterday when we got this announcement that we would see a further wave of infections, may be 50,000 a day by the time we get this further unlocking on the 19th but there was this suggestion that we have managed to lessen but not break the link between infections and hospitalizations.
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so is this a big gamble that boris johnson is taking here or not, given the relatively high level of back nation? >> it has to be a gamble in the sense that we are in in uncharted territory. we have seen the sort of uptick in cases, the sort of numbers that you were just talking about. that has been when the government has had to reluctantly tighten restrictions and prevent people from leaving their homes and shutting down businesses and we are in the opposite case because as you say, the rmb min goes that weakening the link between hospitalizations and deaths -- we know that they follow on some weeks after a big uptick in cases so there is still a sense that while they are pretty sure we are not going to see the hospitals overwhelmed, they don't know for sure and there are plenty of scientific voices out there warning that this is a reckless move at this point and
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that in fact, we may be storing up trouble to, and while the government is pressing ahead on this, as i said, there has been increasing clamor for a little bit more caution perhaps and some people are very concerned that we are going to see the country slipping back into some of the terrible things we saw this year with hospitals for and death rates increasingly high. anna: yes, we will hope that has lessened enough to stop what you described, david. in terms of the business response, we see the government stepping back from the previous guidance that work from home was a kind of mandate, i suppose, if it were possible, but now, we see a request for more information from those businesses that are going to be a little confused with what to do with the mask mandate being dropped. how do they protect their staff at the same time as allowing freedom for people to take personal responsibility. our businesses happy with the further relaxation of rules? >>
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businesses like certainty, as we know, and this tipping a responsibility away from government rules onto individuals and individual businesses to make their own decisions, we can probably assume that will lead to lots of confusion and some chaos i think in some respects. what are employees going to demand in terms of safety in order to get them back to work? what we have seen is the public have watched very closely the infection rates and i think they made their own decisions about whether they want to stay-at-home order whether they feel comfortable going on public transport. if rates are going to hit 50,000 or more a day, our people really going to feel comfortable sitting on a crowded bus where many people around them are not wearing face masks class denmark -- face masks? are people going to revive those areas, things like all the hospitality around them? or not? it seems that confidence will be
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key here. while infection rates remain high, that will be difficult to achieve. anna: thanks very much for joining us. when we come back, we will deep dive into the u.k. housing market. the purple brick ceo will join us, next. this is bloomberg. ♪
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anna: welcome back to the european market open. things are and preventer estate across european equity market -- improving across the european equity market. the cox -- let's look at the sector breakdown. we are predominately and they read in terms of they balance of sectors -- in the red in terms of the balance of sectors. energy and basic sectors are on
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the upside, which explains how london ate out some positive territory. >> opec is leaving the oil market facing tight supply and high prices. it failed to solve a dispute between saudi arabia and the uae. that means action will not increase in august the talks can be reactivated at any time. the leaders of germany and france are urging china to allow more flights from europe. the three-way video summit also discussed global vaccine supplies. leaders agreed there is a window of opportunity to renew the iran nuclear deal.
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social media sites warned they may -- they claim rules to address doxxing could put sta ff at risk. powered by more than -- this is bloomberg. anna: let's get to the u.k. housing market story. house prices in the u.k. have surged by 13% according to the nationwide house price index. the buying frenzy has been reflected in a strong and the fiscal year for purple bricks.
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joining me now is the purple brexit' ceo -- purple bricks' ceo. annual house price growth was 13.4% in the month of june. what do you see in your books purple bricks? >> we are seeing a healthy and buoyant market stimulated by the last 12 months. lee see has price inflation and stimulated by that in excess of 10% -- we have seen a buoyant market stimulated by two things --we are of how we all lived and adjusted to the pandemic. we have seen an exit.
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we assess housing needs around garden needs and working space. the market will remain resilient. we will see the true health of the property market over the next 12 to 18 months. anna: we have seen some support making it cheap your to move then it otherwise would have been. your expectation, -- what is your expectation that the unwinding glow have? what damage -- the unwinding will have? >> the holiday runs until the end of such number. the savings you can make our significantly reduced -- are
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significantly reduced. we have seen low interest rates. the government introduced the mortgage guarantee scheme. we are talking about the reassessing of needs people are going through as we addressed to a new working life -- adjust to a new working life. 20% of homeowners and homebuyers do not plan to return to the office. we are seeing conditions for a healthy and buoyant market. i think there is an imbalance of supply at the moment as homeowners adopt a wait and see approach. we will continue to see has price growth. i do not think 13% growth is it sustainable for anyone in any instance. there may be a calling on has
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prices over the next 12 months but we believe the market will remain resilient. we will see a correction in imbalance then supply and demand -- in supply and demand. anna: wti cruise has risen -- crude has read in to the highest level -- wti crude has risen to the highest level in years. saudi arabia and the uae were not able to come to an agreement. back to housing -- how does the london market compared to the national picture? where has not left london?
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how much of that trend of the last year do you expect to reverse as we cp coming -- see people coming back into city centers? >> we are seeing they easing of restrictions -- the easing of restrictions. we firmly believe we are not moving back to working from office locations 5 days a week. in the data we see from the number of consumer surveys we have run, consumers are looking for properties up to 17 miles away from their office locations. we will see people going to the office 2 to 3 days a week. will have adjusted. they are more engaged, happier. the days of going into the office, presentism, and walking
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-- working 95 argon -- working nine: -- working 9:00 to 5:00 are gone. 80% of the houses we sold nationally were to both who formerly lived in london. that is significant. when we look at house price growth over the last 12 months, that is 3% compared to the national average of 13%. while houses in london are selling quickly, i departments without gardens are not moving -- apartments without gardens are not moving as quick way as people start thinking about their housing needs in a different way. anna: how are you evolving your business model at this time? you have been different to other
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retail -- real estate in the u.k.. you ask for an upfront fee. >> we offer consumers a significant discount versus the traditional high street agents . if you look at the average commission in the u.k. . it is in excess of 3.5 thousand pounds. as we look at the barriers to further adoption, the key consideration for us is that on a point in the u.k. 30% of consumers consider using purple bricks.
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we are the most familiar brand in the category. there are barriers for certain customers. in order to grow to our stated objective of 10% market share of the u.k. residential property market, it is important we evolve our proposition. if we do not find you a buyer, we will reimburse the upfront fees paid by our customers. that will create a sense of accountability that perhaps for some customers has not existed. anna: you mentioned how you are able to, how you are different. one of the ways you are different as you do not have a presence on high street. do not have to pay for offices. what are your starting levels like compared to other businesses? if i show up and try to get
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appointments to visit properties, dry have to wait longer? anna: -- >> absolutely not. one of the key metrics we look at is today availability, which is one of our leading indicators of availability. we have over 800 agents across the u.k.. we operate out of 126 alcoves. we have agents within those communities as local property experts. they have an intimate knowledge of all of our local communities. we do not have rick's and mortar -- bricks and mortar, but we have local agents who understand their area and work from home.
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consumers understand that. a perception of our lack of expertise is dissipating given that everyone is adjusting to the new and earn meant of working -- environment of working from home. our model is we do not spend money on bricks and mortar. we do not think it is that relevant in the modern day. rarely -- 97% of consumers start looking for property online. clearly it plays into our online model. anna: thank you for joining us. 'purple bricks' ceo. china's communist party sees china's primacy is inevitable, but is it? we will have details next.
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this is bloomberg. ♪
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♪ >> we are seeing cases rise very rapidly. there could be 50,000 cases detected per day by the 19th. we are seeing rising hospital admissions and we must reconcile
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ourselves to more deaths from covid. have to balance the risks, the risks of the disease that the vaccines have reduced but have far from eliminated and the risks of continuing legal restrictions, which take tolls on mental health. if we cannot reopen our society in the next few weeks when we will be helped by the arrival of summer and the school holidays, we must ask ourselves when will we be able to return to normal? we will change the basic tools we have used to control human behavior. we will move away from legal restrictions and allow people to make their own decisions about how to manage the virus. anna: boris johnson announcing
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changes to the u.k.'s pandemic rules. well china overtake the u.s. as the world's largest economy and wet -- will china overtake the u.s. as the world's largest economy and when? joining us to discuss is erica do -- eric. many have dates around this. will china overtake the u.s. as the world's largest economy? >> it may happen soon, but it could never happen too. to answer this question we have
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estimated long-term potential growth for both china and the u.s. and based on that projected when china might overtake the u.s.. people could work until they retire. this will determine labor growth. china's domestic reforms and what is the possible extent of chinese isolation, particularly the u.s.-china decoupling will affect china's productivity growth. some main assumptions trying to explore the best case upside into downside scenarios -- if everything goes on track we projected china could overtake the u.s. at the start of the next decade, but that is far
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from guaranteed. if those factors do not go as well as china is planning, then probably in the downside scenario, we will never see trinity -- china do that. anna: the birth rate and some other issues to mentioned could -- you mentioned could stop china from doing. -- could stop china from doing that. >> the government has done some names to effects that like relaxing v3 child policy. it is a good sign -- rely -- relaxing the three child policy.
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it is a good sign that china is -- on domestic reform we think president xi had a ambitious plan. the key is are they going to deliver and how soon it is going to be delivered. anna: thank you for bringing us the analysis. if you go to ni big take, you can get all of the grand research that went into that -- all the research that went into that piece. we are back to the markets and what is driving them today. we will focus in nonoil prices.
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the wti price nearly over $77 a barrel. more on that next. this is burke. -- this is bloomberg. ♪
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anna: welcome back to the european market open. we await the united states to
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rejoin the global equity trade after their market holiday yesterday. i am interested in what you think about oil prices, wti rising to the highest level since 2014. some people are talking about dan oil price of -- an oil price of three digits! are we heading there? >> i hope we are not heading there because that will be negative for inflation. $80 a barrel is looking possible. there is hope that joe biden, there will be renegotiation. no one wants what happened last year. that will cap any gains
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immediately. anna: let me think about what is happening with other central banking narratives. we had the rba overnight. what does that tell us about the exit from monetary policy rabin during the pandemic? did we learn anything from their use of yield curve control? >> definitely. i think the rba seems more confident about the economic recovery australia is seeing despite the lockdowns they have had recently. they have pedaled back to $4 billion from five olean dollars now -- $5 billion now. that has resulted more hawkish at the margin. that is definitely a trillion dollar margin -- this will not
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happen until 2024. they may actually increase rates before 2024. that is definitely holding up the australian dollar today. anna: i know the new zealand dollar story is also jumping, new zealand bringing forward -- thank you for joining us. that is it for the european market open. surveillance early addition is up next -- edition is up next. u.s. markets could be a touch weaker.
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this is bloomberg. ♪
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>> there could be 50,000 cases detected per day by the 19th. we are seeing rising hospital admissions. we must reconcile ourselves to more deaths from covid. >> so today, while the virus has been vanquished, we know this, it no longer controls our lives. it no longer paralyzes our nation. >> to those who say we should delay again, the alternative to that is to open


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