tv Bloomberg Markets European Open Bloomberg October 7, 2021 2:00am-4:00am EDT
>> good morning, welcome to "bloomberg markets: the european open." i am anna edwards. mark cudmore usually joins us from singapore. today he joins us in london to take a look at the market action. less than an hour away. here are your top headlines. debt ceiling progress. democrats will accept a republican compromise to allow short-term increase on borrowing , postponing the risk of
defaults. global stocks climb. the great gas reversal. putin steps in, offering to ease europe's energy crisis with strings attached. it caused a surge in gas prices. a bloomberg scoop. the ecb starting a new bond buying program to prevent market turmoil when pandemic support is phased out next year. a warm welcome to the program. welcome to the european market open. very nice to be back in this studio. just gone 7:00 in london. mark is in london. good morning to you. very early morning. earlier than you are used to. what are the markets saying? mark: it is great to be in london. great to have you back on the show. markets are happy to celebrate your return. a number of issues supporting sentiment. there is a slight sign of positivity around the debt relief situation. it is only a temporary solution. tech stocks very strong. a little bit of easing and
energy prices in oil prices from the gas price drop yesterday is very positive news. short-term, the sentiment is good. how long it sustains might be a different issue. but today, looking positive. anna: we will get into that conversation later during the program. let's get to some data. you've got the industrials production numbers breaking. this is interesting because of the contact, the data before the data we had yesterday. rising by 1.7% year on year. the estimate was an increase of 5%. it looks to be below what had been anticipated. the number for the month, falling by 4%. the estimate was a drop of .5%. two days in a row looks to be disappointing data on the german economy. no surprise given the supply chain issues they are facing. now the higher energy prices. industrial production in focus. we think about the impact on german industry. let's get to the features
picture and see the european equity market space. we anticipate quite a rebound at the start of trade. what will the latest data do? we will have to wait and see. the current picture looks robust. the supply chain, still worried about it, but there are other reasons to be cheerful. more on the u.s. futures picture. the u.s. rallied strongly yesterday towards the end of the day. that is the catch up europe needs to play. u.s. market futures do play to it. they will perhaps outperform, playing catch-up. there's a lot of reasons to be cheerful, in terms of the debt ceiling conversation, the u.s. looking brighter, vladimir putin stepping in. the u.s.-china dialogue. it looks like it will happen at the end of the year. you look at the data in the positive picture. mark: gmm probably doesn't reflect the full amount of exuberance we have seen. part of the strong recovery
yesterday. in the middle of the day, we were weak. obviously recovered very strongly in the u.s. sessions. finishing up quite high. that is when you see the features not extending them. it kind of shows it is positive, green boxes across the board. not the exuberance coming in. the kospi, semiconductor stocks, leading gains in asia. we also see some gains with asian currencies. anna: sort of the risk on theme. and we have the risk on moves across these markets. let's get into the conversation about where we see the debt ceiling conversation going. democrats signaled they would accept mitch mcconnell's offer to raise the u.s. debt ceiling into december. it alleviates the immediate risk of a default, but kicks the can further down the road after financial and corporate leaders
were enlisted by biden to help put pressure on gop lawmakers. >> we will be defaulting on a debt and lead to self-inflicted wounds risking the market tanking and wiping out retirement savings and costing jobs. anna: joining us now is derek wallbank. what do we need to know on what the republicans are offering about whether the democrats are likely to accept, and how much rest bite it gives us from the talk of the debt ceiling? >> chuck schumer went on the senate floor after midnight washington time and said they are close to a deal. he thinks they might have a deal as quick as the morning. lawmakers will come back around 10:00 in the morning to get back doing that. you could have a vote in the usa sunrise hours. in terms of a worry, you can
kick your pre-halloween worry into a pre-christmas worry. you're looking at a two month extension. democrats will say mitch mcconnell blinked a little bit. mitch mcconnell's office will say he's got democrats to move off of their position a little bit. there is a lot of posturing, which has not been resolved. a lot of people trying to say you have to do things, you have to do it this way for various political reasons. but the critical thing, if you are a market watcher in these hours, you don't necessarily -- would have to worry about this as a thing right now. the idea is if you have to worry about it as a possible thing in december, that is not off the books. right now it seems we are eased for about two months. anna: i spent all of last christmas thinking about exit.
it looks like we will have to think about this christmas thinking about the debt ceiling. thank you for telling us about that story. let's think about this from a market perspective. i don't remember seeing the debt ceiling conversation cited all that much when we looked at the downside. not as if everyone was saying they fell so much because of the debt story. we were blaming inflation and higher treasury yields. it is being cited as one of the reasons we see more global optimism. is it right? >> it is a good point. it was the reason for the rebound. i think the market kind of knew that we were going to find a surge, and they were not overreacting. the fact we have removed the tail risk of being a problem is a positive. the market looks at it as not possibly trading, but possibly at the last moment. getting closer to the date, there is tension. anna: some of your colleagues
have been writing about 2011, taking our minds back and thinking about what we can do to risk assets. the drop in less than a month in 2011 as a result of the debt ceiling. as we do this again in december, we should be mindful. >> we have learned to be complacent. it is important to remember the first kind of time the debt ceiling became a big thing. it did have a market reaction. it is probably right to be relatively complacent. i don't like derek's description of changing from pre-halloween worry to a pre-christmas worry. anna: they could get rid of the debt ceiling. let me ask about where we are on the global stock story. selling off inflation concerns, high treasury yields, now tech stocks putting a decent rally. do you believe it? >> it is tough. i don't have a strong
conviction. i think we are still in a difficult period for stocks going forward. central banks more hawkish. energy prices are still higher than they were a couple of years ago. they eased off yesterday speak. the crisis remains. it will be difficult for the next month or two. we might have lower levels in u.s. stocks. we might hit the bottom in hong kong and china. if hong kong stocks can find a base that might support sentiment in emerging stocks, i think u.s. stocks are what we are most confused about. anna: we are not really thinking about covid all that much. probably bringing it to the audience. moderna plans to spend $500 million on the vaccine plans in africa. it will make the covid and other shots based on the messenger rna technology they have pioneered
for outlining plans for this africa vaccine facility. no comment on where it will be. it sounds like a fascinating development. the latest on the market moves with mark. get analysis and insight from mark and the rest of the team. coming up on this program, boris johnson is skip's over the u.k. economic troubles to clear out the conference with a few jokes. but is his sales pitch for a new britain all show and no substance? we talk about it later in the program. and we hear from antony blinken. our interview with him. the thoughts on the energy crisis, nato, and tensions with china. stocks rebound, bolstered by progress on the debt ceiling. and the rebound in tech shares. we discussed the market share. that conversation up next.
>> the problem is stagflation. that is the real risk in so many portfolios are massively exposed. there are ways to hedge their risk, arbitrage that difference between the likely nominal outcomes and those available in financial assets. >> when you look at productivity, people are not talking about it. it is booming. the idea that we don't have any gdp growth, particularly when consumers have this much excess savings, i don't see that. anna: greg henson and henry mcveigh with their very different takes on stagflation. let's get another one.
wells fargo asset management head of investment grade credit for europe joins us. what are your thoughts on stagflation? it seems to get complicated quickly when we have these conversations. i guess we are talking about the u.s. are we heading to a stagflationary environment? >> yes, it is a discussion to have, given what is going on at the moment. as they were just saying, the conditions for growth at this point, particularly if covid is now in the background, and we open up the economy fully, is strong. we are in a situation where consumers do have a piggy bank we can deploy over the next few months. we are still in a very supportive environment from a fiscal and monetary perspective. the conditions are there for growth. there are issues, there are bottlenecks in various elements
near the supply chain, and we are being pressured on the energy side, as well. it is not a slamdunk. i think it is testimony to the shock we had over 2020 and 2021. it needs to ease itself through the system. conditions for growth are there. conditions for inflation are there. at this stage, we've had this discussion through the year as to whether inflation will be transitory or not. for it to be seen as transitory, we need to progress over the course of this year and into next year and see these bottlenecks and potential energy crises ease off. mark: sounds like you are relatively dismissive of the stagflation, mainly on the growth angle. i completely agree. the inflation debate is still out there. how are you positioned around inflation?
how are you positioning credit markets? >> from our perspective, we think rates as a nominal element, we see them go higher. we see them go higher over the last few weeks. we have not reached the peak. we saw earlier in the year with u.s. 10 year, call it 175. i think investors are hoping to have higher rates to be in the markets. and we do have central banks washing this as much as they can to ease that transition at the moment. still cautious, still looking at it. we think it will play out more in the race market than on the credit side. and i think over the last few days, despite a lot being thrown at the market, be it from china,
energy, so on, spreads have been very well behaved. particularly investment grade market and high-yield market. anna: we will get your thoughts in a moment on what has happened in european high yields. what do you think the role is of commodity prices? gas prices have dominated the headlines. coming through from shell, they have a trading update saying cash flows will be significantly impacted by these gas prices. some businesses will benefit from it. but many companies, and we see across the industrial landscape, will run into difficulties. how much of a concern are these higher energy prices? >> it depends how long they last. some companies will have hedges in place. we need to see when they rolloff. you can see a squeeze, in terms
of margin. it will depend on the industry you are looking at. energy is something here to stay, given the transition we are looking to go through over the next few years. pressure in gas and oil at this juncture. it is compounded by the energy transition we are embarking on over the next few years. it was interesting to see the discussions he was having in recent days, in terms of thinking about the energy mix, renewables, nuclear, gas, and having to deal with it for years to come. a lot of investment will be required to make that transition as smooth as possible. discussions around the energy side, pressures around energy are likely to stay. anna: as you say in your notes, it highlights the need for a
thoughtful transition. thank you very much. a stay with us. the head of investment grade europe. we will get thoughts from her on investment grade credit shortly. let's get an update with juliette saly. juliette: great to see you. vladimir putin has intervened in the energy market, offering to stabilize europe's gas crisis and saying russia could potentially export record volumes of fuel. his day pete -- deputy said the pipeline would be one way to boost gas exports. european natural gas futures plunged on mark -- remarks, hitting record highs earlier. bloomberg learned the ecb is studying a new bond buying program to prevent any market turmoil when emergency purchases are phased out next year. the plan would replace the existing crisis schemes and complement an older open ended qe program currently buying 20 billion euros every month.
president biden plans to meet virtually with xi jinping before the end of the year. plans for the meeting were announced after talks between white house national security advisor and the senior chinese foreign policy advisor. a u.s. official called the latest discussions more meaningful and substantive since previous meetings. global news, 24 hours a day, on air and at quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. anna: thank you very much. juliette saly joining us from singapore. coming up, the credit markets. getting a redhead line across the bloomberg. sterling credit yields talked to percent for the first time since june 2020. moving around in sterling markets. the market is pricing in a rate hike in the u.k. this year. a lot of talk of wage increases, gas on the rise. possibly reflecting from the u.k. conversation in a moment. this is bloomberg.
anna: welcome back to the european market open. 40 minutes until the start of trading. futures pointing to the upside. let's get back to our guest. coming back to you on this redhead line. sterling credit yields topped to percent for the first time since june 2020. reflecting higher costs of borrowing for u.k. corporate, being driven in part by the guilt story. how far does it have to run? >> at this point, as you say, being driven by the rates piece, it is in turn being driven by inflation considerations and what we expect out of the bank of england. if you look at investment grade spreads, they have been well
behaved, even on the u.k. side. the u.k. is in a very interesting position. you see the trends and bottlenecks, the pressures, in terms of energy, but in a more acute fashion, giving you have the complexities of brexit. and also, the u.k.. but currency and sterling, that has been on the news. being driven by the interest rate side with credit spreads and well behaved. we will have to see how it goes. mark: with credit spreads well behaved, are you over hedging your weight exposure, or are you minimizing duration exposure as much as you can? how are you protecting yourself? >> two ways we are looking to protect ourselves. we are looking at spread in the portfolio, and the trend of the credit curve.
those are the areas we feel will be less vulnerable to the interest rate volatility we may see. not just in the u.k., but globally. keeping a bit of cash, so if you get the higher rates, you can be ready to invest. anna: thinking about where we have seen stress, looking at the market track euro crossover index. high-yield, across default for high yields at corporate debt. we have seen that quite substantially on the rise during september. it doesn't seem as if you think it will affect investment grade all that much. or do you think it doesn't go as far? >> you've got a few things going with the tracks at this point. it will follow the volatility a lot more than the equity markets. may some gray spreads at this
point, they are pretty strong. it is also a hedging tool of choice. you've got a technical aspect to the move, as well. you are looking at high yields, companies that have more leverage. the impact of potentially having squeezed margins will have more of an impact. a few elements going on on the i tracks of this junction. anna: thank you very much, a lot to talk about, henrietta. wells fargo asset management ahead of investment grade credit. interesting to see how quickly sterling markets are reacting. increasingly. a rate hike this year. mark: seeing gas markets and energy markets. but this is really about an inflation or rate story as opposed to credit spread. it might translate more to credit, but it is rates. anna: coming up, a bloomberg
scoop. the ecb studying a new bond buying program to prevent any market turmoil when emergency purchases are phased out next year. we get the details. we also get plenty of analysis from a host of different angles on the gas story. vladimir putin stepping in. the latest on gas markets. this is bloomberg. ♪
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european market open. a half-hour until the start of the cash equity trading session for thursday morning. futures are pointing strongly to the upside, up more than 1%. better mood music around the debt ceiling in the united states, that conversation kicked into december. and that are news around the gas price. mark, you have been giving thoughts to gas prices. you have taken a long view what
this spike looks like? mark: i have been talking about this all summer. since july we are excited about gas prices. we are breaking through that level, and that seemed exciting, it was a scare for markets, but my brother wondered why people are getting excited for gas prices. we have had gas price scares before. it surprised me, this is a 25 year chart of gas prices to show how extreme it was. this is the one spike to the 80 level in the 25 years. yesterday we went above -- in july we are getting excited when it was getting to 100. we went to four times that level yesterday. this is a shock to markets if we stay there.
short-term we can expect more downside, but higher prices remain, and at that level we will talk about a three day working week like in the 1970's. i'm happy to be walking around a chart. anna: it actually fell to 250 on the back of that all of branch -- all of bran -- olive branch. and between parallels between the 1970's. mark: i think that drawdown was really important. we finished 30% off the highs. 12% down him the previous close. what that normally means is anyone who is trying to short the market has got completely
cleaned out. we can retrace back to the fundamental levels which say there should be upward pressure, but not this up or pressure. anna: what contagion will we see across europe? let's get updates on corporate news, here is juliette saly. juliette: the easing of covid restrictions -- in september more than 2000 new jobs were posted, the busiest month since january 2014. third-quarter postings more than doubled last year's level. firms are under investing in china, speaking at the bloomberg invest summit, many corporate investment leaders are underexposed to the chinese market. the region had short-term bumps,
and investors should take a long-term view. >> the question is not should i be investing in that region are not what is the best way and how should we be doing it? in my mind, i think there is more opportunity in that region of the world than not, especially since valuations have corrected a bit in that part of the world. juliette: amazon's videogame platform was attacked, and the earnings of its top gamers were leaked. documents showing twitch top gamers get six-figure payouts. that is your bloomberg business flash. anna: thank you very much. sources tell us that bloomberg the ecb is considering a new bond buying program to prevent
market turmoil as its current pandemic support gets phased out next year. i thought we were going to rolloff the pet program, the existing pandemic program back into one of the previous existing qe programs. what is the story here? >> basically policymakers are concerned that spreads will widen when large-scale asset purchases stop. it is scheduled to run out at the end of march. it is running at about 70 billion plus 20 on the older program, so there is a lot the ecb is dying each month. when that program stops, there is the risk investors are
getting concerned that the ecb is away from the market. policymakers are looking for a little bit of insurance to assure those investors they have nothing to fear. there is no reason for spreads to blowout. that is why they are looking at ways to achieve that. no decision has been taken, so people are studying options and looking into this. this is one thing they are looking at. we have waited for so long in the decision has been pushed out for so long. we are hoping to hear more about what is happening later next year at the ecb december meeting. a few weeks to go on that one. mark: we have pushed this so long, why don't they extend the program?
why do they want to transform it into something different? jana: as the pandemic program is stopped, it has a specific purpose. it is a crisis tool, an emergency measure that is very flexible and meant to get the economy and inflation back to where it was before the pandemic hit. to restore the trend we have seen at the start of last year. it looks at the program has achieved that. inflation pressures are rising. not the spike driven now by oil and other temporary factors, but the underlying price pressures are rising. ecb forecasts are in the area of what we saw at the start of last year. now it is about leaving the crisis behind and focusing on
the actual work of bringing inflation back to 2%. there is a feeling you cannot stretch crisis instrument for longer than they are welcome. anna: pandemic in the title might not set the right mood. coming up, back to the subject of gas prices. russia offers to alleviate europe's gas issues. and our interview about antony blinken who has thoughts on the energy crisis. this is bloomberg. ♪
better news flow around the debt ceiling. u.s. futures also point higher. gas prices are a big story in europe. russia is offering relief to europe, but with strings attached. after a chaotic day that saw benchmark rices rise 40%, vladimir putin says russia could stabilize problem by exporting record volumes of fuel to europe. while not mentioning the dormant nord stream 2 project, the current route was more expensive and polluting. secretary of state antony blinken hoped russia would not use the situation as a foreign policy tool, and that high energy prices highlight the need to transition to new energy. secretary blinken spoke with francine lacqua in paris, talking about europe's security and defense.
sec. blinken: we have had a few good meetings, including with my counterpart and president macron. we are focused on moving forward. i think we both see an opportunity to deepen our cooperation and consultations and coordination in a series of areas, everything from two atlantic security and the indo pacific. francine: do you have concerns that european strategic autonomy could undermine nato? sec. blinken: the idea that europe increases its defense capacity and security capacity is a good one. it is in our interest, provided it is company three two nato, and there is no -- provided it is complementary to nato.
we want to see our partners have the capacity to engage to deal with common challenges, and again, if it is done in a way that is complementary to the alliance, it is something we support. francine: how should the west and europe deal with putin given these high energy prices? sec. blinken: the high energy prices reinforce the need for a transition to new forms of energy, particularly sustainable energy. at the same time, reinforce the need for energy diversification, something europe has been engaged in for some time. we need to go further. we are in the midst of a lengthy transition to renewables, away from fossil fuels. during that transition, you can
have challenging, bumpy patches before you get to the point where you have renewable energies that are online and able to fill the gap. it calls on the need for coordination and the need for pursuing diversification. francine: is russia laying again by not sending more gas? sec. blinken: russia has not passed used energy is a tool, some would say a weapon of foreign policy. i hope that is not what we will see especially getting to the winter. you will see countries working together, cooperating to deal with energy problems. francine: is there anything the u.s. can do to help europe wean off of russian gas? sec. blinken: this is a process of diversifying that takes time and consistent effort and determination.
it is diversification to some extent within existing types of energy, but especially its transition to renewables and away from fossil fuel. these are long-term projects and efforts, but it reinforces the need to energize those efforts. anna: secretary of state antony blinken speaking with francine lacqua in paris, giving his thoughts on the energy crisis here in europe. let's get more -- what prompted the massive decline in gas prices yesterday? this offer from president putin, what is behind it? >> yes, yesterday was a historic day for the global gas market. the prices went to a historic high and then drop after
vladimir putin made a speech. he said russia is ready to increase its gas supplies to europe to a new historic high. and that russia will honor its obligations with ukraine, something a lot of people, ukraine itself are worried about. these promises came with strings attached. russia is currently seeking regulatory approval for nord stream 2, it's most recent gas project. germany has until january to make its decision. a lot of people doubt if europe could withstand the gas crunch without new supplies from russia.
russia said it would be willing to help europe if europe helps them, but it remains unclear whether germany as a european community will be willing to sharpen the application process which could take up to 10 months , with just several weeks to go. today we received news that poland has been officially approved to join the application process for nord stream 2 regulatory approval, and poland historically has been an opponent of the nord stream 2 project. mark: as you say, the conversation around nord stream 2 is a critical issue around the gas prices. what is the next step in this dialogue about the nord stream 2 pipeline? >> there are two steps we can
expect, if europe says after careful consideration it is willing to make this regulatory approval process faster, taking weeks and not months. germany has the right but not the obligation to look at the compliance of the project for up to 10 months. they can be more expedient. whether they are willing to, and the pressure from opponents also includes members of the european parliament. will they do that is not clear. anna: thank you for bringing us that update around nord stream 2 and if it makes any progress in the weeks ahead.
the u.s. and shut down oil production in the gulf of mexico. shell expects a $400 million impact on third-quarter earnings, and this could shakeup to be a volatile quarter given the swinging gas prices. the shares have benefited from higher oil prices. this is not bode well for peers into the third quarter earnings season. this was for people stuck at home deciding to take a couple of bets on the market. it has given an update that follows a profit warning that said things are going well. it is seen good performance, so this is a good update and could give the stock a boost. anna: take us through the paper
and packaging company. for people looking for macro clues from the micro, this company has a lot to say. >> it flagged higher input costs, the raw materials needed to make the packaging products. this could be an issue going forward but overall it had a strong performance in the third quarter. this is a positive. for people like me who love online shopping, it is a very visible company. anna: thank you very much. really interesting to see the detail in this release. they are saying they have had strong demand, able to raise prices. how many corporate will give us that message where the pricing power will live through the winter. mark: i had this discussion
yesterday, so far corporate's are not suffering from the input price problem. that means it will become an inflation problem. as long as the input prices stay high, that either means corporate scan keep passing it on and it will be an inflation problem, or they cannot pass it on which means there profit margins are squeezed and they suffer directly. if prices are high, that is a problem for stocks in the long-term. anna: let's speak more broadly about the markets spirit a few reasons why equity markets are going higher. better mood music around the debt ceiling. putin's role in the gas story. u.s.-china relations are at the margin, but we are set for positive trading in europe. mark: the u.s.-china thing is important. and now the talk of a virtual meeting between biden and xi jinping.
there are many things you can throw your hat on if you want to ride the positive sentiment. we have seen a little retracing, a little discounted, stocks that look invincible now look discounted. maybe this is the dip to buy. anna: comments yesterday about the strategic petroleum reserve in the united states, suggestions that maybe they could open that up to put downward pressure on oil prices. maybe that is just a message to opec. mark: china released a little from their strategic reserves. suddenly you have china and the u.s. saying, we are intervening in the oil market. they do not have the power to control the price. it is an important signal they are not happy with prices, and they will fight it. anna: brent back down to an 80
anna: welcome back to the european market open. one minute until the start of cash equity trading. i'm anna edwards in london with tom mackenzie. tom: debt ceiling progress, democrats will accept a republican compromise to allow a short-term increase on borrowing. global stocks climb. the great gas reversal, putin offers to ease the energy crisis with strings attached. it causes a surge in prices.
the ecb is starting a new bond buying program to prevent market turmoil when pandemic support is phased out next year. anna: let's look at the futures picture, it looks green and buoyant. futures to the upside. we are expecting a rebound. we missed out on the late day rally yesterday on european equity markets. we play catch up this morning, with more optimism around the debt ceiling and gas prices. tom: the asian session has been positive, the first up session in five sessions. hong kong tech stocks back strongly after a record low yesterday. the ftse 100 gaining 0.8%. money markets are pricing in a rate hike by the boe as soon as december as a result of these inflationary pressures. the breakevens jumping 4%
yesterday for the 10 year. in spain, solid gains, 1.3 on the ibex. the cac quarante 73 points. let's switch on to how things are playing out among the sectors. energy will remain in focus. vladimir putin to the rescue, not bare chested, but in front of the cameras suggesting russia could do more to increase supplies. the energy sector is gaining 0.3%. utilities gaining 0.2%. banks gaining over 1%. tech shares gaining 10 points. there a question marks over how sustainable. still well above 1.5%
comfortably on the u.s. 10 year. this sector is gaining 1.3%. anna: equity markets opening to the upside. positive sentiment continuing what we saw yesterday in the united states with a bullish reversal. there is a lot for markets to digest. the prospect of a meeting between president biden and xi jinping. gas prices taking a breather after the intervention from vladimir putin. myles e. bradshaw, managing director / head of global aggregate fi strategy, jpmorgan chase bank joins us now. nice to see you. to underline the headline on u.k. natural gas prices, u.k. natural gas futures dropping as much as 70% -- 17%. maybe we continue with that drop
yesterday on the european gas narrative because of what russia had to say. this rebound in risk assets today, do you sense it has legs? myles: there is a lot going on. it is important to separate the trend, the underlying macro conditions with the short-term noise. the fundamentals of the economy are good. we have strong household and corporate balance sheet. we will have a gradual withdrawal of monetary and fiscal support. this is supported for risk assets. if i look at my portfolio, we expect corporate earnings to be good. this is a market where we want to own higher risk assets such as high-yield. tom: what about inflation
expectations being baked in? a similar picture across the german benchmarks. are you concerned about baked in inflation expectations, and what that may mean for earnings? myles: this is the key risk. we have had inflation shocks with the liquidity prices before, but it has not become and bedded in inflation expectations. this partly has to do with brexit and labor supplied. it is one thing we are watching carefully because if inflation expectations shoot up, you cannot have the gradual withdrawal of monetary support that economies need to support growth. my own view is it is unlikely we will get an anchoring of
expectations, and even in the u.k. you will see the central bank react to rising inflation expectations. we have to remember not only does it include expectations but it also includes inflation risk, and that is on the upside. that is the risk. anna: what does all of this mean? in the u.k. context, is the market factoring in an interest rate hike and the u.k.? we have seen it from norway on new zealand, is the u.k. the next to go? is that the right move? the central bank governor has told us there are factors pushing up that monetary policy cannot solve. myles: this is the problem in other places. poland rose rates unexpectedly. we have seen it in hungary and
chile. we have rising inflation expectations which is a concern. high levels of inflation which also is a concern. that feeds expectations. you also have a strong labor market. the furlough has ended, the expectations are that unemployment will increase. we have not seen a pickup, so that gives the bank more confidence the labor market is strong. it seemed sensible to withdraw the stimulus they have given the economy. the bank of england in the u.k. is one of the more vulnerable economies to stagflation because of brexit and how it has made the economy more fragile because it is broken the flexible labor market that we had. the u.k. is slightly different from the eurozone, where they have not had the same disruption caused by brexit.
tom: the s word, stagflation, and the consequences. myles e. bradshaw, managing director / head of global aggregate fi strategy, jpmorgan chase bank stays with us. we will talk about the u.s. shortly. coming up, stocks and futures gain as progress is made on lifting the u.s. debt cap. jamie dimon says the limit should be removed altogether. we discussed, next. this is bloomberg. ♪
tom: welcome back to the open, nine minutes into the european trading day. solid gains across european markets. stoxx 600 gaining 1%. the u.k. in similar territory. the dax in germany making up for heavy losses yesterday, up 1.3%. xi jinping and joe biden will meet by the end of the year. anna: that is the broader picture, a positive one. let's focus on stocks on the move. this is a prepaid voucher business. to the upside 3.7%, listed in paris. an upgrade from hsbc, a prepaid
corporate services, and hsbc upgrading that stock. tom: also from hsbc, for the luxury maker, gaining close to 3%. hsbc raising its rating. a good company. it has a price target of 1250 euros. anna: the bigger picture around asia tech, and the rally overnight. tencent went up 2.9%. tom: let's switch focus to the politics in d.c. democrats said they would accept the offer by republicans to raise the debt ceiling. they evade the immediate risk of default, but it kicks the can
down the road. biden enlisted financial and corporate leaders to put pressure on gop lawmakers. pres. biden: if we do not, it will be a self-inflicted wound that will risk the market tanking, wiping out retirement savings and costing jobs. anna: joining us now is derek wallbank with the significance of this. this kicks it two months down the road to the preholiday build up. what do we need to know about this? derek: that is exactly right. you are looking at a two month easing of worries that had not started to get into the markets much, but people are starting to pay attention. it gives lawmakers a little more time to figure out how they will do this.
i would not say it ends the problem but it pushes the problem, because a lot of the underlying stuff here is still at play. a lot of the questions about how republicans want democrats to go through a certain procedure, put a number on the debt limit that would be used against them in ads. they will not provide support for a final vote without going through this. all of that is very much in play, but the critical thing for market watchers is you do not have to worry now that there is a problem with the credit of the united states. tom: derek wallbank, our senior editor, joining us with the latest. short-term relief when it comes to the debt ceiling.
the risks remain around the political wrangling. myles e. bradshaw, managing director / head of global aggregate fi strategy, jpmorgan chase bank is still with us. we are interested in your views on the political risks from d.c., and the consequences for the spending plans of the biden administration, whether it is reconciliation or the infrastructure bill, and to what extent markets should price support in or not. myles: the debt ceiling is a bizarre situation were somehow the u.s. congress needs to approve a debt limit in addition to a spending limit. we have been through this movie many times. the expectation is a deal will be done on the debt ceiling. the moderates agreeing on the size of the infrastructure bill, once they agree, you get the debt ceiling going through the reconciliation process, which
means republicans cannot block it with filibuster. the moderate line taken by the west virginia and senator, i will expect a deal will be done. it seems inevitable that the party that has the majority in congress and the presidency must do it without shooting itself in the foot. you expect you would find common ground on a smaller figure, so something like $2 trillion seems most likely. the deadline will likely be pushed to the end of the year. i'm not sure that it is necessary, it is good news, not bad news, but not a game changer for the deal. i expect a deal will be done, lower figure. anna: we will put it to one side and worry about it again in
december. where did you see value at this time? we have talked about higher saving rates as a result of the pandemic. how do you tap into that from a strategy perspective? myles: it is the most unusual, deepest recession, and one of the fastest recoveries. when you look at balance sheets, it does not seem there is a recession at all. we are in a strong position in terms of the economic cycle. that means we have the ability to whether a few shocks -- to weather a few shocks. corporate health is good. we are likely to get deleveraging of corporate balance sheets, and as a debt investor, you want to on those corporate assets. interest rates are more tricky,
they will go up, and the markets pricing rate hikes. we do not argue with the timing of u.s. rate hikes or the u.k. the greater risk is inflation, expectations rise, and the pace of hikes may be faster. the market that has already moved his china. policy was tightened in the second half of 2020. the economy is slowing. owning interest rate risk is more attractive in china. earning credit risk in the u.s. and europe is the best way to build a global portfolio. anna: thank you very much. we are running out of time. i'm glad you got to put your thoughts in. myles e. bradshaw, managing director / head of global aggregate fi strategy, jpmorgan chase bank, thank you for joining us. let's get a bloomberg business flash. laura: the u.k. has ended the
probe into british airways of ryanair and the refusal to reimburse customers and pandemic rules made flying illegal. it strongly believes people should get refunds. it will not take action, as the laws not clear enough. customers were offered vouchers or rebooking. the carlyle group under investing in china, speaking at the bloomberg invest summit, many corporate leaders are underexposed to the chinese market. investors should take a long-term view. >> the question is not should i be investing in that region or not, it is what is the best way and how should we be doing it? in my mind i think there is more opportunity in that region of the world than not, especially since valuations have corrected a bit in that part of the world.
laura: the easing of covered restrictions in the u.k. is turbocharging jobs. 800,000 new jobs are posted, marking the busiest month since at least january, 2014. third-quarter postings more than doubled compared to last year's level. tom: good news for london. boris johnson skips over the u.k. economic troubles to close out the tory party conference. is his sales pitch for a new britain no substance? this is bloomberg. ♪
when i was in the hospital last year, i looked out of my window at a hole in the ground amid the rubble. they seemed to be digging a hole for someone or something. possibly me. i give you august. i know it has been a ruckus caucus. this is not just a joke. they do want to rewrite our national story. anna: that was the u.k. prime minister boris johnson showing off his comedic chops as he wrapped up the conservative party conference. his speech was heavy on jokes but like on substance on his vision for a new britain as a country faces supply chain pain, and an energy crisis.
we put together deliberately a nice highlight reel. lighthearted but there were not any policy announcements to focus on. there was one our colleagues picked up on, that was intentional. >> i think it was a greatest hits of boris johnson, he has returned to the formula successful for him in the past, to rise above the nitty-gritty of policy, the details, the conflicts, and the economic challenges of the day which are pretty hard to ignore yesterday. he painted this portrait what he called radical and reforming conservativism. as you hinted behind that, there are real questions about what is conservativism now, and how does
he unite these different strands of his party, the traditional conservatives, the wealthier voters. and the norther voters that he won over in 2019 that he will need to keep in the tent, and show his leveling up agenda can deliver for him. -- deliver for them. that is why we hear about higher wages, productivity. the flip side is that business has been blamed for problems rather than the government. tom: how real is that disconnect between boris johnson and the world of business, which typically was aligned, but now they are the whipping boy. is that a real disagreement? therese: we have to take a lot of it with a grain of salt. it is a lot of theater. it is about rallying the
grassroots. there is a strain here consistent with what boris johnson has been telling business since the brexit campaign. it has worked for him. now, i'm not so sure, there are huge pressures on business from rising energy prices and supply chain challenges. he will need business on his side to deliver on this agenda. that is not going to happen with the kinds of things that hurt confidence of investors and business. that is where he has a challenge going forward but it is a convenient whipping boy during conference week. tom: thank you very much. well worth checking out the opinion column of therese. coming up, russia offers to alleviate europe's energy
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anna: welcome back to the european market open. we are 30 minutes into the trading day. debt ceiling progress. democrats indicate they will accept a compromise to allow a short-term increase in borrowing. this postpones the risk of default. the great gas reversal, offering to ease europe's energy crisis, which strings attached. it caused a surge in prices. the bloomberg scoop, ecb is studying a new bond buying program.
pandemic support will be phased out by next year. european equity markets are moving to the upside. we have better news -- we had better news yesterday around gas prices and the debt ceiling. the policy offering by the republicans is adding to that. tom: it has been a choppy week for the markets. there are some catalyst. good things remain around inflation and high yields. catalysts around that geopolitical front, vladimir putin has promised to look at increase in gas. you will see u.k. gas prices coming up. in the u.s., the agreement around the debt ceiling being pushed back to december, relieving some of the risk in terms of politics out of washington. the a's and -- in the markets, the asian section saw some gain.
chinese tech stocks are up after a record low yesterday. we are 30 minutes into the trading session. there are gains. the cac in france is up. there are some positives in the u.k. as well. even as markets start pricing in the potential of our rate hike by the bank of england as soon as december. let's look at sectors. basic resources are at the top of the list, gaining 1.8%. at the bottom, energy followed by travel and leisure. that is how things are shaping up. anna: russia, let's get back to the story around gas prices. russia is offering relief to the gas prices. there are strings attached. after a chaotic date that sought gas prices rise 40%, vladimir
putin said they could stabilize the problem. specifically mentioning, the current gas group which goes to the ukraine was more expensive. secretary of state antony blinken told bloomberg he hoped russia would not use the situation as a foreign policy tool. >> russia has used energy as a tool, in the past, of the foreign policy. we hope that is not what we are going to see going forward. anna: joining us now is our -- and helen robinson. around a month ago, we saw lines coming through suggesting that gas prices were going higher in europe, may be conducive for more.
it was not being listened to enough because we needed to hear from the net at the top. what has putin said that his government can do? >> he said yesterday that russia could help stabilize the market. i think those comments were spurred by the spike in prices. russia does not benefit from chaos in the market. they want stable prices and they want to be seen as a reliable partner. they also want -- for their nord stream 2 pipeline. they could make a pitch to europe being as applications could take months and russia wants to take advantage of the tough situation to try and convince people to allow this pipeline project to go through. tom: we saw gas prices coming
offs after these comments. what does it mean for prices in the short and medium-term? >> yesterday was inc. -- was an incredibly volatility day. after the comments, it came down again immediately. russia wants to alleviate market fears. this morning, u.s. natural gas futures have extended losses, a 10% drop. in the u.k., they are down by 18% this morning. russia's comments have had an immediate impact. the situation remains that european storage levels are at decade lows.
we are still in a very tricky spot. anna: helen, aching about what russia is offering, with the russian offer -- whether it comes by ukraine -- if timing is important, would russia's offering be enough for the supply or do we not know how much of their obligations are they willing to send? >> we do not know enough. we know that russia had record gas this year. it slumped in september. this is not just now a gas crunch, this is a global energy crunch. it has an impact on other markets. the other thing happening with
russia is that the domestic gas bonds are a bigger player than previously. russia's immediate priority is going to be refilling and catering to their own domestic bonds. tom: and not touched on this, about nord stream 2 and whether russia is using this as a bargaining tool. to be get a sense that that is the case? -- do we get a sense that that is the case? >> it seems that way. russia wants to be seen as a reliable partner. they will take care of themselves first to make sure their storage is first. -- filled first. putin has wanted to have nord stream 2 online and it seems to be they will try to press the advantage. tom: thank you to our moscow
chief and helen robinson on the important dynamics from moscow. let's get a business flash with laura wright. laura: easing covert restrictions in the u.k. is charging the markets. in september, more than 2800 new jobs, marking the busiest month since 2014. vacancies in third quarter were more than double of clusters level. the first vaccine for malaria is set to be deployed after more than three decades of work. the shot has been recommended by the who for use in children in africa and other regions with a moderate to high transmission. the vaccine prevents only about four in 10 cases but could still
reduce the 400,000 annual deaths from the disease. twitch leaked critical data including source code and the earnings of its tops gainers. the leak shows documents of six-figure payouts for the highest grossing account. that is the bloomberg business flash. anna: thank you for that. coming up, more on our interview with the u.s. secretary of state as he criticized -- criticizes china's military moves. he has been urging leaders to stop such behavior for fear of miscalculation. we hear more from his -- him next. this is bloomberg. ♪
tom: welcome back to the open. stocks here in europe are gaining, still up 1%. top of the list on your regional benchmarks are the dax gaining at 1.3%. anna: let's get to some breaking news from the ecb. we have been speaking to the government councilmember, speaking to him in an interview that we will bring to you later. market rate hike views do not
reflect guidance. perhaps a suggestion here that we are seeing rate hike expectations, if that is happening in europe, it does not affect the globe. he is saying that asset purchases aim at favorable financing conditions. the government counsel will continue to a for this. for the moment, there is no need to change the stance. if you have expectations around europe, dow those back a touch. the europe has -- europe has pulled back just a fraction. what we have seen a break in movement, technology shares. tom: absolutely. yesterday, chinese technology stocks listed in hong kong remaining closed. they hit a record low. today, there are gains. in terms of technology shares, we are seeing some fairly solid
gains for big companies. the video streaming company is gaining more than 8%. what we have not heard from regulators are any new initiatives when it comes to the swedes on technology. this is likely -- given how the stocks have fallen low yesterday. some gains across the tech space in hong kong. anna: there are the hong kong listings, we will keep an eye on them as things open up in china. sticking with china, president joe biden is planning on holding a virtual meeting with china's president. before the end of the year. on the agenda, trade and rising tensions over taiwan. secretary of state antony blinken has criticized beijing's actions towards taiwan saying they are provocative and destabilizing. he spoke to bloomberg's francine lacqua about the phone call
between president biden and china's president. >> they spoke on the phone a few weeks ago and had a productive conversation. whether they will get together in the weeks or months ahead, we will see. they are likely both to participate in some fashion in the g20 meeting. they had a good conversation. we will continue the work that they set out. francine: in taiwan, is there a redline that you think china's president will not cross? does he understand the redline? >> the actions we have seen by china are provocative and potentially destabilizing. what i hope is that we will see -- these actions will cease.
there is a possibility of miscalculation, miscommunication and that is dangerous. in the past, we have managed to handle issues surrounding taiwan in a way that is actually sustained stability. provocative actions going in the wrong direction, it is important that no one take any unilateral stance to change the status quo by force. we really need to see china cease some of the actions that they are taking. they are potentially a source of d stability. francine: the u.s. needs to take a hard line but find a, agreement when it comes to climate change. >> there are many issues in the relationship between china and the united states. it is one of the most consequential and complicated
relationships in the world. there are different aspects to it. a competitive aspect that we know well, also cooperative aspects. we have to be able to deal and engage with every single one of these aspects of the relationship at the same time. climate is an existential issue that affects everyone in the planet, the united states, china, any other country. china has great responsibility when it comes to dealing effectively with climate change. we are 15% of global emissions, china is 36%, 37%. it is important for both of us to step up and meet our responsibilities. that means hitting our targets to curb climate change, making sure we are contribute into help others deal with resilience and adaptation. taking important steps, like moving away from gold. francine: there is a lot of
focus on how the chinese authorities are dealing with evergrande, what does that tell you? >> china has to make sovereign economic decisions were itself. we also know that what china does economically will have ramifications and effects on the entire world. all of our economies are so much intertwined. when it comes to something that could have a major impact on the chinese economy, we look to china to act responsibly. to deal effectively with any challenges. tom: that was secretary of state anthea blinken speaking to francine lacqua in paris. let's get first word news. laura: democrats have signaled they will accept mitch mcconnell's offer to raise the u.s. debt ceiling into december. the deal would alleviate the immediate risk of a government default but racist the prospect of another political fight.
-- but raises the prospect of another political fight. bloomberg is studying a new bond buying plan from the ecb about wind -- when economic crisis help will phase out. currently over $20 billion in debt. u.k. calls off airline refund over -- flying illegal. they believe people should get refunds. they will not take action as the law is not clear enough. ba only offered vouchers and rebooking. global news, 24 hours a day, on-air and at bloomberg quicktake, powered by more than 2,700 journalists and analysts in more than 120 countries. this is bloomberg. anna: thank you.
>> i am not surprised to see this retreat and correction that we >> have been going through. >>-- that we have been going through. >> they claim to be a superpower and are moving in that direction. >> being somewhat better diversified -- >> you have to pivot, change. >> we have seen dramatic growth in allocations for privates. >> anyone on the sidelines, saw the performance with this reopening. >> it has never been more punitive to hold cash. >> the whole thing will fall over. >> that is the real risk. >> no answers yet, we should expect continued both to leave. anna: some investors speaking to
us on day two of bloomberg invest conference. pointing to the importance of diversification, inflation and volatility. 53 minutes into our european trading day. ven ram for more markets live team joins us. let's start with the bloomberg scoop about the ecb can -- considering a new bond buying program. we are seeing some movement, is disconnected, are we seeing this is having an impact on markets or is it nice for us watching the ecb story? >> it will have a real impact on the markets. they are already closing in. this is going to be supportive of bonds in greece which have benefited from the ecb's purchases. these news leaks will continue into the final quarter in the first quarter of next year
because the ecb wants to suss out the market reaction to what it may eventually do. we do know is that the ecb will be in the market for a long time. that was already known. it is not a complete surprise to the markets. what they are saying is that, we are going to go from a position where we are in the markets all the time to, we will be in the markets when the markets need it. that is what they are saying. tom: that is on the back of this bond buying plan. there is an important piece that your team has been working around around inflation adjusted earnings. what stood out for you when you crunch the numbers? >> if you adjust it for one year forward-looking inflation pricing, what you get is real
yield of about 165 basis points. that is near the lowest it has ever been owing back to 2011. -- been, going back to 2011. even though inflation is on the uptrend, we will not compensate you in terms of stocks and the risk you are taking. that is not a great position for stocks to be in. we have looked at it from so many angles in terms of economic -- and what have you. anna: you are suggesting that maybe that is not the way. thank you so much from ven ram. tom: across the region, optimism continues to sustain itself, 56 minutes into the trading session, gains of 1%. we talked about the cac list
>> the high energy prices reinforce a few things, the need for a transition to new forms of energy. >> we should get rid of the debt ceiling. pres. biden: it would lead to self-inflicted wounds that risk the market taking. >> this is "bloomberg surveillance: early edition" with francine lacqua. francine: welcome to "bloomberg