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tv   Bloomberg Daybreak Europe  Bloomberg  July 27, 2021 1:00am-2:00am EDT

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manus: good morning from dubai. i manus cranny. it is daybreak europe. it is the story setting your agenda? beijing's crackdown. it stocks in the biggest two rise in over a decade. equities mixed. revenue at lvmh soared.
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the s&p 500 to another record. next on the docket, apple, alphabet and microsoft. welcome to the show. the agenda is being driven by china, but the potential is contained for the rest of the world at the moment seems contained. do the chinese really care about global investors losing money? probably not. kathy would is reducing -- kathy wood is reducing. the risk of capital flight is the risk. rishaad: this is it. you look at kathy wood, had 8% of the ark innovation etf, a
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mere one third of 1% of this $23 billion. that gives you an idea of what happened with kathy wood. you look at leverage and debt laden property companies, look at ever grand and the drama that continues with the company downgraded two notches today. a special dividend would be issued, but then the board decided no way. on top of that, they would put himself ahead of the bondholders, which is not something people do generally speaking. bondholders are the first to get paid back whatever they can. manus: bondholders come way above the quiche eating equity holders. to what extent is this heightening on behalf of the pboc without having to tighten? of course, realreal's are at a
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record -- real yields are at a record. many say that expectations of inflation racha higher as we go into the fed meeting. is it peak growth or stagflation, this demise of the real yield is signaling? maybe it is too early for stagflation. we see a 10% growth number this quarter. but the implosion in real yield is impressive to a slowdown. rishaad: let's not forget this is all down to base effects, and the trough we are in in pandemic terrain last year. we did see a muted start this morning in hong kong. then suddenly it all went pear shaped with the selloff continuing. a widening regulatory crackdown
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in beijing, investors rocked by the booming private education industry and buses spreading to other asset classes and industries who are in the crosshairs of further regulation. they may be perceived as the next target of beijing. standing by with the market reaction is juliette saly, but first let's go to beijing. how far-reaching is this crackdown beyond education here? john: since july 1, since the chinese communist party celebrated its 100th anniversary we have had a drumbeat of regulatory tightening. everything from the data security probe to yesterday beijing telling food delivery companies that they had to make sure they paid the minimum wage to the delivery people. and the education crackdown which is most notable because of the magnitude of the move.
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it is officially the government telling a $100 billion industry that they have to become a nonprofit. that industry touches a regular chinese citizen more directly than any of the others, and it speaks to how sensitive the government is to the idea that inequality is spreading in chinese society that could cause unrest. it also brings to fore the idea of risk that the chinese government is willing to go, and that is spooking markets and causing people to ask, who is next? manus: it is a message about the landscape of regulation that can change on a dime. john liu in beijing rounding up the context. let's get the market impact. juliette saly has been doing that through the morning. i do not know the best word to describe this, a little bit of stability. we have had a tumultuous washout
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on the longs. how is it playing domestically? juliette: we have been seeing chinese stocks fall for a third session. the question is, what is the next sector to be hit hard? i want to go into more depth in the sense we saw this flow through into the u.s. session with the nasdaq plummeting friday and monday on the back of this and having the biggest two day drop since 2008. this tracks 98 of the chinese firms in the u.s. today it looks like it was going to be a more stable session. we had seen weakness coming through, although china's market not anywhere near the selling that we saw yesterday. a of concern about the hang seng which has fallen 13% the last three days, and this flow
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through to the lowest level ever today. analysts are still bullish on this stock. citi sees slower profit growth, but jeffries maintaining their buy. let's look at the hang seng, when it hit the red line in february, it had been at the peak, up 59% since that index was launched. now it is in bear market territory. now you see signs that it could be oversold, and that comes from the messaging from authorities. chinese fall is temporary in the fundamentals remain unchanged. interesting to see if you see more dip buying in the coming days. manus: thank, juliette saly.
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let's get to saed abukarsh, chief portfolio manager / co-founder, ark capital management. this is a continuation of regulatory constrictions, another punch. there was a sense of panic in the equity markets, but in the midst of that, what does it say to you? saed: i think we are making a storm in a teapot. china has been on and off for the past two years. i think what we are seeing is another step of the authorities stipulating their attitude toward bigger firms. i think what we are seeing is a moderate check from the chinese authorities. i do not think it will go away. it will be in and out, something the market will pay attention to
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long-term when basically china is still trying to find his policy with the u.s. administration. that overshadows everything else medium-term. rishaad: they just essentially eviscerated an entire sector. this makes it more or less, as one trader was saying, on investable. -- univestible. it almost seems to be a grab for power, and more control. we know china has had a planned economy, but almost had unbridled capitalism. saed: we are assuming the chinese authorities care about the external side of the equation. short term we are making more noise about this than it is worth. we do see china as a main market , and while we see corrections
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and authoritarian systems being more aggressive, i think it is an issue of choice. where else can you go in terms of china for exposure? it remains a main market for most investors. given a choice, investors will come back to the chinese market. manus: what about the currency? i was looking at onshore and offshore yuan, but yen is stronger for a variety of reasons. maybe a cap doubt dollar, delta -- capped out dollar, delta, but how do you think this will play out near term on the currency? saed: china once a stronger yuan.
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and we saw support from chinese authorities. we are looking at a situation where chinese intervention is weighing on the yen, and chinese authorities balancing their basket against the yen and euro. in the short term, probably we are looking at range in terms of the yuan for the year. long-term it has a lot going for it relative to the dollar. in the short term we are stuck in this range until the fed makes massive shifts in policy. rishaad: how much of it is down at the moment? and how much are people monitoring yield spreads? saed: again, it is an issue of risk. the yield spread in terms of fixed income versus u.s. income takes a backseat to equities.
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we are seeing an increased course in chinese fixed income the past few years, and they should remain the case for the near future as chinese authorities --[indiscernible] rishaad: thank you, saed abukarsh, chief portfolio manager / co-founder, ark capital management. he is staying with us. let's look at what is going on first word news wise. simone: new york city and california are to require government workers to get a vaccine or submit to weekly coronavirus tests and wear masks indoors as cases linked to the delta variant climb across the united states. new york staff has until mid-september to get vaccinated. those who resist will risk dismissal without pay. the cdc says americans should avoid travel to spain because a very high levels of covid-19.
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workplaces in london were the busiest they have been in 16 months, but despite the list of government restrictions, there was only a marginal increase on attendance from the previous week. just under half of workers were back in london's offices. 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. manus: thank you very much. a quick recap, this is one of the world's biggest employment companies. they have delivered revenue numbers, a fairly triumphant beat. how are they doing in italy,
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australia, the netherlands? it is a critical question. what are they seeing in terms of wage inflation as we reopen? we will be joined by jacques van den broek coming up after 6:30 london time, 7:30 in amsterdam. coming up, the real yields. a warning on growth ahead of the fed's july meeting. we discussed the record low. this is bloomberg. ♪
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rishaad: this is "bloomberg daybreak: europe." i'm rishaad salamat in hong kong, alongside manus cranny in dubai. officials expect tapering slowly
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winding down the bond purchases. jay powell may look to tweak his inflation message, in line with joe biden's push for simpler language. u.s. real yields hit a low overnight. saed abukarsh, chief portfolio manager / co-founder, ark capital management is still with us. give us broad brush strokes and what you are looking for. saed: this is a case of come in and let's have a discussion about future prospects in terms of inflation prospects. i do not think this is a massive change. the fed has been clear of their policy. given the fact we have had subsidies of unemployment benefits the past few months, it is unlikely the fed will look to move in the short term simply speaking because they know what it looks like after september
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when the subsidies come out of the market. it is a case of, let's hope and wait the delta variant does not have an effect on the economy. let's hope growth remains stable at the very least as opposed to having an anomaly base effect from the past few months. on the issue of inflation, we know the fed is willing to take more inflation before they act. what the fed really needs to indicate tapering is effectively lower employment. they have made that clear, but the fed needs to keep the backend elevated somewhat. we will hear from jay powell about how they are having discussions about having discussions about how they will lift rates eventually or use accommodation. the market is looking to 2022-2023 as key periods when that will happen.
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it is contingent on the delta variant and any potential lockdowns in the future. manus: we know jay powell is leaning on the slack argument as one of his underlying pillars. when we started the show talking about real yields and a potential slowdown or stagflation, record low real yields. rising inflation expectations. contextualize that for me and correct me if i am wrong that it is an indicator for stagflation. saed: the fixed income markets are always looking six months ahead. at march of last year the income collapse, then we had the rally, the market is looking forward. the market is saying we had this relapse, this release of consumption the past few months, and it is an issue of does the
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market believe the consumer will hold up the economy? that is what the real yield is saying, that growth is not on the same trajectory. jay powell and company will try to allay that concern by insisting growth is still going, but they will be looking carefully and be prepared to be accommodative as long as it takes. the ecb will take the same stance, they will stay low until inflation is there. rishaad: i wanted to shift the chat to europe and the u.k., the u.k. more aligned to the american recovery. all these countries are covid contingent, but in your view what was the message behind what christine lagarde said last week? saed: when i heard christine
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lagarde speak, i walked away thinking this is a different ecb. the policy has shifted somewhat the past few years. however, i have a feeling this ecb is not going anywhere anytime soon. a very big change relative to the policy that -- i think this ecb is seeking inflation to stabilize the market over this unknown period over the next six months. manus: that was the view last week, and it puts the taper debate to bed in europe.
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thank you very much, saed abukarsh, chief portfolio manager / co-founder, ark capital management. he is joining us from poland. coming up, tesla ceo elon musk warns the global chip shortage situation remain serious. more on this story, right here. this is bloomberg. ♪
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>> regarding chips, we are pretty good because we bought ahead for the near term. longer-term the problem will go away. the medium-term planning, the beginning of next year, we have risk mitigation strategy,
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including alternative sourcing for some chips and alternative designed to accommodate those. i think we are in a good position. we have a number of backup plans in place. >> it does seem like it is getting better, but it is hard to predict. manus: the ceos of tesla on the chip shortage facing the world. those numbers of tesla beat the expectations. let's put context, benedict, thank you for getting up early. it is now a company best in class when it comes to margins. put some context around these numbers for us this morning.
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benedict: good numbers from tesla yesterday, the prophet reached $1 billion. notably this is a company scraping together money from the back of the sofa a few years ago, now they come in with an impressive set of numbers. it was also profitable from what they usually get from other companies to offset greenhouse gases. if you strip that out, they were profitable. the margin really quite strong. 25.8%, to put that into context, daimler does half of that. so really best in class and it comes to the numbers. the stock did not do much after the close, languished a bit, went up a bit. no real movement. as people digest the figures, there are a lot of good things to see. rishaad: one of the biggest
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surprises is the bombshell he will not take part on the earnings call anymore. that means he will not comment on the key challenges facing the company on those calls. what are they? benedict: that was one of the big surprises, why will elon no longer show up on the calls. he says only when he has big things to say, that is up to interpretation what he considers big. some more short-term challenges, the chip shortage that you played in that little clip is something rippling across the entire industry. he said that is an issue that makes planning harder and any forecast more difficult. he hopes they are over the hump on that front. we have rising commodities, that is another issue. rishaad: that is all we have
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♪ manus: good morning from dubai. i'm manus cranny. rishaad salamat along for the ride from hong kong. beijing's crackdown. the biggest two-day ride in a decade. revenue at lvmh soars.
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driving the s&p 500 to another record. apple, alphabet and microsoft. it is all your fault, rishaad. where you sit, you frighten the horses. we don't want any profit in education. what happened? rishaad: this is the big mystery. we have seen as the regulators of course here -- in china, the i.p.o. we have that. people wondering what happens next. who is the next industry group? we saw healthcare stocks as they took a bit of a dive as well on the prospect they could be next in line for the -- as it were
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here. we have property very much in the frame given the amount of debt accumulated in that industry. the most indebted property developer in the world. had its right cut two notches by s&p. two other agencies cut it earlier. they are not allowed to issue as well. a lot of moving parts currently. manus: i just wonder is it the regulators and government doing the pboc's work? let's pivot to one of the biggest plors in the world. delivered second quarter earnings this morning. the revenue beat estimates. the recovery continues through the pandemic. jack vanderbrook is the c.e.o..
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who is reopening and hiring the fastest with the biggest recovery? good morning, sir. >> thank you very much. that is a tough one. who was the fastest. let's say italy. compared to 2020. that was a bit of a -- year. we compare to 2019. a record year for our company. italy is already 15% above 2019. also what we call the rest of the world, japan, latin america, 16%. definitely back. rishaad: it is pent up demand i suppose here as well. how much of that is going to last -- how much is temporary? how much is permanent as well? >> business is mostly temporary. what you see, being flexible.
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they saw last year they maybe were not flexible enough. they are filling their roles now with temporary people but at the same time also permanent placement has gone up 91% compared to last year. it is also above 2019. in our u.s. business we see a strong pipeline for the recruitment process. it is pretty much broad based actually. manus: with that recovery, who is paying more? where is the tightness in the market? lots of reports that temporary workers in the reopening industry are hard to find. where are the spikes? >> spikes is too strong a word.
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it is tough to find people. at the same time, the good news is that there were a lot of support packages for unemployed people. you know, people now know, we're optimistic. a little easier to fill roles again. the change from unemployment to employment sometimes takes time. precovid times in the labor market are back. companies really, really need to take care of their people. look at retraining, reskilling and see where they can fiend people and accommodate people. we have done a lot of research of that in our branding studies. work-life balance is very important. you really need to ask your workers how would you like to work now that the pandemic is over and how can we adom date you to have a great workplace. rishaad: this is the question i
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was going to ask you. working from home. how much people or staff demanding they do work from home and not going to an office? >> yeah, of course that is the beginning of the discretion. it was necessary to work from home. 35% of people want to go to the office. they do want to meet people. apparently colleagues are more -- than you thought they would be precovid. it is going to be a mix depending on the sector of course. let's say one to two days from home and when it is convenient for you and the employer and for the rest probably back into the office but in a way more flexible hibe reasonable doubt way. manus: we're tracking what is going on in the u.k.. ahead in vaccination and
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reopening relatively speaking to the rest of the european peers. to what extent is the managing of covid in the u.k. translating into shortages of labor? >> that is a tough question. every country wants to get covid behind them as quickly as possible. vaccinate everybody. then it is a new balance. so again, it is individual companies that need to have a competitive marketplace where people feel happy. that is going to be different company for company. the u.k. is not special compared to other european countries from where i'm sitting. rishaad: any evidence of people saying no jab, no job? >> no. not really. that's a discretion.
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of course if you have no jab, no job -- you mean employers or employees? >> employers. >> so active in safely back to work and those kind of procedures. i'm not seeing massive evidence of it. rishaad: thank you so much for joining us. randstad c.e.o. the food delivery giant in mainland china, the stock around 15% right now. this is in the cross harris of regulators. we have shares adding to other sessions there yesterday where it was only 10%. 14% there. that's when the government posted notices telling online food platforms to respect the rights -- that workers earn at least the minimum there.
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27% down essentially in the last five days. let's have a look at what is going on in first word news. >> thanks. the u.s. and china have left open the possibility of a presidential summit despite contentious talks between top diplomats. wendy sherman's visit was focused on setting guardrails on the relationship. she was presented with two lists of key demands. in return, she underscored u.s. concerns. said washington doesn't seek conflict with china. bloomberg has learned that credit swees -- suisse has tagged its chief officer. we're told the partner will
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succeed warner in the coming months. she stepped down as the firm lost about $5.5 billion from the collapse. global nees news 24 hours a day on bloomberg and quick take. in more than 100 countries. this is bloomberg. manus: thank you very much. north korea and south korea have agreed to rebuild ties. repairing lines of communications that were cut just over a year ago after improving the prospects for progress in the nuclear talks. great to have you with us. what do you know so far? what is the scale of the restoration? is it material? and will it shift global geo-politics? >> the answer is yes indeed because just last year remember north korea blowing up the office that was along the border of south and north korea as a
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signal to say they no longer want to engage in diplomacy. in this, released just hours ago, north korea said -- they called it a big stride in restoring trust between the two koreas and this could be a message sending to the u.s. side as it comes at the back of wendy sherman's visit to seoul and tokyo. jen sake also said north korea was on their agenda. >> our philosophy is we should not avoid hard topics. they are part of any discussion we have diplomatically. there are areas we have concern. whether it is crimes against humanity in exinjong. there are other area wes might align. nonproliferation.
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political concerns in iran, afghanistan and burmea. -- burma. >> it is worth noting that her predecessor was the main facilitator of the trump-kim talks back in singapore. though it resulted in not much of a deal. wendy sherman was the coordinator under the clinton administration. rishaad: just quickly before we get back to the air. we'll be looking at what is going on here as well as the selloff in asia continues to worsen here on the tech side. let's get back to pyongyang here. when we got this news, we got a little bit of a push yaup for the so-called peace dogs there. what were they?
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>> we saw stone hitting its daily limmed limit of 30%. hyundai elevator rose the most in a year. but the fact of the matter is though it has effects after the summit taking place, it is not really longer lasting. an analyst -- these stocks are like game stocks. fueled by retail investors buying. manus: thank you so much. in hong kong with the latest on north korea and south korea. coming up, it is a big week for big -- kicking off the earnings report for the energy majors. we dig into the numbers. this is bloomberg. ♪
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manus: day break europe with me, manus cranny and rishaad salamat. to the oil market. above $70 a barrel and taking some of the pressure off the largest energy companies as we go into earnings week. it kicks off with shell on thursday. morgan stanley global strategist, head of european energy. the backdrop this earnings season is frankly colossal. the net income is expected to come in at just under $14 billion and the cash flow is mounting. how bountiful a quarter do you expect it to be on the equity side of the equation? >> this is a great top toik start off with. this earn season has been fantastic. the fact that we can present earnings forecast the way we have them is nothing short of
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remarkable. forecasting earnings that are on par with what the sector delivered in 2018 and 2019, prepandemic years. share prices were 30% to 40% higher in that period. we're looking at strong -- a balance sheet that will drive speculation about increases directions so altogether, this set of results that we will likely be looking at for the rest of the week is likely to be very strong. rishaad: we have brent at $75 a barrel here. more than doubled over the course roughly speaking. it can't help but make money. you have to repair the roof on a
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sunny day as well. >> the commodity prices are universally strong. not just oil. not just natural gas. very strong petrol chemical. the complex is very encouraging. if you look at share price performance, it has been quite lackluster even though we have seen significant earnings upgraced. on the sell side we put up estimates that present a sunny picture but our investors are asking the question how sustainable are these commodity prices but also looking further into the future, we're looking at the energy transition that brings with it a lot of change and uncertainty. there will be significant vems required to turn these companies around over the next one the two decades. returns on the capex are not so clear.
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an uncertain future. what we're seeing in practice is that evaluations of the companies in this seb sector are overwhelmingly driven by the cash that they distribute and less so by the cash that they generate. that's the discrepency. they are generating twice much cash as they are likely to distribute but because the distributions have been slow to move, the share price performance has been underwe maying. -- underwhelming. manus: so that end, not everything is created equal. we're at different parts in the transition between the liverbings shell and b.p. that has an implication in terms of the capital return story.
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differentiate the nuance to us in terms of who is going to be the returner and who is going to be more judicious? >> there are several companies who said they would increase distributions for example when they reach certain targets . shell falls in that category. b.p. falls in that category. but if you look at the overall financial framework of each of the companies we cover, there is by far the most room to surprise on the upside. taking into account the expectations. there is the most room to surprise to the upside in shell. there we expect quite a bit of potential. rishaad: thank you so much for joining us from morgan stanley with global oil strategies ahead of european energy research. we're going to focus on the boom in luxury and look ahead to number three as well. don't go away.
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this is bloomberg. ♪
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rishaad: bloomberg day break europe. rishaad salamat in hong kong. crandemran dubai. another stellar quarter from the french luxury conglomerate lvmh. luxury stocks have been among the best performers in europe this year. let's get over to paris and caroline. caroline, it was a big beat here. lvmh managed to do that. tell us about the main drivers. >> people are spending their savings on luxury. hankering for luxury after this
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pandemic especially true in the u.s., china and also in the middle east where travel is starting again. lvmh up 84% in the second quarter. the fashion unit has revenues up 120% including louis vuitton. one put it this way saying it was the strongest first half ever for lvmh. it is interesting because lvmh has been seen as a bellwether for the luxury industry. they don't only have fashion but also watches and jewelry. they made a big acquisition of tiffany's for $16 billion. it had strong moment numb the u.s. and china.
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in the second quarter. people it seems have been indulging with more champagne or dom perinon. they have an easy -- and second, travel retail is still impacted, especially in europe. manus: i have this vision. shall i paint a vision for you? it is rishaad with a bottle and his louis vuitton man bag. wealthy louis vuitton-buying customer. did you buy any luxury goods? rishaad: i'm very bored with champagne. i noticed you had a berkin bag when you came into the office there. manus: my man bag is more
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subdued. we're getting ready for the italians. did they win? did they beat the brits? i can't remember. did italy? it was football recently. rishaad: you're slightly mistaken. can we move on please? it hurts. manus: there are painful moments. caroline, what about the italians? what is going to knock them out of the park? do you think they are going to beat the french with the gucci brand? >> rish will buy a gucci handbag. the main rival lvmh is expected to do well. their sales expected to be up 77%.
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the luxury stocks have been surging since the beginning of the year. manus: let's see whether rish's big. s play big in the gucci numbers. this is bloomberg. ♪
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>> good morning and welcome to bloomberg markets, the european open. i am anna edwards and mark

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