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

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anna: good morning welcome to "bloomberg markets: european open." i'm anna edwards. mark cudmore our managing editor joins us from singapore. cash trading is less than an hour away. big bank earnings keep up, jp morgan goldman sachs report today. the ecb warns excessive dividends for european lenders may be off the table. we will hear more about bank
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evidence and the bank of england. the latest financial stability report drops shortly. plus, u.k. scientists warn the country could see as many as 200 deaths a day at the next virus peak. in france, macron says vaccinations will be compulsory. welcome to the european market open. mark is with us from singapore. what are the markets saying to you? mark: in a macro sense it was a quiet day. we have no clear themes. yields were quiet, fx quiet. asian stocks generally positive. hang seng and tech stocks were leading the way. as a story of approval, tencent boosted its move. and a rebound after pain in chinese stocks recently. that was one of the main micro stories. it is anticipation for what
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comes ahead. we have u.s. bank earnings and the important u.s. report today. anna: we will focus on the cpi report. we are getting lines on the financial stability report, and lines coming through -- we will get through those and have more analysis through the show. the first line is the cyclical buffer. the ccyb as it is known. an increase will not happen until q4 2022. this is capital banks have to put aside to lend out money with regards to their books. looking at what they previously said in december, any subsequent increase is not expected until 2022, q4. that does not look to have changed. perhaps we are seeing a reiteration of a statement that
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banks should support the u.k. economy, so they need to use the buffers to do that. the bank of england says it will remain vigilant to consulting on u.k. leverage ratio framework, and u.k. corporate debt weaknesses have risen modestly. the bank of england previously said it was consulting on trying to get more debt and long-term equity like financing to corporate's in the u.k. further lines dropping through here. housing debt service ratios remain low. that is referencing the amount of housing debt we have, and the cost of that debt which is low because interest rates are low. we have seen a boom in housing. those lines coming through. we will kiev anymore follow, and get thoughts through -- we will see if anymore follow, and get
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thoughts through the morning. andrew bailey will speak about this report in around one hour and a half. we will bring you his thoughts live on this program. under one hour from the start of cash trading in europe. what are the futures telling us where we will go. yesterday we did see gains in europe, not in london but elsewhere in europe. today expecting flat to negative. the u.s. session yesterday moving to the upside, a record close on the nasdaq. tech stocks were doing well yesterday. futures on the nasdaq flat to negative. that is the focus on the futures picture. the asian session looks broadly positive. what else is it saying? mark: i'm afraid you have stolen my lines. i do not know what else to say. it is broadly positive but not
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excitingly so. equity markets are higher, and the kospi is leading. the hang seng tech sector, not a benchmark index, did very well. asian currencies strengthened as well. crypto is a little softer, particularly ethereum, at the lowest level in july. not much of a take away apart from broadly positive but not exciting. anna: let me go back to what we were talking about of the top of the program. we have heard these lines from the bank of england not raising any warning signs about housing, but the thing that caught my eye, reiterating the guidance for the buffer will not change. that is quite interesting, because if you think about the amount of support economies need, and a lending you need banks to do for the economy, if you are not increasing that
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cyclical buffer, you allow banks to lend down. that is necessary for these economies as we continue to chart a recovery from the pandemic. to a large part, we are still in that pandemic. mark: you phrase that like the rrr cut from china last week. why is this perceived as a slight negative? i think it is a positive, a reassuring sign that they will not change the policy margin, they will continue to do all they can to support banks, support lending, support the economy. i think it is a reiteration that policy support will not be retracted early. it is good news and a support for banks, and they are in focus today across not just u.k. but europe and the u.s. as well. anna: we are getting a red headline from the same report in
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the bank of england, removing restrictions on bank dividend payouts. the europe story has been the ecb was edging toward removing those limits for a while, but the latest news lines are from the spanish side. they do not want to see banks paying record dividends. they want average dividends at this stage in the recovery from the pandemic. the bank of england is taking more of a hands-off approach, removing restrictions on bank dividend payouts. they are also talking about measures to calibrate the mortgage market, still reviewing those. there were complex measures the bank of england has placed on the mortgage market, and they will continue to review those. that is the u.k. story. let's about what else is on our minds this morning. i know we have been looking at commodity prices of interest. lumber prices dropping compared
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to what we have previously seen. i suppose in the context, what does that mean for those who do not follow lumber prices closely? it has implications for the inflation narrative. if your transfixed by the move to the upside, you have to keep an eye on this move to the downside. mark: it is one of the first times i remember a lumber story was one of the most read stories on bloomberg. this idea that lumber had given up its year to date gains, when a couple of months ago we were talking about extraordinary gains in lumber, and one of the best signs of the inflation wave that would be terrible for the world economy. suddenly now, lumber has given up their gains. that means the inflation threat has gone away? no, it does not. the threat from lumber prices has gone away, but that was a small component of the inflation threat.
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it was a great anecdotal story and an extreme move. that will likely play on other commodities as supply reacts to prices, more supply comes on and prices come back down. it is a self-correcting mechanism in many commodity markets. lumber can be quick to react. lumber prices are still up 45% from where they were a year ago. 45% is quite crazy inflation still. while we have given back the extraordinary gains, there is an inflationary wave coming. do not underestimate the size of this inflation wave. anna: the inflation wave is still present in lumber prices. talking so much about commodity prices -- that's pause that conversation for a moment. -- let's pause that conversation for a moment. coming up, ramping up
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vaccination rates. the delta variants threatens the recovery. all the latest virus news you need to know. we will bring you live coverage of the bank of england stability report. andrew bailey will speak about these lines around the housing market, the banks and their ability to pay out evidence. up next, big dividends from european banks may be off the table after an ecb official said the central bank could take steps to stop excessive payouts. we get the take on the banking sector from sebastian raedler, head of european equity strategy, merrill lynch. if you have any questions for our guest, get in touch on tv . this is bloomberg. ♪
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anna: welcome back to the european market open. just over 40 five minutes until the start of the european trading session, and european equity markets point two the downside, or flat to negative. the london market failed to benefit from the gains in europe yesterday. president biden will warn u.s. companies of the risks of operating in hong kong. the biden administration will warn u.s. companies of the increasing risks, the risks cited in the story -- the chinese government ability to get access to data companies store in hong kong, and the new law, the new security law also being cited. we will bring you anything we hear from the biden administration. the bank of england removed
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researches on bank dividend payouts, and in europe the european central bank may move to ensure lenders avoid excessive dividends. the ecb cap on payouts set at the outset of the pandemic will likely lift later this year, but the bank once lenders to remain cautious, according to a member of the advisory board. let's talk about the banking sector with sebastian raedler, head of european equity strategy, merrill lynch. what do you make of the banking sector at this point? the u.k. and european banking sector, we see shares in hsbc in hong kong moving higher because we have the bank of england to say there is no limit. the banks are free to pay dividends. we will see if we get a nuanced message from the governor of the bank of england later. meanwhile, we have a slightly different story from the european banking sector where the ecb is suggesting we do not want record dividends, we want something average. what is your assessment of the
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ability of banks to pay out at this point? sebastian: i am interested if they will track this investment. the dividend story is interesting, but the key macro drivers are far more important. specifically bond yields. we see a spectacular pullback in bond yields over the last three months, and the question for investors is more important than the dividend story. can growth be strong despite the challenges from the spreading delta variant, and will bonds rise again from the recovery? our answer to these questions is most likely yes. they do not reflect the strong macro fundamental. we see growth momentum strong, bonds rising, and a sweet combination from banks. mark: if you think the dividend story is not as important as the macro factors, does that mean
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u.s. bank earnings could have a bigger impact on how european and u.k. banks trade in the coming days? sebastian: i think they will be on the day -- if you read the headlines, it can influence price action on the 10 minute patch, but if you think of where the banks will be in three months, will they be higher or lower, the historical correlation strongly suggests that is a function of what the interest rate environment and the growth environment, and a lot of other things, the ability to pay dividends, generate earnings is a function of that. these are the first drivers and the things we should focus on most. anna: where have we got to on the shape of the treasury curve, the shape of government debt curve, and how able tanks are to make profits? -- how able banks are to make profits?
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some people say we should be in cyclicals, others say that is overdone and we should be in growth stocks. where do you see the curve going and banks ability to make profits? sebastian: the curve has clearly flattened. the long end of the curve has come down, but that is resected in the bank share prices. -- that is reflected in the bank share prices. the key question can longer-term bond yields rise? if you have a situation where the price holds up and inflation expectations are around 30 basis points too low, and you have a fed that will have hardly any tightening despite the u.s. economy is on the path to overheating, that requires more of a response from central banks. that means a higher bond yield. if you have the next three
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months higher inflation expectations, that means a steeper curve. that is very attractive for the performance of the bank sector. mark: i completely agree. it has been frustrating me in the last couple of weeks. you have a very optimistic take for the second half, and it is generally correct in equity markets. what is the one thing that worries you most? sebastian: effectively there are two worries related to the same phenomenon. we are late in the cycle. you have hands down the sharpest acceleration in the global macro cycle. everything related to risk has been flying. record equity rally. that is according to the playbook, growth accelerates when these things happen. can you accelerate from here? it is more difficult now because
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you are elevated. risks icr the delta variant and the spread of the delta variant -- risks i see str the delta variant and the spread of the delta variant. clearly there are risks. the risk is a matter of old age, the cycle organically starting to slow because you have a high run rate already. these potential catalysts of a slowdown are things i am worried about most. anna: thank you very much, sebastian raedler, head of european equity strategy, merrill lynch. he stays with us, and we will get further sector thoughts from him, and his thoughts on commodity prices and inflation. coming up, the race to ramp up vaccinating populations. the delta variant complicates
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the recovery. more on that next. this is bloomberg. ♪
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>> for our unity and protection, we must aim to vaccinate all french people, because it is the only way to return to normal life. from early august, it will not only apply in cafes, restaurants and shopping centers, hospitals, retirement homes and medical establishments, but lanes, trains and coaches and long journeys. only the vaccinated and people who test negative will be able to access these places. anna: that was french president
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macron urging all people to get vaccinated as he asserts it will speed up the return to normal life. we get the same message in the u.k. and many other countries, pushing the population to increase vaccination rates. the most contagious delta variant spreads around the world. u.k. scientists estimate anglin faces up to 200 deaths a day after restrictions and. -- u.k. scientists estimate england faces up to 200 deaths a day after restrictions end. you think it is not a good time to get further exposure to defensive bond proxies. why is that? why around pharma when we consider booster shots for
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various different vaccines? why is it not a good time to get involved in pharma? sebastian: is a direct consequence of the bond yield, and it is so important to have an awareness of what is driving stocks. you could have thought in july of last year the farmer sector would save the world and provide -- the pharma sector would save the world. it underperformed almost 30%, the sharpest underperformance in almost 20 years. the reason for this is a tremendous acceleration in growth in bond yield. these sectors are sensitive to the swings in these macro factors. for pharma, they need growth to slow. bond yields are very low given the strong macro backdrop. there is one leg of pro
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acceleration. growth is stronger in bond yields are higher, that is not an attractive position for pharma. mark: is it more about the nominal level of bond yields or the curve? what happens in a situation where we see the curve flattening because the fed is hawkish and as the front and rises, they can bring forth rate hikes, but the 10 year does not rise as much. what is the combination of nominal yields to yield curve? sebastian: that is effectively what we do, to understand which factors matter most. we test these hypotheses to see which factor we should focus on most. for pharma, the answer is crystal clear, it is the long end of the nominal curve. as a simple rule of thumb, you only want to biofarma if you think -- you only want to buy
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pharma, there will be a stable decline in bond yields, and that condition is not yet met. anna: how does that play into your broader view of inflation? we have high expectations where it goes. we have been preoccupied by lumber prices. what is your latest thinking? sebastian: i heard the discussion on lumber prices. i think reflation will be one or the next 24 months. the most important theme of the past 12 months is the terrific acceleration and global growth momentum. the most important theme in the next three months is the global macro cycle will peak and decelerate for the first time. the u.s. economy will overheat. anna: peaking and overheating is
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the conversation we need to have. sebastian raedler, head of european equity strategy, merrill lynch, thank you for your time. coming up, britain's banks will be free of pandemic restrictions. more details, next. this is bloomberg. ♪
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anna: welcome back to the european market open. a half-hour until the start of tuesday's trading session. futures in europe are flat to negative. we have to wait until later in the day to get data that will really matter, that is u.s. cpi. the charts look incredible, but that does not mean they will be long-lasting with the high levels of inflation they will show us. talk us through what to watch for. mark: sebastian teed me up for this nicely, saying there is an
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overheating u.s. economy and we will have inflation to come. u.s. cpi full year is forecast at 3.7%. the last time, once in the last 30 years have we had inflation above that, that was 2008. that was a bad year for markets, not the high inflation that caused the bad year, but it did not help the oil prices surged in the summer. 3.7 percent full-year inflation at the moment, but look at this chart, core cpi. everyone says food prices is temporary, and oil will increase supply. core cpi excludes energy and food prices. it is the more underlying driver of inflation that compels people to ask her wage hikes. we are set to have core inflation print which will be
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the highest core inflation print year on year since 1991. just like the full-year forecast, this is once in many decades high inflation print. it does not answer the question if it is transitory, but it is a bigger scare than people were thinking of months ago. anna: you think that puts rusher on yields. hsbc has a different view, treasury yields are coming down, and 1% by the end of the year. they will continue to keep inflation low like the increase of technology. mark: i think stephen major is a genius at the treasury market.
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he has been on the bond bull fight for years. many people have tried to pick the bottom of yields, and he has said we will go lower, and he is proven right. it is his work the educated me a decade ago. i think his work is brilliant, but at some point the treasury market cannot rally forever. his argument about disinflation or a pressures is absolutely valid. maybe yields will go lower in a few years time. i would counter that the inflationary threat in the short-term, the next six to nine months, will be worse than people think. i think the scare in the coming six to nine months will be worse than many people still think. anna: a big focus on how high the push and inflation will go, and how high we will get, and whether that has an impact on central banks and consumers to respond.
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let's get a bloomberg business flash, some of the top corporate stories we are covering. laura: blue origin secured a license for human space travel from the faa ahead of the scheduled launch on july 20. the launch will happen nine days after richard branson's virgin galactic successfully executed space tourism. more problems for the boeing dreamliner. the company has uncovered an additional manufacturing problem that has to do with the forward pressure bulkhead. it is not considered a threat to flightsafety. regulators are looking at tiny imperfections on the lining of the carbon fiber airframe. disney is investing heavily in sports rights, and viewers will pick up that have. they are raising the price of their espn plus streaming
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service from six dollars a month to seven dollars a month. it is the smallest of disney's streaming services with 13 million subscribers. that is the bloomberg business flash. anna: let's focus on the central banking story, and concerns around financial stability. the bank of england is removing restrictions on bank dividend payouts. it says these it shorten every measures are no longer necessary. joining us with the latest is dani burger. what are the details on the banks lifting dividend restrictions? it is having an impact in hong kong on the hsbc listing already. dani: obviously this is taken as a positive by shareholders because they want that payout act. there were concerns going into the financial stability report given the noise out of the ecb. they say we want banks to be cautious, and we have the tools
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to curb excessive dividends. the boe removing the guard rails is clear in this report of the u.k. financial system is resilient, that they have ample liquidity, ample support to give to households and businesses as the economy recovers. they think banks can continue to help, therefore they can continue their dividends. mark: the boe thinks the economy needs support from financial systems. is that correct? dani: exactly. compared to the december report, they see an improved economy. there are less risks, but covid is not over, especially as we have new variants spreading and case cans beginning to rise, and fiscal support is about to leave as well. banks need to be prepared to help households and the economy. for that reason they are not
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increasing the capital buffer, they want to encourage loans and help to the economy. they are also concerned about some of the risk-taking in markets, and elevated asset prices. they point to the proportion of corporate bonds issued at high yields. it is at the highest level in the past decade. they talk about how the spreads are tightening and that there is evidence of a loosening underwriting standard, especially in the loan market. they say this could turn into future stress. highly leveraged firms amplify downturns in the real economy. this is one of the flags they are raising when it comes to highly leveraged companies. it is not all-out concern yet, but something you should keep an eye on. anna: concerns that the bank of england has expressed before when companies sure up balance sheets. -- shore up balance sheets. we talk about the boom supported
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by government policy and tax breaks, but sounding unconcerned because interest rates are low. dani: they point to that a lot of this is structural and has to do with support from government measures. they say, we have seen on aggregate a little more of this loans for housing compared to income, but it is still hanging around pre-pandemic levels when it comes to debt service ratios. that has to do with low interest rates. it is something they are not concerned about, they continue to assess mortgage rate policy to limit any rapid buildup of debt. the measures they see in place or something that they will continue to look at, but they are not concerned about it. anna: thank you very much for bringing us the latest on the bank of england's financial stability concerns.
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we will bring you further coverage, andrew bailey will be speaking at 8:30 u.k. time. as governments raise to vaccinate populations, the delta variant complicates reopening efforts and threatens the recovery. we will get you the rundown on the latest virus news. this is bloomberg. ♪
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>> i think there is a good chance that oil prices will be robust and high over the coming year. i think there is a good possibility they will be volatile. we are not planning on them being high. we are building a company that is resilient, but i can assure you if they are high, we have a
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portfolio that will absolutely benefit from that. anna: that was bernard looney speaking on the company's strategy. you can catch more of that conversation at 1:00 p.m. u.k. time. let's turn our attention to coronavirus as countries raced to vaccinate their populations as the delta variant spreads around the world. french president macron has ordered all health-care workers to be vaccinated by september 15. israel will offer a third dose of the vaccine with patients with weakened immune systems. a third dose for all people is not necessary. >> at this point i have not seen evidence yet that would make me feel that it is appropriate to vaccinate the entire population with a third dose of the vaccine.
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i have not seen clear evidence on waning immunity. anna: i wonder which country you're watching, which is proving to be most informative about how we get out of the pandemic restrictions in the safest way possible. which experiment are you most focused on? sam: the united kingdom is the one to keep an eye on because we are going back to normal with the opening on the 19th, and a lot of discretion given to people to make their decision whether they want to wear a mask or not. that will be the interesting experiment to watch. spain's cases are rising rapidly. people have been able to dine
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indoors at capacity for quite a while. in the netherlands, i'm sure you have heard the government apologizing for too early of an opening. it was interesting and all of them to see how the case counts evolve. that is the key element i am looking at. mark: on that front, many people are starting to worry the u.k. is opening too early, but 200 fatalities a day is a material jump. at the moment we are seeing 25 per week, and that is a level not seen since early march. you think it is likely we could see 200 fatalities a day, and are you not alarmed the government projecting this is the same government saying let's happily open up and head toward that path? sam: at the end of the day we
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will never be rid of this. in countries able to create a zero covid environment such as new zealand, a few cases leads to lockdowns and border closures. we have not done that, so there has to be a number. you start saying, at this number -- it is an awful thing to say -- we are ok with the evolution of this disease. we have never talked on this program about being ok with 5000-10,000 flu deaths per year, why don't we worry about that? we have a more transmissible disease here that can pass easier through people. there is a number where you have to say this is the number we have to accept. individually it is an awful thing to say, but collectively for society, that is where we have to get to. will we get to 200? too many variables, and we have
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to see if the models are predictable with the we have. anna: lines out of the u.k. yesterday about how to open up, and what might be required. in france, a lot of talk about using covid passes to get into restaurants and cafes, a part of everyday french life. are you expecting to see these measures used in other places to drive up the numbers of people who have been hesitant to get a vaccine? sam: some countries had the green pass and have gotten rid of it, even though cases arising. they are not sure about a green pass. the issue in any country -- the u.k. will be about 90% fully vaccinated adults by september. in france, you worry that you
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have a population that might be reticent to go past 70% fully vaccinated, with the delta variant running around, you need incentives. i think this is what these are. to make sure people really think about getting vaccines. yesterday we spoke about this with friends, one who is not able to upload his qr code. the french hate being told what to do, so it will be interesting to watch. it is to incentivize people to get vaccinated. anna: thank you very much, sam fazeli, our senior intelligence expert. let's look at other stories we are watching out for. at 1:00 we get the bank earnings season started. j.p. morgan chase kicks off the season, then i 1:30 we will have
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june u.s. consumer price index. will it be the highest since 1991? later today, bloomberg live presents the business summit, a virtual event that brings together business leaders and investors globally to drive innovation and scale best practices in business and finance. the atlantic council host a conversation with the who on the future of trade in a post-covid-19 world. let's get a bloomberg first word news update. laura: white house officials are discussing proposals for a digital trade agreement covering indo pacific economies as the administration seeks ways to check china's influence in the region. that is according to a bloomberg source. details of the agreement are being drafted, but could include countries such as canada, japan, australia, new zealand, and singapore.
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the european central bank steps to assure lenders avoid paying excessive dividends later this year, when it will likely lift a cut on payouts. a member of the supervisory board says the central bank will call on lenders to remain cautious. britain's prince william and prime minister boris johnson led a chorus of voices aimed at online racism aimed at soccer players. that is after sunday's european championship final. it follows weeks of controversy over whether the england players should have been supported taking a knee before games on discrimination and racism. johnson addressed it in a news conference monday. >> to those who have been directing racist abuse at some of the players, i say, shame on you.
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laura: global news, 24 hours a day, on air and at bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. anna: thank you very much. coming up, we will look at your stocks to watch. the ecb signals it may rain in excessive dividends. -- rein in excessive dividends. this is bloomberg. ♪
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anna: welcome back to the european market open. eight minutes until the start of cash equity trading. futures flat to negative. let's get our stocks to watch from our equities team. a real focus on european banks. you could see u.k. banks knowing in one direction and other european banks going in another. >> that is what we are hearing
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this morning. the boe is releasing u.k. banks from dividend restrictions. what we heard from the ecb may well take away the bullish start people have had on european banks over the last year. they were waiting for these payouts to come. if there is any caution on those, it may take away from the case there. that will be one to watch when we open up. mark: you are also watching nokia. did you ever have a nokia phone? i still miss mine. >> i did have a nokia phone. pound for pound, one of the best phones you have ever owned. they do not do phones anymore, but the equipment business is doing well. this might be interesting to watch, this pattern over the earnings season. they are keeping costs down but
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demand is going up, so there profit line is looking up. this is something you can see from industrial and infrastructure stocks over the earnings season. anna: i just looked up the nokia banana phone. you can buy them still online, they are really expensive. let me ask you about swatch. what are we hearing? sam: this one is more of a case of restrictions easing, and tourism opening up. swatch earnings ahead of expectations primarily because people are traveling again, buying watches in airports, and retail stores are opening again. a much better picture for retail. anna: thank you very much. as we move toward the european
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market open, things look lackluster. we are waiting for the inflation print out of the u.s. later. mark: yes, from a macro point of view, it is about looking ahead. we have quite a few stories of banks with earnings coming in later, but the inflation print is the important one. and it is one that will not decide the issue. it will be skewed which ever way you want, a lot to interpret and it. you have a few hours to go down the internet wormhole to check out your first nokia and play with your friends. anna: other things you could do, that is just one of them. mark, thank you for spending the past hour with us. 4.5 minutes to go into the start of the european trading session. futures pointing to the downside. ftse futures flat. yesterday we saw other markets in europe doing better.
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we will keep an eye on the banks this morning. this is bloomberg. ♪
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anna: welcome back to the european market opened with a minute to go until the start of trading. big bank earnings kickoff. j.p. morgan and goldman sachs report today. european lenders may be off the table. britain's biggest bank will be free from the pandemic dividend restrictions. we will hear from the governor. u.k. scientists warren the country -- the next virus peak. in france, the president says vaccinations will be compulsory
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for health-care workers. let's take a look at your future is. 15 seconds to go until the start of tuesday's trading day. things improving a bit. we have a flat to negative picture for u.s. futures. down around 0.1%. european equity markets just getting into their stride, we will have a look at where we managed to open out. the ftse 100 is up by 0.1%. the ibex in spain also up 0.1%. we will be focused from the macro perspective on inflation data due out from the united states. expected to be the highest since 1991. will we see an overheating u.s. economy and the summer? -- in the summer?
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we will build our way towards that inflation data here in europe. the other focus is around the banking section and the ability of banks globally to pay out. we have had plenty of news lines around all of that in the last 24 hours. the bank of england says these extraordinary measures brought in during the pandemic are no longer necessary. the rollout of vaccinations and the results bolstered the central bank's view that lenders could return to a standard approach of spending. joining us now is simon french from penn be our -- from panmure gordon. let me get into the banking conversation with you. it is interesting to see what is a bit of a divide. u.k. or the bank of england suggesting that banks can return to deciding what to pay back.
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the ecb says they might still want banks to pay out an average dividend. nothing record-setting. what are you expecting? simon: later this morning, he can be forgiven for feeling a little bit smug. the last 16 months, financial stability and the tightening of financial conditions is at the dog that has not barred in the crisis. we saw an aggressive's like. -- we saw an aggressive spike. it contrasted sharply with the 2009 experience and again in 2012. in terms of how it translates to dividends, i don't think it is a surprise against that back drop that banks will be allowed in the u.k. to release more capital.
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a more cautious approach in europe which is consistent with the pace of recovery. the euro expected to grow out 4%. it risks growing on the downside because of the delta variance. we heard last night about a divergent recovery and a divergent path to bank payouts. anna: that makes sense. some of the banks are moving higher as a result of the lines coming through and the improvements. the other things coming through in terms of the u.k. story right now, is there is not too much concern around what has been the tax cut fueled housing boom. not much concern about that at the bank of england.
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we talked about the increased utility value that people in many parts of the world attach to housing especially during a pandemic. how concerned are you about the boom in the housing sector that we have seen up until very recently? simon: thank you first sighting what i think is the key determinant. yes, there are fiscal changes, the fire started burning with the utility shift which i think is one of the reasons why the bank of england has felt relatively relaxed. the other major reason that why weaker housing prices -- it takes you back to 2000 eight levels. when you start to adjust for household incomes, there is still 40,000 pounds --.
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reasons for i wouldn't say relaxation but overall, there is a bigger agenda for financial stability. it could start to cause societal problems particularly in parts of the u.k.. that are not used to runaway house prices. this is generating a sense of unease. anna: let me ask you about something else the bank of england flagged which is u.k. corporate debt levels. they remain vigilant to debt vulnerabilities. this is coming from the financial stability report. this goes back to something i remember talking to you about a year ago and a lot of u.k. companies loading up on debt to
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shore up balance sheets to see them through tough times to the pandemic. that seemed like the right thing to do. ab that leaves you with a debt problem afterwards depending on the line of business you are in. does that concern you? simon: it does concern me. you are right to toss our memory back to when corporate u.k. was building up. that reversed a lot of the deleveraging that has taken place over the last decade. it does read quite relaxed regarding the overhang. the treasury has pointed to the fact that the liabilities are going to be managed in terms of the overhang on balance sheets by this pay as you grow initiative.
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this is the idea that we spread out the servicing costs depending on the recovery of the underlying corporate's which is one of the forbearance measures, the liability smoothing measures. the fiscal authority can have the stability authority. anna: simon, thank you very much. a lot more to discuss with simon and a lot more to come on the financial stability report. the bank of england official will be talking to us and we will bring his statement and some of that press conference as well. coming up, governance -- governments -- we will take a look at what that means for global reopening efforts. more on that next. this is bloomberg. ♪
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anna: welcome back to the european market open. european equity markets reflecting the opposite of yesterday where we saw the ftse rally. today, we see everything but the ftse in negative territory. we are just getting some news lines from the pboc. a spokesperson announcing the financial statistics of the first half of 2021. we see live pictures from beijing. the spokesperson saying macro ratio levels have been brought back down. the rrr cut she says will help lower aggregate financing costs. they see this as something beneficial to the banking sector reducing the amounts of liquidity they need to keep on hand and the buffers.
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financial risks in key areas prevented and resolved in the first half. interesting to see these lines from the pboc as we track risks tracked by global central banks. let's take a look at what is on the move. the banking sector at the heart of things but let me start with what is going on at nokia. the company increasing its guidance after a strong second quarter. up by just over 5%. news on the banking sector -- the u.k. banks have been pushed higher by being let off a leash i the bank of england. a nuance added to that by the governor, andrew bailey later today and about 20 minutes when we hear from him around the ability of banks to pay out dividends. what will that look like in the immediate aftermath of dealing with the pandemic? hsbc up by 0 -- up by 1.5%.
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interesting contrast. let's get to swatch. it is returning to profits. that is the story. the numbers coming through today described as solid by analysts from bernstein. citing stores reopening and travel resuming. the share price up by 1.6 percent. let's get a bloomberg business flash. top corporate stories. laura: problems with the boeing dreamliner continuing. the company has uncovered an additional manufacturing problem with the plane that has to do with the forward pressure bulkhead. it is not considered a threat to flightsafety but boeing has halted delivery of the plane. regulators are looking at tiny imperfections that have cropped up on the lining of the carbon fiber airframe. disney has been investing heavily with -- in new packages
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of sports. viewers will pick up the tab. the company is raising the price of the espn sports streaming service. yes pm plus is the smallest of disney's streaming services. it has 3.8 million subscribers. that is the bloomberg business flash. anna: thank you, laura. countries are racing to vaccinate as the more contagious delta variant spreads around the world. the french president has ordered all health-care workers to get vaccinated by september 15. in the u.k., scientists are estimating england faces up to 200 deaths per day after restrictions and. orest johnson has urged people to remain vigilant against the virus. >> this pandemic is not over. this disease continues to carry risks for you and your family. we cannot revert instantly from
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monday the 19th of july two life as it was before covid. we will stick to our plan to lift legal restrictions and social distancing. anna: let's talk to simon french again and get an economist's perspective on a human story and day health tragedy. let's talk about the global growth strategy. is your focus of concern where we are seeing low vaccination rates? simon: absolutely. i think what you look at in terms of the global recovery is a set of strong metrics in the aggregate. global trade has recovered to more than 6% higher than its pre-pandemic level.
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global pmi's are strong. global growth at the aggregate is strong. you are right to say that there are pockets of low vaccination prevalence where -- which will actually limit and spill over to the amount of economic activity. both on a commerce level as well as a tourism level. it is a spillover effect that you worry about not just in terms of the bottom lines to commerce but also the health pandemic. one of the big uncertainties regarding all pathways from developed countries out of this is the degree to which a further variant may emerge in one of the countries where the virus is still prevalent. anna: we are also thinking about recovery and charting a course out of the pandemic in countries where we do have high
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vaccination rates. and how we do that. i'm interested to see the chinese example. many have been looking at the latest measures from the pboc cutting the rrr rate at the end of last week. saying this morning in a press conference that it will help. some people may have been surprised by this saying this measure as necessary. many would've put china in a box of countries that have done well with the pandemic. and to see the need to bring further support to the chinese economy a have surprised some people. are you surprised by what china is having to do to support its economy? simon: no but i understand the confusion over why this has happened. let's try to unpack this. you are right as always at the chinese economy recovered fastest among the major economies from the pandemic. you would think therefore that
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additional monetary stimulus at this point was unnecessary but they are trying now and i think this is a sensible move on some of the structural reforms particularly in the environmental space, the energy transition space, the speculative activity, commodities trading, trying to lean against a potential slowdown that may have through monetary stimulus. we were looking at previous rrr cuts and normally, that puts about 150-200 basis points of growth and currently that is growing about 8.2% in china. the chinese authorities i think would be happy with that at 9.5%-10%. anna: do you see this as a warning sign for how long we might live with the pandemic measures in other parts of the world?
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how long it might be necessary for monetary and fiscal support to be provided to western economies? does the china example teach us anything about that? simon: it is another piece in the jigsaw and the jigsaw is telling us that monetary authorities and fiscal authorities are likely to be fighting themselves and the way that they did in many geographies after the global financial crisis. there is an emerging consensus that stimulus can afford to be very supportive. the question about financial stability risk that may emerge from these loose conditions. we also talked about the inflationary -- i do think the reserve ratio cut in china tells us a broader picture of monetary authorities keeping their foot to the floor for a very long
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time prepared to see not just the whites of the eyes of inflation but going into the retina as well. anna: we will certainly watch that. we will see what the data says later on. thank you for joining us. simon will continue his conversation with us on bloomberg radio at 9:00 a.m. u.k. time. looking forward to speaking further with him. coming up on this program, u.s. bank stops are squeezed and the ecb urges caution on lenders. what does that mean for earnings season? we will see what the u.s. bank'' messaging will be. this is bloomberg. ♪ is bloomberg. ♪
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welcome back to the european market open. 22 minutes into our trading session which looks a little different from yesterday. the ftse is going its own way but in the other direction. up by 0.2%. yesterday, it underperformed. european equity markets under pressure. banks in the u.k. moving to the upside. individual earning stories cutting through. u.s. bank stocks are under pressure on speculation the second quarter results will not justify an ongoing bull run.
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jp morgan and other lenders are warning that the revenue boom is slowing. at the same time, the european is urging angst to stay cautious and could take steps to limit excessive dividends. whereas the bank of england has removed restrictions on bank payouts. let's think about all of this with bloomberg's asia finance reporter who has been casting her eye globally. good morning to you. wall street bank earnings kicking off in a few hours. what our expectations like? -- what are expectations like? >> this time last year we had bumper results in wall street. this year, it might be a little different. we are expecting a big drop in trade revenues as volatility has come off. markets have stabilized as the pandemic stabilized.
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that has hurt trading activity. we are talking about something like a 20% drop in combined revenue across the big five banks. the question is, can they make up for it elsewhere? anna: one of the ways they may want to try or be trying is it. looking at the ma go function to see the uptick in m&a activity and north america. 87% more than the previous year. last year might have been a bit of a low point in the first half. what can that do to make up for the shortfall in trading? >> dealmakers have stepped into the limelight this year. they are having a gangbusters gear. in the first half, we already had $2.5 trillion of deals. you have bankers talking about this old and moment. you have goldman sachs which has been traditionally number one in
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terms of dealmaking. they have raised ahead to a trillion dollars in deals faster than they have ever done before. but we are trying to see is what revenues have come out of that. when you do a big transaction remember you are relying on that company to be able to do a stock buyback or equity raising. they are trying to maximize that to try to make up for the trading revenue. anna: the latest lines on the ecb, a mixed picture for eurozone listed banks this morning. >> the euro zone banks are beginning warned not to hand out excessive dividends. remember they are still under pressure. they cannot hand anything out until september. they were banned from paying anything out between the biggest banks. they have about 26 billion
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dollars in excess cash. you have to wonder when they will start to see some of that. anna: thank you so much. good to get your updates on all of these things. our bloomberg asia finance reporter. what we have heard from the bank of england this morning on its stability report. it is holding a press conference after publication of the report. we will go live to that press conference shortly here on bloomberg tv. this is bloomberg. ♪v. this is bloomberg. ♪
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anna: welcome back to the european market open. a half an hour into the start of trading which overall is fairly flat. the ftse 100 up by about 0.3%.
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let's take a look at a sector breakdown. that will tell you what you need to know about the u.k. story. to the upside in terms of sectors. the mining sector is doing well. telecoms moving higher. we are divided across europe with those sectors moving higher and those moving lower. banks in the middle of the mix because we have a couple of divergent themes. on one hand, the ecb is talking about limiting the ability of banks to pay out. even when they remove caps later on. that is the ecb story. the u.k. banking story looks a little different. that is why we see the banking sector as a whole playing mid table. this is what we have for the banking sector this morning. in the u.k., banks moving to the upside. this comes as a response to the
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financial stability report that we got out where they have removed or are removing the restrictions on banks' abilities to pay out dividends to shareholders. hsbc and the hong kong trading session. let's get a bloomberg first word news update. laura: white house officials are discussing proposals for a digital trade agreement covering indo pacific economies as the administration seeks to check china's influence in the region according to a bloomberg source. details of the agreement are still being drafted but it could potentially include countries such as canada, japan, malaysia, australia, new zealand and singapore. the french president turned up the pressure to get vaccinated saying getting the covid stock will be mandatory for health care workers and health passes which show proof of negative tests or vaccination will be obligatory in places like
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restaurants. the ecb could take steps to ensure that brings avoid paying excessive dividends later this year and it will likely live day cap on payouts. a member of the supervisory board says the central bank will call on lenders to remain cautious. remarks dampen the possibility that there will be a surge in bank payouts. prince william and prime minister johnson led a chorus of voices condemning online racism aimed at some of england's lack soccer players. after sunday's defeat. the episode followed weeks of controversy over whether the england players should have been supported in taking the knee before games on issues of racism. johnson addressed it in a news conference on monday. >> to those that have been directing racist abuse at some of the players, i say, shame on you. the entire team played like
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heroes. laura: global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. anna. anna: laura wright in london. joshua, from the johns hopkins school has been discussing with us the risks around the covid-19 delta variant and the urgency to vaccinate or people. let's get an update. >> there are parts of america that are 40% vaccinated or 35% vaccinated and those are the parts that are not only seeing an increase in cases but also hospitalizations due to the delta variant. it is like, here we go again in those places. it is important to be vaccinated but more generally it reflects a big problem we are having. >> i get that but what we do the
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parts of the country that are 60%, 70% or more vaccinated? do we have to amend our lives because another part of america is down at 38%? >> as long as there are places at 38%, the places at 70% or 80% will be at risk. what about people that have conditions where the vaccine does not work so well for them? they are immunocompromised or children or older adults. >> i apologize for interrupting but this is a crucial point that i have not heard before. the vaccine does not work for certain individuals. how many people are we talking about? >> probably hundreds of thousands or more than a million who have such significant medical conditions that they are
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not going to react to the vaccine. it may be more as you consider people that are on me -- immunosuppressive drugs. they are not responding as well to the vaccine. or at all. they have to worry that they will come into contact with someone that is infectious. if you are in an area where there are not many cases, the risk is low. as long as a virus is spreading, the risk will be there. >> there is also confusion i think around the uncertainty of the threshold to returning to normal life. does it become a public health issue when we have individuals who might suffer but as a whole, the health care system is not going to be torpedoed by a flood of cases? >> i think it matters that they health care system will be stable. that does allawi think for a lot of things to return to normal.
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but it still makes it unfortunate for people that have to take extra precautions or protections because other people have not decided to be vaccinated. it is even worse for the people that have decided not to be vaccinated. >> how close are we to and under 12 vaccine? >> i think you have to wait for the studies to be done. the companies right now are looking for the right dose to make sure that they have a dose that is both able to create the protection but without side effects. until we know and see the data from it is hard to say. the studies are going on and i think we will have the early read-out in the next couple of months. anna: that was the vice dean of the johns hopkins bloomberg school of health giving his perspective and focusing on the u.k. -- i'm sorry, the u.s. vaccine rollout. i should say the johns hopkins
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bloomberg school of health which as the name suggests is supported by bloomberg. we will get back to the markets conversations next keeping an eye on lines coming through from the financial stability report from the bank of england. this is bloomberg. ♪♪
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anna: welcome back to the
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european market open. 40 units into our trading session. a mixed picture. the ftse 100 moving up 0.3%. the dax and cac fairly flat. i want to mention some of the lines coming through from the bank of england. a press conference taking place with the bank of england governors speaking out about the reports. we do have this press conference taking place. we don't have pictures but we can tell you some of the lines coming through. nothing new to add to what broke at 7:00 but governor bailey is saying u.k. economy is recovering but risks remain. we will keep an eye on those pages to see if anything new emerges. let's get a bloomberg business flash. laura: blue origin has secured a license for human space travel from the faa days before the
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scheduled launch on july 20. it will happen nine days after richard branson's virgin galactic successfully executed a key test for space tourism. more problems for the boeing dreamliner. bloomberg has learned the company has uncovered an additional manufacturing problem with the plane. it has to do with the forward pressure bulkhead and the nose. it is not considered a threat to flight safety boeing has halted deliveries of the playing. regulators are looking at tiny imperfections that have cropped up in the lining of the carbon fiber airframe. disney has been investing heavily in new packages of sports programs and viewers will pick up the tab. espn plus streaming service will be raised by 70% from six dollars a month up to seven dollars. espn plus is the smallest of disney streaming service. it has 13.8 million subscribers. perhaps anna edwards is one of
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them as a sports fan. anna: i am not sure how wide-ranging my sports appreciation is. laura wright. it's take a look at some of the things on our radar. it could be a busy one. in terms of u.s. data and the banking season. around 1:00 p.m., j.p. morgan chase kicks off the second quarter earnings season. we will have june u.s. consumer price index. these are all u.k. times even for things taking place in the u.s. later today, we will have the bloomberg live presenting a particular event. the sustainable business summit. it brings together leaders and investors globally to scale bast practices -- best practices. and a conversation with the wto
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governor general. -- director general. a lot to keep our eyes on. and we will keep our eye on the u.s. cpi data. it is forecast to be its highest since 1990 one. expectations were a big jump. that is not the whole story i suppose. >> definitely not. you have had [indiscernible] despite that, we have not seen it kick higher in the u.s. at the moment, it is like -1% in an economy that is forecast to grow like 7%, the fastest in decades. how do you explain real rates that are so anemic lee lowe which is the quandary for traders -- anemically low which
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is the quandary for traders. it will inform us about this debate as to how [indiscernible] anna: you are focused on real rates. 1.3 6%, the nominal rate, the u.s. 10 year yield. we have seen a lot of auctions and many having to be fit into a couple of days because we have jerome powell testifying later this week. the auctions seemed to go well. did we learn anything from the level of demand and the recent move in prices? >> the auctions have gone off relatively well. it is not great. the rates on the 10 year treasury. but compare them to the rates elsewhere in the world, german
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is -1.3%. against the backdrop for an investor, you have no choice but to support treasuries and that is what we see is going on. anna: let me ask you about the piece you wrote this morning. rising stock valuations like nokia was knows -- pinocchio's n ose. morgan stanley warned overnight about the valuations that they see on price metrics. they are very concerned about the price to sales. valuations in the tech sector looking very similar in their view to the dotcom period. >> i am not surprised. the forecast for nominal
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earnings is out for -- 4.4%. except during the dot-com bubble, that kind of earnings has never been so low. at the moment, the nominal earning is so low because treasury yields are low. you can kind of explain as to why stocks are so -- are valued. how long will it be sustainable? if the fed is not tapering, the discount rates must necessarily go higher and that will act like a pull of gravity on stocks. anna: and just like pinocchio's nose, u.s. stocks tend to grow.
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thank you for joining us. mliv is the function to use to focus on their work. big dividends from european banks may be off the table after an ecb official says the central banks could take steps to stop excessive payouts. there is a contrast between the ecb and the bank of england. we will pick up on that next. this is bloomberg. ♪
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>> those resilient hydrocarbons are the engine of the transition. rosneft is the appended me of resilient hydrocarbons both from a cost perspective and from an environmental perspective. it is a core part of our company and strategy. anna: that was the ceo speaking to bloomberg about the importance of hydrocarbons to its green energy transition. you can hear more of that conversation. it would be broadcasting at 1:00 p.m. u.k. time as part of bloomberg's sustainable business summit. 51 minutes into our trading day. look at some of the market moves.
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we have a fairly flat picture overall but the ftse 100 being lifted by basic resources. to the upside. and the banking sector. have a diversions between u.k. banks and banks and the eurozone because the ecb line on this is different. u.k. banking story. we will show you the response in u.k. listed banking share prices. moving to the upside by 1%. partly because the bank has said it will lift the restrictions on the banks abilities to pay out. the ecb will do something similar later this year but it is suggesting that banks should pay something more like an average dividend. more of an emphasis on restraint in the ecb case. further lines from the bank of england this morning as we watch a stability report. the bank of england's andrew bailey talking about those dividend restrictions saying they were the right policy for 2020.
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perhaps that is justification for removing them now. we are also getting lines from the deputy director governor for a financial stability. he is watching the housing market closely. he is keeping a close eye on the link between housing prices and debt. bank of england not ringing alarm bells around the housing market in the ok -- in the u.k. that is the central banking story and its impact on banks this morning. broadening the conversation, here is laura wright. laura: white house officials are discussing proposals for a digital trade agreement covering indo pacific economies as the administration seeks ways to check china's influence in the region according to a bloomberg source. details of the agreement are still being drafted but agreement could potentially include countries like canada, malaysia, australia, new zealand and singapore.
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the french president turned up the pressure to get vaccinated saying getting the koba chart will be mandatory for health-care workers and so-called health passes which prove a negative test or a vaccination will be obligatory in venues like restaurants. >> for our unity and protection, we must aim to vaccinate all french people because it is the only way to return to normal life. from early august the health passes will not only apply in cafés, restaurants, shopping centers, hospitals, retirement homes and medical establishments but also on planes, trains, and coaches for long journeys. only the vaccinated and those that test negative will be able to access these places. laura: global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg.
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anna. anna: thank you very much, laura wright. interesting to see the extensive use of the health passes in france to access those parts of daily life. and in that context, the aim of it is to drive up vaccinations in france. we are hearing from the -- she says to keep safe from variants and avoid a new wave of infections. the eu has enough doses to vaccinate 70% of adults. let's do it. a big push on trying to vaccinate more people across europe. the ecb looks to be taking a different approach to the bank of england when it comes to dividends. let's get more on this from rhea taddeo. give us the latest. >> this is part of an interview
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that we did with the deputy governor of the bank of spain. [indiscernible] she was also a bank executive before she moved to the central bank. she argues that the ecb will be paying attention to banks looking to pay excessive dividends. she says there are a number of measures that the central bank could take a look into if that was the case. these words are probably not going to go down well with banking ceos and executives in the european union who have felt for a while now that it is almost impossible to become attractive to shareholders given the fact that you have negative interest rates and you are being
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denied to pay as much as you would pay. anna: the euro listed banks underperforming those in the u.k. this morning and other european non-eurozone listed banks. that is it for the european market open. surveillance early edition is up next. and we will continue to monitor the press conference from the bank of england. this is bloomberg. ♪ is bloomberg. ♪
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>> this pandemic is not over. this disease continues to carry risks for you and your family. >> we must aim to vaccinate all french people. it's the only way to return to normal life. >> i have not seen the evidence yet that would make me feel it's appropriate to vaccinate the entire population with a third dose. francine:

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