Skip to main content

tv   Bloomberg Markets European Open  Bloomberg  September 28, 2021 2:00am-4:00am EDT

2:00 am
francine: morning, everyone pill welcome to." i am francine -- welcome to "bloomberg markets: european open." i am francine alongside tom mackenzie. embarrassing revelations of their stock trading during the pandemic. treasuries spike. two year yields hit an 18 month high as the five-year tops 1% and fed officials signaled the taper is coming soon. powell and yellen testify later
2:01 am
today. brent crude costs $80 a barrel while the global energy crunch continues, sparking further gains in natural gas. we are just under an hour away. futures are holding onto gains. 0.2 -- between 0.2 and 0.3 percent. a similar picture across the board for the s&p futures. the focus is on china. we await more news from evergrande. this is also an energy prices -- crisis. what it means for the recovery. the s&p 500 futures gaining a touch. the futures of the nasdaq unchanged and you are looking at the global macro groups. tom: as you say, it is a question of energy, the yield story, and china as well, the three big elements laying into the market sentiment. a mixed picture across asia. the pboc coming in with another net injection of 15.5 billion
2:02 am
u.s. dollars in the pboc reassuring that they would strive for the healthy development of the property sector and australia down by 1.4% in the asian session. iron ore is a big factor. you look at the commodities space. the price up in terms of oil but it is a different picture when it comes to iron ore and that has been reflected in the equities space within australia. south korea is down by 1%. mainland china is fairly mixed. the picture is essentially flat. the u.s. closed mixed as well and divergence between what is happening in the nasdaq, the russell, and smaller caps are stronger, again, on the back of this shift from growth to value so that is probably the picture as you see futures looking out for the european session and the u.s. as well as things stand. francine: they have separately announced plans to step down. the seven announcements, after
2:03 am
revelations of stock trading during the pandemic. it removes two of the hawkish officials at a time when the fed is grappling with tapering. joining us now is our bloomberg economics columnist in singapore , daniel moss. thank you for joining us. this came as a bit of a surprise. two at once, but how much of a difference really do these exits make for policies on the short to medium-term? >> good morning. francine: i think we are struggling to hear you. we will reconnect the line and see what happened. this is an embarrassment. i don't know whether we will hear a lot more from it or exactly what happened and you have to ask yourself what does it mean for the succession of jay powell? probably nothing. if it is somebody similar to him, we know that joe biden should make his mind on that very soon. tom cole in yes, it is a big
2:04 am
question for joe biden. this adds more. rosengrant saying that there were health issues. kaplan was being straightforward in saying that the? about his financial dealings were distracting from the broader mission of the fed and fomc, and that was the decision he was taking. of course, there is pressure from the democrats to have a more diverse lineup at the top of the fed. francine: there's these scandals which rocked the fed officials, giving them a chance to reshape the fed. brent crude topping $80 a barrel. that looks to be outstripped by supply, depleting inventories. prices rising for a sixth consecutive day and it comes as natural gas source to seven years -- source a seven year highs. we are joined by our middle east
2:05 am
markets reporter in dubai. anthony, first of all, how much of a headache is this for the global economy? and do we have any idea when it goes down? >> this is kind of piling pain on top of paying for consumers because it is already coming in the context of this natural gas prices where we are facing shortages in europe, in asia. this was in part to be expected. we had a really strong year already for oil as demand has recovered as we have moved out of the pandemic and we got vaccines. people are traveling and working again. now, we have this gas crisis which is shortening those supplies as well and people are having to switch into oil. if there are power plants that can run on fuel oil or crude, they might be switching to make up for some of the shortfall in power supplies so that it was always something that would contribute and feed into the increased demand and bring up those prices.
2:06 am
we had comments from a lot of executives from the nigerian national oil company telling us last week that one million barrels per day of additional crude demand could come out of the national gas crisis and feed into the prices at a time when opec is outputting that much back on the market to make up for this short paul -- shortfall in supply. tom: it does not change the calculation for the cartel. anthony: well, from a financial and fiscal standpoint, you have to say that they are pretty comfortable. they want to be making money after a difficult last year. however, as we get to these levels, $80 is tight for consumers. we have regular complaints from consumers like india. joe biden has already made some complaints prior to the last opec meeting. we have another opec gathering coming up next week so when it gets to these levels, producers really start to have to consider
2:07 am
if that is sustainable for the consumers. they want to be careful that they are not destroying demand, pushing users to use natural gas or renewables. at this point, when all those other sources are in really short supply, you know, potentially, we are not going to have that switching factor but opec will really have to take this into account and look at how far they can let those prices ease up and whether they want to tweak their plan for bringing production back to the market. have a meeting next week so this will probably be some discussion going into it. it looked like it would be a rollover of their easing of those cuts but we will see if there needs be anymore, tom. anthony, -- francine: anthony, thank you so much. anthony di paola.let's get back to dan moss. we were talking about the two governors at the fed that had to resign because of the scandal
2:08 am
regarding trading. does it actually affect policy? dan: in the short to medium-term, francine, it does not. not an enormous amount has changed since last wednesday when chair powell intimated the taper would happen soon. soon in fed speak means the next meeting of the fomc so that is done. it would take a disaster for that not to happen. the other thing i would say is, among the district bank presidents, rosengrant and kaplan were not knee-jerk hawks spirit over his career, rosengrant has dissented both on the upside and downside and kaplan is nowhere near as chronic at the center as his predecessor, richard fisher, was. tom: so is it a misreading to characterize this as a reduction in the emphasis or at least the influence that the hawks are
2:09 am
happening across the fed? >> the way to interpret this is a reduction in this way that the district fed's will have relative to the power of the board of governors. in washington, d.c.. the board has long regarded the district banks as some time rebellious provinces. this gives them the opportunity to reign in the centers, be they on the outside or the downside, and manage the communication flow a little better. francine: dan, thank you so much. dan moss from singapore. let's check back into the markets. juliette saly joins us from our singapore studio. how is it looking? juliette: pretty flat here. we did have a little bit of weakness coming through from some of the tech players. quite a bit of weakness on the rising yields. you do have this rebound coming through in hong kong and china
2:10 am
as we continue to focus on the evergrande concerns. hong kong bank -- hong kong asking banks to announce their exposure to evergrande but you have seen some upside coming through in the latter session, pretty flat movement on the msci asia pacific index. you have a lot of support in the energy sector and then we have had china downgrade their growth forecast. goldman downgrade therefore -- their growth forecast for china. a lot of that because of this crunch that we are looking at in china. that's have a look at how some of these are rallying today. shanghai electric that by the daily limit of 10% as we see authorities boost electricity outward. the evergrande concerns not going away but this october holiday coming up as well, the golden week holiday. today, you are seeing a little bit more of a by the these concerns and also we heard authorities say they want a healthy property market so that is getting a bit of upside amidst the concern about the
2:11 am
growth trajectory. goldman seeing 7.8% economic growth, down from 8.2% to the evergrande concerns and what we are seeing with the crunch in china. tom: juliette saly in singapore. to the power crunch in china and europe. the european gas, carbon, and power jumping to a record today, crossing the terminal right now. european gas, carbon, and power, jumping to a record on tuesday. looking at the u.k. natural gas prices currently in today's session, up more than 8%, francine, so this pressure is just accelerating in terms of energy spaces across europe. we will hear from christine lagarde later. certainly, the implications for monetary policy as well as the national government. francine: it will be difficult for her to ignore this. there was a beautiful piece of research by bloomberg and they
2:12 am
were saying that the colder than normal temperatures could leave europe with almost no natural gas and it gets much worse from here. there's a number of factors. you look at angela merkel and it all has to do with nord stream 2. if you look at energy securities for europe, it is that relationship with russia which at the moment is not doing great because there's just not enough russian gas coming through. it's not going to be great for a lot of energy producers and i'm sure that they will move at the open. tom: certainly want to watch as these prices continue to go up across europe and the challenges that poses across the corporate space but as well for europe's policymakers. coming up, we will discuss more on what the resignation of the two fed chiefs means in terms of stock trading. that scandal and what it means for the future of u.s. monetary policy. this is bloomberg. ♪
2:13 am
2:14 am
2:15 am
>> joining us now is the global head of investment strategy. andrew, thank you for joining us. quite a lot to talk about. the energy crisis, the supply crunch, a lot to do with supply chains, and then the fed. there has been a repricing overnight and we will see an interest rate hike sooner than we thought. what does that mean for asset allocation? >> it is challenging. you have to step back and think about where we are in the cycle. we are still in the recovery phase of the cycle so that is more mature. we still have economies in
2:16 am
general. lots of spare capacity. i still think the majority of these inflation pressures, we are seeing -- they are transitory. central banks still have not started raising interest rates yet. that is a way away. in this early part of the cycle, it is a part of the cycle that favors broad equity and risk asset exposure over more defensive asset classes like government bonds. tom: andrew, is the path of least resistance for u.s. yields just upwards here until year-end? andrew: not necessarily. i do like the idea of that from here on in. i think it has got a little bit more upside but remember, there are a lot -- there are a lot of countervailing forces. it's not completely one-way traffic right now, but yes, i think yields overshot. they went too low. we had a bit of a short squeeze
2:17 am
a few months ago. that is now in the process of being unwound. reevaluating monetary policy going forward. inflation breakevens have not moved much higher over the last few weeks so i think that there is a bit more upside for yields. i think we are in the process of re-normalizing the longer ends of the yield curves. francine: if you look at some of the rising bond yields, could it help european value stocks? is there a rotation that will continue from this point? andrew: yes. it is very well in the early part of the year ended has certainly taken a pause over the last four months to five months. the correlations between the values and the long end of the yield curve is quite high. the bigger step in value is financials. we know that when yield curves start to sink -- steepen, financial profitability starts to go up. this yield curve steepening, we
2:18 am
should get a second wind i think in that value revival over the next few months if this yield curve steepening continues. tom: i know you have a view on china and the growth outlook. you previously said you look at 5.5 percent for 2022 in terms of gdp out of china. do you hold to that view? are investors adequately pricing in the potential of a steeper slow down in the world's second-largest economy? andrew: this is the biggest implication for property market developers out of evergrande. it is pretty much where the consensus is. that is probably the best case outcome now. we know that on most assumptions that the property slowdown will probably be around 1% of gdp growth next year. the key unknown is how aggressively will china stimulate its economy? how much does the common prosperity, the fact that they do not want to re-leverage the
2:19 am
property sector stop them from coming in with an aggressive stimulus? that is the big unknown. the thing i'm watching most closely on china will be credit growth, and secondly, what sort of policy moves to we get? what sort of fiscal stimulus happens? do we see any cuts, and if we see those, i will be a little bit more confident, but right now, how big is that china economic slowdown? francine: thank you so much. let's get straight to the bloomberg first word news with juliette saly. juliette: a pivotal trade meeting between the u.s. and the european union will be narrower in scope than planned. the contents of a joint bateman outlining the results also are still up in the air. sources tell us france would not agree to the draft conclusions ahead of today's meeting with the u.n.. u.k. has officially put the military on standby to help
2:20 am
deliver supplies to petrol stations in an effort to stem the widening crisis. it is the latest emergency measure after supply chain disruptions that have drained petrol pumps and emptied some supermarket shelves. fuel supplies have run dry at numerous sites around the country. facebook has halted plans for an official instagram platform for kids under 13 after critics said it would be harmful. the social media giant said children were currently lying about their age to join instagram and it argues that a designated site with age-appropriate policies and no ads would be safer. facebook says it has not abandoned the idea but it is taking time to consult with parents and experts. global news, 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. tom: thank you very much indeed. coming up, we are in berlin as olaf scholz appeals to the greens and the free democrats.
2:21 am
backing a three way coalition. more on germany and the implications postelection, next. this is bloomberg. ♪
2:22 am
2:23 am
francine: welcome back to the open. 35 minutes from the cash equities open and futures are kind of undecided. you can say they are on the green side but they slip around a little bit. concerns over the fed policy. maybe we are looking at a tighter -- interest rates rising before the market was expecting it. we saw a repricing of treasuries. we look at the energy crisis and china, holding onto a little bit of gains. it is not all that bad. tom: john authers has written about it. where else do you go? stocks.
2:24 am
let's see how the politics falls into this and get back to germany after a narrow win on sunday in the national elections. olaf scholz is now appealing to the greens and the pro-business free diet democrats to back a coalition as the cdu candidates chances look to be fading. for more, we are joined by maria tadeo in berlin. will it be traffic lights -- what is looking most likely in terms of the coalition? maria: yes, just to break it down because it can get complicated, it would be led by the cdu. the traffic lights is led by olaf scholz, and the spd. if you were to ask me that question, i would say, looking at everything that has happened over the past 24 hours, it is looking like it is the traffic lights coalition gaining momentum. yesterday, olaf scholz gave an interview saying i am confident that the talks will be
2:25 am
successful. i am optimistic. there was also a poll that showed 56 percent of germans ask the question who would you rather be the next chancellor and they responded olaf scholz. i also want to note that in the past 24 hours, the campaign is really collapsing quickly before our eyes. he is facing a lot of the internal criticism. a lot of members blame him for that disaster performance on sunday and built the most read newspaper in germany, very close to the cdu. that's really set the opinion going in germany with very critical of him yesterday, saying that he needs to wake up to reality. he does not have a mandate and he looks like a wounded soldier. that is not the type of person that needs to lead germany. francine: we were listening to the olaf scholz press conference yesterday. quite a merry -- quite amazing to hear him speak english.
2:26 am
if we have a chancellor that speaks english in germany, that would be a bit of breaking news p also breaking news. they are launching an ipo in oslo. we are speaking to the chief executive at 7:40 am. it will be interesting in these kind of times to see is it a good market to launch an ipo? or is he a little bit concerned about the headwind? tom: capital raising and a time where you have acute labor shortages in the u.k.. you are seeing that play out in the u.s., the demand for robotics in warehouses. that is accompanied by amazon and others so that will be one worth watching. clients are looking forward to the interview. natural gas source the most since winter. brent jumped above $80 a barrel and is warning that the global energy crunch is hitting growth. more on the price of power, shortly. this is bloomberg. ♪
2:27 am
it's moving day.
2:28 am
and while her friends are doing the heavy lifting, jess is busy moving her xfinity internet and tv services. it only takes about a minute. wait, a minute? but what have you been doing for the last two hours? ...delegating? oh, good one. move your xfinity services without breaking a sweat. xfinity makes moving easy. go online to transfer your services in about a minute. get started today. >> more than 60 container ships
2:29 am
2:30 am
at anchor in san pedro waiting in los angeles which handles around 40% of u.s. container imports and 30% of exports. there are a number of reasons for the backlog, but they cannot get the containers off the ships quick enough because of the shortage of truck drivers to move the containers down the supply chain. downstream we see delays at key u.s. rail terminals, the question is what to do in the short term. hiring more truck drivers could
2:31 am
be the solution. longer-term, they want more investment from the u.s. government. >> the infrastructure has been a topic of discussion for a while. the u.s. government and congress has out invested the u.s. ports at a rate of 11:1. $11 billion to the u.s. east coast compared to one billion to the west coast. >> the global supply chain is under pressure. china is home to seven of the 10 biggest ports. policymakers are not afraid to shut down ports to stop the spread of the delta variant. rates between asia and europe skyrocket in 2021. the next big question, when does the global supply chain troubles end? this could be a matter of
2:32 am
quarters and not months. >> in the international markets you are looking at through february, march before anything will change. i think it will go long after that, getting the backlog resolved. >> there is an element of seasonality. e-commerce giant in north america and europe are restocking ahead of the holiday season. they do not want to be caught in a situation with shelves empty at christmas. the question going into a busy earnings season is how much impact that could have on the bottom line, and when will it be resolved? tom: that was ed ludlow breaking down the logistics story from los angeles. the strains are real. earnings and the bottom line
2:33 am
impact could be felt with three to four months before these supply chains are built out, or do they wait and hold because it is a restocking phenomenon that will not be long term? francine: you could have overinvestment. what surprises me is when we started the pandemic and look at supply chains, there were experts saying it is ok because of the trade war between the u.s. and china. you can see the secondary effects where it has not been rebuilt to where you can move things around. tom: dependent on china which continues to build out its market share despite those tariffs. francine: gas prices surging to a seven-year high and a rally field by escalating concerns
2:34 am
about tightening supplies. brent oil tops $80 per barrel with demand running ahead of supply. tom: joining us now is our energy and commodities executive better, will kennedy. how should we be thinking about the price surges we have been seeing? how sustained are they likely to be? will: we had an interesting comment from one of the biggest energy traders yesterday that said they are likely to be sustained for as long as two years. people underpricing oil for next year because of oldish factors -- bullish factors, a lackluster response from shale with the spillover from the wider energy crunch means we have a bullish scenario. we have an opec meeting next week.
2:35 am
they will likely continue with their plans to add 400,000 barrels a day into the market. there is a question how much those producers can increase. the markel wi --the market will absorb that and more. francine: energy prices are surging to a record. can we once and for all break it down to understand what the problem is. is there not enough gas from russia? or we have not stuck filed enough? can you break that down for us? will: in terms of power and gas, last winter depleted europe's gas supplies. we have researching demand as we come out of lockdown. russia is maintaining some oil
2:36 am
fields. it cannot send that much more gas. asia is also trying to rebuild its stock piles ahead of the winter. a lot of consumers are fighting over a nice of by, and that sends -- fighting over supply, and a lot of the european system relies on gas powered plants. tom: can we zero in on the u.k. story, the measures the government are lining up to get the military involved to ease the supply crunch around petrol. is that likely to be sustained? will: the lack of petrol, it is part of a wider picture that reflects unique circumstances in the u.k. we are we are short of people to drive big trucks. that is stopping refineries
2:37 am
getting those drivers. getting drivers may help at the margin but in terms of how long it lasts. hopefully this will calm down demand at the pump and allow those trucks to slowly start refilling. there is no sign of easing yet, but we are hopeful it is not as acute in the second half of the week. francine: is this just brexit? will: brexit certainly has exacerbated the shortage of truck drivers because a lot of people left during the pandemic and they do not wish to come back. there is a global shortage of people to drive trucks but it is fair to say brexit has made critical in the u.k.. francine: thank you will
2:38 am
kennedy. coming up, the energy crisis in europe may cause trouble for the rest of the planet. we discussed the price of power with goldman sachs. that is at 9:30 london time on bloomberg tv, twitter and youtube. tom: a really important conversation. coming up, softbank and egt backed robotics company has a plan for an ipo which could be one of norway's biggest public offerings ever. this is bloomberg. ♪
2:39 am
2:40 am
francine: welcome back to the open, 20 minutes from the start
2:41 am
of cash equities open. not huge moves but a lot on investors minds. the fed taper timeline, whether that means we could get rising rates sooner than expected. a lot of focus on china and this energy crisis which is getting worse with energy prices in europe at a record high. tom: we saw prices in the u.k., gas futures climbing to a record 206.7 pence. that keeps rising that pressure. francine: that filters through to how central banks make exceptions, because if you are spending more on gas, you are not spending elsewhere. a norwegian robotics company, a company backed at more than $10 billion, as it joins the global ipo market.
2:42 am
we are delighted to be joined by the chief executive. thank you for joining us. many questions about what exactly will sustain your growth going forward. is there a region where you think demand for robotics will increase significantly? >> generally we think growth for robotics will continue to grow strongly for a long time going forward. we are an independent market, today 50% of houses are automated. this will increase strongly in decades to come. the market has come the longest way. we expect continued strong growth in europe and strong growth in north america. tom: how strong is the link
2:43 am
between the labor shortages and the demand from automation? >> it is clear we have a clear impact in some countries. there is a problemem there is a problem their is a problem for companies to get labor to continue. francine: we are excited to follow some of your investors and big investments and private equities of softbank. what will they do with their investment? karl: softbank has a strong portfolio company. they can support growth. we need long-term investors going forward. softbank is a good investor for a company like autostore. francine: they had 40% of the
2:44 am
company. are they shelling -- are they selling shares? karl: they are holding onto them. tom: you talked about their role in investing, what will they do materially to support your expansion? karl: generally they have a strong presence in the region. we get a strong focus on our company as a softbank company, and they have a large portfolio of companies were technology can make sense to use in their operations. francine: how much is the company valued at? $10 billion or more? karl: i cannot comment on that. tom: how are you planning to use any funds that you raise? break it down with expansion r&d
2:45 am
and headcount. karl: we will use the money -- generally what we do is invest heavily in r&d for new products with new technology and drive new solutions. that could be the focus going forward. we will be in all the major market. francine: give us a sense if you think automation is unstoppable. we are seeing a lot more where houses automated. do you have a percentage how many warehouses will be automated in the next 4-5 years? karl: today the market is clearly underpenetrated. 85% are manual. we believe in the next decade
2:46 am
this will grow strongly. it will probably be 75%-80% of households in the next decade. tom: you talked about the fact your company offers a solution when it comes to labor shortages. what about supply chain constraint when it comes to materials and components like chips? how reliant are you on supply chains? karl: we have all seen the impact all over the world. it is important to work hard every day to secure deliveries. where we are delivering their many components. that has not stopped the possibility to deliver in this situation. aluminum supply means the
2:47 am
customer can get the parts when they need them. francine: what about energy prices? does that heard any of your customers? how much do costs rise because of it? karl: for energy generally, it does not have a big impact on prices. esg does not use a lot of power. tom: thank you very much for joining us. that is karl john lier, autostore ceo. let's get the first word news with juliette saly. juliette: two regional fed presidents are retiring following embarrassing revelations of stock trading last year. alice fed resident robert kaplan has joined eric rosengren an early retirement.
2:48 am
both under scrutiny for trading activity last year. kaplan said the recent focus risks becoming a distraction. the leader of the social democrats in germany is calling on partners to join him in a new government as soon as possible. all of schulz -- olaf scholz asked backing for his three-way coalition. the candidate, armin laschet, will try to form a majority. that cannot happen after his second-place finish. a meeting between the u.s. and the eu this week will be narrower in scope than originally planned. they outline the results that are up in the air. sources tell us france would not agree to the conclusions ahead of the meeting. the u.k. has put the military on standby to help supply petrol
2:49 am
stations to stem a widening crisis. it is the latest measure after pumps have been emptied and supermarket shelves have been emptied. 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. tom: thank you very much. we will look at your stocks to watch. ferguson posted its four year trading profit. this is bloomberg. ♪
2:50 am
2:51 am
francine: welcome back to the
2:52 am
open, nine minutes from the cash equities open. a little fluctuation but stocks pretty much unchanged. expectation on what the fed does next. we look at energy prices in europe on record. we look at stocks to watch. you are looking at ferguson. >> days are important -- these are important results given that ferguson has a bigger exposure to the u.s. market. they expect a year of good growth. one thing to watch for construction stocks are inflation pressures. the costs are going up which could pose an issue going forward. giving that the shares touched a record recently, we will see if there is further room to go, but definitely one to watch. tom: then the soft drinks maker, what are you looking at? >> a positive update, a confident statement.
2:53 am
it is receiving dividends is a positive for investors. they have been depressed lately because the company has been exposed to the carbon dioxide shortage which is troubling these companies. overall a positive update. we will see if it is enough to give them a boost. this is a private equity firm investor, it wants to show the interest it has an u.k. stocks. the valuations are depressed. it looks like buyers want to get exposure to an exciting tech company with prospects for growth. another interest in the u.k. market. francine: youmuch.
2:54 am
there is a lot going on in the markets. it will be interesting to see how energy stocks open. it does not look like any sign of that abating. tom: $80 per barrel for brent. goldman sachs ahead of the curve saying last week you could be looking at $90 a barrel. how cold the winter is will be a factor. francine: a lot going on. stocks are probably going to follow what treasury yields have been doing. you see a possible value rotation. we check on the markets. it is always nice when there is going on in the markets. oil has been rallying with brent topping $80 with crunch concerns. does that hurt inflation
2:55 am
expectations for central banks and what we should expect from the fed when they raise rate. tom: the readthrough for this in terms of the economics is complicated. is this pointing to the fact that the economies around the world are aching up pace faster than some have suggested? how much is a demand story versus a supply story? natural gas in the u.s. will not be back for months. china putting liquidity into the system again today. francine: watch out for nasdaq. yesterday we had the spike in yields adding to concerns. tom: that rotation around the tech play and whether valuations are looking high. you are looking at a 10 year around 1.5. we go back to march levels. does it get to 2% by the end of
2:56 am
the year. we are looking to open in five minutes. stay with us. this is bloomberg. ♪ baaam. internet that doesn't miss a beat.
2:57 am
that's cute, but my internet streams to my ride. adorable, but does yours block malware? nope. -it crushes it. pshh, mine's so fast, no one can catch me. big whoop! mine gives me a 4k streaming box. -for free! that's because you all have the same internet. xfinity xfi. so powerful, it keeps one-upping itself. can your internet do that? it's moving day. and while her friends are doing the heavy lifting, jess is busy moving her xfinity internet and tv services. it only takes about a minute. wait, a minute? but what have you been doing for the last two hours? ...delegating? oh, good one. move your xfinity services without breaking a sweat. xfinity makes moving easy. go online to transfer your services in about a minute. get started today. francine: welcome back to the
2:58 am
2:59 am
european market open. one minute until the start of cash equity trading. i'm francine lacqua in london with tom mackenzie. tom: fed resignations, kaplan and rosengren step down within hours of each other after stock trading activity while in public office. the u.k. has the military ready to alleviate its worsening fuel crisis. power prices hit record highs. olaf scholz begins coalition talks after claiming victory.
3:00 am
armin laschet insists a deal will be struck by the end of the year. francine: i'm excited about the future. we are seeing a little volatility. it does give us an indication of what the market is looking at. energy prices at a record high, we are worried about china and a repricing. tom: the central bank of china with liquidity injections led to a mixed picture across the chinese session. they want to see the healthy development of the property sector. the story around evergrande continues to unfold. the u.k. government lining up the military to be on the road driving those carriers to ensure there is enough petrol. currently there is not. a lot of concern within the u.k.
3:01 am
on that story. the cac quarante is lower 0.2%. in spain, up 0.3%. we are looking for comments from the ecb, and christine lagarde later today. the central bankers are still firmly in focus. let's look at sectors. energy up 0.8%. utilities are flat. record highs with energy prices and the u.k. in europe. the banking sector is in focus as yields grind higher. the yield trajectory is firmly to the upside. gains of 0.2%. the rotation story away from technology as a result of high yields back into the value play. the european session, tech stocks down 0.4%.
3:02 am
across the region -- this is a sector breakdown. we will give you the map in 28 minutes. francine: a lot going on. we are watching these energy stocks. markets opening lower a touch but indicative of the session we will have. treasury yields topping 1.5%, the highest level since june. energy is also in focus. prices continue to soar. brent crude plumbing past $80 per barrel for the first time in three years. let's get more with dr. nannette hechler-fayd'herbe, global head of economics & research, credit suisse. thank you for joining us. a lot of unknowns with energy prices. i do not know if the treasuries move if we will see a rotation into value stock.
3:03 am
dr. hechler-fayd'herbe i think when yields are on the move up, rotation, some sectors are benefiting, financials is a good example. and those that are sensitive to it. volatility ahead indeed. tom: will that be sustained? we have seen head fakes when it comes to that rotation. will that get baked into the sentiment, yields going higher, tech elegy is something you want to pull out of. the value story is back in vogue? dr. hechler-fayd'herbe: i think the whole year has been a story of fast paced changes. there has been one quarterly theme at a time and the fourth quarter is going to be anchored around inflation. inventories are at such lows across-the-board in so many
3:04 am
sectors that what is concerning at the moment, markets around price increases and breadth of price increases will be with us for a bit more before the industrial production engine starts and stocks can get replenished. francine: where do you see value now? dr. hechler-fayd'herbe: there is value in regions, so we see value in those indices in europe. you can take germany as an example but the u.k. equity market has good exposure to the industrial production cycle and materials. their value is also enjoying a catalyst coming out of the current situation.
3:05 am
there are old economy stocks beyond regions which are compelling at this point. tom: where are the margin pressures most pronounced as a result of the high energy costs? which sectors will feel the pain? dr. hechler-fayd'herbe: for example, capital goods in the system, there is also increased margin pressure. i would add to the margin pressure from the input prices, which most companies have faced but are ready to pass on to their consumers. we
3:06 am
from those sectors where wages are increasing. in particular low wages. that includes retail. tom: we will be back with you shortly. dr. nannette hechler-fayd'herbe, global head of economics & research, credit suisse. we will be continuing the energy conversation later in the show. we discuss the role renewables have to play with morten dyrholm , svp marketing & communications, vestas wind systems. do not miss our special half our coverage on the power crunch at 9:30 u.k. time. boston chief fed, eric rosengren, and dallas'robert kaplan have separately announced plans to step down. the sudden announcements come after revelations of stock trading during the pandemic. that removes two more of the hawkish officials when the fed is grappling with tapering. joining us now -- what should we be reading into these resignations? how significant are they for the makeup of the fed? >> the significance of the short
3:07 am
to medium-term in terms of setting monetary policy is negligible. jay powell made it clear last week when he used the word soon, which is code for the next fomc meeting that the taper would begin and it would be over mid next year. that is a slightly more aggressive taper than in 2013-2014. the real battle as a consequence of the departures is a battle between the center and many of the doves. they set policy but hope that this is an opportunity to put them in their place. they are unlikely to miss it. francine: how do they put them
3:08 am
in place? daniel: this will likely lead to more board of governor oversight over the boards of the district fed banks which are comprised of local bankers local prominent executives, local nonprofit groups. the board of governors will lean on them to make sure everything is not just on the up and up, but seen on the up and up. they will lean on the district banks to ensure there is more diversity among the candidates for bank presidents. we might see a slight change in the political complexion and policy leanings of those folks as well. the district banks are in the doghouse, make no mistake about it. they have long been a source of
3:09 am
frustration. it is time to clean shop a little bit. francine: thank you so much. let's get back to dr. nannette hechler-fayd'herbe, global head of economics & research, credit suisse. we had these disclosures, two fed presidents have left. is the fed inching towards raising rates sooner than the market thinks? dr. hechler-fayd'herbe: the fed has certainly shown the dot plots, how they have handout. that is half the members of the fomc are seeing potential rate increases next year rather than in the first half of 2023. any change that is moving toward more of those leaning members of
3:10 am
the fomc will continue fueling the market in terms of expectations about a forthcoming change in monetary policy. francine: thank you so much, dr. nannette hechler-fayd'herbe, global head of economics & research, credit suisse. she stays with us, and we will talk about the energy crisis. tom: record prices across the board in europe today and here in the u.k., the military lined up to deal with the pressures. how does that factor into the fed thinking will be a question. coming up, live in berlin as olaf scholz appeals to the greens for a three-way coalition. more on germany, next. this is bloomberg.
3:11 am
3:12 am
3:13 am
tom: welcome back to the open. we are 13 minutes into the european trading day. across the stoxx 600, losses of 0.4%. just into the green is the
3:14 am
spanish ibex. the ftse 100 is essentially flat. euro-dollar a little softer. let's get the business flash. >> offer price of 350 pence per share in its london ipo. that gives the group the valuation of 4 billion pounds. investor appetite brought strong with surging more than 25% on its recent trading debut. ev maker giving it a valuation of $20 billion. the company backed by volvo plans to spend $1 billion bringing three models to market in the next three years. volvo announced it will invest $600 million more giving it close to a 50% holding.
3:15 am
ford will construct three battery factories and assembly plants for electric pickup trucks. two giant sites in tennessee and kentucky will be the biggest investment in the automaker's history and employ 11,000 workers. the tennessee plant will occupy six square miles. that is the bloomberg business flash. francine: let's get the latest from germany. olaf scholz in the social democrats claimed a narrow victory. he is appealing to the greens to back a coalition. do we have a line on who wants to be the minister for the greens? how far along are we in these
3:16 am
negotiations? maria: yes, it is early days but it is coming clear the focus is on the spd led traffic lights coalition. olaf scholz was optimistic, saying he believes the talks will be successful and there will be a government before christmas. in terms of the distribution of the district ministries, a type of government we have not seen in recent german history, that is unclear but we are getting what the government could look like. having a big say on the economic agenda is crucial. christian lindner carries a lot of leverage. in the past he was very clear he wanted the finance minister or the budget minister. when it comes to the greens there is speculation about
3:17 am
whether the leader of the green party could be part of a traffic light coalition. what is interesting going into the talks is that the greens have agreed that before they sit with olaf scholz, they want bilateral talks to set up the common agenda, and then go to the negotiating table. tom: bloomberg's maria tadeo breaking down the possible coalition scenarios. let's get back to dr. nannette hechler-fayd'herbe, global head of economics & research, credit suisse. we know this is the consensus there will be more spending whoever forms whatever coalition. it looks now like olaf scholz will be leading that coalition. we will see more spending.
3:18 am
that is the consensus. who will see the biggest benefit from this? dr. hechler-fayd'herbe: so far the greens are a central part of the coalition. all the sectors that benefit from increased spending that is focused on specifically green policies. renewables continue to be front and center in those sectors. but then also when you think about spending, infrastructure related sectors come to the fore. increased government spending also supports consumption. those sectors are likely to see the benefits a bit faster with growth in germany going forward. francine: how do you play the
3:19 am
renewable space? you hear of some of the components of lithium and cobalt needed. is that another way of getting into it? dr. hechler-fayd'herbe: our approach has been to put our arms around what decarbonization means. when you think about transportation, there is the electrification and all the supply chain that is part of it. when you think about power generation, which is the other area leading to a lot of greenhouse gas emissions and therefore gains in energy footprints, there is not only the renewables in terms of sources of electricity but also
3:20 am
some of the other sources in the resilience of the grid. we have seen in the current energy crisis that electricity producers happen to benefit. it is additional source of diversifying electricity. tom: how are you thinking about the drag on the german economy from the slowdown in china? dr. hechler-fayd'herbe: the german economy is export oriented. it has been one of those economies closely linked to the chinese business cycle. what is happening at the moment mitigates these effects. when you consider the euro against the u.s. dollar. it has lost a little strength. for the german exports sector, this is help.
3:21 am
it is critical what the rest of the trading partners in europe are doing. trade is most of within europe. germany through its exports sector has a link to china and the business cycle and how monitory authorities in the government in china will continue supporting the chinese business cycle. then a number of mitigating factors. we are positive on the german economy and the german equity market. francine: you have important reports on women in the work place. and the effect the pandemic has had on gender diversity. what is the most significant thing you are seeing that could
3:22 am
impact the value of investments? dr. hechler-fayd'herbe: for women, the most important thing to realize is this is an investor group that is exposed to fixed-income. this is the most prevalent asset class. we have been speaking about the increase of yields. reviewing that in the light of the new episode ahead of us is critical. and making sure they are sufficiently exposed to equities as a sort of capital growth. it is critical, women are coming back from a timing covid where they have drop out of the labor force entirely, or some of them face unemployment. volatility in income in a range of countries is the reality for many women. it is critical women can benefit
3:23 am
with no further lockdowns. we can come back to the labor market. they can benefit from large scale which is important for women. or with the objective that they can close the pension gap that exists for many of them. and they can invest on top of saving. francine: thank you so much, dr. nannette hechler-fayd'herbe, global head of economics & research, credit suisse. coming up, a look at stocks on the move this morning, including oil. this is bloomberg. ♪
3:24 am
3:25 am
3:26 am
tom: welcome back into the open. at 26 minutes into the european trading day. across the stoxx 600, losses of 0.8%. shell gaining 2.4% on the back of energy prices, $80 per barrel. totale, gains of 2%. morgan stanley is cutting its rating to underweight for this
3:27 am
technology company, falling more than 8% in the first 26 minutes. those are stocks to watch, we will have an update on the sectors across the board in about five minutes, after the break. this is bloomberg. ♪
3:28 am
3:29 am
3:30 am
francine: welcome back to the open. here are your top stories. fed resignations, robert kaplan and eric rosengren step down within hours of each other after stock trading opportunities. the u.k. has its military ready to alleviate the worsening fuel crisis. u.k. power prices hit record highs. olaf scholz declares victory in the german election. armin laschet says a deal will be struck by the end of the
3:31 am
year. markets not looking as good as an hour ago. pressure to the downside. tom: the central banks seem to be -- investors seem to be pricing in earlier rate hikes from the central banks. we will hear from jay powell later today, as well as christine lagarde. record prices across carbon and gas across europe. the u.k. will have to potentially lean on the military to alleviate shortages with petrol. stoxx 600 down by 0.4%. the dax is lower 0.7%. red across the screen. futures pointing to the upside. the yield story playing out with energy. energy is gaining. bottom of the list, technology.
3:32 am
we saw that clear rotation yesterday as the small caps gained at the close, but it was technology that posted 0.8%. you see that mirrored in today's trading session in europe. this is the state of play. francine: the pandemic has thrown the world of logistics into a tailspin, with lengthy delays and shortages. it is putting pressure on transportation hubs, including los angeles. it is grappling with record backlogs. ed ludlow reports. >> there are more than 60 container ships at san pedro at the port of los angeles. it handles around 30% of exports. there are a number of reasons for the backlog.
3:33 am
they cannot get the containers off the ships quick enough. downstream we see delays at key u.s. rail terminals. the question is what to do in the short term. hiring more truck drivers could be a solution. longer-term they want more investment from the u.s. government. >> the infrastructure has been a topic of discussion for some time. over the last decade, the government and congress has out invested at the rate of 11:1. $11 billion to the u.s. east coast compared to one billion to the west coast. >> the global supply chain is under pressure. china is home to seven of the 10 biggest ports. policymakers are not afraid to shut down ports to stop the spread of the delta variant.
3:34 am
rates between asia and europe skyrocket in 2021. the next big question, when does the global supply chain troubles end? this could be a matter of quarters and not months. >> in the international markets you are looking at through february, march before anything will change. i think it will go long after that, getting the backlog resolved. >> there is an element of seasonality. demand is surging because e-commerce giants in north america and europe are restocking ahead of the holiday season. they do not want to be caught in a situation with shelves empty at christmas. the question going into a busy earnings season is how much impact that could have on the bottom line, and when will it be resolved?
3:35 am
tom: the latest supply chain threat comes from the energy market, energy prices at a seven-year high in the u.s. options added momentum to a rally fueled by escalating concerns about tight winter supplies. brent topping $80 per barrel with demand running ahead of supply. joining us now is morten dyrholm , svp marketing & communications, vestas wind systems. thank you for joining us. how much damage is being done to your industry and the sales pitch you and investors make given the intermittency of wind power, and the lack of reliability? morten: thank you for having me. you talk about intermittent, the
3:36 am
real discussion is about volatility in fossil fuels. you see what gas prices are doing to the economy. it should be a wake-up call to speed up to a fully sustainable economy. i do not think it is fair to talk about intermittency of wind but volatility of gas markets. that is the problem here. we understand -- francine: we understand but here in the u.k. i have been looking at the weather to see if there is wind in a country that is always windy. that helps with our renewable energy. how can it be more stable going forward? morten: we need to speed up the pace of getting wind turbines in the ground. i think that is the first point.
3:37 am
we need to speed up the transition of renewables. that is a more flexible energy market. let's get more storage and electrification and grade buildout. there are a number of items we can do. it is a matter of political will. that is within our reach. tom: you have had success in russia recently. what is the demand picture toward the year-end. morten: orders will be announced when they come in, but we are seeing strong volume, and we are happy with the pace. francine: how has the run-up to steal prices infected you? -- steel prices infected you?
3:38 am
morten: like every company, we are working everything we can and as fast as we can to mitigate those challenges. it is difficult for everyone now. i see what is happening is a wake-up call. this situation is showing how dependent we are on volatile fossil fuels. we have to break that independence and fast. now is the time to speed up investment in renewables and all the other things we know will help break this vicious cycle. francine: so many people say because of the intermittency of the renewables, what needs to happen. if you study what happened in
3:39 am
the u.k. the last two months, what do you do so it does not happen again? should fuel be paired? morten: it is a number of those things. it is a matter of getting a mix of different renewable technologies, making sure we have enough storage capacity. looking how we can transform renewables into green fuels like ammonia and other items. it is a matter of applying that technology at scale. right now the way we operate in energy markets is around a fossil fuels system. we need more flexibility and a better way of deploying across the economy. francine: thank you so much for joining us, morten dyrholm, svp
3:40 am
marketing & communications, vestas wind systems. later this morning we discussed the price of power and a half-hour special. we will talk about the transition and the flow of wind output. that is that 9:30 a.m. on bloomberg tv, twitter, youtube. also tomorrow our exclusive conversation with the totale ceo. tom: coming up, ongoing supply chain problems. what is the political fallout in the u.k. as a result? this is bloomberg. ♪
3:41 am
3:42 am
3:43 am
tom: welcome back to the open. of 43 minutes into the trading day and a loss of 1% across the stoxx 600. the cac quarante is down more than 1%. in the u.k., 0.4%. the u.s. 10-year yield, 1.53. laura: two regional fed presidents are retiring following an embarrassing
3:44 am
revelations of stock trading last year. robert kaplan has joined eric rosengren in early retirement. both have been under scrutiny after trading last year. kaplan said the recent focus on his financial disclosures risks becoming a distraction. olaf scholz is calling on potential partners to join him in a new government as soon as possible. he appealed to the greens and pro business free democrats to back a three way coalition. armin laschet says he will try to forge a majority. allies say it cannot happen with a second-place finish. a trade meeting between the u.s. and eu will be narrower in scope. a joint statement said they are up in the air. france would not agree to the draft conclusion.
3:45 am
facebook has halted plans for a special instagram platform for children under 13 after critics said it would be harmful. the social media giant said children were lying about their age to join instagram. facebook says it has not abandoned the idea but it is taking time to consult with experts. 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. francine: instagram is facing a huge backlash. my kids will definitely not be on into graham. tom: francine lacqua is very big on instagram. kids are using it anyway, so they say to carve it up.
3:46 am
they face a lot of criticism about its handling of content. francine: some surveys are terrible about how instagram makes teenage girls feel about their bodies. the u.k. has officially put the military on standby to help deliver supplies to gas stations to curb a petrol crisis. the crisis comes as the opposition labor party gears up for a snap election before voters feel the impact of johnson's 1.5% tax hike. i have a million questions. first of all, what is the government doing? how worried are they about the fuel shortage? >> the government has rolled out emergency measures the past few days.
3:47 am
the government had been holding firm that supermarkets needed to pay truck drivers more. they have ramped up driving test to get more truck drivers, and they relaxed competition rules. that is a big step. it has only been used for coronavirus reasons. it's now we have army drivers on standby. half of them could be ready in coming days. tom: it seems like a desperate move. is there anything else to
3:48 am
alleviate these pressures? >> they have not yet deployed the military. they do not think they will have to ultimately. they think this will calm down in the next few days. people have filled their tanks and do not have many places to store gasoline. in terms of other tools at their disposal. the main one laugh given the government blames this on the shortage of drivers rather than fuel, the main one left they have is the relaxation of drivers hours. the government has been saying there is no shortage of fuel, and the fuel suppliers are saying that too. drivers cannot get the fuel from
3:49 am
where it is to where it is needed. francine: there has been punchy language from the public and media saying the government could have dealt with this weeks ago. will people hold the government to account, or is there an assumption they did the best they could to deal with it? >> tom: we have lost the line. alex broke down what tools are at the government disposal. some say fair criticism is lined up and how the government did not respond quicker to this.
3:50 am
francine: it is incredible the eu and u.k. are in this position. we will have a full roundup of all of this with our great panelists at 9:30. coming up, how sustainable is the rising treasury yield? we discussed that, next. this is bloomberg. ♪
3:51 am
3:52 am
3:53 am
francine: welcome back to the open. 52 minutes into the trading day that started off of a nice day of gains that has turned into a day of losses. the focus is on what the fed does, and on the supply crunch. it seems to be getting worse, sending energy prices to a record high and europe. we get opec's world oil outlook. christine lagarde gives an introductory speech. jay powell will testify before the u.s. senate committee on banking, housing, and urban affairs. tom: later in the afternoon,
3:54 am
u.s. commerce secretary will speak at an economic club outlining her vision to increase america's competitiveness. joining us now is ven ram from our markets live team. we are seeing tech selling off, the energy space and utilities gaining. we are seeing losses. how is the positioning playing with how this is folding into market action now and the days ahead. ven: we are seeing a big spike on the back of the energy crunch. we have moved about 20 basis points since the fed meeting, the direction is right from a conceptual and logical standpoint. what we really need is a
3:55 am
sustained move higher for the selloff to gain traction. the 10-year yield was 15 basis points. we are now around -83 basis points. even during the rut that this selloff that we saw, we only made it to -60 basis points. it comes down to whether we will get the rates anytime soon, but i am not holding my breath. that will be the key. francine: give us a sense of the timeline of what you are expecting from the dead? does that change at all with these resignations? ven: it changes quite a lot. with rosengren stepping down, he was one of the more hawkish members. he was going to be a voting member next year.
3:56 am
the markets will be keen to know if his replacement will be a dove or a hawk. we also have terms ending soon, and there is no clarity on whether jay powell will be reappointed. we have musical chairs going on at the fed, which means we need to take the ambitious dot plot with a huge pinch of salt. tom: thank you very much, ven ram. francine: it will be inched into see who replaces them. the treasury yield move will have an impact on stocks going forward but i'm not sure how the energy crisis plays out.
3:57 am
do we go into the winter of 2022 in the same situation? tom: do not forget the focus on the labor market. jay powell said yesterday it is not fully repaired. francine: that is it for the european market open. "surveillance: early edition" is next. ♪
3:58 am
3:59 am
4:00 am
>> i think it is clear we have made progress on our inflation goal. >> employment short of the mark for progress, but progress continues and it may soon meet that mark. pres. biden: this is a pandemic of the unvaccinated. i moving forward with vaccination requirements wherever i can. >> this is "bloomberg surveillance: early edition" with francine lacqua. francine: good morning and welcome to "bloomberg surveillance: early edition."


info Stream Only

Uploaded by TV Archive on