Skip to main content

tv   Bloomberg Markets European Open  Bloomberg  October 5, 2021 2:00am-4:00am EDT

2:00 am
dani: good morning, welcome to bloomberg markets: european open. i'm dani burger alongside tom mackenzie. your cash trade is just less than an hour away. the global selloff deepens. the s&p 500 closes at its lowest level since july amid concerns about surging prices. asian stocks slump is another chinese property developer misses a bond repayment. facebook suffers a devastating outage across its most popular
2:01 am
platform. millions flock to competitors and mark zuckerberg's personal fortune plunges. oil rallies to its highest in 2014 after opec+ maintains its planned gradual increase of supply despite the energy crunch. the gauge of commodity prices soars to an all-time high. we are just under an hour away from the start of cash equity trading in europe. it was a manic monday. will it be followed by a turnaround tuesday? we are looking at euros stoxx 50 futures pushing higher. not able to recoup all the losses from yesterday. ftse 100 or the dax, up by more than 0.3%. a pretty even performance when it comes to the future trading session. some dip buying coming in. the real concern was u.s. indices yesterday. not getting a lot of people
2:02 am
willing to step in. more buying when it comes to the nasdaq. tom: what were the catalyst to be to encourage investors to get in with any real convictions given the headwinds around growth around central banks, around higher yields, around tech challenges? when i came in this morning and there was line after line about correction, correction, correction, near correction territory. let's have a look at gmm. the nikkei in japan, that was short-lived. investors have changed their tune it seems on japan. the commodity story still in
2:03 am
play. opec-plus not coming to the rescue. the bloomberg commodities index back to a record high. in terms of china, the mainland markets remain closed for a holiday. stable despite the concerns. fantasia the latest developer to be under pressure. let's get more of a deep dive amid this global selloff in stocks and let's cross to asia were juliette saly can break down what is happening. what stands out to you at this point? juliette: it really was what we woke up to. the selloffs in the tech stock. the likes of amazon printing negative. the dollar a little bit ahead of
2:04 am
the u.s. and european session. let's have a look at how this flew through into the asian session. three asian gauges are so for the world's worst performing in october but still some pretty hefty pain we have seen coming through from these indexes which are growth heavy. closing lower by 2%. as we have been mentioning, it did look like it was going into that correction territory. down from its july record. we are saying that -- seeing the tech index. we see that surge coming through in crude. let's have a look at the gauge of commodity players we have seen 202011 peak to reach a new high. we see money going into a rush of commodities.
2:05 am
did somebody mention stagflation? dani: that scary stagflation where definitely something getting mentioned more and more. now, some of the damage and asian stocks. let's talk about another chinese developer that has fallen into crisis. fantasia adding to the strains of the nation's heavily leveraged property firm following evergrande's debt woes. rebecca chung wilkins joins us now. how are we seeing this stress starting in some of the specific companies manifest through the entirety of the chinese credit market? >> absolutely. the broader chinese high-yield market which has been dominated by real estate developers has fallen significantly this morning, trading a little bit patchy. we are seeing some really dramatic declines, particularly
2:06 am
among the weaker rated companies. when it comes to fantasia and we saw this missed payment and it did take investors by surprise. we were expecting them to pay because they had made a significant effort that was due over this weekend. also kind of away from fantasia, we have seen another stress developer flagging potential cross default and technical default on some of its bonds onshore and offshore. i think really when we think about some of the signs here. the sizes obviously totally different and it is not going to have the same kind of contagion risk. however, many of the same problems that were flagged by ever grande, problems of opaque obligations and default risks are the things that are striking
2:07 am
many of these smaller, weaker borrowers. tom: the fallout regulatory squeeze not yet fully contained. thank you for joining us breaking down the latest when it comes to fantasia and the spread from and across the property sector in china. mark zuckerberg has apologized for a global service outage that kept it social media apps off-line for much of monday. laura wright joins us. bring us up to speed on where things stand. what happened? >> there was a network configuration which led to a global outage affecting two point 7 billion users across platforms including messenger, facebook, instagram, and whatsapp. even facebook's own internal systems were affected. mark zuckerberg was led to apologize. it took engineers to officially be on site -- physically on site. it took a dive, facebook,
2:08 am
closing down over 4%. that prompted the nasdaq down over 2%. facebook was already under pressure because of a whistleblower who had given an interview to 60 minutes on sunday evening regarding privacy concerns at facebook. one prominent democratic congresswoman tweeted her concerns yesterday about facebook, saying it facebook's monopolistic behavior was checked back when it should have been, people who depend on what's happened instagram for communication or commerce would be fine right now. break them up. more regulation concerns ahead. dani: thanks so much. tom, i think i spent maybe 15 minutes thinking my internet was just out. tom: that must have happened to millions of people before they went online twitter and found out this was a global outage. quite incredible how long this was out for. aoc taking the opportunity to move things forward and just drive them and push them and
2:09 am
poke them in the eye with the regulatory stick. it seems to be a bit of a bipartisan issue. dani: it does. it was already really important and why not use this as a way for aoc to really drive home the point as well? it has meant that the stock falls pretty significantly and i love that the solution here was the fancy engineering equivalent of turning it off and turning it back on again. tom: it makes us all feel like we are slightly less batted technology when facebook themselves have to do that and resort to that solution. ok, let's switch focus now. we are going to dig into the facebook fallout a little bit more with richard windsor. we will get his expertise on that topic. plus, steady as she goes. opec+ sticks with its out pat plans -- output plans. we get the latest in the energy markets. the s&p 500 retreats to the lowest since july and stocks in
2:10 am
asia continue to slide. will the selloff continue into the european session? futures suggests that won't happen. we get into all the market action with susan hutchins from newsom investment management. if you have any questions, please send them to us on tv . this is bloomberg. ♪
2:11 am
2:12 am
>> that is the only mandate of the fed, price stability in full employment. let's be clear, right now we don't have price stability. inflation at 5% is among the highest numbers that many of us have ever seen in their lifetime. and it is transitory. that is a big bet. dani: ken griffin giving his thoughts on the ongoing inflation debate. that is playing out in markets
2:13 am
today and yesterday. continuing through to asia in the concerns of a rising prices, field as well by surging commodities. joining us now, suzanne hutchins. first off, thanks for joining us this morning. you have ken griffin giving us his thoughts, we also had james bullard saying that the mentality of companies has shifted and that they are willing to charge more. is this time different? are we seeing a regime shift? >> we are certainly in an environment where we were perhaps a year ago, when we were coming out of covid. i think we are in a different part of the cycle and we see supply chain issues and labor shortages, which means prices are under pressure and they are being put through to the consumer. yes, we certainly are seeing an
2:14 am
elevated inflationary environment. whether or not it is transitory, that is of the market is debating at the moment. tom: how do you remain constructive? inflation is just one of them. how long do you expect to remain constructive? >> we have been constructive ever since the first quarter drawdown of these asset. we are seeing much better growth opportunities coming through. global economies are opening up. some inflation is good for businesses. but what we worry about, with the market is worried about at the moment is if we are getting too much inflation and not enough growth. the market has been quite concerned about the fed bringing
2:15 am
forth its tapering to mid to next year and obviously the impact that follows if we have rate increases. [indiscernible] as pretty dovish. dani: you have very diplomatically talked about an environment of higher inflation and lower growth without mentioning the dreaded s word -- stagflation. will it have an impact on these markets and how do you want to position if there is more sentiment surrounding the possible oncoming of a stagflationary environment? >> i don't think the stagflationary environment is going to be a permanent one. the markets are pretty rattled by whether inflation is out of control and what is the impact on growth? i think it really depends on your time horizon. over the longer term, we are investing in good, quality businesses that are compounded, that are structural growth opportunities.
2:16 am
if you are investing in the short term, perhaps you want to trade interest rates rather than securities. tom: without longer-term view, is this an opportunity to load up on some of these tech names given what we have seen? >> i think you have to be really selective. yes, i think some of these tech companies, much of that is to do with the environment we are now living in. i strongly believe every company needs to be a tech company. dani: suzanne, you were going to stick around with us. i longer-term opportunity.
2:17 am
apologies. getting a little too excited. you are staying with us, so we will get into those longer-term opportunities. let's get over to the bloomberg first word news. juliette: president biden is warning the u.s. is in risk of breaching its debt limit into weeks. he is describing it as a meteor headed for the economy and blames the senate republican leader mitch mcconnell. the president is calling on the senate to suspend the debt limit by a simple majority, which would stave off the risk of default. ministers from opec+ ratified a 400,000 barrels per day hike for november, but glued to the test due to the global energy -- but due to the global energy crisis, somewhere expecting a bigger output. there is an update in the scandal plaguing the international monetary fund's chief. the group's executive board met.
2:18 am
he is accused of getting them to adjust to global ranking in china's favor. the imf says it is committed to an objective and timely review. the federal reserve's internal watchdog plans to probe trading activity by senior u.s. trade officials -- bank officials. regional chiefs kaplan and rosengran were forced to resign. chair jay powell opened an internal investigation into the central bank's ethics rules. 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. tom? tom: thank you very much indeed. coming up, commodities rally. soaring to an all-time high as a global rebound slides with supply shortages. this is bloomberg. ♪
2:19 am
2:20 am
2:21 am
tom: welcome back to the open. a little under 40 minutes or so away from the cash equity. futures in the u.s. pointing down by 0.1%. in europe, gaining just a small margin after a heavy selloff particularly on wall street yesterday with tech stocks weighing across the board. ok, the bloomberg commodities index has soared to an all-time high, rising more than 1% monday, and topping in 2011 record. that is as a resurgence in demand for raw materials collides with supply constraints, further banning fears of inflation's. the biggest gainers are energy commodities. suzanne is still with us. we have seen energy companies benefiting in of the back of
2:22 am
these very high prices. we know that opec-plus is not coming to the rescue. it is sticking with its planned increases. how are you positioning around these record energy prices? >> yes, it is quite a challenge because many of our clients are trying to avoid a lot of the carbon emitters due to sustainability and climate change. the way we have exposure to the oil price is through an atc rather than investing in the companies themselves. that gives us exposure to the oil price without actually investing themselves in the carbon emitters. that is one way of playing the commodity increase. we've got exposure to other commodities, as well. there is a real supply shortage, as you've noted.
2:23 am
this is quite a crunch point for the sustainability and climate change. dani: is this crunch point enough that you would want to avoid some of these companies whose margin pressures are going to be pretty immense this quarter? is it enough to show up in this nearing earnings season? >> i think that you need to invest in businesses ultimately that are going to be going through transition, and i think many of the big oil companies are transitioning. it is these types of companies to the longer-term that perhaps you do want exposure to or indeed, as i've said earlier -- if you don't want to invest in companies themselves, than to gain exposure to energy through the oil price one way of doing it. tom: how much exposure do you want to have to china at this
2:24 am
point given everything happening in the real estate sector, the broader squeeze on technology, the slower growth technology -- trend? >> we've got some exposure to china [indiscernible] and certainly china has been one of our major themes and how we think about investing in china over the longer-term. [indiscernible] i also do believe you want to be invested in the types of industries that are aligned with the chinese communist party, in their interests, whether it is along the lines of renewable energy, food security, etc. but quite clearly, there is a shift going on in china and the
2:25 am
cost of investing in china has gone up. tom: we are having a few technical issues, not just facebook, it is us as well. suzanne, we are going to have to leave it there because your line keeps dropping, but thank you for your time breaking down your views on china, energy, and what is happening in technology across the u.s. that view on china seems to be fairly broadly shared, which is that it is becoming less enticing. you do want some exposure, the consensus still is despite what you are hearing from george soros and others -- the consensus is you do want some exposure, but the risk reward scenario has changed. dani: i remember when the started to seep into western media. mark mobius said you can't avoid china. there is some concern, there is some risk, but it's the world's
2:26 am
second biggest economy, you will have exposure some way or another. tom: it is where and how you want to get that exposure. certainly the demand for chinese sovereign, when you look between the chinese 10 year yield, the differential over the u.s., the sovereign space and those policy bankers, still despite all this turbulence. dani: i should point out one viewer writing in about the story about china. saying we could even see negative sentiment for european consumer luxury. this is the story of a perhaps china specific story, but it clearly has consequences even if you are investing -- tom: absolutely. those luxury companies had such a good run in china over the years. this is part of that common prosperity push, it would seem. the european luxury stocks to watch this morning. let's switch focus. we will be talking more about what is happening with
2:27 am
zuckerberg, facebook, mark zuckerberg apologizing for a global service outage that kept the social media apps off-line for much of monday. we will look at the fallout from that next. this is bloomberg. ♪
2:28 am
baaam. internet that doesn't miss a beat. 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?
2:29 am
2:30 am
dani: welcome back to the open, about a half-hour from the cash equity open. looking at european stocks heading higher as we get closer to the open. of course, yesterday's selloff dominated by tech, where facebook's mark zuckerberg has apologized for a global service outage that kept his social media apps off-line for much of monday. joining us to discuss this and much more around tech is george windsor from radio free mobile. richard windsor, rather, who joins us. thank you for being in with us.
2:31 am
let's start with that. this at a lot of people up in arms. twitter was trying to make this into a social media moment for them. people were upset they could not text on whatsapp. i wonder if this has any longer-term consequences for facebook or if this is just a blip we will forget. >> i think it is a blip. these things sometimes happen. this happened to google a couple of times. usually, what happens is there is a weakness in the system but no one could ever have possibly predicted and it is a strange circumstance of events that led up to it. they go away, they apologize, they fix it, and things pretty much go back to normal. in the telecom world, reliability is what you go for. i would guess facebook is not far away from that. tom: do you think it has any regulatory impact? we saw aoc over in the u.s.
2:32 am
suggesting this is why companies like facebook need to be broken up. >> no, i don't think so. i think the regulatory risk of facebook is far more fundamental than that. i think it is more around what is facebook's influence on the social discourse of america and the rest of the world and that, when regulation comes, if regulation comes, it is there that it is most likely to be scented, rather than a monopolistic point of view. dani: of course, it is not just the u.s. where regulation is concerned. you have big tech companies, foreign and domestic, especially in south korea we have these legislative crosshairs. executives facing questions over their practices. google under the spotlight. the country's antitrust watchdog is investigating additional cases in relation to the anticompetitive practices.
2:33 am
at the same time, the korean fair trade commission chairperson spoke exclusively to us. take a look at that. >> [indiscernible] after the investigation is completed and our deliberation process could start. dani: it seems south korea is trying to downplay some of the regulatory fears they may be more like china. is that a fair assessment when looking at south korea and their approach to big tech? >> i think that is absolutely right. it is really quite simple. one of the things we have identified in the research we published last week is the
2:34 am
struggle between the u.s. and china has moved away from a rivalry and much more toward an ideological struggle, really started by president xi himself. what that means is if you look at the regulatory environment in china, a lot of what is going on with the big tech, it is driven down from the top and it is the ideological change in china that has driven quite a lot of it. if you flip to what is going on in korea, it is much more similar to the economic concerns that regulation in the eu focuses on. what you will find is that any regulation that comes down and south korea will be much more like something that the eu would do and much less something that is going on in china right now. tom: where do you think we are in china's regulatory scrutiny, in that process? are we halfway through, are we near the end? do you have a clear sense? >> what an excellent question.
2:35 am
what we have found is in we have defined a framework by which you can kind of gauge what is going on with this whole regulatory environment, the first thing we found is every company's influence very differently. you look at one company like semiconductor manufacturing, hardly impacted at all. that is the first thing. the second thing is some areas, some companies have been already regulated, take alibaba for example, and other companies like tencent have been much less regulated, or baidu. one we looked at the chart in terms of where these companies are on the regulatory process, if you had to force me, i would say maybe about halfway through. the key point is everyone is going to be affected very differently. dani: only about halfway through, that is something that market watchers will not be too comforted to hear. if we are only about halfway
2:36 am
through, what is the next leg of this regulation and scrutiny from china? >> i think in terms of what the government wants to do and how it is going to implement it, i think that has already been done. i think all the bad news around that is already out there, but some companies have not been touched yet. it is more a question of who is going to have regulations imposed on them rather than the actual regulations themselves. if you look at that part of it, we are really only halfway through. terms of what the regulatory environment will look like, it is much more complete in terms of what china intends to do and how it intends to get that. tom: is there anything else within the tech sector in terms of changes, developments, themes, or indeed regulatory scrutiny that investors are overlooking? >> that's a very good question. what i would say is most
2:37 am
overlooked is if you look at what has happened to chinese technology sector, they have thrown the baby out with the bathwater. they have sold everything indiscriminately. our research found that companies with a range of impact would be absolutely huge. if you are willing to stomach may be lots of chinese regulatory risk, there are probably some bargains to be found in the chinese technology sector. dani: richard, think you so much for joining us. really interesting conversation. that is richard windsor of radio free mobile. let's get over to the bloomberg business with juliette saly. juliette: ken griffin has a warning for younger employees, you are risking possible career advancement by continuing to work remotely. the citadel chief says working outside the office also hinders innovation. he thinks working from home could cost us dearly over the next few decades. chipmaker global foundries filed
2:38 am
for an ipo looking to capitalize on the chip boom. the firm is owned by the investment arm of the abu dhabi government. bloomberg previously reported it was looking to value the business that around $30 billion. jp morgan is banning business travel and in person meetings for employees who are not vaccinated. it also says the unvaccinated will face higher payroll deductions to cover the cost of health insurance. wall street banks have been adjusting their rules as they continue their push to bring staff back to the office. that is your bloomberg business flash. tom: juliette saly in singapore. coming up, the clean energy transition. we will discuss what the current energy crisis means for the shift to clean power. that is next. this is bloomberg. ♪
2:39 am
2:40 am
2:41 am
>> if you are early in your career, you are making a grave mistake not being back at work. it is incredibly difficult to have the managerial experience in the interpersonal experiences that you need to have to take your career forward in a work remotely environment. work remotely is very good at maintaining the status quo, but the world is not static. competitive pressures from around the world will put american businesses continually under pressure. the chinese have been back at work from almost the start. they are continuing to evolve at a very rapid rate of innovation. we are stuck in patterns from 18 months ago because it is so much harder to create and innovate in
2:42 am
a remote working environment. for our youngest members of our workforce, i'm gravely concerned at the loss of early career development opportunities that is going to cost us dearly over the decades to come. dani: citadels ken griffin with some advice to people beginning their careers and getting into the office. you can catch more of that interview on your terminal. i feel like this is very so often framed as a generational divide. the young people want to stay at home, older people know how good it is to go into the office. i don't totally get that because if you are someone who has children, you want that flexible working. i feel like it should not be this broad brush of young people stay home and older people are happy to go back. tom: is that the point he was making? i thought he made a very valid point. if you are starting off in your career and you don't have those
2:43 am
obligations, get into the office and make those connections and build up that experience. i find it hard to push back on what he was saying. by the way i can validate what he was saying about china. they never did this whole work from home thing. from march of last year, offices in china were full. partly because they had very little covid and part of being culturally was something. i find it hard to push back on it. there are those divisions. dani: maybe i'm being nitpicky where he says you were making a grave mistake by being home and maybe his overall message is that it is damaging. you are making a grave mistake. for some people, their offices just won't let them back in. tom: it was pretty strongly worded. this is the debate going on in offices all over the world. the world is shifting to clean power, the shortages jolting natural gas and electricity markets from the u.k. to china
2:44 am
are unfolding just as demand is roaring back from the pandemic. it highlights the fragility of the transition, which still has decades to go to becoming resilient. for more on just how complex the shift will be, we are joined by our energy reporter in singapore and rachel morrison in london. they have done today's big take. well worth checking out another bloomberg. why are we facing this energy crisis right now at this point? >> you know, one of the things that puts the focus on is this energy transition is amplifying all these underlying issues in the market. we already have a very, very tight market for natural gas and for call because of covid-19 and that pushback. when the economies opened back up, there is enormous pent-up demand for electricity. at the same time, folks were not investing is they could have a
2:45 am
natural gas and other upstream output. that all came to a head this year and it was exemplified and exacerbated by intermittent renewables. if you look at the u.k., if you look at other countries like the u.s., there is a lot more wind power, a lot more solar, and that creates a more instability in the system, but the main thing that has happened is there is huge demand and there isn't enough supply. on top of that, you have that instability. dani: given this instability that steven is describing, what should we expect over the next decade when it comes to these energy prices? does this continue on? >> what we may see his companies and countries pushing toward finding ways to store electricity because that really would even out some of the problems that have been highlighted here. if you could take wind or solar
2:46 am
when it is abundant and store it or use it later when you need it, that would really help. one of the things that may come out of this crisis is an increased focus on finding technologies that can provide some of the solutions to this. it is clear that across the world we will be moving off call -- coal, try to move off natural gas. in this scenario, where there is a shortage of gas, they are not going to help that much. one of the main solutions that needs to be found is a way to store large amounts of electricity so that it can be used when it is needed. tom: that sounds like one of the solutions to easing volatility. what else can policymakers look at in the asian region? >> one thing a lot of folks talk about in asia is hydrogen.
2:47 am
what you do is you take renewable energy and you convert it. when it is burned, when it turns into a fuel-cell, it not emit any co2. you are seeing the japanese and the koreans invest in that technology because those are super smallish countries that are very important dependent on fuels. they don't have the ability to make batteries. what they could potentially do is import this green hydrogen from australia, where there is plenty of room for wind and solar, into their country. china is also looking to significantly expand nuclear power to try to boost of that clean energy source. dani: what about the other side of this? where do we stand and energy switching from natural gas to dirtier sources like coal and
2:48 am
oil? >> that is something policymakers won't want to come out of this crisis. they won't want us to say, it is too difficult, we need to go back to things that we can rely on. when you have intermittency, the first thing to say is we need something you can switch on a know it is there. the government in the u.k. made a move toward support nuclear as a backup for a oval energy -- renewable energy. that is very low carbon power. perhaps it could be a renaissance for nuclear in some places where you can be energy independent, but we hearing a lot more countries talk about being independent and not wanting to rely on volatile gas markets, which are controlled by
2:49 am
countries like russia and maybe we will see more moves that will speed up the transition away from gas. tom: thank you both very much for joining us. the importance of digging into that shift, that energy transition, and the complexities around it. get more of our big take and coverage of the global energy crunch on the terminal and online read let's get the bloomberg first word news now. juliette: president biden's warning that the u.s. is at risk of breaching its debt limit in two weeks. he is describing it as a meteor headed toward the economy and blames the senate's republican leader mitch mcconnell. the president is calling on the senate to suspend the debt limit by a simple majority, which would stave off the risk of default. opec-plus is sticking with its plan to slow and steady increases in oil production. due to the global energy crunch,
2:50 am
many market watchers were expecting a bigger boost in output. that has pushed crude to the highest since 2014. the federal reserve's internal workforce -- watchdog plans to probe activity by senior bank officials following revelations that forced regional chiefs robert kaplan and eric rosengren to resign. chair jay powell opened an investigation into the ethics rules. 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. dani: thank you so much. against the backdrop of surging travel demand, the international travel transport held their general meeting. guy johnson spoke about the recovery of international travel. >> the other strong message i think is the resilience of the industry despite massive losses. we are still here and still
2:51 am
optimistic. i think the industry has learned a lot. it has significantly restructured, and i believe the future is quite positive. >> you have indicated that you think the worst is behind the industry. what is your degree of confidence that the worst is behind us? >> i think the forecast for losses significantly reduced. that is to lead loss for the industry. but if you look back to 2020, we were talking about nearly 140 -- $140 billion. we are going in the right direction and we've got to take confidence in recent announcements like the u.s. opening to european vaccinated travelers. what the u.k. has done recently, what australia is saying it will do. we are seeing a change.
2:52 am
as we know, domestic markets have effectively recovered to where they were in 2019. the problem for the industry today is the significant lag in the recovery of international markets and particularly long-haul international markets. tom: coming up, we will look at your stocks to watch, including a chipmaker expecting an increase in revenue amid the semi conductor shortage. this is bloomberg. ♪
2:53 am
2:54 am
tom: welcome back to the open. just six minutes away from the trade in cash equities. futures in the u.s. pointing up. in the europe -- in europe,
2:55 am
gaining 0.2%. we are looking at infineon, the chipmaker expects another left to revenue profitability as it benefits from strong demand for semiconductors. dani: i'm checking out the oil majors. this civic sector story. you have brent crude above $81 a barrel. wti hovering around the highest since 2014. it stands to reason that in terms of what sectors outperform, we could see some of those big oil companies, royal dutch shell, bp, total, there is a lot to choose from. tom: in terms ofpeople's favorite sandwich choice and sausage roll stock, greg's. indicating momentum. investors raising it to buy. earnings estimate of 6.5%. that is the u.k. chain of sandwiches and sausage rolls. dani: for what it's worth, vegan sausage rolls, not that bad. i will have one again.
2:56 am
we will see if it does move on their earnings. futures pointing slightly higher. we are going to have the open for you next. this is bloomberg. ♪
2:57 am
2:58 am
2:59 am
dani: a minute to go until the start of cash equity trading. i'm dani burger in london alongside tom mackenzie. tom: the s&p 500 closes at the lowest since july amid surging prices. asian profits fall as another developer misses a bond payment. facebook suffers a devastating outage across its popular platforms. millions flock to competitors. mark zuckerberg's fortune
3:00 am
plunges $6 billion. oil rallies the highest since 2014. dani: let's look at the futures, 10 seconds until cash equity trading. markets are higher across the continents, up 0.2%. not huge gains, but we are getting this market opening. how is it shaping up? tom: the futures are not making up for the gains. losses yesterday, concerns for the technology sector, and the nasdaq closing down more than 2%. we want to look at individual indexes across europe given what the futures are showing. question marks about growth and inflation. which a bank -- deutsche bank will break down stagflation risks, that is increasingly part
3:01 am
of the conversation. hong kong tech stocks, china tech stocks in a correction. the september record of the nikkei taken down 10% -- that did not last long. let's look at how the other sectors are faring. it was energy a top of the pile yesterday on the back of higher oil prices. opec-plus not changing their stance. not coming to the rescue for those who want a softer oil price. here is how things stand now. energy is unchanged after yesterday. technology is gaining 0.5%. maybe a little bit of dip buying. if you have a five-month a view on the markets, you want to buy cyclicals and value stocks.
3:02 am
when you have a five to 10 year view, look at growth in technology. travel and leisure gaining 0.8%. that is how things stand in the first two minutes of the trading session. dani: getting direction from energy. equity markets are opening broadly to the upside. what takes me back to the tech question is bank of america saying it is this pavlovian buy the dip. will we see that in tech? here is where tech stands at the moment. we are heading to a correction. a lot of worries on this, long looking less attractive with higher rates. be it a simple outage were people could not use whatsapp or check instagram. this is the sector to play and now. let's take this question to our
3:03 am
guest host, louise dudley, portfolio manager global equities, hermes fund managers. are you a buyer of the dip on this text selloff? louise: i'm actually not. it depends on your time horizon. we have a positive outlook for the year end but there is near-term volatility corrections. we will have a earnings and we are expecting inflation to be a big concern. interest rates hurting those tech growth names as well. tom: how sticky do you think inflation is in terms of breakevens, and suggesting these are more entrenched views on inflation? are we passed this view on central banks? louise: it is still transitory but longer-term. we expect it to stay through 2022 and come in stronger than
3:04 am
people expected. in some cases even double. also hits from multiple sides, wage inflation as well as the energy pricing. maybe energy can keep going from here, and that will impact those names. we are seeing scarcity in freight that will push that. we have supply chain constraints coming from china. we see shutdowns and manufacturing. we had we numbers last week in chinese manufacturing numbers, so expecting supply chains constraints will not ease in the near term, so inflation sticking around for 2022, but then expected to come off and not rally through out-of-control rages like in the 1970's. dani: in terms of costs picking up on the effect on
3:05 am
corporations, we see earnings upgrades slowing down in the third quarter, analysts flagging this as a risk and why earnings may not look a strong. how concerning is the earnings picture to you? louise: we have gone through a couple of earnings that have been strong. last year was so weak, year on year numbers pretty good a lot of companies. that is coming down but we are seeing some growth. it is a case of the delta change coming down. we are still seeing the absolute number coming up. there is a lot of concern for the top line not being able to grow looking into 2022 as strongly as we expected. those global growth numbers not as good particularly when looking within asia, one of the big growth drivers globally, and
3:06 am
that will hit across the world. tom: what is your view on europe as a heavy tilt toward cyclicals and value in this part of the world? is that were you want to increase exposure? louise: when looking at u.s. versus europe, europe has more of the value exposure. you will take a market view, you will get more value from your because of that's poser. the u.s. is so heavy within technology. maybe you have the areas we look at in terms of value in japan. a strong industrial and sector focus as well. europe and japan at the moment have not rally as strong as the u.s., and those are areas of attractive names. dani: it is interesting to see the contours the value rotation
3:07 am
is starting to take because of what we see outperform, sectors like energy. it is more energy and financials. what does it tell you that we are not having a wider breadth of rotation? louise: materials have been so strong through the year. we have seen some of those names come off and individual commodities come down. we are saying the lower quality names doing well. and interest rates, the financials are really benefiting from them. tom: we have a view on the equity space given the challenges this country is facing. they are trying to look ahead to reskilling the workforce. but a note suggesting we could see a recession in the u.k. next year. they are flagging a potential policy misstep.
3:08 am
how do you view the u.k. space? louise: the u.k. is generally looking stronger than the rest of europe in terms of growth expectations, but at the same time a little bit of that sector split. we have lost performance from materials names. maybe within the u.k. looking at the small caps space, definitely saying stimulus coming through as well. that is where we are focusing at the moment. dani: heading into year end, what do you want to avoid? louise: we are continuing to ensure we are looking into 2022, so actually capitalizing, taking on names where we become dislocated in terms of valuation. we have that longer-term view. definitely looking into year end
3:09 am
we have the infrastructure bill coming through. and some ongoing spending, longer-term value drivers will come through, so sustainability continues to be a big driver next year. within financials it is more of the technology financials, alternative payment systems. we are seeing really strong growth. some trends from last year in terms of work from home technology and online shopping will continue to be strong. logistic names within real estate as well. that is what we are thinking in 2022. tom: louise dudley, portfolio manager global equities, hermes fund managers stays with us. we will get your views on china next. coming up, more difficulties for that sector, after fantasia failing to pay a $300 million
3:10 am
bond. this is bloomberg. ♪
3:11 am
3:12 am
tom: welcome back to the open, 12 minutes into the european trading day. stocks across europe -- in terms of indexes, the outstanding
3:13 am
indexes, the ftse 100 gaining 0.6%. the dax up 0.4%. individual movers, the demand for sausage rolls in the u.k. remains strong. greg's, gains in the share price of that company of more than 4%. raising their forecast on the demand -- on the back of strong demand for their sandwiches. dani: in the meantime, i am looking at ef, the french -- edf, the french nuclear energy company. considering the energy crisis, there has been a move to phase out gas use and go toward nuclear. we had morgan stanley upgrade the shares today. tom: in terms of a stock not performing well, we will look at gn, a danish company that makes
3:14 am
hearing devices. they have cut their financial outlook for the hearing aid unit setting delays in product development. down 4%. dani: let's get over to the bloomberg business flash. laura: a veteran hedge fund manager, ken griffin, has a warning for younger employees -- you are risking advancement by continuing to work remotely. he says working outside the office also hampers innovation. he thinks working from home could cost them dearly over decades. global foundries filed for an ipo to capitalize on the chip boom and the shortage of semiconductors. it is owned by the investment arm of the abu dhabi government. bloomberg reported it was looking to value at $30 billion. jp morgan is banning business travel for employees who are not
3:15 am
vaccinated. it says the unvaccinated will take that payroll deduction to cover the cost of insurance. wall street is adjusting rules as they push to bring staff back to the office. tom: another chinese developer fell into crisis monday after failing to repay $206 million bond. fantasia is adding to the strains of the heavily leveraged property firms after evergrande's debt woes. how are we seeing stress manifested across china's credit market? how bad is it now? >> we are seeing a brutal selloff in china high-yield junk bonds today. the broader market down five cents on the dollar. single be rated names down as much as $.10, some of the worst
3:16 am
performances since 2013. i think the danger is we see a shift in tone after the surprise missed payment. the expectation was they would make this payment. the problem is it becomes a self fulfilling prophecy if borrowing costs reach the level where they cannot refinance their debt. it becomes inevitable they will re-struggle to repay and we will see more default. the broader landscape is happening against the backdrop of the imminent potential restructuring of the evergrande group, which people are worried about, and little clarity on how that will play out, and with another property developer of an evergrande unit. a lot of uncertainty here, and
3:17 am
investors are looking closely at these weaker companies and their weaker cash flows. dani: thank you for staying on top of this story. louise dudley, portfolio manager global equities, hermes fund managers is still with us. does it make sense that the entirety of the asia high-yield bond space sold off in sympathy with what is happening with evergrande and now fantasia? louise: i think definitely, and up until yesterday there was a feeling things had been contained, we were getting positive sounds in terms of the fact it would not leak into other sectors. the banks had it under control. now it brings up the risk somewhat. we do worry about how it impacts other sectors and whether it will lead to broader chinese
3:18 am
consumer weakness. we had the weaker numbers coming on the manufacturing side. if it comes through on the consumer side, we get greater contagion across other sectors, and that will weaken the outlook , not just in the near term but longer-term as well. tom: is there an opportunity to discriminate as an investor between those companies heavily leveraged and do not meet beijing's requirements, and those better capitalized and have a big footprint in major cities in china? is there an opportunity, or is it too early? louise: it would affect financials but it is too early, we are cautious on what regulation may come in, what movements are happening behind the scenes. we are looking at the names that are consumer standards, but also
3:19 am
have strong business models and will keep growing almost due to the consumer although they are being impacted by inflation numbers. they do quite well. they are looking risk off in that market. there are a lot of questions and regulation within china it is very much an unknown and almost anything can happen, so not willing to go there yet. dani: you mention from the inflation numbers. are you concerned about a slowing pace of growth from china? louise: yes, and there is a lot of discussion around the energy crunch. some of the real estate, financials, and energy names. we are seeing companies being asked to step in and via prices
3:20 am
they probably do not want to. and securing those supplies. that will hit them as well. the delta that we have in terms of the change within china and signs of that economy are so. the visibility we have is not great. a lot of question marks, and concerned about the inflation and help leave that could ramp up across china. tom: louise dudley, portfolio manager global equities, hermes fund managers, solid insights this morning. thank you for joining us. coming up, mark zuckerberg apologized for a global service outage that kept facebook off-line for much of monday. we will look at the fallout from that, next. this is bloomberg. ♪
3:21 am
3:22 am
3:23 am
dani: welcome back to the open, 23 minutes into the european trading day. mostly solid rises. edf, the french energy nuclear company is where we are seeing gains. more macro stories about energy helping push up higher, but elsewhere a half percent gain for the euro stoxx 600. the dax and the cac quarante
3:24 am
pushing higher as well. let's stick with the tech story, the source of a lot of pain yesterday. facebook's mark zuckerberg apologized for the global outage that kept its media apps off-line monday. bring us up-to-date what happened yesterday. for hours i was not able to send a whatsapp. >> it was like being sent back to the 1970's because of a network configuration that led to a global outage. 2.7 billion users across the platform, facebook, messenger, instagram and whatsapp off-line for six hours. even facebook's internal systems were down. mark zuckerberg apologized, and engineers had to go on site to reset services to fix the problem. this led to millions of downloads on alternative apps.
3:25 am
tom: how did it affect facebook's stock? laura: facebook was already under pressure because a whistleblower gave an interview on cbs "60 minutes." it was trading down 4.2%. when the outages hit, it closed down 4.8%. the nasdaq closed down over 2% yesterday. tom: thank. let's they deeper into the story. do these big outages feed into the broader debate about regulation, the need for regulation, particularly on capitol hill? >> it raises questions about how all-encompassing these companies are, and how and outage can affect billions of people on multiple platforms owned by one company. you saw the u.s. representative alexandria ocasio-cortez
3:26 am
saying facebook needs to be broken up. it shows several things, the vulnerability of the system to one outage. businesses and individuals and prickle groups rely on these for communications and within their organizations. dani: i'm wondering, this is not just a u.s. problem. how are governments around the world changing their stance? >> countries are rallying behind e-commerce giant's with the power they have, not just in china but south korea and europe. that monopolistic behavior in delivery of services like
3:27 am
ride-hailing and e-commerce, or the information some companies facilitate and whether that is enabling hate speech. tom: we have to leave it there, but thank you. this is bloomberg. ♪
3:28 am
3:29 am
3:30 am
dani: welcome back to the open, 30 minutes into the trading day. the global selloff deepens, the s&p closes at its lowest since july amid concerns about surging prices. asian stocks fall is another chinese property developer misses a bond imminent. facebook suffers a devastating outage. millions flock to competitors, and zuckerberg's personal fortune plunges $6 billion. oil rallies to its highest since
3:31 am
2014. opec sees gradual supply increases despite the energy crunch. i feel this story capturing markets yesterday was this more than 2% selloff in tech. so many things to be concerned about, higher rates being one of them. tom: there is a bit of dip buying in europe on technology, but how long that will be sustained? short-term values, cyclical still works. longer-term there is an opportunity to pick up growth names, but the yield story is front and center. the premiums you are paying for growth stocks. with u.s. 10 year relatively stable, investors are getting back into technology for now. the sustainability is in question. the wall of worry remains in place.
3:32 am
the stoxx 600 currently gaining 1.5 points, 0.3%. the dax is gaining a little less. the cac quarante up 0.3%. the politics are still in focus in the u.k. amid the conservative party conference in manchester. prime minister johnson will speak tomorrow as this country wrestles with energy prices, fuel shortages. banks are gaining 0.8%. travel and leisure in solid territory and on strong footing, gaining 0.8 sent. auto parts, telecoms and construction are at the bottom of the list. dani: wti crude factoring into the global equity picture. the commodity moving to the highest in almost seven years
3:33 am
after in opec-plus meeting which stuck with its slow and steady plan of increases. they agreed to add 400,000 barrels per day. many were expecting tightness in the market. we are joined by our energy reporter in singapore. we had oil prices jump, but how do we square that with the opec-plus announcement that many had seen coming. >> the big thing to focus on is the deficit in the market. there is more demand than supply in the market. opec-plus expect 900,000 barrel deficit for november. they are only adding 400,000 barrels a day for that month. they were not really willing to meet the deficit, and it shows there will be tightness in the market.
3:34 am
you are hearing saudi aramco say a surge in natural gas prices, utilities are switching from natural gas to oil products to boost demand as well. not only did we not have enough supply about the natural gas and coal rally that is ravaging the world is leaking into oil. this is a global energy crunch materializing. tom: opec-plus not budging, we will see if that continues to be the case. we will move on to the big take, looking at the clean energy transition. why are we facing this crunch now? >> it is a perfect storm of different things. first look at natural gas, demand for natural gas used for power plants, heating, chemicals boomed this year because after covid crashed demand, economies
3:35 am
came roaring back, specifically china, and demand exploded. there was not enough supply to meet that demand, and last winter was cold. a lot of inventories were drained. on top of that you have the post-covid economic recovery. all of those combined make for a tight situation in the market. countries like the u.k., the united states are depending on intermittent renewables. they are using solar and wind to make up so much of the grid, so wind is not blowing in natural gas prices are high, power prices will hit records. dani: there has been criticism on reliance on wind. what does this mean over the long run for energy prices? >> volatility is the name of the game. it is not the fault of renewables, but they will
3:36 am
exacerbate these shortages and potential because more volatility in the markets going forward as there are crunches or if there are problems with coal mines in china. it will make everything worse. going into the future, when there are more renewables, everything is expected to become more stable as we shift into that new green economy. the in between is where the volatility lies. tom: let's bring in rachel, our energy reporter. what are the idiosyncrasies within the u.k. energy challenges? >> the u.k. has been an unfortunate example for the sky high prices that have affected
3:37 am
global markets, but also having low wind and although the weather has not yet accentuated these factors come u.k. has reduced emissions and built up offshore wind capacity, and in the backup at the moment is gas. the u.k. has been particularly affected by this crunch, and gas prices were affected again today. the government has an interesting proposal to make the electricity on the grid totally green by 2035. we had a lot of talk about energy independence. we are hearing the same from brussels. they need to get off of volatile gas, that is what is really worrying politicians. dani: a complicated story.
3:38 am
thank you for joining us. coming up, the u.k.'s excessive borrowing is called immoral at the conservative party conference. this is bloomberg. ♪
3:39 am
3:40 am
tom: welcome back to the open,
3:41 am
40 minutes into the european trading day. some optimism's starting to fade . the stoxx 600 gaining 0.2%. pairing the stronger gains in the first few minutes of the open. the ftse 100 gaining 0.5%. in terms of the sector breakdown, top of the list, banks at the top of the list. let's get the first word news. laura: facebook suffered a major outage for six hours yesterday, shutting its users out of its services. it blamed the issues on technical problems. there is no evidence user data was compromised. mark zuckerberg lost about $6 billion, dropping to number five on the rich list. president biden is warning that the u.s. is at risk of reaching its debt limit in two weeks, and
3:42 am
described it as a meteor heading for the economy. he blames republican leader mitch mcconnell. he is asking the senate to extend the debt limit. there is an update and they scandal -- the executive board met with the law form, accused of getting them to adjust a global ranking in china's favor. the imf says they remain committed to a timely and objective review. the internal watchdog will probe senior bank officials following revelations about transactions last year that forced regional managers to resign. jay powell opened an internal investigation into the central bank's ethics laws. 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.
3:43 am
this is bloomberg. tom: thank you very much. that's switch to u.k. politics. u.k. chancellor said it would be immoral to accumulate bills and borrow excessively to pay them, speaking at the annual conservative party conference. he said he would not make decisions based on fear, but would do whatever it takes to improve the u.k. economy. >> our recovery comes with a cost. tax rises are unpopular. i want tax cuts, but in order to do that our public finances must be put back on a sustainable footing. the worst parts of politics are driven by fear. we will do whatever it takes. i remember five years ago being told if i backed brexit, my political career would be over it had begun.
3:44 am
i put my principles first and i always will. i believe in fiscal responsibility. borrowing more money is not economically irresponsible, it is immoral. tom: joining us now is alan wager, associate, research changing europe, king's college london. we heard from the chancellor that there is a division within the conservative party, those in the north and those in the south and southeast who would like to see tax cuts and a return to what many would argue is a traditional conservative ideology. what were the key takeaways from the party conference for you? where is the focus? alan: there is a sense the conservative party defies political gravity. morris johnson continues to be
3:45 am
popular despite the disruption. the economy at the moment, and internally he is a strong prime minister, but the labour party is not able to profit from the problems the conservative party faces. some of the structural issues that face boris johnson, and face internal division on economic focus. and the fact we have covid, and brexit is more unpopular. we potentially see it difficult in the autumn and winter for the conservatives and prime minister. dani: you see that translating into public opinion changing about boris johnson despite the disruption?
3:46 am
alan: one of the things, it never changes until it doesn't. it is a tipping point, the level of disruption, there is no sense that boris johnson is in any danger, and he has a solid base among the right bloc of voters with no challenges to his right, which makes his support stronger than it would have been in the past with nigel for raj or the brexit party challenging him. when you saw the conservative party go behind the labour party in the polls, you see an upsurge in people saying they will vote for parties to the right. at the moment the lack of any challenges to boris johnson means he can make these populist appeals on the economy without risking his base.
3:47 am
the reality is threats internally will make that difficult to sustain in the long term. tom: do you think that is a message she will emphasize on wednesday? how will he craft his messaging? alan: one of the key things we are saying is immigration, and the idea that some disruption we have seen in the u.k. economy can be seen as a necessary price to lower immigration. for the last five years we have seen concern about immigration drop in the u.k. and in the u.s. the calculation from the conservative party is there is a residual dislike for uncontrolled immigration, and they can say all this disruption is a consequence of moving to a high wage, low immigration economy. that is the key message he was
3:48 am
bringing this morning, and that is a gamble, what is the cause of seeing lower concern about immigration. have people stopped talking about it? can they rally support? that will be key to watch in the speech tomorrow. dani: it is an interesting contrast, the idea they can move to the left because of the vacuum at the moment. how do you square those? could there be an ideological shift in that direction for the entirety of the tory party given that vacuum? alan: yes, the base of conservative support has more to do with social conservatism than right wing economics. that is the calculation. they look at the average voter, someone socially conservative but also quite left-wing populist on the economy.
3:49 am
we have seen this turn toward trying to maintain power by holding onto his many of those voters as possible. there are small state ideological mps, but they are protected by boris johnson's pulling lead, and people think he is a political winner. that wing of the party remains at the moment given this conference. tom: some of the guests we have been speaking to have flag risks around negotiations. how pertinent is that concern? we know the europeans will put forward proposals next week. alan: it is increasingly likely the u.k. government will make a
3:50 am
song and dance, but that is a long and drawnout process that has come to a head after a couple of years. the outcome is pretty forgone the eu has not breached the protocols. there was an exchange yesterday where the discussion focused on the fact that trade between northern ireland and ireland is working too well for the u.k. government. there is a sense the government wants to show a political challenge to the protocol on brexit. dani: before i let you go, considering the energy crisis in the line at the pumps we see in the u.k., do policymakers need to do more to address those? alan: absolutely.
3:51 am
the problem for the conservatives at the moment -- and we saw this with interviews boris johnson did this morning -- he is going in with the slogan, get on with the job. there is no sign there is a plan to deal with the current problems of the supply chain. this will drag on and on for the next few weeks and months, and that is a serious indictment for what was thought of as the value of business. tom: it is a challenge politically when "the telegraph" editor calls desperately for a plan. alan wager, associate, research changing europe, king's college london, thank you for those insights. coming up, opec-plus -- we will dig deeper into how markets are reacting with our mliv team. this is bloomberg. ♪
3:52 am
3:53 am
3:54 am
dani: welcome back to the open. one hour into the european cash equity trading, gains across the board. the weakest of the sectors is the dax, flat on the day. other sectors with energy companies, like france, up 0.3%. let's dig into this market action.
3:55 am
part of what is driving the market today has been a higher energy price. even those dynamics, is it fair to start having the stagflation discussion? >> i will say let's wait off on stagflation. i'm more concerned about the inflationary environment that we have. we need high prices and price pressures for stagflation to come in afterwards. that is a little more of something i would pay more attention to at the moment, but it does not mean stagflation is not of interest. stories on the bloomberg terminal have topped when it comes to stagflation, but it is something i am more worried about now. tom: you cannot talk about inflation without talking about oil. that output that they planned,
3:56 am
how is that factoring into market sentiment? >> this is the time to ride the bullish wave for crude. i did a post yesterday that looked at oil indicators to show how bullish market is. if you look at an oil sku that determines the volume trading based on puts and calls, and the commitments of traders, you will see the market is bullish when it comes to crude. now is the time for brent to shine, especially with the energy crisis on the back foot. tom: what about china and the property sector? >> it is not looking very good, with another company missing a payment. junk bonds out of china are set for the worst performance since 2013.
3:57 am
realistically, any move or signal from the pboc to cut rates is a good thing for equities. tom: thank you very much. across europe we see gains, 0.3%. stay with us. "surveillance: early edition" is next. this is bloomberg. ♪
3:58 am
3:59 am
4:00 am
>> that is the only mandate, price stability and employment. right now we do not have price stability. >> above all else we must defend to the hilt our economic interest. >> we do not want to be dependent on the supplies, that is the key point. >> this is "bloomberg surveillance: early edition" with francine lacqua. francine: good morning. welcome to "bloomberg surveillance: early edition."


info Stream Only

Uploaded by TV Archive on