tv Bloomberg Markets European Open Bloomberg October 4, 2021 2:00am-4:00am EDT
said to have guaranteed a bond that just matured. electricity and gas prices surged more than 1000% from spring 2020 lows. boris johnson says britain must adapt amid fuel shortages. it will be a hot topic at the tory party conference today and we will be speaking to them on this program. we are one hour away from the start of cash equity trading here in europe and this is what the futures are telling us. the focus is on inflationary pressures. we hear the word stagflation more and more. you could see a repricing of certain asset classes but like we see in the last two weeks, every time there was a dip or small correction in equities, there was always an excuse for investors in the rest of buy the dip. futures for the moment in europe practically unchanged and you can see also similar patterns for the ftse on the dax. a lot will have to do with what we are seeing with opec. evergrande, what happens there is giving us an indication of whether we see appetite from investors or not. in the u.s., you are seeing pressures from the nasdaq futures. we talk about that shortly.
the nasdaq down 0.4%. what do you have? dani: looking to gmm, this global picture, it is that stagflation narrative. it is one we would need to keep our eye on top of pure moving away from this reflation to the stagflationary picture. we are seeing some equity indexes. china is closed on a holiday. the nikkei down more than 1%. those evergrande pears filtering through the market. over on the sovereign bond column, you look at the 30 year up more than 1.5 basis points, you look at the 30 year in japan, also up a similar amount. we have seen duration take a hit in the past week and past trading session. we definitely have people selling out of the long bond positions. the nasdaq picture is all about cutting your duration exposure. with that in mind, let's check in on top stories today. first, evergrande. it is facing its next big test.
and maturing bond. this shares were suspended in hong kong. that follows a report that hobson development would develop a stake in the latter unit. sophia joins us now. what is the latest here? china looking to -- the company. sophia: it is all about keeping risk very limited to evergrande and presenting that from spilling over to the property market and to the economy. what we do know this morning, there's a little bit of excitement around that -- evergrande, throughout the whole debt saga we have seen in the past few months, has never halted its shares. they have always had continuous trading. a shareholder means big news. what local media, the financial news platform, they reported this other company, little but also based where evergrande is
based. it is preparing to buy a stake in the properties services unit and that would raise 5 billion u.s. dollars for evergrande. still spare change when you consider evergrande has $300 billion in liabilities. it is moving in the right direction, as it were. francine: thank you so much. another top story this morning, energy. supply shortages. rising costs are threatening to derail europe's recovery as it reopens after the pandemic. it will take center stage today when finance ministers me in luxembourg. maria, how big a concern is this for europe, especially as energy demand is picking up? will we see further caps on prices? maria: when the finance ministers meet in russell, they have two competing narratives. this is an economy that was gaining momentum and picking up
before the start of september but that of course, we have had energy prices kicking in and jumping from record to record. yesterday and especially last week. have seen every benchmark for european energy prices jump to a record highs so this is a concern in terms of what it could do to the european recovery and it is also a concern in terms of how much this could feed into the inflation conversation that has huge ramifications for the european central bank and monetary policy. of course, you have the third elements that are equally important. how much of this will eventually feed into households? for european governments, this is a serious concern. they fear that perhaps they could see some social unrest going into the winter if consumers start to feel the heat in terms of those sales. francine: maria, thanks so much, up all morning in luxembourg for us, maria tadeo. to the u.s., where house democrats are trying to break a stalemate holding up a vote on a stalemate for new spending on
infrastructure. it is supposed to be a major component of president joe biden's economic agenda. pres. biden: we are going to get this done. it doesn't matter wet and. it doesn't matter whether it is six minutes, six days, or six weeks. we are going to get it done. maria: let's get more with bruce einhorn. any signs here of progress in these negotiations? bruce: the president is trying to reset expectations about how long this whole process is going to take. we know that house speaker nancy pelosi is hoping to have a vote by the end of the month. on the infrastructure bill. in addition to that, there is the big 3.5 trillion dollar bill on health care, education, childcare, climate, and that is where the negotiations are currently. $3.5 billion -- $3.5 trillion, excuse me -- is what it is at
the moment. senator joe manchin, key vote in the senate, has said it has to be $1.5 trillion. the head of the house progressive caucus said $1.5 trillion is too low. that's where we are. aoc, she is a leading progressive in the house, and she was on one of the sunday talk shows saying there might be a way we could figure out how to reduce the cost. instead of having some of these programs go for the full 10 years of the bill, we can only have it go for five years. and then you are reducing the cost significantly. there's other ways of getting money, getting the cost down. there is a limit to what they are willing to do. they cut back on the spending on climate. back and forth, it will be a while before this all gets resolved. francine: thank you so much,
bruce einhorn with the latest on u.s. politics pick coming up, we will be joined by the head of the cbi from the tory party conference. this comes as boris johnson tells the u.k. we will have to adapt to higher prices. plus, we discussed the biggest risks heading into the final quarter of the year with our guests, charlotte, cohead of investments. of next, if you have any questions for any of our guests, please send them through on ib+tv . this is bloomberg. ♪
very unlikely they can get to that target. they will not be revising the target up yet again. inflation is a global issue. but i call them stagflationary wins because they need not result in a stagflationary trap if you get the policy adjustment. francine: how big a risk is stagflation as we head into the final stretch of the year? joining us now is charlotte, cohead of investment. thank you for joining us. we talk about inflation and possibly rapid inflation with low to no growth. what are the policies in place that central bank can do to avoid that --thanks can do to avoid that? -- central banks can do to avoid that? charlotte: a lot of it relates to the reopening of the economy and a lot of those changes will begin --
the direction of policy is going to be for some increase in interest rates, particularly for equity markets in terms of having had strong evaluations over the last 10 years. it will be more challenging. in terms of where people invest, that focus is on companies which can grow through a difficult environment. i think it is not the place to be. >> when it comes to value, we had warnings last week. there are value traps in this market. when you are looking at a rotation into value, is it value wholesale or are those areas you want to target this morning, coming from kathy wood? charlotte: i think for us, you
know, we have structural headwinds which are not going to be going away. there are obvious areas. we want to be cautious because if we do -- that will make it difficult for those companies. we would remain over long-term and cautious on the commodities markets. for us, all in all, it is the long-term picture. that will be the focus. stranded assets there. there is spare capacity. whether it be from opec or the u.s.. iron ore prices are down 40% from their highs so you have a lot of actual strength in commodity prices. francine: charlotte, how do you
actually play china? i know you are invested in stocks that have exposure in china. what does it mean for how you look at regulation in china to actually change into another industry? charlotte: i think for us, investing directly in china is something we have been cautious of. and the efforts that happen this year, i think we are focused on investors saying this is not an economy like the west. when the chinese government decides it's going to attack an industry, it can do that with a velocity and speed you would not see in western markets and that raises that caution but over the long-term, you know, this is a vast consumer market and the second largest economy in the world. you have a rising middle class and those people are -- they have already spent on things. more basic areas, things like yum! china, restaurants
expanding across china. we think that there are interesting areas. francine: if that is the long-term year, if i can take you to the medium-term review, more strategists are downgrading their chinese growth prospects and along with those calls, we have had bank of america saying if china growth is slimmer, it means multinational companies are also going to see their growth diminished. does a slowing growth picture in china change the attractiveness of some of these big large western companies as well? charlotte: if you are going to slow down, it will probably be hitting more into areas like properties, commodities areas. caution for the idea that we are moving into a super cycle for commodities. you probably will not have quite the rampant growth we have seen before. the right names, the most
desirable games, it produces a reasonable degree of growth. francine: we have much more to cover with you. charlotte ryland, cohead of investments. let's get to the bloomberg first word news with juliette saly. juliette: shares in china evergrande and the property unit have been suspended in hong kong as the firm edges closer to a massive restructuring. beijing stepped up efforts to limit the fallout of the firm cost difficulties. its willingness to prop up healthy developers, homeowners, and the real estate market, but it is showing little interest in a direct bailout of the developer. new covid vaccines will be needed next year according to the head of vaccine maker biontech. speaking to the financial times, a new formula will be likely needed by mid-2022 to protect against future mutations of the virus. he is warning new strains may emerge that could evade booster shots and the body's immune response.
rodrigo duterte says he is retiring from politics and will not be seeking the vice presidency in 2022. prior to the 2016 election, dutere also said he was retiring. he ultimately ran for president and won. the list of presidential contenders will not be finalized until mid-november. a massive document make has revealed how world leaders and the superrich hide money in offshore accounts. the international consortium of investigative journalists has dubbed the 12 million files the pandora papers and they say beneficiaries of secret accounts include king abdullah, tony blair, and a former associate of vladimir putin. 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. >> thank you so much at this is what markets are telling us. we are about 40 minutes away from the european market open.
equity futures are starting the week on the back foot. partly, it is because investors are worried about stagflation and monitoring the situation at china evergrande. unclear exactly how that gets resolved. dollar study for the last few sessions, looking at them fluctuating as well. everything including the kitchen sink. chancellor rishi sunak of the u.k. says the government -- help people find jobs. we will discuss the u.k. economy, next. this is bloomberg. ♪
>> and that is part of the plan. >> and yes, there will be a period of adjustment, but that is i think what we need to see. >> boris johnson in a contentious interview this weekend on the andrew marshall. -- show. the nation faces a dual crisis, born of the energy woes and supply chain shortage catalyzed by brexit, the pandemic, and the resulting lack of labor. as the people of britain become familiar with empty shells, expensive energy bills, and lines snaking around the corner, how are investors looking at the country? the cohead of investments is still with us, charlotte ryland. in a post-brexit world, do we need to treat british assets different than those of europe? i'm wondering if the most recent developments with the energy shortage, especially acutely hitting the u.k. in terms of lower driver shortages, if that -- lorry driver shortages, if
that leads you to separate them from the rest of europe? charlotte: you invest globally. there is a top-down sector in terms of individual countries. brexit is going to continue to be a problem for the u.k. in terms of adjusting itself, in terms of getting goods in easily in terms of getting labor across that we need. i think, you know, you can blame it all on brexit. there is also to a degree some ms within relation to covid in terms of them getting their driver's licenses through and getting the system working so part of it is going to be covid. as we see the furlough scheme unwind, which is happening now, that will release some onto the market and relieve some of the shortages but it is going to continue to make it more difficult tapering. >> at the end of the day, what does this economy become in for five years? we don't exactly -- four or five
years? there is the nuclear option and the e.u. will probably want revenge when it comes to clearinghouses and the like. how difficult is it to see what this country will become in five years? charlotte: i think, you know, we don't want to be too depressed about the u.k. there are still areas of innovation within the u.k., like cambridge science, producing health care, technology. there are investments towards those areas. it remains probably not the most interesting economy. the u.s. is a much more dynamic and interesting place to find investments. there are always one or two names within the u.k. that would be quite interesting. >> i like the way you are describing it. one thing that i personally find interesting that is taking place is the behavior of some of these assets. if we look at what the pound is
doing, cable rate versus the dollar, it has been dropping pretty dramatically. at the same time, yields continue to pick up. this has brought adam cole over to rbc to say that the pound is trading like an emerging market currency. what do you make of the relationship between these two assets? charlotte: it is hard to perceive the emerging market economy. it was quite interesting. as we came out, the crisis started to strengthen quite significantly. a beneficiary of growth picking up. this inflation is more of an issue. you can see that beginning to impact on sterling. the bank of england is making noises that they will begin to step in if they do continue to see issues become bigger. these inflationary shocks are transitory -- the gas price, you expect them to move into next year, to ease off.
therefore, that inflation pressure will disappear. >> out of everything right now, what is your number one investment tips? charlotte: [laughter] i think we would be looking at some of the beneficial reopening's. the economy -- you see travel again. so if you can find some values from areas whether that be hotels, whether that be companies -- global industry. why are they looking reasonably interesting question marc -- interesting? >> thank you. charlotte ryland, investment management cohead of investments to francine, i was looking at the pound, basically unchanged. i think it's interesting to look at where the pound keeps underperforming at its lowest since january and this comes in the middle of a tory party conference so it's a really big
question about the economy from a global station, the fuel crisis. francine: it is amazing how the brexit debate has come back to the forefront because the party and the prime minister keeps on saying that there is a shortage. it is not necessarily because of brexit. look at the numbers and say there is a shortage of drivers because they went back to the e.u. it has a political layer and that kind of i guess in flames the hearts of the remainders and brexiteers. we have gone past it. dani: telegraph reporting this morning that they could look at throwing out the northern ireland protocol and that might come in the form of a speech from david frost at the conference today. we are talking about political risks and they might increase here. francine: this might be the nuclear option. ready to fight back in some way or another. jobs aid on its way. the country faces the cost of
francine: welcome back to the open. the focus is on evergrande and possible inflation. the u.k. chancellor is set to unveil a jobs plan as the country braces for a tough winter. the government faces concerns over fuel shortages in a cost-of-living crisis. the conservative party holds its annual conference. we will go live to the tory
conference in manchester, where tom mackenzie is standing by with a special guest. good morning, tom. tom: good morning, francine. it is the first conservative party conference since 2019. last year's was canceled as a result of the pandemic. voters across the country talking about the constraints, the second weeks of the fuel crisis and the shortages at the petrol pump, and the impact on households as a result of that. i am pleased to say i am joined by the president of the confederation for british industry, who can give us those insights into the impacts of the corporate and business level of some of those inflationary pressures. some of this is down to supply chain, some down to the shortages in labor. i will start by asking for your reaction to prime minister's statement over the weekend to the bbc that these adjustments
are post-brexit adjustments. he pushed back on the idea that there would be a further loosening of restrictions to allow more workers in. i know you have been vocal about the opportunity to attract workers. what is your reaction to the prime minister's comments? guest: we are in a position that is so challenging globally, in the u.k. in particular. we not only got 18 months of the global pandemic that we are now coming out of, but we also had brexit, which took a most five years to resolve, and we are having to adjust to it. there is an adjustment required because for decades we had access to free movement between 28 countries. suddenly, you don't have that free movement anymore when it comes to the lori drivers. there is a shortage of about 1400 because of that. you cannot blame brexit for everything. there is a small reason for the
brexit effect, but there is the pandemic affect. for the lorry drivers, we have licenses pending. if we could fast start those, that would get more drivers on the road. the most important thing now is to adjust to the short term because the long-term we will adjust to. what we need now is the short term. tom: what are the priorities for you? guest: the government clearly said when the economy needs it, we will have a shortage list. in desperate times, when we need not just lorry drivers, it is across the board that there are labor shortages. if we can address them from a temporary point of view, that would help. in the long term, cbi estimated nine out of 10 people have to rescale over the next 10 years at a cost of about 130 billion pounds. the good news is the chancellor
has just announced the 500 million pound budget for rescaling, including using job centers. tom: is it enough? guest: it is a good start. i was on the national employment panel going back many years and i have seen how effective it can be. we have one million people coming off of furlough. the furlough scheme was brilliant. the government has done a lot to save jobs. that is why the unemployment rate is less than 5%. tom: do you expect that those workers who have been supported by the furlough scheme that ended at the end of last month that those workers will come back into the workforce and ease some of these labor shortages? guest: yes, but there are shortage numbers that very. some say one million vacancies. can there be an adjustment and
rescaling? i think it is possible. we still will have that shortage, and that is where we need to be careful because this recovery, the imf chief economist, he said, you have a fantastic vaccination program. companies like yours should have a v-shaped bounceback recovery. that is what we thought in may. now look at the recovery. it is very fragile because of all those issues, the energy crisis, labor shortages, inflation. we have to be careful. government and business have to work collaboratively together. that is what got us through this pandemic. all that was government and business working together. tom: the energy crisis is not unique to the u.k., but what is the pressure being exacted, the toll being exacted on your members by these record high energy prices? guest: the energy price is a
global issue. it has gone up six fold since january. that is not under our control. there are certain things under our control, but that is not, and the effect has been huge. the disruption caused by the fuel shortages has been enormous. in our own business, we have not been able to get deliveries through. what people are worried about is food shortages and we have to avoid that as much as possible. the hospitality industry, they are doing the right thing. they have formed a task force, government and business working together. we at the cbi said we should have a task force right now so we can work together day by day to deal with these really challenging issues. tom: are your members able to absorb the cost? inflation is running at a nine year high. there are management companies saying they forecast inflation as high as 6% next year. our company is able to absorb the cost and the impacts? guest: in some cases, freight
has gone up 10 times. to absorb freight rates going up 10 times, it is very difficult. inflation is predicted by the bank of england to go up to 4.5%. the prediction is this is about adjusting to coming out of a pandemic and it should go down to 2% by the middle of next year. the worry would be if inflation persists. the worst thing you would want is stagflation. many have the prospect of interest rates go up. the most impertinent the government has to do is encourage investments. we have a super deduction that the chancellor announced. what we have got to do is create growth with great jobs, which will pay the taxes, which will pay down the debt. the worst thing to do is put out taxes. tom: you have made the point about taxes. this increase will kick in next year to pay for the nhs and
social care. there is a debate going on as to whether or not the conservative party should raise taxes further as they look to level up that mantra, particularly in the north of england. there is, some would argue, and need to do that, given the spending that was triggered to reduce some of the impacts of the pandemic. guest: we have had a situation over the last 18 months that has been a global crisis. the last time we had a crisis of that magnitude was probably the second world war. at the end of the second world war, debt to gdp when up to 250%. we are about at 100%. it took until 1962 to come down to 100%. three have been nowhere near 250%. these are desperate times that have needed desperate measures. we need to make sure we do not stifle the recovery. businesses have suffered so much. we need all the help we can get, and government is brilliant.
we need to make sure we come out of this with growth. tom: are you confident they will not raise taxes further? guest: we have always said this is the wrong time to raise taxes. tax rises have been announced, and we hope there will be no more tax rises. we want to growth in investment. tom: president of the cbi, a successful businessman in his own right. thank you very much. back to you, francine. francine: we will have plenty more from tom mackenzie in manchester. we will also hear from another guest shortly. let's get through to the bloomberg business flash. here's juliette saly. juliette: tesla has seen a record new quarter with better than expected 241,000 deliveries worldwide. analysts call it an eye-popping number. deliveries is one of the most-watched indicators, and is seen as a barometer of consumer demand.
a whistleblower at facebook has accused the social network of putting profit ahead of the well-being of users. thousands of internal documents were sent to u.s. lawmakers and "the wall street journal." the product manager gave their first public comments to "60 minutes." >> someone else might have just quit and moved on, and i wonder why you take this stand? >> imagine you know what is going on at facebook and you know nobody on the outside knows. i knew what my future looks like as i continued to stay inside of facebook, which is person after person after person has tackled this inside of facebook and ground themselves into the ground. juliette: jamie dimon has ended up defending his payment again. the ceo gave an interview to axios. he said the board decides what he makes, saying it is part of a broader package used to retain senior management. he was paid $31.5 million for 2020.
we also focus on evergrande in china. on tuesday, french industrial output numbers are out. wednesday, it is russian cpi. data could determine the size of the next interest rate hike. dani: thursday, we have the minutes from the last ecb meeting on the decision to scale back the bond buying program as the economy recovers. friday, it is the u.s. jobs data. the latest figures on nonfarm payroll. let's focus in on the energy crisis, which francine mentioned. it has been gripping the globe. you have both china and europe struggling to secure supplies. let's get to our energy reporter, who joins us now. helen, what is going on with china's energy consumption? how acute is this push to do it at all costs? reporter: it really is acute indeed. china's energy consumption has surged recently, and that is
basically because the industrial output has increased as it has come out of the pandemic. what is happening is it cannot get enough coal. it is paying sky high prices for natural gas. what it is doing is impacting the rest of the world and increasing, petition for the rest of those. it is exacerbating an existing crisis in europe with gas and power prices. they have been surging toward record after record, and that is something analysts expect is likely to keep continuing. francine: how does it play out? what does it take for these gas prices to stabilize? reporter: essentially, we will need more supply available, and there's a combination of factors impacting that at the moment. also, historically low storage numbers are not helping. analysts estimate that europe's at a decade low at the moment,
which is catastrophic. what is likely to happen as well is what we call fuel switching. essentially, sky high prices will encourage suppliers to look for alternatives as sources of fuel, and that directly relates to oil. dani: oil moving higher because of this fuel switch. we have opec-plus meeting today. how does this dynamic affect what they are likely to announce in terms of raising oil production? reporter: you might be thinking, what does gas have to do with oil? but essentially, as i mentioned, if oil demand increases, because competition for those new fuels wreps up, -- wraps up, feelers will pay the high prices -- fuelers will pay those high prices. what is interesting is whether opec continues to raise
output, or it starts buckling under pressure from the white house and other voices to increase that. francine: helen robertson, our energy reporter, on the very latest on opec-plus gas prices around the world. let's get straight to the bloomberg first word news with juliette saly. juliette: a massive document leak has revealed how world leaders and the superrich hide money in offshore accounts. a national consortium of international journalists have dubbed the 12 million files the pandora papers. they say beneficiaries of secret accounts include jordan's king abdullah, former prime minister tony blair, and associates of vladimir putin. >> this is a different leak from what we have seen before because in the case of the panama papers, they focused on one offshore provider in panama. in this case, we have
information coming from 14 different service providers and law firms around the world. this investigation really tells us how the system works, and it is not just about how one company operates, but how offshore finance works across borders. juliette: house progressives looking for ways to rescue president biden's agenda is looking for ways to scale back spending. a bill was delayed after progressives balked at a standalone infrastructure bill without 3.5 trillion dollars in social spending and tax increases. >> one of the ideas that is out there is fully fund what we can fully fund, but maybe instead of doing it for 10 years, we only find it for five years. juliette: covid vaccines will be needed next year. that is according to the head of beyond tech speaking -- of by on tack -- biontech.
they say it will be needed to protect against future mutations of the virus. he warns that new strains could emerge that evade booster shots and the body's immune response. 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. danny? dani: juliette saly, thank you. a quick check on what these european futures are doing because as we get closer to the market open we are seeing them dip further into the red. you are looking at dax futures underperforming, down 0.3%, compared to 0.1% for the u.k. market. i should note as well, the german breakevens are moving higher this morning. they are up about 0.2% at 1.7. we have that inflationary concerns weighing on germany. that could result in these lower equity indexes. what will be the inflect of -- the impact of stagflation on these european indexes? we will continue to check this
francine: welcome back to the open. we are eight minutes from the cash equities open. we are trending lower, but still undecided about where we go next. stocks futures down 0.1%. let's get your stocks to watch with joey's did. -- with joe easton. joe: we finally know who will take control of the u.k.
supermarket. we have seen a really rare auction. fortress was beat out. although the price was 60% around above where the trade -- where it traded, it is lobe were than where the stock traded on friday -- it is lower than where the stock traded on friday. the m&a story for u.k. grocers may not be over, saying that there could be another target. fortress says they view u.k. as attractive. there is another report that tesco could announce share buyback and traders are saying this may potentially be them preempting any kind of interest and a seeing it as a defensive way to give investors something to cheer about in case a bid
does come in. it looks like this story could go on longer. dani: we will keep our eye on the grocers. you also have your eye on german real estate. joe: adler, which focuses on low-cost german real estate, they are looking to sell some of their high-yielding assets, they said this morning. we have seen the stock jumping around 8% on the trade exchange prior to the regular german market open. it is also quite interesting, given there has been a regulatory clampdown on german real estate, particularly on landlords, something that has gone on in berlin for a long time. it looks like the investor landscape still seeing some value in those stocks in germany. francine: talk to us about plus 500. joe: this is an important one. the markets have been waiting for this, and this is cfd trading online, at home trading. it was really popular during the
pandemic obviously. we had two mixed reports from the groups. we had markets that gave a negative update around a month ago, which sent the doctor tumbling, saying people -- which sent the sector tumbling. then we had ig group, which said the opposite, said people are still trading, volumes are still high. plus500 is on the side of ig group. they are really confident, saying their trading volumes are higher than they were pre-pandemic levels, and also that profit for the year will be ahead of expectations. they are expecting to see that entire peer group moving higher in london. dani: maybe people are bringing their laptops and trading while they are traveling. joe easton. coming up, we are looking at a more negative session, but i wanted to give you some good news courtesy of michael purves. october is historically a strong
francine: welcome back. one minute to go until the start of cash equity trading. i am francine lacqua, with dani burger. dani: evergrande shares are halted pending news about a major transaction. china's developer is said to guaranteed a bond that has just matured. opec-plus meets. they will discuss the production policy today amid rising crude prices. in boris johnson says brexit britain must adapt amid fuel and food shortages. we are live from the conservative party conference. francine: let's take a look at
the futures. we are seeing some pressure on the dax futures. a similar pressure across the board. the focus is on evergrande. the other focus is on the worries about stagflation. this is not only inflation, but overgrowth. we seen a number of participants saying banks have the tools to deal with it as long as they act now. unclear when that will happen. we get the tory party conference. we are expecting them to do more for the labor market. we are also expecting something nuclear when it comes to brexit and northern ireland. dani: all of that is making u.k. assets not the most attractive. we basically only have the ftse 100 open thus far. as you are saying, it is not doing well. it is declining about 0.2%. it is not anything really dramatic, but it is more of the same. the ibex just opening, down 0.2%. we are expecting france and germany to be the most under
pressure. that is what our future boards were indicating. it could be a lot of those larger companies that are feeling the pain. these are the types of companies that have to deal with higher prices. how are investors going to treat it? we are seeing a lower market. we are looking at a weaker pound and stronger euro. we want to point out that they are opening down 2%. the boards did indicate that was moving lower. let's get a quick look at the sectors. energy has been the outperform or for some time now. we are looking at energy up 0.2%. credit suisse says if we are in a stagflationary environment, what you will see is energy be the sole sector to outperform. as we look at the markets opening up, keep in mind we are
just seeing energy being the only sector that can consistently move higher. banks under pressure, down by 1%. they had been doing better with a steepening of the yield curve. perhaps that trade is seen as overdone. autos under pressure as well, down 0.6%. for autos, it is always the supply chain concerns. we have warnings out for companies. it will take a lot to improve the sector at the bottom of the pile. francine: european markets opening a little unders ided. they are exploring the risk of growth and inflation. here is the view of mohamed el-erian. >> inflation is not going down. inflation is hot at the core level. if you do the pure statistical calculation, it is very unlikely they can get to that target. they will be revising the target
up yet again. francine: joining us is been got rich -- ben gutridge. what do you do with inflation? is it temporary or will it run hot, much hotter than we think? guest: good morning. i think we are sort of in that transition phase about how we are assessing inflation. i think our working assumption is off balance. we will get the labor market replenished, get the chinese ports reopen and supply chain issues in relation to gas and other energy sources resolving themselves. inflation should settle, but we are seeing a broadening of inflation. you take out some of the outliers and start to see more inflation pressures across the board.
and those wages, the all-important wage numbers. probably on balance thinking inflation is transient, but you have to adjust portfolios to the increasing risk of higher levels of inflation. dani: how do you rebound your portfolio to account for the possibility of stickier inflation? guest: i don't think we need to get panicked asset equities just yet. i do believe the central banks, even though we are seeing a marginal move away from emergency policy sectors, and some central banks initiating taper and interest rates, but that major act for the federal reserve is still far away. that should settle fears about moving away from equities. but within your equity allocation, we have a growth
orientation. i think you have got to be looking to rotate more value, real estate, commodity type businesses, financials on the back of the rising interest rates. those sorts of moves seem to be the sensible ones at the moment. francine: what does it mean for how you monitor a portfolio? how much cash do you have been there and how much gold? guest: that really depends on the risk of the client. but we like to stay fully invested, so i don't think we are being aggressive on cash at the moment. and i am afraid, given the meeting, gold is not a particularly sensible option for all types of clients. but all of that being said, i still think within the fixed income component, you have to be working harder, looking at
alternative type assets, whether it is infrastructure, private credit, real estate. it is that component, the natural diversifiers that need to be working harder. gold can play more of a role for those who can invest in that asset class. dani: this is good to know. you are talking about leaning towards more cyclicality and value. when we look at the rotation that the market has done in the past week or so, it has really been energy, financials, not those classic value type sectors. things like materials. what does that tell you about what the rotation will look like as we close out the year? guest: the materials sector does have this rather big chinese real estate story to deal with, and that could yet weigh on
performance. i think we all agree this is a labored moment, but that does not mean it cannot be pretty bad. while it may not be our base case, a break on the real estate sector or within china to continue to be a bit of a drag on materials performance, you still have to be selective within the value parts of the market. i think financials and energy are the more sensible ways to achieve exposure in those parts of the market. francine: it seems like the u.k. is imploding for a number of reasons. a lack of drivers, unclear whether taxes will rise again, and the u.k. changes protocol so you don't know how the eu will retaliate. what are you buying, if anything, in u.k.? guest: some pretty emotive
language there. in the u.k., i think we can still get comfortable with retail names and financials, and the more cyclical elements. we do have the big materials component. we just talked about concern in that area. the u.k. economic picture on an aggregate level -- of course, there are lots of troubling stories -- but growth is ok. the labor market is looking in decent shape and may be able to cope with this closure of the furlough scheme. that does support consumption and spending power. whether they will be able to spend it on all the things they want is another issue. but on balance, i think the cheapness and the cyclicality of u.k. looks reasonable at this stage. dani: all about finding the good value. that is ben gutteridge.
i think you need to tell tom to ask someone about the u.k. imploding for a variety of reasons. francine: let's say, it is not going to plan. dani: a diplomatic way of putting it. francine: a lot of the banks have said, -- and i know you asked about whether the pound was trading like an emerging market currency, and there are many more banks saying if you look at it from a data point of view, the volatility we have seen, there is something underlying, and it is trading at the margins. dani: this inflation question is a problem in europe, but the fact that it is so acute in the u.k. goes to the emphasis. next, we will be talking about china. ever grand woes are growing. we are going to have more on that next. this is bloomberg. ♪
would lead to a stagflationary environment. dani: all about those stagflations. i want to kick us off with stocks on the move, the first one being morrison's. this is the u.k. grocery chain. the winning bid comes from cdn cd&r, bidding out fortress. perhaps the price was lower than had been expected. the winning bid is 287 pence a share. the fact that a lower bid one means the share price is falling, even though it will be going private. francine: the parent company of british airways getting 1.5%. the focus is on some of the travel restrictions being lifted in time for half term. we are looking at some of the red list countries, giving a nice lift to some of these companies, including iag.
dani: a real estate company for us, adler. it last week have been trading at its lowest since march 2020. now it is mulling the sale of some german residential assets. it has had interest from potential buyers as well. the company said in a statement it could sow material parts of those residential assets in germany. sell them, get revenue which would pay down debt and return capital means people are bidding up the stock, up more than 4%. francine: evergrande's shares have been suspended in hong kong, along those with the property management firm. that is with reports that another company will acquire stake. our reporter joins us now. what is the latest? china seems to be trying to save the company. reporter: it has been a very fast-moving story today. let me tell you how our day went over here in hong kong as we follow this story.
we heard that shares were suspended at request of evergrande. this is very rare. evergrande last requested suspending in 2016 and have not over the saga for the last few months, so we knew something material what happened. a financial news platform reported that evergrande was nearing a deal to sell a 51% stake in its property services unit. this is its crown jewel, a company that is more profitable than evergrande itself, even though it has only a fraction of evergrande's revenue. the reports said evergrande would get about 40% premium for that stake, which confused all of us. then a few hours later, the local media report was amended to show that the price is actually very different, showing it at a 28% discount of market
value when the share last traded on monday. it was a holiday on friday. evergrande, what we know is evergrande will disclose the material transaction today or in the next few days. shares are suspended. it looks like it will be a sale of its crown jewel, at least a stake in the property services unit, at a discount. if evergrande is selling its most valuable asset at a discount, how else is it going to raise money? dani: thank you so much. still with us is ben gu tteridge. we were just talking before. you said evergrande is not a lehman moment, but it has been affecting materials and stocks globally. does that mean you want to go in and buy some of these equities or some of these assets that are
perhaps now underpriced based on this reaction to evergrande? guest: to a degree, that depends what you are starting -- what your starting position is. i am sure it is worth having a hedge against it. that would be the catalyst, a larger scale, tiny stimulus -- a larger scale chinese stimulus than we were expecting. the reason we are not expect and that is the rounds of chinese stimulus have helped and boosted or widened that income inequality. we are expecting stimulus to offset economic contagion, and the worst possible economic outcomes. but our core view is not that we get a large scale stimulus so those types of stocks and sectors remain in the throes of volatility in markets. there is a cheapness over there
within that sector over the long-term. for the short-term, i probably would not be adding. francine: i know you were talking about financial stocks a little earlier on. how much do we know about their exposure to china and possibly what is happening with evergrande? guest: that is a great question. what we can garner from the level of transparency that we can get out of banking institutions is there is not too much exposure for us to worry about. developing market banks should be able to move through. it is not the same effect slowing real estate will have on global growth. these hidden assets on balance sheets that are difficult to read, we could certainly be surprised negatively in regards to exposure. i think it is sensible to
believe the develop market -- the developed market banks can move through this crisis relatively unscathed. dani: hidden gems. whatever the opposite of gems is, maybe. thank you for joining us this morning. great to have you on this morning. let's get over to the bloomberg business flash. here's angel feliciano. angel: tesla has seen a record quarter with a better than expected 241,000 deliveries worldwide. an analyst calls it an eye-popping number. quarterly delivery is one of the most watched indicators, and is seen as a barometer of consumer demand. a whistleblower at facebook has accused the social network of putting profit ahead of the well-being of users. she passed thousands of internal documents to u.s. lawmakers and "the wall street journal." the former product manager
gave her first public comments to "60 minutes." >> someone else might have just quit and moved on, and i wonder why you take this stand? >> imagine you know what is going on inside facebook and you know nobody on the outside knows. i knew what my future looked like if i continued to stay inside of facebook, which is person after person after person has tackled this inside of facebook and ground themselves to the ground. angel: wall street titan jamie dimon has ended up defending his payment again. the ceo gave an interview to axios. he said the board decides what he makes, saying it is part of a broader package designed to retain senior management. jp morgan paid him $31.5 million for 2020. the interview also focused on the pledge to combat racial inequality. that is your bloomberg business flash. francine: angel feliciano in london. coming up, progressive democrats are looking for ways to rescue president biden's stalled
some of the larger stocks lower by about half a percent. same with france. we are seeing some outperformance when it comes to the very bottom. otherwise, we are seeing a mostly negative day. progressive democrats are trying to break a stalemate holding up a vote on legislation for a $550 billion infrastructure spending plan. it is supposed to be a major component of president biden's economic agenda. nancy pelosi set october 31 as the new target date to pass a bipartisan infrastructure bill. pres. biden: i am telling you, we are going to get this. it doesn't matter when. it doesn't matter whether it is in six minutes, six days, or six weeks. we are going to get it done. dani: joining us for more is bruce einhorn. biden is saying we are going to get it done, it does not matter how long it takes. are there any signs of progress
of getting it done? bruce: yes, so the key thing to keep in mind is the infrastructure bill is something that biden, that president biden, wants to pass along with the bigger reconciliation bill. that is the one that has his plans for health care, for education, childcare, climate, all of those things. the bipartisan infrastructure bill is something that if passed in the senate, nancy pelosi says they will vote on it by the end of the month. but in order for that to happen, they need to have agreement on the bigger reconciliation bill. that is the one where we are seeing signs there are some negotiations taking place. for instance, over the weekend we saw alexandria ocasio-cortez, the prominent progressive in the house, she said it is possible that we can get the price tag down on the $3.5 trillion bill
by limiting the amount of benefits or the timeframe for benefits. that would help to reduce the costs. that was really important because senator joe manchin says he wants the bills to be closer to $1.5 trillion. he will not go for $3.5 trillion. francine: how does this get unlocked and how quickly? bruce: i think we are going to be waiting a while, to be honest. given that speaker pelosi has set she is not going to have a vote for the infrastructure bill until the end of the month, that gives them time to get things worked out on this bigger health care, education, climate, all of those things. it will be a while, i think. dani: bruce, it is going to be a while and i know you will be staying on top of it for that long while. thank you for joining us. coming up, euro area finance ministers gather amid the worst energy crisis the bloc has
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says --. let's get straight to the markets. a little bit of pressure across the board. dani: europe is underperforming. we had a better future session in the u.s. we definitely are seeing dax, cac 40, the large-cap indices are underperforming. france is down 0.9 percent. doing better is the ftse 100 but it is moving deeper into the red as we continue toward our trading day. overall, on a headline basis, the benchmark, european stocks are down 0.6%. the story is inflationary. the supply chain issues are not being factored in. sector breakdown. health care, food, beverage and
tobacco and utilities. what are they having common? they are in the red and they are safety type sectors. if you are worried about a market, these are the equities you will end up buying. on the bottom, banks and autos and technology. an interesting mix of things that people are selling off. only three sectors to the upside this morning. the breadth are to the downside and they are selling banks, autos, and technology. francine: the global energy crunch. we are watching two events today. the opec-plus. the oil market is tightening. >> the recovery will continue. it will be slow. it may be bumpy. but we are on the path of a positive trajectory. >> demand for jet fuel is going to pick up but we don't have
enough gas to keep the world warm. it could potentially happen sooner. >> we still have a long way to go but year will be a lot stronger for travel and oil demand. >> all the risk is to the upside so we stick with our $80 a barrel. >> people will begin to invest and create new cycles. francine: in luxembourg, finance ministers are gathering. we are joined by our energy reporter in london and our reporter in luxembourg, maria tadeo. what is going on with china's energy consumption? how is that impacting the rest of the world? helen: china's energy consumption has surged. it's industrial activity has ramped up. china is struggling to get enough energy.
coal grew to record prices last year and is paying sky high prices for liquefied natural gas. it is having a knock on impact on the rest of the world and is exacerbating a supply crunch that we are ready have in europe. gas and power prices in europe continue surging past record after record. analysts are expecting it will be a pretty tricky winter for us especially as inventory levels are so low. analysts estimate that europe's gas storage levels are at a decade low. dani: and another knock on impact from oil prices. opec-plus meets today. how might the global gas crunch impact their policy when it comes to oil production? helen: opec-plus has indicated they are likely to continue with their gradual increase approach.
however, they are under increasing pressure from the gas crunch because analysts are expecting the demand for oil to increase as competition intensifies for other types of fuel. coal and gas for example. if that happens, prices are likely to rise and opec will be under continued pressure to release further barrels into the market. the thing with that though is that the group is likely to be hesitant or cautious in doing that because they are not going to want to derail the hard work they have done in rebalancing the market. francine: let's go to maria in luxembourg. good morning. this is a concern for europe especially as energy demand picks up. will we see further caps on prices? maria: this is probably going to be the number one issue when finance ministers meet here in
luxembourg for a number of reasons. as you alluded, encz mark prices for elect to city and gas in europe hit a record high on a daily basis. in esther's worry this could derail or remove some of the momentum in the european economy but they are also worried about inflation pressures. there is already a big debate as to whether this is sticky or temporary. the other issue as you mentioned is the social impact that a lot of this will have. we have european governments taking action to cap prices. look at the wholesale -- today in particular, the spanish well put a proposal or a measure so that european countries purchase gas in bulk. it does not mean it will happen soon but the sense is that european governments are prepared to take more measures and that they want to see collective buying in order to get some leverage power that some of these companies have on
an individual basis and have a bigger say in those transactions. it is still very much top of the agenda. can see the tensions between the governments and the companies as they heat up heading into winter. dani: it is a political issue and policy makers are taking action especially in spain. what about when it comes to the relationship of russia? how will europe approach this? will there be any conversation about this at this finance ministers meeting? maria: there are two things -- one is that this is about the european economy picking up. it is a demand and supply issue. russia has been running a tight ship. this is still a very political story for the political unit especially when you look at germany and the nord stream 2 and vladimir putin. there are calls in europe that there should be less dependency on russia. when you look at the green
transition as we switch from fossil fuels into the greener economy, there are concerns at this is showing some of the limits of this transition. the transition costs money but perhaps we need more time. it feeds into the debate. can we reach the targets when it comes to green and should europe be more diversified, maybe even nuclear when it comes to energy mix? francine: thank you to you both for joining us. howling in london and maria tadeo in luxembourg. jobs paid on its way. a jobs plan as a country faces a cost of living crisis. we are live in manchester next. this is bloomberg. ♪
inflation turning into possible stagflation if we do not have the growth. pressure growing on the ruling conservative party. as it holds its conference. the u.k. chancellor unveiling a jobs plan as a top winter. there are growing concerns over fuel shortages and the cost of living crisis. our own tom mackenzie conducted an interview earlier today in manchester. desperate times. we need lori drivers and others. if we can address that, that would help the situation but the long-term, you have to rescale. at cbi we have estimated that nine out of 10 people will have to reskill. francine: the prime minister trying to respond to labor shortages.
and that we have the chancellor saying also that kids won't have christmas presents. tom: this just points to the pretty dire backdrop for this conservative party. the conservatives are facing a laundry list of dire problems and it is heading home for households across the country. it is the second week of that panic buying at petrol stations. the energy crisis and it is not just a european story. you see utility companies closing and households are seeing their bills a while. and in many markets, across the country, you are seeing empty shelves in supermarkets. at as the backdrop. it is the chancellor of the exchequer beginning his speech just before 12:00 p.m. but it was the prime minister on sunday pushing back on any short-term fixes to alleviate labor shortages that are under what is
happening when it comes to petrol stations in supermarkets and it leads up to christmas as well. he said this is a post-brexit adjustment. he wants to see a high skilled workforce and high wage workforce as well. causing some to further relax the curbs on foreign labor coming into the u.k. dani: in your interview, one of the things i was surprised to hear was for him to bring up stagflation. you know this looking at markets. a concern coming to the fore. how common of a conversation is this at the tory party conference? is this present in the mind of people as a consider where the u.k. goes from here? tom: how can it not be? it has got to be on the mind of the chancellor given that the u.k. arguably is closest to this conundrum and the pain of
stagflation. there is a debate among economists as to whether we are there or if it is likely you do have an inflation picture that is the highest in nine years. andrew bailey is saying that growth is starting to peter out. you have labor shortages. that toxic mix of slowing growth and higher inflation is something that policymakers and the chancellor front and center will be coming to wrestle with. stagflation will be on the back of the mind for the chancellor but he will also try to address the issue of jobs in getting people back to work after the furlough scheme at the end of september. the 500 million pounds they will deploy to reskill workers. that is also what the boe will be watching as well. the market has been pricing in two rate hikes in 2022 because of inflation pressures but also economists are saying that the
labor market will be watched closely by the boe in support of these 11 million workers. whether they will be able to fill the labor gaps and reduce some of the pricing pressures we are seeing. and by the way, the chancellor will also be trying to give a nod to foreign investors to reassure about the u.k. being an investable location. francine: the u.k. has drafted a plan to replace the northern island plan. -- northern ireland plan. tom: we are expecting to hear from lord frost too. he was the chief negotiator. in about 20 minutes. there have been reports that he will threaten to trigger article 16 and suspend that northern ireland protocol. that would not go down well at all. we are also hearing that the
europeans themselves are set to present their own proposals to the protocol at the conference next week. they are reluctant in brussels to renegotiate this northern ireland protocol altogether but this is an issue that remains unaddressed ultimately. the transfer of goods from the united kingdom into northern ireland and through to southern ireland as well. that question remains. and we will hear from lord frost we believe later this morning. dani: tom, thank you so much. tom mackenzie in manchester for us staying on top of the tory conference. we are reliably told that tom's choice of coffee is across the street and i'm going to send him a coconut latte. francine: i think i will have to hand in my italian passport. dani: be prepared to hand it in. hello, angel. angel: japan's parliament has
appointed a new prime minister. he will unveil a new cabinet lineup as he looks for support for his ruling party. he is likely to call a national election for october 31. he was not the top choice for the job and now has to win over voters. new covid vaccines will be needed for next year. biontech says a new formula will be needed by 2022 to protect against future mutations of the virus. he is warning that new --. police search credit suisse zurich offices last week and arrayed elated to the greensill probe. the swiss bank -- the bank says it is cooperating and the police is targeting credit suisse itself. and a massive document leak has revealed how world leaders and the superrich hide money in
offshore accounts. an international and saoirse of investigative journalists has dubbed the papers the pandora papers. they say a number beneficiaries include tony blair and former associates of vladimir putin. >> this is a different leak from what we have seen before. for example, in the case of the panama papers, it was based on one offshore provider in panama. in this case, we have information coming from 14 different providers and law firms around the world. and so, this investigation or this leak tells us how the system works and it is not just about how one company operates but how offshore finance works across borders. angel: global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120
francine: welcome back, everyone to the open. 52 minutes into your european trading day and we are still to the downside. pressure as we wait to find out what happens with china's ever grand and we wait for more news. and the tory party conference in the u.k. going on in manchester. let's look at some of the stories we have been following. u.s. factory orders for august. on tuesday, french output numbers are out. wednesday, russian cpi. that could determine the size of the next interest rate hike. dani: on thursday, we will be scouring the minutes from the last ecb meeting. and on friday, we have u.s. jobs data. the latest figures on nonfarm payroll.
we have a lot to digest. nora joins us now. i feel like the concerns around ever did recede as we concentrated on the energy story. have we lost the plot? should we be paying more attention because of the spillover effects? >> at the moment, i think we are doing well juggling everything. we also have the opec-plus meeting later today. when it comes to evergrande, i think this is good news. they are trying to figure out what is going on. it is a double-edged sword situation because they are apparently, according to the reports, they were a little confusing, they were selling at a 20% discount. not good news to their holders of that property -- of the list of property -- the company they have got but realistically, this is them trying to handle the
situation and this is the best they have got at the moment. francine: what are you expecting for oil? and there is a read across to oil and gas prices. >> realistically, opec is sitting at the cusp of a great moment. this is what they wanted. this is the market they have been building for. prices are high. saudi arabia is making as much money as they did in 2018. i don't expect them to raise their output. white house is pleased with them at the moment and what they are doing. and they want to be as dynamic as possible and they will respond to price shocks if they come. i don't expect anything out of the ordinary to come out of opec today. dani: it is expected they will double their output but i think the majority of analysts are in your camp. but how high do oil prices need
to get in order to move opec and also have a consequential effect on earnings? >> realistically, i think if we start seeing levels head towards the $90-$100 cash that is a number that was far-fetched. a number of banks pared back their projections and now they are leaning towards $80-$90. i expect if we see numbers that lead us to the 2008 financial crisis, that is when you will see some heads start to sweat. if you look at the chart, saudi arabia is comfortably making as much money as it did in 2018 so i do not expect them to go to 800 thousand. it would be a shock. i would be the first to mea culpa if that happens. francine: always some great insight, thank you. that is it for the european market open. surveillance, early in dish and
-- early edition is next. dani is trying to figure out what is happening with evergrande. and inflation expectations. it will be interesting to see how the markets position themselves. dani: not looking so great. down as much as 0.4% in some of these regions. francine will walk you through the early edition of surveillance. that is up next. ♪
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>> inflation is hot at a core level. it's very unlikely we can get to that target. >> we are seeing stickiness in terms of core inflation. >> we are working with our supply partners to gradually improve the situation. >> this is "bloomberg surveillance: early edition." francine: good morning everyone and welcome to "bloomberg surveillance: early edition." here's w