tv Bloomberg Markets European Open Bloomberg July 27, 2021 2:00am-4:00am EDT
cudmore joins us from singapore. the cash trade is just less than an hour away. top headlines. caution on china. beijing's crackdown pushes u.s. stocks to the biggest route in two decades and the hang seng continues to sink. splashing out on luxury. and number results. tesla drives the s&p 500 to another record as earnings top analysts' forecasts. it has just gone 7:00 here in london. work is -- mark is with us here from singapore. >> all the action is in asia this week. yesterday we saw the turmoil was in china and hong kong stocks. contagion did not spread. we did not get as much drama. and again today, the pain in
hong kong and china continues. it is extending. it is interesting because earlier this year when chinese stocks were slightly higher, we saw the so-called intervention coming in. chinese stocks are down. and hong kong stocks are slumping again. there is a lot of pain in the sector. the contagion has not been wide or broad but i think that will change in coming weeks. >> we will get your thoughts on that and a moment. let's have a word -- let's have a look at where we are. global futures -- in europe, the trading day in europe was a little subdued yesterday. flat, mixed. the u.s. did little better. new highs on all of the markets in recent trading sessions in the u.s. european futures suggest a little downside and u.s. futures also suggesting a little
downside despite the fact that we have strong earnings stories coming through with tesla being the latest example. there is concern around technology and china and that is the counterpoint. chinese stocks in the u.s. taking a let down yesterday. but it has not stopped there. we have not drawn a line in the sand because on the gmm you can see the hang seng is one of the markets under pressure once again. >> the hang seng -- it is g20 only. hong kong stocks are down about 6% in the last two days. when you look at the gmm, you wonder where the panic as. -- is. this follows on a lot of pain yesterday. the two day move is 4.5% and that is when they have already fallen to the bottom of the range. they had a bad friday, a bad
close to the week. this has broken through the year to date lows. and the rest of the world is seeing stocks hit fresh highs. the other thing to draw attention to on the gmm screen is the fact that the commodities column, the bloomberg commodity spot index reached a 10 year high yesterday. and again today, we see the commodities going higher. it has been driven by the climate affected stocks including natural gas. it is broader. oil prices are up again despite the opec deal. and the other thing is that the stock market that is performing better is australia. it is a less tech focused index. it is commodity heavy. the fact that it is doing well despite the chinese pain is because commodities continue to surge. and that divergence is not
sustainable forever. >> that is interesting. the chinese economy versus the commodity story they meet in australia. an interesting reference point. as you rightly point out, the hang seng is not on that g20 board. the selloff continues for chinese stocks at the center of a widening regulatory crackdown by beijing in particular this continues into a third day. investors have been rocked by the measures against the booming chinese education industry. for more, we are joined by juliette saly who has a breakdown on some of the latest market moves for us. good morning. >> you were talking about how this had fallen through into the u.s. session with the golden dragon index. it is having its worst today selloff since 2008. when we started trade in asia,
we thought we would be ok but the selloff has exacerbated. we continue to see big falls coming through. today is the one-year anniversary of the launch of this index. it had been up some 59% in february but it shed more than 550 billion dollars and it is now in negative territory one year after its launch. this has fallen through into some of the other markets that you were talking about. particularly as we see big weakness coming through in the likes of tencent which has already been in regulatory crosshairs. it shed about $58 billion and broadens this wider question of how far this crackdown is going to go. it is worth noting there are still some solid calls on might
eituan including from jeffries. have a look at the hang seng index, it is in bear market territory. it is starting to look oversold when you look at the peak that we saw in february. it was looking like it was overbought. now, it is getting to the 30 level for the first time in five years suggesting that some of this selling is being overdone. >> juliette saly taking us through some of the important charts to keep an eye on. let's think about how substantial a theme this is. you suggested earlier that you do not think we are done with this. if profitability and capitalist impulses were allowed to exist in china at the tolerance of the communist party, and if they
change their minds, perhaps we will be aware of where we can go. many are scratching their heads as to how far this can go. >> that is a key point. i'm sure that at some point soon, we will get a respite. we will see people try to come in and bottom pick that market. the point is that we don't know where this stops. we thought the end of the crackdowns had come a while ago. we know they have not decided what they want to do with the real estate sector. we know there is more focus on unaffordable housing and health care and the education sector and the pressures there. we do know there is more to come and it is the undefined limits that create uncertainty. how much will this spread? at the moment, people are saying it is just a china story. the wealth impact is just too large though.
many global benchmarks -- this will cause damage to a lot of investors which will feed through in the coming days. >> and no matter where your finances rope up on the chinese growth story or your business, there will be something in this story that could have the ability to impact you. and when we think about what is driving this, the goals behind this, and we spoke about this with our colleague jean-luc yesterday, some say babies and debt are motivating chinese -- china's crackdown. new thematic's that we -- somatic's -- new thematics that we need to take seriously. >> decades
and now, the new ones are education, property, and health care. they are the three big mentions of the communist party. the reason i think we will get another leg of contagion, right now, they are focused on domestic firm pain but we know that many international companies are counting on the big growth story of the next five or 10 years being based around china. many u.s. companies are in this position. some of this regulation will continue to impact on their growth stories. this will be a broader national story even at the moment the contagion is remarkably contained. >> chinese market access is important to many businesses here in europe. mark cudmore will stay with us throughout the hour. and you can get that from the rest of the team as well, mliv go is on your terminal. we speak with our next guest,
anna: welcome back to the european market open. just over 45 minutes to go until the start of trading. european equity futures suggesting some downside is to be expected. it's turn to the earnings story. vontobel is up 50% year on year. the wealth asset managers says it was driven by strong investor demand. let's get to the ceo who joins us now, dr. zeno staub.
this is digital access for your private investors. kaluz what it is in particular has caught your eye in this reporting period. what has been the driver? dr. staub: first of all, thank you for having me. tesla has been catching my eye. operating income of 25%. asset management up 17%. other institutional clients are up 32%. wealth management up 9%. and especially the net new money growth of annualized 6% which compares very nicely in the industry perspective -- and the industry perspective shows that we do wind market share and clients across the board. self-guided investors have done a lot in h1.
investing, saving. they understand that they need to tap into different return sources and reserve them through our digital investing. mark: a great set of results, really good profits. what will you do with all of your excess capital? acquisitions, shareholders, or compensation? zeno: we know we have a particular shareholder structure. one share, one vote. one of our competitive advantages. we tend to have a very long-term approach to almost everything we do and that is also when we talk about our capital position. we have a very reliable and solid dividend policy and we have our track record that goes
back many decades. we are regular, reliable and robust dividend payers. the current capital position of 14.5% gives us ample optionality. we are also very proud that we can say that the organic investments compound at the return of 18.7%. the money we reinvest in the business creates value for our shareholders. but, this gives us room to consider both organic developments as well as inorganic options. anna: you talked about the net new money you have seen come into the business. what are your thoughts about new client activity? how are you planning for the second half? zeno: firstly, july, august, and september usually happen in h2
so it is never wise to look at this linearly. what we have seen in h1, the massive increases in interest rates really impacted the willingness and the decisiveness of clients to allocate capital. now in q2, they were turned more to the status quo with the conviction that capital needs to be invested in markets. we also see a pretty resilient behavior in self-guided investors that they want to tap into markets so we currently see a decent robustness of client activity also going into july. mark: why did you decide to bring forward your investment in 24 asset management rather than an alternative name or an asset
manager in switzerland? zeno: 24 has been a great success story for everybody, first and foremost our clients. the team of 24 -- we have become a majority shareholder in 2015. the current position has over delivered on all targets and the payback has been growth. we have found a way to put everything into a fully future proof set up. departments flipped there 24 shares in a significant part. the transaction structure will add an additional 2% to a return on equity for shareholders and 24 simply as a wonderful company. it runs very strong investment strategies that compete in some of the largest asset pools in
the world predominantly in multisector bonds. that is a huge opportunity for everybody, clients, staff, for income and return. and the capabilities of 24 can help them and with the global footprint, we can create a lot more going forward so it made a lot of sense to align everybody and to move forward with the fully aligned set up. anna: can i ask you about the appetite you see in your client base for crypto assets? do you offer it in some areas with caution? what is the strategy? what are they asking for when it comes to crypto? zeno: clients have an interest in digital assets and cryptocurrencies.
we believe that the underlying technology is actually more important than certain types of applications. we believe down the line that locked chain technology is the logical consequence of the general trend of securitization. it can create trust without a center party. we do see major changes coming out of that going forward. what we offer is that we represent some cryptocurrencies in a secure, convenient and easy to handle way and clients appreciate that and allocate part of their wealth to them. anna: thank you so much. zeno staub. coming up on the program, u.s. real yields send a warning on growth ahead of the fed's delight meeting. we discussed the outlook next. this is bloomberg. ♪ is bloomberg. ♪
anna: welcome back to the european market open. 40 and its to go until the start of cash equity trading. futures point to the downside. investors are gearing up for tomorrow's fed decision where the pace of the bond buying program will be in focus. officials will probably also discuss how to balance the downside risk from the delta very with upside risk from inflation. let's speak now to florence barjou. your thoughts as we head toward the fed meeting. there is concern around inflation as well as an infection and the delta variant. do you think we will get much reference to the latter, the spread of the delta variant and its risk to the u.s. economy? florence: i think the fed will
mentioned this. in june, the fed had a more hawkish tone. they penciled in two rate hikes by 2023 and since, jerome powell has tried to downplay this hawkish tone because of the rising infection rates and potential negative impact on growth. but we will need from the fed is a clarification on where they stand in terms of balance of risks. inflation -- is inflation a risk, is growth a risk? they are hesitating between the two and we cannot blame them because markets are doing the same. mark: given your expectations around the balance of risks, what is the risk reward play? is it the real yield? where is the best sector going into this? florence: i think it may be a broad way to look at rates and
that is the way that we do it. first, take a directional view and from there, on rates, we think the risk reward of being long bonds is very negative. we tend to have the view where we think that the downward movement in rates, the flattening movement in curves, has gone way too far. if you look at curves, if you look at the level of even real rates, these would tend to indicate that the u.s. economy is in a recession or close to moving into one and that is something that we really don't see. we tend to think the u.s. economy will enter midcycle. we are close to something which could be take growth and we will have gdp out which will show a very strong acceleration. what we going to see from
now ot is a softer growth rate but it is still an expansion. the way the rates market is priced today we think is not consistent. anna: that does not make sense. what gives regarding real rates? inflation will come back down or nominal rates will rise substantially, or is it both? florence: i think it is both. we know a large fraction of inflation is linked to base fx and these are going to come out of the --. growth is going to remain strong. again, i don't think this is consistent with the current level of rates. even nominal rates, we do expect them to move up until the end of the year. mark: -- anna: florence, stay with us.
♪ anna: welcome back to the european market open. a half-hour away from the start of cashingities trading for europe. in france we have luxury earnings to talk about. we'll do that shortly. this is the picture now. flat-to-negative on futures. you have been talking about about the weakness in chinese stocks and hong kong stocks as a result to clampdown we're seeing by chinese authorities in this case on the education sector making money in the education sector. you have been taking about the
evaluation or all the positioning around u.s. vs. chinese equities. i wonder if you can compare this to history or whether we have seen extreme change in the way the communist party is approaching profits? i wonder how much history teaches us. takes through that thinking. mark: it is a great question. it is very important. the u.s. is the world's largest stock market by some distance. china is a distant second. they are the two largest stock markets in the world. look at the ratio of the two benchmark >> there is. the raichio to the s&p 500 is falling down to the bottom of the 15-year range. you can see it is near the bottom end of that range. has there been a big change? yes, id seems like the policy makers in china are saying we're not allowing free market capitalism so you can't necessarily benchmark these. on the flip side though there is
a lot of lick kidity in the world. -- liquidity in the world. china is turning its back on certain sktors and targeting certain sectors. this is about micromanagement. healthcare. housing. the whole concept of the stock market. in terms of earnings, actually chinese stock markets continue to get cheaper. in terms over the economic side, the chinese economy is 57% of the u.s. economy. now it is more than 70% of the u.s. economy and growing faster. that means over all, the chinese stock market should be a larger share of u.s. markets. i think we are at the bottom of the range. at some point in the coming weeks or months, this will turn around rapidly. the key question is does it turn around because u.s. stock catch
up with china? so far the contagion has been limited from this story. do you think that will be the case in the coming weeks or we will see some contagions in other assets? anna: i think this is really a local situation. it made it very clear. it is the chinese government which is trying to reduce inequalities targeting specific sectors. for moment, it has remained contained and it will continue to remain contained. now the question is there there was a selloff on equity markets, actually i don't think it will come from china. it will probably come either from growth fields related to covid or it is going to be which i don't think is probably but --
it is difficult today. investors are faced with a lot of regulatory uncertainty. something they do not like. i don't think it has the power to destabilize the world financial system. anna: you think the global investors then were cautious about the amount of regulation in investing in china and therefore will take this in their stride. do you think investors will be very surprised and rethinking exposures to china as a result of what we have seen this week. >> i think investors act surprised. the tech clampdown, that's -- it was understandable in a sense because it had also to do with the data, with security and it could have been interpreted as part of a foreign policy. what we see today with food
deliverries, with education, this has really to do with domestic issues. it is chinese government trying to reign in some excesses. foreign investors, it can be difficult and which sectors they are excessive . how does the chinese goved see them? before coming back to chinese equities, i think foreign investors will have to have a clearer view of sectors which are investable and sectors which are not. mark: one of your high conviction views the second half of the year there will be a time to go into emerging market equities. i'm curious. one is obviously it is much broader asset class. where are you thinking when you say emerging market equities? what is the capitalist you're looking for? does it happen with the china
story? >> actually, e.m. equities, something that we're waiting to enter during the second half of the year for the moment we think it is a bit too early. this has been accentuated by everything that is happening in china. this is a call for the second half of the year. why are we looking at e.m.? you were mentioning it. evaluation. e.m. markets have underperformed. this hand take an lots of momentum with what's happening in china. and they are -- assets. evaluation. can be an argument. a second argument that we see is a lot of bad news has been already priced in. the virus disruptions. the fact also that there has been some monetary tightening in e.m. markets and that could come to an end.
a good example is russia. china specifically what we were expecting is growth to slowdown in growth that we have been seeing during the last six months to bottom out. potentially some softening in support from the monetary policy side. that paved the way for opportunities in the segment. but to be honest, with what has been happening in the last days, we really need some additional clarity here before we can enter the chinese market again. anna: we're looking at some of the big drops we are seeing in the chinese market in hong kong today. some worsening in the last half-hour. the hang seng down more than 2% now. the scrmbings i. down 3%. the food delivery space. i'm going to ask you if you want to get involved in merging
markets, from what you said you need to know more perhaps? >> yes. i think we need to know more. these businesses are down. we find it difficult to assess what is going to be the bigs model going forward. from going public, from raising capital. what is expected. you are not allowed to do all of these things that a private company should do and you really need to understand what is going to be the business model going forward of all of those segments before we can come back. mark: i'm just -- i'm looking at some of the december makings we're seeing in hong kong stocks there. hang seng index down the most in almost 10 years in terms of a two-day loss.
we're seeing really expensive pain and zero reaction coming through for other equities. you make a point this is a microstory. which i get but this is surely going to have an economic impact. you talk about being bullish in emerging markets. china is the engine to that emerging market story. that is clearly going to filter into other markets and emerging markets. >> you're right. i don't think at the current stage the chinese government wants to targets the equity market globally and they don't want to have a significant negative wealth impact particularly on chinese consumers. probably what they are trying to do is some kind of fine tuning of the excesses which have hit some segments. it can be -- education. you know that is the long-term.
they don't have enough young people. they don't have enough children anymore. we know that everything which is related to the cost of financing education is hampering the chinese couples from making more children. i think the chinese government is going to try to target specific segments. i don't think they want to destroy the whole economy or whole stock market. let's wait it out a little bit and don't overreact to what we see happening today. anna: thank you very much. thank you very much for joining us. let's gets a bloomberg business flash. >> good morning. reporting a second quarter earnings beat. they reported a record profit of $1.1 billion and operating income surging on higher clubs of thed model 3 sedan. a bitcoin related impairment of
$23 million. a shot for malaria. the biotech firm aims to start patient trials in the shot against the disease by the end of next year. malaria kills some 400,000 people a year. most of them young children in africa. that's the bloomberg business flash. mark, anna. anna: thanks very much. coming up on the program, back to the corporate earnings story. sales for lvmh beating expectations. what is driving the fashion boom? we'll get to analysis next. this is bloomberg. ♪ oomberg. ♪
european market open. 17 minutes to go until the start of european equity trading. futures increasingly negative. there is a bit of downside there. we'll talk more about what is going on in luxury sector there in just a moment. increasing by the hour. this is the markets over in asia now. c.s.i. down 2.9 pebble beach. hang seng down by 2.9%. we're into a third day of this. the tech sector in hong kong and under particular pressure. this is where you find some of the companies in the cross harris of the latest regulatory attack by the chinese government. we have the enterprise index in hong kong, china, as well down 3 pk. this is pretty broad based. mark: i think they are absolutely right.
you can't read too much into the price action. this is not just one day of pain. it is several dives pain. it is at the bottom of the range. that already was quite remarkable given what's happening with stock markets elsewhere. what is amazing is the s&p future is 22%. it has been pretty stable for the last hour while chinese stock markets are falling 2% roughly. i think that is that resilience is not sustainable long-term. it is definitely sustainable short-term. these markets could -- tomorrow. but i think the point is they are all breaking through the bote long-term ranges. they are very, very weak and we are not seeing policy makers step in. we're not seeing the so-called national team in china come in to buy market up. they are saying we are happy with this pain. we're going to leave it. that means there is probably more to go in the weeks ahead.
i have no idea, the next 24 hours, 48 hours. this does not look like the bottom here. anna: that makes you have some conclusions willing they are to let this negative happen. u.s. equity futures down but not all that moved by this story. let's go from what's happening in chinese equity market but also the earnings story here in europe is certainly going to be front and center. lvmh beating analyst expectations. sales are soared at the world's biggest luxury marker ond brands like louis vuitton and christian dior. joining us from paris, our guest. a lot chinese profits fiend their way into french luxury projects. give us some of the top line.
>> back in paris quite yet. strong domestic demand in china is driving it along with the u.s. and also places like middle east where tourism has started again. the fashion and leather goosed have revenues of 120%. even though they benefit from an easy base -- of course one year ago most of these stores were closed due to the pandemic. if you look at the jewelry sector, lvmh of course acquired tiffany's for $16 billion early they are year. tiffany's performed pretty well in the u.s. and in china.
they are also going launch new gold jewelry collection soon and finally of course people have indulged with champagne during the pandemic. even when they were home they were buying dom perinon to survive covid-19. mark: it is important that we have that champagne to survive. i found myself increasing my wine budget. households have increased savings as such from the pandemic. it seems like the broader luckry sectors did well for this stage of the pandemic. >> very well indeed. if you look at the euro stocks. it was one of the best sectors since the beginning of the year and you have lvmh and also
gucci, cartier, many remain bullish about the sector however some are saying that the sector could runout steam and we could see bullish moves fade in the future. the rebound in certain luxury sectors, have a lot of mma activity. we saw this with tiffany's and in belgium, we saw richemont acquire the handbag. anna: if you're thinking about what to do with bitcoin. that money saved up during lockdown. thanks for joining us with the latest on the luxury sector. coming up on this program, we'll stick with the market open.
as you were mentioning earlier, people were stocking up on champagne during the lockdown and also disinfectant. that is starting to ease off a little bit. similar to unilever. we're expecting their stock to be a little bit lower this morning. mark: logitech had earnings. what was the news there? >> they make webcams for computers. working from home has given them a huge boost. the results have beat. still a significant beat. not quite as much as they have seen if the past four quarters. anna: buying priffrells -- peripherals. for our computers. >> in terms of cash flow, michelin, the french tire maker, very strong. we're expecting it to pick up.
broadly in line with the analyst supply sector. might not be too big of a boost then. anna: thanks very much. mark, time to recap on what we have seen through chinese session. the hang seng down 3.45%. the composite 2.3%. the momentum seems to be building as we go through the session. mark: absolutely. at the start of show, the c.s.i. was a big mover of the day down 1.2%. it is now down 3 headline 4% as we go into the close. six minutes left in that session. fallen almost 2% in the last 50 minutes. hong kong markets are open for another hour. that's where we're seeing the extreme pain. the hang seng is about .1% away from being the biggest two-day loss since 2008. so much for the pandemic pain.
so much for the -- this is like a really, really big mover in china market. in spite to have intense pain we're seeing, .19% is basically unmoved for the past hour. i think it is remarkable. i guess people are thinking retailers are going to buy the dip. we are seeing a massive wealth destruction. the wealth destruction we have seen is well over a trillion dollars from china and hong kong stocks alone. i know there is or deliver 700 billion by yesterday and much more today. this is going to have an effect. anna: big wealth destruction. one of our guests early saying this is a domestic eck story. the enormous market. in a huge market that was expectsed to grow so far. going to be the source of growth in many businesses. to what extent in the u.s.
total gym includes everything you need to get into the best shape of your life. for every body at any age. it works every muscle group, including your core, using your own body weight as resistance. customers love total gym because it's fun, fast and effective. nothing delivers full body results like total gym. and right now you can try it risk free and enjoy special savings too! get on demand workouts free, free shipping and more. call now!
♪ anna: welcome back to european market open. a minute to go until the start of cash equities trading in europe. here are your headlines. caution on china. beijing's crackdown pushs the stocks to their biggest tuesday route in over a decade. the hang seng continues to sink this morning. sales of louis vuitton happened bags. a report today. and tesla drives the s&p 500 to another record. as earnings top analyst
forecasts. we have just 20 seconds away from the start of the european equity trading day. european equity market features looking like this to the downside. cac futures have been a little bit more resilient. perhaps we'll see more performance coming through on some of those luxury names. pleasing some analysts. the dax, the ftse 1,000 down .45. we look for -- is there sentiment or anything more substantial to it? another day of sales move on chinese equities. msia pacific down by 1%. the shanghai down 2.45%. the hang seng 3.7%. the technology-weighted index is coming urn more pressure over in china. all of a that because that is
the latest focus of some of the latest chinese action. it is also about technology. we'll keep watching the chinese story when it comes to regulation because this is having an impact on other markets. to what extent that will continue to be the case, we can discuss. at the center of a widening regulatory campaign. john, good morning. so i wonder to extent you think there is --. it is a huge domesticing economy in china. if they are changing their tolerance for levels of profitability or foreign money, that is going to be something that is -- >> i think there has to be. such a dramatic -- when you look at that. those companies, the u.s. you had around 45% from the peak in february.
you can getfects as well. if you have concentrate position in some of these names. it can start to introduce problems for investors in other countries. globally -- the size of our economy and the importance of some other areas, particularly tech alongside the u.s. they have been the driver of global growth emerging technologies. really, really interesting. the total change in narrative. now they are seeing it more as a policy share and wondering how far it can go. anna: we have a question from a guest earlier on who was talking about how maybe this is whatnot -- not what the west anticipated when china was welcomed into the international economy i suppose,
w.t.o. membership and other membership. maybe there was an assumption from many in the west that china was on a path to increasing transparency, increasing opening up to foreign money. we seem to be rethinking all of that now. >> absolutely. this is some common themes . when you look at the company s that aretargeted, they have high levels of foreign ownership. bringing capital back to china seems to be a theme. something around the wealthy founders. we shouldn't take a western perspective to this. there have been a number of actions from the u.s. and their allies. against china and recent weeks. the exedgeses have been allowed to roll off. the semi conductors and other industries. to some degree, wherever there is an action, there is a reaction. you don't want us to play freely
in international market werks have some leevers we can pull in that space. it is important that we see both perspectives. china may not have anticipated the type of actions it is seeing from the u.s. and its allies. it is a complicated picture. there was action against food delivery and in hong kong against property managements. it feels like some policy shift aimed at deleveraging and from a global perspective, deflationary. expected to be value creating for private companies. anna: china is not so much part of global economy then maybe that is an inflationary impulse. i just want to break into our conversation. something at the forefront of our minds at the moment.
tokyo finds over 3,000 cases of coronavirus. this is gnaw record according to a japanese news agency. we understand they are citing an unidentified official. we haven't had this from the official source yet. this is according to japanese news. tokyo is set report 3,000 cases of coronavirus as they host the olympics. it was just last week, just last monday we got ourselves concerned around the delta variant. at least that was some people's reason for the heavy selling. u.s. equity markets at these high levels. new high levels relative to history. it is not going to take much to spook people whether it is the deltsa varpte or concern around access to chinese markets. we seem a little vulnerable. >> i think that is very fair. sentiment looks more neutral.
the spread is back to zureo. the lowest level since november. there is some good news. there isn't actually that much sentencement that what the investors say. i agree the delta variant is of concern. that is split into two groups. one is those that haven't got their vaccinations. unfortunately japan falles into that camp doing everything they can now but they started too late relative to some of the other developed markets. australia is another and new zealand and efficacy being focused much more back on china. the u.s. is in the former camp, even though they got off to a great start, they have plattsoed and recently republican leaders changing tone and saying go out and get vaccinated. unfortunately that has really come too late. there are significant parts of the older population that are not vaccinated.
there are these questions over efficacy, particularly around some of the vaccines. from that perspective, that is where the delta risk sits. anna: john will stay with us a little bit longer on the program. coming up, we'll discuss the outlook next. we'll get john's assessment on the earnings season and some of his key conviction calls. this is bloomberg. ♪
anna: welcome back to the european market open. 10 minutes into our trading session. european equity markets are rned pressure. stocks down just under half a percent. the cac down maybe more than we anticipated before the start of trading. lifted a little bit by some of the luxury names. the risk aversion from the asian session. we should bring you another redheadline. the kongkraphan court issued its first guilty verdict. they decided on the first guilty verdict under this new law. a man found guilty of inciting
secession. found guilty of terrorism. these are the fiendings of the court based on that new security. back to to the markets. the chinese government clamped down on profitability in the chinese economy. that has captured the market's attention. let's have a look at where the movements are. a process certainly front and center. down heavily yesterday. this is of course the technology investor. investor in technology. he owns a share in 10 cent and 10 cent shares have been under pressure in hong kong. down another 9% in today's session. this is the stock that did so well. the self-cleaning projects. people were cleaning a lot more. the stock is down 9.2%. let's have a look at where we are on randstat.
it has executed well. down by 6.6%. as we see numbers coming through from them. the q 2 revenue seemed to beat estimates. there is a move to the downside in those shares the morning. investors are geering up with -- official also probably balance the downside risk from the delta variant. john is still with us. what are big rescues? what is at the forefronts of your mind as you head to the fed meeting? some people are suggesting this is not going to be the main event of the week. i guess you can be sure. john: you can never be sure. what happened in china, will keep that probably front and center. the risks for the fed meeting
will be they will move from substantial -- their way of bringing tapering and tightening into focus. the expect saying it will happen in september. we have seen very positive inflation numbers with b.p.i. well over 5% and actually we have seen further inflation surprises and so far the fed has remained very dovish against that improvement. actually they have seen a bigger improvement in the economy than the u.k.. the bank of england more concerned and ready to act. the risks around this event there are some sort of signals toward tapering. that is the main area he needs to address. he will touch on covid and delta variants. and then inflation is it transitory? at this stage, i think they will stick with that mess allen. they have beaten on the upside. that is where the risks are.
anna: on that inflation theme, i think transitory inflation is still the base case. what does that really mean? how quickly do we drop from high inflation levels that we have seen of late. not as high. how can we drop down from there in your base case? elevated for longer inflation rates? john: the year-on-year numbers which everyone normally talks about. they are elevated all the way through. but month for month will fall off for quickly and fall off pretty rapidly from here, we would expect. you'll get very high year-on-year rates but a subdued pattern coming through in second half of the year. we were short u.s. inflation last week. as inflation expectations fell. it was really a reflection about we need to be concerned about the inflation risk on the
upside. a 20% or 25% chance inflation is more sustained. it turns out to be less transitory. there isn't much of a relationship. people talk about its wages will drive price up. we need to be conscious, we could see inflation expectations of consumers continue to rise and if that happens, yes, we need to -- that is where the risks are certainly, phenomenal bonds and credit. there is really no relationship between equities and inflation. anna: picking up on some of the -- there is concern around inflation risk. it is increasingly has to be on the agenda. how does that lead to the position around fixed income and government debt in particular? i know you prefer treasuries and bonds. what is the rationale? john: the hawkish message that came out from a couple of members from the bank of england.
they came out with a message that made people more concerned that early rer tapering for rate hikes. there is really no reason they should be sounding more hawkish than in u.s. where the recovery is less strong. we have a series of fiscal measures. the end of furlough. support for the self-employed. this is going to be a fiscal pullback. we have seen from the chancellor, really no enthusiasm for further fiscal largess. in the u.k. and europe, we have seen much less power on the consumer balance sheet than in the u.s. we have actually seen consumer incomes rise during the pandemic. against that, we think it is overdone on the hawkish mess archage around the u.k.. we don't think the growth will rise. we have seend spending not rise the past few months. it is really that compared with
in the u.s., we feel that the yields are pretty low already and the same in europe where we have the five-year bond low, below the e.c.b. deposit way. anna: john will be continuing his conversation with us on bloomberg radio at 9:00 a.m. u.k. time. we'll be picking up on further thoughts with him including what's happening in china and the hong kong market. the hang seng on its big west to-day fall since 2008. such is the scale what we're seeing here. the biggest two-day fall since the height of the pandemic. msia down 3%. another leg lower on the back of that news around the first conviction through the security in hong kong. just looking at u.s. future >> there is. we think there is a move to the
downside as well. these are now having an impact on expectations, if you like for the u.s. session ahead. futures down. coming up, we will be talking about the earnings stories. the move we're seeing in technology stocks. a c.e.o. has being plans for the e.v. maker. we hear from him next. this is bloomberg. ♪
>> we're going into production with -- this year an we're on track for this year's production schedule this year and next. we can accelerate our growth as a company and mitigate execution risk. anna: ok. so production can start this year. i'm sure a lot of shareholders are looking faurt to that. speaking of your shareholder -- forward to that. speaking of your shearleds, you had to get this done, a lot of the sheryls are retail investors. what does it mean to you to have such a large retail base to own your shares? >> the reach of our mission has reached so many people in the retail sector but we have an
illustrious roster of traditional institutional investors as well. so we have this dimension, this diversity which is attracted to our technology and our mission. i think it is a great situation. >> in terms of that though, it feets -- feels like it is going to set you up for a lot of risk. the retail bases that you have, you to v to beat the target in order to deliver. >> absolutely. execution is everything now. i tell in my team that every day. we haven't achieved a thing as a company until we deliver our car to satisfied customers. i spend time in the factory every week now making the teams operate cohesively.
this is a huge push now in execution mode and the main factor is getting the quality right. we started building a run of production cars. we have already started that. our quality validation run. make no mistake, these are the cars that once the quality is right, will be sold to customers. >> if you're in the factory nearly every single day, you must see some of the supply chain issues that have come through. we saw delays in production because of the supply chain. how bad is it out there? >> yeah, the supply chain has been hit by covid. that is undeniable. it is meant our quality people have not been eable to do their audits which could be the norm for businesses like ours. we rely on 250 suppliers around the world for about 3,000 parts. this is a significant logistic operation. many of those suppliers have
produced wonderful results. we're having to support some of those suppliers that need that extra help to get them across the line in terms of their component quality but we're getting closer every day now. i'm confident we're going to have a fabulous motor car in production this year. >> peter, as dani was mentioning, it is not just chips but things like lithium to make the cars. the chips may be the problem in the short-term but long-term there are still going to be some resource problems. are you going to have to bring some of that internally? do you have to make acquisitions to help shore up the supply chain? what do you think? >> that is not a major solution. regarding the chips, we're pretty good because we bought ahead. the nearer term. long-term i think the problem will go away. the medium term planning, the beginning of next year, we have risk mitigation strategy including alternative sourcing
for some chips and designs to accommodate those. i think we're in a good position. we have a number of back-up plans in place. remember, it is not going we're going into true mass production immediately. we'll gradually scale up production on an s curve and because of that, we don't have the demands in the near term that a major automaker would have. that is to our advantage. >> can you get more specific about that? exactly what is production going to look like this year when you do begin if it is a ramping up type approach? >> absolutely. absolutely. we'll move from two cars a day to four to 10 to 20 and so on. we will be limited by our ability to make the quality right. if the quality is not right, we'll slow things down and get it perfect. this is the sort of approach that customers rightfully demand. >> that was after the e.v. maker
debuted. back to the market action. we're into a third day of impacts from the chinese government clampdown on education technology. food delivery. the hang seng technology index down nearly 10%. hong kong china shares down 6%. this is really widespread. the technology stocks and intersurprise stocks most of it. on the hang seng more broadly, we're seeing more than 5%. the most since may of 2020. if you look at a two-day loss on the hang seng, it is the most since 2008. the government debt down. yields up to 2.9% on chinese government debt. the yuan under pressure. money going into the dollar as investors seek havens away from
anna: welcome back to the european market open. half an hour into the european trading day. downdraft is being felt across the european equity markets. down 9/10 of a percent. one of the worst performers by 9.2%. process and focus. it's the story of the earnings. we are not doing as much cleaning as we were previously. last year at the height of the pandemic, it's down because it's holding in tencent is less than tencent shares that came under pressure in the hong kong market.
see the fallout from what's going on in china and our european equity market. in that disappointing story around earnings. all of that is having an impact. no sector is in positive territory. personal consumer, drugs and grocery store is the worst performer. we did see commodity movements to the upside in the last couple of days. but stocks are under pressure. that's taking its toll on london as the london under pressure is down by more than 1%. the dax also down by more than 1%. it had some luxury earnings. let's get a first word news update. laura: new york city and california are to require government workers to get a vaccine or submit weekly coronavirus test in wear masks and doors. cases linked to the delta variant climb across the u.s. staff have until mid-september to be vaccinated. those who resist the new rules or risk dismissal without pay. the cdc says americans should avoid travel to spain due to
very high levels of covid-19. workplaces in the city of london with the busiest they've been for 16 months last week. but despite the listing of government restrictions, there was only a marginal increase in attendance on the previous week according to data compiled by google. just under half of workers were back in london. the u.s. and china have left open the possibility of a presidential summit, despite a contentious talk between top diplomats. the white house as the deputy secretary of state visited the city with focus on setting guardrails on the relationship. she was presented with two lists of key demands. in return, she underscored u.s. returns, but says washington does not seek conflict with china. powered by more than 20 700 journalists and analysts and more than 120 countries, this is bloomberg. >> laura wright here in london.
it is a big week for big tech, with microsoft, apple and alphabet earnings due out today. tesla has reported better than expected second-quarter results. strong sales of the electric vehicles delivered $1 billion in net income. a milestone for the company. here is elon musk on the future of ev. elong: public sentiment is at an inflection point. at this point, i think everyone agrees that electric vehicles are the only way forward. anna: electric vehicles the only way forward. richard winds are joins us. the founder of the independent research company, radio free mobile, good to speak to you. a lot of companies would agree with elon musk that ev's are the way forward. we are seeing all manufacturers putting their money into electric vehicle development. are you skeptical of that or skeptical of the valuations of tesla? or are you not skeptical of
tesla at all? richard: the way to think about tesla is, it's a story of two halves. the first half is the fundamental half. in tesla is doing pretty well. it has executed well. historically i've had lots of fears about the company's ability to make money and generate cash, and they've proved me substantially wrong. and more credit to them before that. the other half of the equation is look at the company's valuation of $650 billion, which is more than most of its competitors combined. even though it shifts a tiny fraction of the global automotive market. so when you put that into perspective, you justify total valuation today and you need to assume it will shift 40% of all cars across the world. it is incredibly unlikely. this is where you get the imbalance when you look at this company. anna: what explains that? is it a cult status or a
advantage going back years, and what erodes that? richard: it's a narrative. and you see, as you see across the board, there are any number of stocks out there today primarily driven by the narrative, and the narrative is, the world is going green, everything will be, and the best way to play that is tesla. certainly, there is a better way than buying tesla, but that's the way the market is sitting. also, the market is also largely bought into the tesla robo taxi story. which, when we run the numbers, it has fundamental flaws, but not enough to support their current valuation of tesla, let alone the $3000 that people are putting out there. anna: thinking about the tech sector and headlines we are falling for china -- following for china. we see chinese stocks really falling today, particularly those connected to technology.
the government with its clampdown on technology has been a wobbly story. but more recently around education technology and real estate, and food delivery and other areas. it's broadening out. does this have impact on the u.s. tech names that did make a lot of money in china? is there play on the chinese consumer going to be intact on the others of this? richard: i don't to get does. what you are seeing now is the market is pricing in the increasing risk of chinese regulation. the reason why it's so bad right now is that the moves are being potentially proposed on impact on the chinese education sector, they are so draconian and that everyone is getting worried that, hang on a minute, the degree of regulation and what we see on abilities to make profit for shareholders are more severely impacted than we thought, and that's the risk
being priced in. if you look at google, virtually no revenues in china, though it has a bit out of hong kong. facebook, no revenues in china. twitter, no revenues in china. the real one is the most exposed and that whole group is probably tesla. but then again, arguably, tesla is up against quite severe competition in china. at the moment, i don't see a massive impact. this is very much a chinese theme, which is why you are seeing tiny -- chinese tech companies take a huge hit and everyone else shrugging it off. anna: it is very much a chinese thing, but it is a big market for companies like apple. we will have numbers through from apple later on today. certainly this week. this is not typically a big call of apple as they are gearing up firm the launches -- from the launches in the fall. what are you expecting to see here?
richard: i think possibly, yes. but, part of the problem you have in china is that, arguably, the clampdown is perhaps in the interest of the chinese people who are finding competition and raising children expenses. you can make those arguments. in its to some degree to do with the implicit bar get that exists within china that will give up some of our freedoms. i would argue it might make iphone buyers, which there are a few in china, less happy. it seems that the government wants to avoid, at this point in time, which is why i don't necessarily think it's a risk. directly, it will be a fairly nondescript quarter, as you say, the big launch is yet to come. the big quarter is always calendar q4.
we'll see continued developments on the service side. what is the impact of the people going back to work on the job that we saw in mac sales and ipad sales as a result of the stay-at-home trend. i would expect things to slow down a little bit. anna: thank you for joining us, good to get your perspective. founder of the independence radio free mobile. coming up on the program, stocks in china and hong kong are recovering. investors see a clampdown. we discussed the news with the markets live team and we get an analysis from china as a key driver. this is bloomberg. ♪
anna: welcome back to the european market open. 41 minutes into the trading day and european equity markets are down by more than 1%. many of these markets, the french market had some of the performance and luxury goods. but we see the downdraft of what's taking place in china. the selloff continues for chinese stocks at the center of a widening regulatory crackdown by beijing. investors have been rock i the measures against the looming private education industry. losses are spreading because of further regulation. standing by with market reaction is juliette saly. but let's get to bloomberg's executive editor for greater china, who joins us in beijing.
you had another day to look at this, i suppose. i was reading plenty of analysis by our colleagues on the subject, one of our opinion, miss writing that capitalism is no longer welcomed. i suppose many investors are asking where money from foreign investors is no longer welcome. ari any further to understanding how far this crackdown will be? >> i think there crackdown is going to be very far-reaching. in hindsight, obviously looking back in december of last year as the communist party was planning out what they would do economically in 2021, they highlighted the need to control what they said was the expansion of capital. now that that seems to make sense with what we see today. the investigation. there crackdown against education. i think anything where the government things that business has taken a turn for the worse has made it become a blight for society and they will take
action, and may be extreme action as the education crackdown shows. anna: so where this is leading to a blight on society is the reaction. what is the ultimate policy goals beijing is aiming at? some people are suggesting that this has to do with population growth or a large part to do with population growth in trying to reduce the cost burden attached to having children in china. is that where this is coming from? this will be a long-term theme if that's the case. >> ultimately, with this education situation, the biggest motivating factor is the worry about inequality. beijing is really worried that, as the economy grows, you will have some people that will be better off than others. in the education situation you had a situation where if you had money you could pay to get your kids ahead. and that exacerbated, highlighted this growing tension -- tension between the haves and
have-nots. it something beijing has no appetite for. anna: thank you for air analysis. joining us from beijing. let's go from the driving politics to the markets reaction and get some analysis from juliette saly, who is with us this morning to take us through all of the latest market moves. this is turning into a story that is turning out into a day after day. what's the latest? juliet: -- >> look at the hang seng tech index. today is the one-year anniversary of its inception. and we have seen it fall by more than 9% today. the biggest fall it's ever taken. its drawdown since its peak in february down by 45%. as you can see on the chart, it is now in negative territory. this was supposed to be a way for investors to get into these key tech players. more broadly we have been watching the big fall down coming through in the hang seng
index. on track for its biggest two-day law since 2008. in the last 20 or minutes or so by this news that you had the first guilty verdict on the security law in hong kong. hang seng index down by some four point 8% and we are seeing this continuing to come through in a-shares in hong kong, now down around 6%. a lot of this has been focused on the tech players. the likes of tencent fell. they are down by another 16.6%, the most on record after that 14% drop yesterday. interestingly, there are pretty bullish analyst views on tech players, when you look at the anr function it has something like 55 five and zero holds. jeffrey has a price target, which is trading at 196 hong kong dollars. let's have a look at whether or not this is going to be a sign that buyers could start to move, and particularly when you look at the hang seng china enterprises index. this is the h share index and bear market territory.
we saw a yesterday, down by 25% from its peak. we are starting to see when it hits that level, that green line of 28. it is now in oversold territory. so you could start to see some movers coming in. but daniel is saying it is too soon, in his opinion, for investors to start to bottom fish. they could be in for a few more days of selling in the key hong kong markets. anna: thank you very much. indeed, it's an equity market story. we are seeing money coming out of chinese bond markets in those yields going higher. we are seeing money coming out of the chinese currency and the dollar going higher. just a quick word on what's going on over in tokyo. tokyo says it find a record 2008 coronavirus cases. that's lower than some of the reporting in japan has indicated. we are dealing with the number reported in japan earlier of 3000. not quite that high, but a high number.
anna: welcome back to the european market open. 51 minutes until the market open in the european equity markets are suffering from what has been happening in china. down by 1.2%. the dax is similarly weaker. we don't have quite the volume of earnings stories we will have later on this week. it's at a time when we are seeing a big change out of china. let's go to bloomberg -- get a bloomberg business flash update. laura: more than $58 billion of market values over to frantic trading sessions after beijing unveiled sweeping reforms
against private sector companies. the world's biggest food delivery company backed by tencent is already the target of a chinese antitrust probe. they posted rules, ordering online food platforms to ensure their work is earning at least the local minimum wage. tesla listed its delivery outlook after reporting a second-quarter earnings. the ev maker posted a record profit of $1.1 billion in operating incomes surging on the highest sales of the mask market why in model 3 sedan. tesla has a bitcoin related -- of 23 million dollars after the cryptocurrency plunged in the second quarter. bloomberg has learned that credit suisse has got david from goldman sachs coming its risk chief. it comes as the first lender tries to move past his multibillion scandal. it will succeed in the coming months. she stepped down as they lost $5.5 billion from the collapse.
that's the bloomberg business flash. anna: laura wright with us in london. joining us to talk about the markets and as we close out the hour of the european market open, the market live macro strategist. what a session. i think it was down by more than 1% on a number of these european equity markets. does this all read across from china? because there is limited directly across. investors say it's a domestic story, but it's a domestic story in the world second-class economy. >> u.s. equities have been fairly resilient against these chinese crackdown regulations. the what we are seeing is bloomberg is reporting that potentially u.s. funds are shedding exposure to chinese and hong kong stock because we could see restrictions imposed. that does appear to be the catalyst that is sending european equity sharply lower this morning. and i think, really, this is a
risk off environment. when i came in this morning, equity futures were flat. it's turning out to be a risk off day. it will be interesting to see whether more of the earnings, tech ahead, will be enough to catalyze a higher equity. and we have the fed tomorrow and it could potentially be dovish. anna: do we see, in response to the chinese news flow, a lot of money going into haven. certainly, we are seeing money going into haven. the dollar up by an eighth of a percent. bloomberg dollar index up by 2/10. the yen is stronger. money is going into the u.s. treasury curve. just yesterday we were talking about real yields at record lows. 1.2% on the nominal yield on the u.s. 10-year. are we expecting to see on treasury markets? laura: we are seeing treasury bid in a broad safe haven play. you have 10 year treasury yields hovering around the 125 mark. but you are right. the fact that real yields tested
those record lows once again yesterday, but the dollar remains big. and that just points to the fact that we do still have these growth fears that are dominating. the fact that we are seeing the spread of the delta variance, that is continuing to feed into this broader risk off narrative. i think it will be interesting to see whether the fed tomorrow, how dovish they are going to be against these rising risks. because the u.s. economy still remains strong, but certainly we are seeing more of those fears play out in markets. anna: it's fascinating. concern last week dominated by thoughts around coronavirus in the delta variant on monday of last week. this week it's dominated by the clampdown of the chinese government on certain parts of that economy. yet we have u.s. equity markets touching new all-time highs. to your point, it does seem as if it has isolated itself up to a point from what's going on in china. we have the earnings story to
focus on in the u.s. laura: it should be a strong earnings season for the u.s. major tech reported today in tesla set a high bar. they did have that quarterly profit above one million. so far it has been a fairly strong u.s. earnings season. so a quarter of the s&p 500 has reported that 87% have beaten estimates. that's the second-highest beat ratio since 1992. so it is quite strong. i think markets will be watching for two things, signs of cost pressure potentially hurting those companies going forward, and anecdotes around the outlook. and whether they do see this in peak growth. that could really feed into the more deterioration for that outlook. anna: bloomberg markets live macro strategist, thank you for joining us. that's it for the european market open in what turned out to be eventful day. when we planned this show, the chinese equity was calm, hang seng was calm. not so now.
more voluminous hair instantly. all it takes is just one session at hairclub. introducing xtrands. xtrands adds hundreds or even thousands of hair strands to your existing hair at the root. they're personalized to match your own natural hair color and texture, so they'll blend right in for a natural, effortless look. call in the next five minutes and when you buy 500 strands, you get 500 strands free. call right now. (upbeat music) >> we have on the one hand the
economy being opened up, and on the other hand the economy being close down. >> carbon is rising in the united kingdom. >> the reality is what we have to avoid is any technological control of our electronic structure. >> this is "bloomberg surveillance: early edition." >> good morning and welcome to "bloomberg surveillance: early edition" on