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tv   Bloomberg Markets European Open  Bloomberg  July 9, 2021 2:00am-4:00am EDT

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anna: welcome to bloomberg markets "the european open." mark cudmore joins me in singapore. the cash trade is just less than an hour away. more virus concerns hit the markets. asian stocks follow the s&p 500 lower. some of the world's biggest asset managers stick to the reflation trade amid signs of recovery. taxation revolution.
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the world's richest nations meet in venice for an overhaul of corporate taxes. we are live on the ground. a china stock index in hong kong on the edge of a bear market amid beijing's crackdown on the tech sector. good morning, everybody. welcome to "the european market open." market is with us in singapore. he can tell us what is on his mind this morning. >> we are missing out on all the fun in markets. it seems like the slight risk aversion we have seen has been driven out of asia. has come from the didi story, from china talking about rrr cuts, it is coming from the delta variant which is having its main problems in many places in asia. and yet the action seems to be during the european session, the u.s. session. asia wakes up every morning
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like, what happened overnight? asia is wondering, went to we get the fun back again? anna: we will return to that theme, what we? -- won't we? economic indicators in the shape of gdp this morning. the u.k. economy grew 0.8% in the month of may. that is below what had been anticipated. we were expecting a substantial leap forward. this is the month of may we are talking about. during may we saw more opportunities to spend cash that had been saved up. maybe we have not jumped forward as much. u.k. made gdp rising 0.8% month on month, the estimate, a jump of 1.5%. thoughts right now turn to july 19 and the reopening set to take place.
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some will still be in place because of the need to self-isolate until the middle of august. there is a lot going on in the u.k. and it continues to evolve. we are still very much consumed by the delta variant, but with greater levels of vaccination. watch the pound dropped just a touch as we respond to that number. we are just an hour away from the start of ca trading in europe. there does seem to have been plenty of action in europe. we were down by more than 2% on the euro stoxx 50. europe did take the brunt of it. that is reflected in the futures . the u.s. equity market looked to be fairly flat.
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a bit of a contrast in terms of transatlantic trade. even if asia was missing out, certainly catching up with the bearish trades we are seeing in stocks. mark: asia arguably started the risk aversion. we said hey, the gmm points to classic risk aversion, but very mild. europe took it seriously. a negative stigma from asia. at first glance, the gmm pages look similar today. every equity market is lower. we have another risk-averse day. but there is one large difference. yesterday it was equities lower and bonds rising with yields lower as well. classic risk aversion trade. today bond yields are higher across the board. it started on a treasuries bounce and we are seeing into other markets.
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it is more of a deleveraging town with equities and bonds selling off today. that is the shift in the gmm page. anna: the relationship between what we see in treasury yields and what we see in stocks is what we see in growth stocks a little bit confused this week, or maybe is not giving me a picture i can latch onto. for a long time we were talking about watching treasury yields because when we saw treasury yields go higher, that led to selloffs in tech stocks. when you saw treasury yields lower, there was more appetite to continue buying tech stocks. that does not seem to have been the case. you saw stocks punished yesterday despite the fact we saw the very speedy drop in treasury yields. maybe that was the point. mark: it is confusing everyone. the move in treasuries have been -- have caught most people by surprise. there will always be a chunk of the markets. that is why the markets are going that way.
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when we got the original pullback, everyone said we have a more stable range, and yet yields just continue. the initial leg of this was about a clean out of hedge funds. a slight hawkish signal from the fed. the next leg was about that real money happening to catch benchmarks. it is a little about commodities coming off suddenly as well. oil prices suddenly dipping lower. that has led another leg lower in yields. the move in treasuries has gone so far it is worrying other investors. we are seeing equities selloff. we are seeing risk aversion. we don't know what's happening in bonds and it worries us. anna: when the moves happen so quickly and they are substantial and they are not easy to explain , everyone is scratching their heads a little bit. let me ask you about something happening in asia. that is ongoing concern about the coronavirus.
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clearly concern about the delta variant is a global story. but there are very vaccinated populations and less vaccinated populations. that is laying on the asia-pacific stocks. that plus a clamp down by china on tech stocks. leading to underperformance from asian stocks. this chart goes back to the beginning of 2021. mark: two things behind this chart. asian stocks have underperformed this here. -- this year. asian stocks were over performing last year because we were playing the china recovery trade. the market played that theme of asia leading the recovery. this year we migrated very quickly in january to this idea that the world is catching up. we have a vaccine. catch-up trade elsewhere in the world. we knew asia would underperform. it has been enhanced by the idea that even though we have a
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vaccine, asia has lagged the rollout around the world. that happened in developed economies, but also developing economies. indonesia is at the forefront of the next wave of virus concerns. the philippines and thailand as well. these are large countries in terms of population normally fast-growing economies. all of them have a virus problem which seems worse than what is happening in the u.s. and that is a concern. anna: let me finish by -- i sought reporting suggesting help is being sent by certain countries that include singapore and australia. we will continue to watch that tragic story. let me ask about china and the data. yesterday we saw china markets outperform. with asia leading the pack, part of that was driven by concern around, why does china need to talk about a rrr cut?
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today we got more disappointing data which i suppose is not help -- does not help. >> it is amazing how this data has been perceived in the context of that tone shift for policymakers in china. a week or so ago a lower cpi in china would be, hey, the inflation threat is not as strong as we feared. it would be a positive sign for global assets. wednesday when we got this indication there might be a targeted rrr cut.zñ, smaller companies, because there are concerns about the growth the second half of this year, that made people worried about what was happening. the services pmi was disappointing. the consumer is not doing as well as we hoped. it goes back to the story,
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china's first-ever pandemic, if they are seeing a slowdown on the demand side, people are more conservative, they be there is a path for the rest of the world's economy and that is why this is being taken negatively. anna: lots to deal with, lots to think about. you can get up-to-date analysis and insights. many of these things covered by the markets live team. get the thoughts of mark and the team. mliv is the function to use on your terminal. coming up, a key gauge of china stocks in hong kong borders on a bear market. but investors see tech's crackdown. g20 finance ministers and central banks are gathering for the in-person meeting. we will be speaking to top newsmakers on the ground. we will speak to the eu economy commissioner and bruno le maire, the french finance minister. later we will speak to the spanish economy minister and blackrock's vice chairman.
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next on this program, we dive back into the market action and get the take of jeffrey gill from goldman sachs. get in touch with us using ib+tv . ♪
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anna: welcome back to "the european market open." european equity market futures point to the upside but not making up for what we saw earlier on this week. yesterday session losing more than 2% on some european equity markets. the reflation trade is crumbling concerns about the spread of variants gross.
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asian stocks follow u.s. equities lower. joining us is jeffrey gill, macro strategist in the fixed income team at goldman sachs. very nice to speak to you. i know your expertise ranges widely. let me tell you where you had on treasury markets. -- head on treasury markets. we have seen substantial moves on treasuries this week. we are at 132 now on the u.s. 10 year. have we done the testing whether this can go to the downside, or is that to come? >> we think they will trend higher from here. the rally we saw this week was a recalibration. the way we view it as the market has gone from expecting a be plus shaped recovery to more of a -- and so we have this in --
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we were always going to have this reopening burst of activity . the data is still on track. we think concerns about the delta variant are a bit overdone because in populations where large shares of the adult population are vaccinated, you are seeing that vaccines remain effective against hospitalizations. that is not a uniform narrative. is an emerging markets there are concerns driving this risk off sentiment. mark: your base case is that tapering from the fed will start in early 22. if we suddenly find the fed starts tapering the third quarter, started the fourth quarter, where do you think we
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will see the biggest asset push? >> we did some analysis where we looked at market metrics. what we have seen is that many markets are beginning to price in expectations for the fed to do and asset purchase later this year. we looked at volatility in treasury futures for example. we think there is less risk of a rapid repricing in financial markets in response to tapering. last month's meeting, jay powell told us the central bank is talking about talking about tapering. there will be an upcoming meeting. we think it is going to be very well telegraphed. the risk to financial markets in the second half of this year is more about data going in the direction that is not expected. much of the economic data in the
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labor market and inflation is clouded by pandemic distortion. anna: let me ask you how you position in credit markets. you say you are underway agency mortgage-backed securities. how far does that concern about abnormally tight spreads ago? we have seen spreads widening this week, certainly around corporate credit. maybe other parts of the world there are concerns about how narrow those spreads become. >> when we look at the fixed income spreadspectrum, we would say over the past year you saw a rebound as an financial asset performance and the massive stimulus. going forward, we think the focus should be less on
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appreciation and more on looking for carrie opportunities. -- carry opportunities. u.s. corporate bonds offer the potential for high-end rolldown. we are underweight the asia mortgage backed securities sector. due to the latest round of fed qe, but also that asset classes favorable capital treatment. we also continue to find sustainable investment opportunity. we are overweight in european companies responsible for installing electric vehicle charging points throughout the continent. that presents an opportunity from a cyclical and structural sense. mark: one of the correlations or connections this year that has broken down is commodities.
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we are seeing an incredible commodities search -- commodities surge. yields are starting to retrace again. do you think we are going to see that read correlation? are you worried about an oil price spike? >> we would say we view that bleed through to inflation which would impact the yield market. we don't think that is what we are seeing in commodity markets. i am not the commodity expert, but that is not something we are concerned about at this juncture. i would go back to something you mentioned in the earlier comments. when it comes to opportunities out there, that market is attractive. it offers a yield premium. chinese government bonds have a low correlation to other fixed income asset.
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other fixed income markets but also asset classes like equities based on -- it supplies attractive diversification. anna: gurpreet gill, thank you for coming to talk to us. finance ministers and central bankers meet with a packed deal on the agenda. -- a tax deal on the agenda. we are live in venice for you next. ♪
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>> the globalization and digitalization of our economies has created inequities. the revenue to fund the services
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people except -- expect and need . this is a very fair deal. anna: the oecd secretary-general talking about tax. a lot of people are going to be talking about tax, central bankers and government ministers meeting in venice. the group's formal endorsement will be a key milestone after years of arguments on the subject. joining us is maria tadeo who is in venice. what do we expect on tax? >> we did get here in about an we just saw janet yellen with a
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big delegation on a boat. you know, this is really a meeting finance ministers already say will put forth a tax revolution. you are looking at a corporate minimum tax of 15% but also something that in particular for the europeans is key. this idea they will now be able to tax companies that operate in their countries and won't be able to shift profits into lower tax countries. that is something they are looking for. yesterday i did speak with the head of the oecd and he said, look, we are confident we are going to get a deal by the end of the week. we know it is a situation that will require a lot of negotiating. in particular with the irish. but we are sure we can get there. he also said, and this is key, this is a two pillar package. it is not pick and choose. you cannot cherry pick.
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this is a full package. we do not see a hybrid solution. meaning the tax rates, but also taxing in the country where you offer service has to be in the deal. mark: what would this mean for big tech? >> here is the thing. for the big tech companies, they will be majorly affected. to some extent, they knew this was going to happen. these companies know the political mood has changed after president trump left the white house. this is not a full surprise. this is perhaps to some extent thin, but they say this is something we would welcome. we prefer one solution across the world, one single tax rate, clear rules across jurisdictions.
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having every country come up with their own digital tax. the europeans had said if we don't get an oecd solution by the end of the year, we are going to enact our own solutions. big tech say they welcome the move. anna: now keep tracking the conversation here on bloomberg for the latest from the g20 in venice. we will be speaking to the eu economy commissioner. we will hear from bruno le maire. later on, the spanish economy minister, and blackrock's vice-chairman, all joining us to talk about the g20. coming up on this program we will track the china story. a key gauge of china stocks in hong kong. investors fear tech crackdown.
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we will talk about the tech crackdown and data coming out of china just recently. ♪
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anna: welcome back to the european market open. bear in mind some of these markets lost more than 2% in session yesterday. some way to go if we wanted to clawback that. it's been a wild ride in treasury markets the last five days or so. yields at 133 on the u.s. 10 year. we are back to 196 on the 30 year. that had dropped to 190.
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the 10 year dropped to 125 or so. do you think we have tested how low we can go on these yields? or do we not know yet? mark: we have turned the corner. i want to have a little bit of a lighthearted moment about the treasury market. i am a macro guy and if you are getting treasuries wrong you're getting everything wrong. it has been happening when i have been asleep, it has been taking advantage of me. every day i walk in, yields are a little higher. i come in the next morning and yields our way lower. every night i'm seeing a massive rally in the u.s. and u.k.. it seemed to have stopped yesterday. . i drew this trendline. it needs to stop now. if it starts going below here it is going to start worrying people we are not just returning to trend, we are going back to a negative, low yielding, low growth world. there are fundamental reasons it
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should turnaround. we have no supplies since june 25. we are set to get a three year and 10 year auction monday. who is going to want to buy treasuries at 1.3% yields given what is happening in every other asset class? there is a chance we have seen the final capitulation. there is a risk it is tilling over into other asset. i think we could see yields higher from here. anna: you ask who is going to buy it. other times during the week we talked about those who need to buy. is that part of the narrative we missed when it comes to treasuries? mark: it is absolutely true. there's a lot of people who are underweight treasuries. we know there are hedge funds are actively short. there are people who have to buy to catch the benchmark. we know there is natural demand.
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we see banks around the world continuing to buy bonds. they continue to pour liquidity into the market. they have to capture some yield. if you have any ability to be flexible, and absolute return fund, it is not appealing. it is not unattractive time to buy this market. some people have two, it is not going to be a failed auction. but we see the end of this treasuries rally and i think yields will go higher. anna: let's get a bloomberg business flash. these are the top corporate stories we are covering. >> for the first time since the pandemic began, u.s. hotels are outperforming pre-covid levels. revenue per available room was more than 5% higher last week compared to the same period in 2019 according to data from
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analytics firm st r phoenix in arizona so the best gains of any market. hotels in new york continue to struggle. a data breach exposed the names, date of birth, and social security numbers, but not passwords. it did not disclose how many customers were affected. richard branson made his reputation with a series of daredevil exploits. he returns to that sunday when he is scheduled to take a rocket powered trip to the edge of space. the test flight of the virgin galactic craft would be a step toward carrying passengers. do you see yourself as one of anna: i don't think so, but let's see how it goes. i'm quite happy not to be at the front of this innovative wave. now back to the g20.
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finance ministers and central bankers are meeting in venice. top of the agenda, the global minimum tax rate. they are expected to endorse the deal, but key details need to be hammered out. more nations must sign up. implementation could take a long time. do we see barriers in the u.s. political system? let's get to maria tadeo, joined by a guest. >> we are here in venice and we have a special guest. commissioner, how are you? >> wonderful, good morning. >> you know, this is a very important meeting for the european union. you have been pushing for the taxation to come through.
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how confident are you that we get a deal come sunday? >> i am optimistic. all the g20 members are already agreeing in the oecd process to have this because of course we need to take into account the fact that in this digital and global world , we can't have the taxation system we have last century. we need big multinationals to pay taxes and we need to avoid the race to the bottom, tax havens, and have minimum taxation all over the world. we are near there and we will do our best. >> you make a good point because you say the countries, but it is
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also the tax rate. the irish say it is something they cannot accept. do you see a compromise? >> they need to be together, both. i respect the irish position. and other countries that have a lower tax rate. but i am also saying we are not imposing the same tax rate to all countries. several countries will keep they much higher tax rate. o enhuenhuvwsyñ>qp 15% leaves cs the possibility to be competitive with their own taxation system. i'm optimistic working together with our irish colleagues, we
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will find a way to have disagreements. anna: the european union is putting forward its own digital levy. the europeans are doing their own thing. can you explain what this is about? >> we are not deciding anything. we are working on this. we have worked to coordinate what we will table, what we will propose to the international agreement. to avoid any risk to undermine the eu proposal at a global level, i can assure you we will not have any discriminatory or double taxation systems. we are working on this. it is not for now. now it is for the global agreement. >> you don't fear this going to create tensions with the united states, especially because congress is going to have to
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sign on. >> we are aware of this and we will work with our u.s. partners. >> i know you always say the central bank is independent, but yesterday was that big announcement. the change in the 2% target. what do you think? >> we can make an exception to the fact we are normally not commenting on ecb decisions. in this case, what i can say is that we appreciate the fact that they are establishing these 2% targets with clarity in the global discussion. we are very much appreciating the fact they include climate policy in their priorities. this also is important. we have an interplay between fiscal policy and monetary policy. i think we should of course keep
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our independence, but at the end, work together to strengthen our economies. >> you mentioned fiscal. there are some who believe the debate around fiscal you w -- fiscal rules is going to get ugly. >> it is always, i would not say ugly, but i was a difficult. we have to update our rules due to the fact we have a lot of investment to support and due to the fact we have to adjust the need to reduce public debt to the reality of higher public debt. i am again confident that a consensus will be reached. but it will be hard of course. >> i have to ask the most
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important question, which has created so much debate. is it coming home or coming to rome? who is going to win this match? >> will of course the answer for me is obvious. >> and it is? >> italy. >> is it 2-1 come sunday? >> i have no protection. i avoid -- no prediction. i avoid any form of prediction. >> superstition, ok. we will see what happens but you make it clear it is coming to rome. thank you for that. there is a big game. there you go. it is italy. anna: you took the opportunity. you heard roma. i heard home. a little bit difficult, must
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have been the line to venice. >> you said it very clearly, rome. anna: i definitely heard home. thank you to the european economy commissioner. coming up, a key gain in china stocks in hong kong. analysis of what is happening in hong kong, in the beijing tech crackdown as well and what impact that is having on hong kong stocks. ♪
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>> young bankers who think they are working too hard should choose another living. you want to be a banker, you have to work really hard when
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you are young. to complain about it after you got this great job just seems silly. anna: the cantor fitzgerald ceo giving a frank assessment of banker work culture. i don't think you can use that argument to suggest culture change is never needed or you should never assess stress levels amongst your workforce. at the same time, he does make a point you should go into these things with your eyes open. i want to be the only one who did a brief stint in banking to make a career change. that is what some people will decide to do. mark: absolutely. i think as you pointed out we see a culture change in terms of the manners and attitudes of how we deal with, but that does not mean we need people to have very cushy hours, get paid very well,
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not work hard, have no stress. the people going into banking are not being forced to do it. it is a competitive industry. it is very hard to get into it. you get in because you choose you want to go down the path. if you're just doing it for the money, that is a choice. there are people who love the job and they are willing to do the hours because they enjoy it. i have sympathy for howard. it is ironic to choose to go down this path when you know full well it is a demanding job and then go, the job is a bit tough for me. do something else. anna: talking at someone who did go do something else. let's get back to the markets. asian stocks have faltered amid concerns over the virus and china's corporate crackdown. some asian indexes are on the verge of correction. that is how tough things have become for china tech stocks in the midst of the tech crackdown.
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>> certainly. we have been watching the hang seng china enterprise index all week. it has been down eight of the nine past sessions. you see a lot of selling in the likes of tencent, alibaba. there has been a rebound in afternoon trade after we saw the hang seng china enterprises index look like it was going to enter bear market territory, down from its peak amid concern about the claim down from china. more broadly it is covid variance. big selling in korea and japan. the nikkei seemed like it was going to enter correction territory. all these countries are dealing with a spike in virus cases meeting the overall regional index continues to underperform what you have been seeing in the likes of the u.s. and europe. investments very. -- investors worry this will have ramifications into other sectors. you have reuters reporting the u.s. will add 10 chinese
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entities to its economic blacklist. all of that weighing into this today. mark: we have inflation data today which is making investors nervous. the china economic recovery is already peaking. what is the perspective there? >> certainly looking at the factory floor with ppi, 8.8% on the year for june, down from 9% and what we saw in may, a 13 year high. many suggesting have seen inflation through the factory floor, and what does that mean for the chinese economy? we heard the pboc could be looking at a cut to the rrr rate. consumer prices increasing from a year ago. still below what the market was looking for.
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the chief china economist at j.p. morgan chase saying you could see modest decline in factory inflation in the second half. anna: thank you very much. juliette saly joining us with the latest on china themes. let's take a look at things that are on our radar today. the group of 20 finance ministers and central bankers will be meeting in venice. this will be the g20's latest attempt to wrap up tax talks following the endorsement by 30 nations of setting a minimum tax rate. janet yellen is there. she will be in attendance at that meeting. afterward she will make her way to brussels for a meeting with the euro group. at 11:00 am u.k. time, christine lagarde along with andrew bailey may appear on a panel discussion about digitalization and
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intangibles as part of the annual conference of the global forum on productivity. at 3:00 p.m. u.k. time, u.s. wholesale inventories data will be released. coming up on this program, the stocks we are watching, including the luxury space. more m&a. ♪
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anna: welcome back to the european market open. eight minutes onto the start of friday's cash equity session and futures point to the upside. now let's get stocks to watch. let's get to the story, what can
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you tell us about luxury? >> still room for m&a. the owner of gucci is going to buy lindbergh, the danish eyewear maker. analysts suggested could be worth around 300 million euros. it does follow the ray-ban owner buying the larger company grand vision. kind of a defensive move. it is a huge market, the eyewear market. this total eyewear market is worth around $140 billion globally per year. it looks like kering is trying to get a piece of that market. mark: you are watching team viewer. >> team viewer yesterday dropped 14%, their worst day since 2019 ipo.
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what is happening is companies have signed up during the pandemic, they are not renewing their subscriptions as quickly as the company expected. morgan stanley saying the big question is whether investors will now believe the guidance. there is a credibility issue. there is a stronger football link given the shares tanked because it was very expensive to get their name on the main united shirts next season -- man united shirts next season. anna: a takeover by philip morris beating out private equity. >> this is interesting. it is a u.k. listed maker of inhalers. being taken over by philip morris, according to the latest update.
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phillip morris known for its legacy tobacco brands like benson hedges and marlborough. there are seeing this as a way to get into the alternative nicotine market. they did recently by a nicotine gum brand, an indication of their efforts there. there was a big jump when we saw the carlisle and takeover offer. that share price could see further upside. anna: we have a whole day to get through, but the next time i see you, it will be monday. it might be bleary-eyed. mark: i might try to get up and wash it or stay up and watch it which will lead to a painful day. before the football, i hope treasuries go to plan first. anna: we will tick those off as they happen. thank you.
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i'll be back with the european market open next. this is bloomberg. ♪ ♪ ♪
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♪ anna: welcome back to the european market open. a minute to go until the start of cash equity trading, here are your headlines. more virus concerns hit the market. asian stocks follow the s&p 500 lower. but some managers sit for the reflation trade amid signs of recovery. the world's nations and meet in venice. we're live on the ground in italy. china's stock index in hong kong teeters on the edge of a bear market amid crackdowns on the tech sector.
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welcome back to the european open, the second hour of our program. and european equity market futures do point to the upside. we lost considerable ground, euro stoxx 50 down more than 2% yesterday. we underperformed in u.s. stocks, only around .7% or so. we're certainly watching this rebound on european stock markets this morning. a lot of people questioning the reflation trade. george's that go? concerns -- where does that go? concerns around the markets. there's a host of different narratives when it comes to delta variants and what makes the markets nervous. that's something we're watching, something that's back in the conversation. let's get to the markets. we've got the ftse 100 up .4%, cac 40 up, ibex up point 4% --
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.4%. we are moving to the upside. we seem to be spooked by concern around growth. it sent investors piling into treasuries and sent yields down. let's talk about where we are on these markets. the 10-year treasury yield is on course for one of the biggest weekly slides despite picking up a little bit this morning. joining us is steven major. very good to have you with us this friday morning. nice to speak to you. so, we see risk assets gaining, pausing for thought or gaining a bit of boys after yesterday's selloff that we saw. it seems the pace and this size of the moves boosted other assets. could you give us your insights into what it was that was driving insights yesterday? we seem to have been testing the
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downside when it comes to yields. what's been driving that? steven: to put it into context, we started the month at 1.5 and we've been below 1.3 for the treasury. for me, this is the correct direction of travel because we're forecasting 1%. i'm surprised how fast it's happened. to answer your question more directly, i think most people thought something else was going to happen. and you've documented the so-called reflation trade. it involves people being short of treasuries and other government bonds, and expecting the yield to go up. now, the market had been pricing in the higher inflation all the way through the back end of last year, and even into the first few months of this year. so yields peaked at the end of march. that's more than three months
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ago. and we've probably seen the higher for yields. markets move ahead of the data and i think the issue here is the many investors and traders may be overly reliant on the incoming cyclical data, and under representing the longer-term structural drivers that make it very difficult for the rates to go up at all anyway. anna: ok, and in terms of those structural drivers, what are the ones you would .2? what are the -- you would point to? steven: these are things that don't go away. and you know about the debt overhang and the impact of technology as wealth inequality demographics, etc. please don't go away, and they detect -- these don't go away. and they determine what we go
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to. some might call that the terminal rate. it's like the longer run do on the dot plot. it looks very unlikely that if and when they start to hike, they are going to get anywhere near. if you put your mind to the idea that 2.5% is too high for the destination point, then you've got to decide, when do they start hiking and how fast to they go? you've got three pieces to put together. to me, the market has been overestimating the speed and magnitude of the hikes when and if they come. anna: is that because we got to carried away by the reflation narrative? we got carried away by the anecdotal evidence and the documentable evidence of supply chain destruction and thought it was going to stay longer than it will. we got overly excited about economies too quickly, and that meant people were wrongly positioned in markets. is that what's been going on,
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and you think the market has gotten to a point where we've got a better understanding? steven: yeah, i think you probably explained it better than i did, anna. i speak to a lot of investors, and there's no doubt there's been a lot of supply-side anecdotes about the bottlenecks. and everyone's got their favorite story about the crisis. that is not sufficient to drive the forecast on a 10 year treasury. you've got to weigh -- in terms of the pandemic, you've got to weigh it against the scarring impact. and that's speaking to where the potential gdp is. and that's linked in to work the policy links can get to. stressing that point. people have been investing and behaving as if it's a done deal,
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that there's really high reflation and rates are going up. the market was priced for 2.5% cpi average for the next five years. that was back in march and april. 2.5% for five years average, that is a done deal in terms of what the fed has been aiming at, so it's been in the price. as for the rate hikes, i will believe them when i see them. anna: we'll get back to 2.5%. in terms of the scarring you mentioned and what that does to the economies as we recover from the global pandemic, one of our colleagues talked about after pandemics talked about the natural rate of interest rates,
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pandemic. is that something that supports your line of arguments? is that something you are thinking about? steven: totally. i haven't read that piece and i must. i know that jackson hole last year, the focus was the pandemic, and there was some academic papers talking about potential gdp being lower. that's focusing on the scarring. think about here in the u.k. on the one hand, you've got shorthand inflation pressure. that's a simple way of explaining it. what's happened to the
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potential gdp due to brexit and the pandemic, did that come down? if that's the case, which i suspect it did, then the equilibrium rate that we are going to is going to be much lower than in the previous cycle. that's what matters to bonds. that's what really matters, not this month's inflation print. anna: right. let me ask you, what is the biggest risk for your view? what is it you worry about when you tell me confidently that the u.s. 10 year is going down to 1%? steven: any forecast is a probability weighted of some kind. it's not like a best case single model forecast. what i'm saying is we are reliant on these risks and maybe we can make the reflation move better ourselves. i think in the second half of the year, we've got incoming
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reflation from the u.s. treasury about what they are issuing. we'll have to look at that. the data could be volatile because we are going through the reopening trade. that's a bit of a copout, so i apologize, but a lot of people will tell you the same thing. it could be very volatile. anna: it could be very volatile and we will keep and i on the data. thank you. coming up, we will ask the ecb confirming bloomberg talking about yesterday morning, raising its inflation target to 2%. the bank has been seated. we'll discuss that next. this is bloomberg. ♪
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anna: welcome back to the european market open. 11 minutes into the trading session and stocks rebounding a fraction, up .6% on the stocks euro 600 after we locked in yesterday's session. my colleagues tell me all sectors on the stoxx 600 are in the green. that gives you a sense of how broad the rally is today. let's look at the stocks on the move. we'll start with airbus. we've got airbus stocks moving
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up for the french listed playmaker. the deliveries number surpassed the 20 21st half total, which is good news -- 2020 first half total, which is good news. so, that's boosting the case over at airbus. the luxury sector in focus, generally, we heard about the e-minis intention of caring. that's the stock under pressure, up 2.5% this morning. we'll finish with other, name moves -- other m&a news, the business that operates in a similar state received an offer from philip morris, and philip morris tried to beat interest in private equity in the business sector, up 12.5% this morning. let's get a bloomberg business flash this morning. here's laura. laura: thanks, anna.
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becoming an investment bigger becomes work. he says junior bankers complaining about long hours should consider other careers in the industry. >> there's young bankers who decide they're working too hard. they should choose another living, in my view. these are hard jobs. you've got to work really hard when you're young. you should know that going in and make the decision. to complain after doing a great job seems a little silly. laura: pfizer says it will request u.s. emergency authorization in august for a third dose of its covid-19 vaccine. the move comes after early data shows it can sharply increase protection against the coronavirus. the company received initial data from an early study showing the third dose of its existing vaccine is safe and creates antibody levels five to 10 full
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compared with the original vaccine. jobs opening are at triple the level year ago ahead of u.k. assets for covid restrictions later this month. according to data from recruitment firms, there were more than 3,300 jobs available at the end of last month, the highest levels since january, 2019. that's the bloomberg business flash. anna? anna: thank you laura wright in london. it is changing its inflation target. we reported the new target will replace the old with a simpler 2% plus headroom, easy be president -- ecb president christine lagarde will strike a balance will support the bank's we transition. >> yesterday, the government's counsel unanimously approved the
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new monetary policy strategy. the governing council considers that prized stability is best maintained by aiming for 2% inflation target over the medium-term. it replaces the previous formulation of below, but close to 2%. the new formulation removes any possible ambiguity and conveys that to present is not a ceiling. the government counsel therefore decided to account implicitly for the implications of climate change and the carbon transition in our new strategy. we believe that this 2% is clearer, simpler to communicate, solid, and a good balance. anna: let's get to steven major, fixed income research, who is still with us. is it clearer to you? we heard from christine lagarde.
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we heard from a councilmember, saying this new goal is unambiguously clear. steven: yeah, it was coming. and most in the market expected the ecb to move something more symmetrical. and to me, it's part of the global rates story. in the space of a few weeks, we've had these developments in europe and signs that rates could even be going in the downward direction in china, for example. and we were discussing the u.s. earlier. so it's not part of a global picture. in some ways, the ecb and the eurozone were out of line with other big central banks. the bank of england, for example , they are all looking at targets which they are happy to overshoot and under shoot and balance things out. i think it was fairly clear this was going to happen, but it's
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still report for the dovish view on rates. in my opinion. selina: -- anna: we're all hearing comments that it aims for this to be emphasized. i suppose it might make the ecb in line with central banks but wouldn't necessarily lead up to what reaction function it is going to have in any given circumstances. steven: yeah, if there's one thing we learned in recent times is that central banks want a bit more ambiguity. maybe they need to be a bit more enigmatic because you're having extinct -- targets. think about it from the fed's point of view. they have a dual mandate, and the employment side of that mandate paints them into a corner a bit because they're so far away from full employment and they revealed what those numbers are. so, maybe it makes sense to be a
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bit ambiguous. anna: where does this leave you with your rates when it comes to european markets? we've got the german bundy yielding negative, 0.3. what next? steven: our forecast is -50 for year end, and treasury forecast is for 1%. so the forecast hasn't changed because of recent developments. if anything, it's moving a bit more our way. we are only halfway through the year. and the thing is with these forecasts, they are not wrong or right until we get to the forecast horizon, so for me, there's still a long way to go. but the direction of travel is downward for yields, not upwards. anna: ok, halfway through the year, very close to a very important football game. you're a man of numbers,
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somebody who models things very seriously for a living and comes to very learned conclusions. what are your learned conclusions about personal bias telling you about what is happening sunday evening? steven: i'm just happy that we're there. based on the numbers, it's almost a coin toss. it will probably go the whole way. it might go down to penalties. it's probably going to be agony. i hope not. it's so exciting. i'm still recovering from the last match. anna: i am, too. some of us have to get up pretty early. the extra time, it takes its toll. steven, thank you very much. steven major, thank you for joining us. stephen will be continuing his conversation on bloomberg radio, not :00 a.m. london time. -- 9:00 a.m. london time.
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england versus italy. football finals this sunday. we'll take a look at what this highly anticipated event means for equities. call it what you like, it's happening sunday night. more analysis on that next. this is bloomberg. ♪
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♪ anna: welcome back to the
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european market open. 23 minutes into the trading day, and equity markets bouncing nicely from heavy losses yesterday. the cac 40 picking up, m&a to talk about this morning helping certain sectors. it is england versus italy in the final this sunday. on the pitch, the winning side will lift the coveted trophy. a range of consumer stocks could get a boost from the event, whatever the result. our correspondent joins us from the fever pitch. joe, it wouldn't be bloomberg tv if we didn't lend a markets focus. dani burger said it was about pubs and beer. i would love to hear the answer is more sophisticated. is it? joe: there is pubs and beer involved, but usually we look at the stocks as the main beneficiary and the interest in the games. when it stays really high, it's
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a limited -- when england is eliminated, it stays high. and this time around, we've had the social restrictions so pubs haven't been able to get their news out, so instead we've seen a shift towards grocery stocks and people stocking up on booze and snacks. and deliveroo sponsors the england team. then there's the stock makers which i find interesting. you can see in the data that during june and july of tournament years, the new client numbers increase around 100%. they doubled versus non-tournament years. it's a big way for bookmakers to attract new clients and also clients that haven't gambled for a while, reopened their accounts. obviously, there are social
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implications whether or not that's a good thing. anna: certainly plenty of appetite during the games. any reference to supermarkets to well, something that's been mentioned. a lot of people trying to work out what's being happened, yet a sense of what the result was going to be. -- get a sense of what the result is going to be. what sort of credence should we attack to the model? joe: it is a statistic model. and the important thing to remember it is based on averages. if we played the tournament a thousand times, belgium would have won the tournament. the model is correct. even though belgium is eliminated, the model does the work. now it predicts england will come home. football will come home to england. england will win the tournament. the keyword is probably. i assume probability model.
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it is based on probability rather than facts. we're only playing the tournament once. if it was under profitability, goldman predicts england will win. anna: and that probably was doing a lot of heavy lifting. thank you so much for joining us. you certainly got the impression that just being in the final was, in a sense, some sort of victory for the england team. coming up on this program, global tax reform. that's top of the agenda. we'll be speaking with the french finance minister, bruno le maire, live from venice. we will bring you that conversation shortly. this is bloomberg. ♪
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♪ anna: welcome back to the european market open.
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into the session, equity markets moved to the upside. we try to bounce back from some of the losses yesterday. g20 five finance ministers and central bankers are meeting in venice. top of the agenda, the global minimum tax rate. more widely, thanks to ob cd led negotiations, they are expected to endorse the deal. key details need to be hammered out. more nations need to sign up. implementations could take years. we're joined by maria tadeo in venice with a guest. maria? maria: yes, anna, we're here in beautiful venice. we have an amazing guest joining us, french finance minister bruno le maire. thank you for being with us. we know you've been pushing for this digital tax, something you made your battle hoard to some extent.
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how confident are you we get a deal? maria: i'm very confident. we could have, during this g20, a groundbreaking agreement on international taxation. you know that france has been pushing for the international agreement for more than four years, so we're on the verge of having this agreement. it would be good news for all g20 member states. it would be also good news for the rest of the world. maria: you know the irish, just to give you an example of countries not fully convinced, they say we can work with taxing major services. but the 50% is not something we can accept. is this -- 15% is not something we can accept. is this a full package? bruno: full package. we need to have digital taxation, digital giants being decided. and we also need to have the minimum taxation being decided
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with a level rate of at least 15%. for france, we aim at having more, more than 15% for the minimum taxation's. maria: how much would you want to see? what are you targeting? bruno: i don't see a pacific -- a specific figure, but we need to be ambitious. this is the minimum we need to have for a more efficient taxation system for the 21st century, with a digital giant being targeted in a fairway. and with this minimum taxation, which we put an end to the race to the bottom on the taxation system. once again, 15% for the minimum taxation on corporate tax is a minimum. and france aims at having more than 15%. maria: let's say best case scenario, there is a deal. everyone agrees on it. it will still depend on u.s. congress. you have your own national tax. are you going to drop your tax?
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that's automatic. what happens in the u.s.? bruno: i've been discussing this point many times, and we have a friendly relationship with the island -- the biden administration. i want to take a very clear commitment to french values as soon as international taxation and the digital taxation will be in demand, france will withdrawal its own national taxation. and i'm ready to take not only a political, but a legal for 2022, and to introduce the commitment that as soon as this system is implemented, we will withdrawal our national taxation . i want to avoid any kind of concern for u.s. equity, but for the u.s. administration. . we are fair. we stand ready to withdraw as
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soon as taxation has been adopted and benefited. maria: that's a good point. you're working on an eu digital levy. that's created a lot of confusion a few days after you got a deal at the ocd. what is that? bruno: we are behind the digital levy. the idea is to have new resources for all countries. we have decided an economy recovery plan of 750 billion euros. we have fresh money, which means we need new resources. there are many tools that have been put on the table by the commission during the digital levy. there is also the adjustment mechanism, so there are many tools on the table. and we will discuss those tools. and we're still ready to discuss
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with the u.s. administration all the tools that are currently extra mind by the eu member states. we will have to chance to discuss on monday in brussels, so let's be open. let's listen to the concerns of the u.s. administration. we have once again a from the relationship between your and the u.s. -- europe and the u.s. maria: yesterday, we had the strategy review of the 2% strategy. i'm wondering, what's your thoughts on that? bruno: the decision is great and good news for all member states, eu members states, and especially the 19 members. first of all, because the ecb has been able to find the consensus in a few weeks, which means that the ecb is ready to take quick decisions. i think that under these times
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of crisis, this is of highest importance to have the possibility of making quick decisions. second, because the ecb hires decided to put some more flexibility in the monetary policy and once again, since we are under special times, having flexibility decided i the ecb is very good news. and third, for the first time in the history of central banks, there is a climate goal that has been defined by the ecb, and very proud of what has been decided, especially by the leadership of christine lagarde. , because you are once again, the first continent to have this climate goal being decided at the level of the central bank, which means we are the lead in the fight against climate change, using the tool of the fight against policy. maria: we're in venice. there's a big game on sunday.
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england or italy? bruno: my bet is it is going to be italy. maria: very good. [laughter] bruno le maire, thank you for joining us. anna, there you have it. it's going to be italy. anna: he says convinced, and convincingly. maria tadeo speaking with bruno le maire. let's look at the stocks on the move this morning. get a sense of where we are, what is leading the rebound. we are rebounding a little from yesterday's losses. there's one sector in negative territory. that's energy. oil prices are higher. they are not as high as they were. not as $77 a barrel. that is up .5%. energy lagging. travel and leisure to the upside. not all travel and hotels to the upside. let's get a bloomberg first word
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news update. here's laura. laura: most young people face and actually low risk of illness and death from covid-19 and have no reason to steal from the virus. under 18's in and clint had a one in 50,000 chance to being admitted to the hospital for coronavirus. very little risk. president biden says the u.s. is on track to end its mission in afghanistan by august 31, even as the taliban makes gains by withdrawal. they reflected on america's longest war, which ended before the 20 anniversary of the 9/11 terrorist attacks. he says while of the u.s. will continue to surprise -- supply report, it is not their job to build a nation. pres. biden: u.s. support for the people of a gratis kevin --
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of afghanistan will endure. we will supply assistance, including speaking up for the rights of women and girls. laura: the u.s. is reporting to add 10 chinese entities for its blacklist for human rights abuses and high-tech surveillance in that she and jang province. according to reuters, it could include moves from other countries. it includes solar products from the region. global news, 24 hours a day on air and on bloomberg quicktake, powered by more than 2,700 journalists and analysts in more than 120 countries. this is bloomberg. anna? anna: thanks very much. coming up, one giant leap for extraterrestrial tourism. the rate -- race to space is taking off. we'll give you the details next. this is bloomberg. ♪
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♪ >> i think it's amazing, so $25 million in the company, meaning at $10, we think this company is going to do incredible things and really change the course of
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data from states. i hate to say it, but states is the final frontier and i think this is incredibly exciting that the space market is there, $140 billion for the market annually for the data coming out of space. anna: that was howard loopnet, talking about his experience in space and the massive potential for that market. he's certainly excited. of the years of hype, extraterrestrial tourism is finally taking off, with jeff bezos and richard branson across the final frontier this month. we took a look at another scheme taking at one step closer. >> looking for a vacation and have $125,000 looking -- around? you could flow around the stratosphere on a space balloon -- float around the stratosphere on a space balloon ♪ it's changing the space travel game, aiming giant space balloons to bring eight people at a time to a 19 mile high,
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pitch black lookout for astronaut style views of the planet earth. its hydrogen powered balloon flights went on sale and are slated for takeoff in 2024. according to the company, they are resold more than 200 tickets. the company's providers met while taking -- the failed excrement from the early 1990's that in early united states. they served elon musk on human spaceflights, and help set records to the highest space balloon flight ever recorded. when their vessel, neptune one, gets their finishing touches, it will join a space tourism industry which is finally bearing fruit after years of hype. also in june, virgin galactic got the green light to go to space from the faa.
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but space perspective is front from its crisp -- is different from its peers -- is different from its competitors in different ways. 50 miles above sea level, international bodies put it higher at 62 miles, a measure known as the carbon line. neptune one gets only one third of its height, achieving epic views, but no time in zero gravity. the trade-off is a saver, smoother flight that requires no preflight training for his passengers. it will arrive a few days before the trip, allowing sometimes to visit the launchpad towards the capsule and make sure everyone feels comfortable. the trip will last about six hours, well before the crack of dawn, to see the world's most perspective their sunrise creeping up from behind planet earth. space travelers can get behind -- out of their seat, enjoying
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mimosas, and talk to the pilot. eventually the balloon will slowly deflate and the capsule will land gently in a large body of water, were a special vote will pick it up and bring -- boat will pick it up and bring the passengers back to shore. it will ramp up to 100 flights per location per year. the goal, say the founders, is to go quickly and bring space tourism to the masses, or at least those that can afford it. i'm nikki ekstein. for more on the future of apps, -- for travel follow us on your favorite platforms. anna: the balloon gradually deflates and lands in a bottle of water -- body of water gently. i feel like i've seen that movie. good luck to whoever tries. that was nikki ekstein on the future of space travel. it was an exciting weekend for this,, because coming up we will have richard branson's story
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into space. don't forget to tune into bloomberg tv for that special programming beginning at 2:00 p.m. london time. let's get a bloomberg business flash. here's lower wright. laura: thanks, anna. phillip morris has agreed to buy it for $2 billion, that it can help force. the offer trumps an earlier bid for the u.k. fund by carlyle group back in may. for the first time since the pandemic again, u.s. hotels are outperforming pre-covid levels, revenue for available rooms, which provides occupancy and prices with more than 5% higher last week compared to the same period in 2019. that's according to data from analytics, spr. phoenix and arizona saw the best gains in major markets. new york continues to struggle. something will sink an additional $5 billion in
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american companies which hold the firm to approving the new capital allocation, which would double its commitment to the region to $10 billion. southbank will also expand investment from a startup brand to state and public companies. morgan stanley says the personal information of some of its customers were stolen after one of its contractors was hacked. the banks has the data breach exposed names, dates of birth, and social security numbers, not passwords. it didn't disclose how many were affected. that's the bloomberg business flash. anna? anna: thank you laura wright in london. back to the markets, treasuries halt an eight-day rally. the ten-day is on one of its biggest weekly slides since june, 2020. we'll get that next. this is bloomberg. ♪
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♪ anna: welcome back to the european market open. 52 minutes into the trading session, up in the cac 40 as we rebound from yesterday's lawson -- losses. ven ram is with us. losses yesterday triggered by
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rapid moves in treasury markets. how do make sense of how low leave gotten, whether we've gone back down there on treasury yields? ven: morning, anna. i think the treasury, to me, is looking long and overdone. all that we know is going on about the u.s. economy's growth outlook and all that. rates have crumbled because of two principal reasons. one is real rates. real rates have declined because of qe, which we discussed before. frames compressed because there is less uncertainty around the press actions than at least earlier before the june 15 stock watch. however, i expect yields overshooting to the downside. i think they will find a better equilibrium. anna: ok, so that's what we'll
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look for. we've also had news on the ecb confirming what we reported here just yesterday about the 2% inflation target. we've seen the governing council member and tried to understand where this policy from the ecb is the same and where it is different from the fed, olli rehn saying the reaction wouldn't be that far apart, but also saying the inflation goal formulation at the ecb and the fed are not identical. what's your sense of how different these strategies are now? ven: i think president lagarde kind of alluded to it yesterday by saying we will act forcefully to ancillary inflation expectations. the way they mean it to differ from the fed posits -- policy is from qe. in the euro area, it's got not only the asset purchase program, but the pandemic purchase
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program, as well. and we are going to be a market leader from the fed because we've got other measures going on there are longer entrenched than the fed bond buying, which is expected to be tapered early next year. but a key question to make, it's great to have him go to 2%, but it's worth keeping in mind that euro inflation has averaged 1.5% the past decade and lost about 2% in 2018, lb it for a very short period. now, how they are going to get to this goal is a key question and i don't think there's clarity on that yesterday. anna: thank you so much. thanks for joining us. surveillance early edition is up next. it'll continue to take you through this market action.
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we continue our live coverage from venice, live on the ground in italy at the g20 meeting take place. if you have to go somewhere, i can't think of many places nicer to go than venice. pressure to get that global tax will continue our coverage on the ground, and come sunday, it will be that all important football match. if you are watching, i hope it goes your way. i hope you have a very good weekend. i hope you have a nice weekend, whatever you're doing and i'm off to bloomberg radio. this is bloomberg. ♪
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♪ >> the new formulations removes any possible ambiguity and
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resolutely conveys that 2% is not a ceiling. >> that was great for 131 countries around the world through the oecd g20 inclusive process. it's a very fair deal that will improve the system. >> young bankers who decided they are working too hard, these are hard jobs. they should choose another living. you've got to work really

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